ACNB Corporation
11/07/2024 | Press release | Distributed by Public on 11/07/2024 09:12
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
acnb-20240930
#
The accompanying notes are an integral part of the Consolidated Financial Statements.
______________________________
_____________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-35015
ACNB CORPORATION
(Exact name of Registrant as specified in its charter)
| Pennsylvania | 23-2233457 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
|
16 Lincoln Square, Gettysburg, Pennsylvania
|
17325 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (717) 334-3161
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | |
| Common Stock, $2.50 par value per share | ACNB | The NASDAQ Stock Market, LLC |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☒ | |
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
The number of shares of the Registrant's Common Stock outstanding on October 30, 2024, was 8,548,625.
Table of Contents
ACNB CORPORATION
Table of Contents
| Page | ||
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Glossary
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3
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| Part I - Financial Information | ||
| Item 1. |
Consolidated Statements of Condition (Unaudited)
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4
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Consolidated Statements of Income (Unaudited)
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5
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Consolidated Statements of Comprehensive Income (Unaudited)
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6
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Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
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7
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Consolidated Statements of Cash Flows (Unaudited)
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9
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Notes to Consolidated Financial Statements
|
10
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
31
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| Item 3. |
Quantitative and Qualitative Disclosures about Market Risk
|
49
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| Item 4. |
Controls and Procedures
|
51
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| Part II - Other Information | ||
| Item 1. |
Legal Proceedings
|
52
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| Item 1A. |
Risk Factors
|
52
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| Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
53
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| Item 3. |
Defaults Upon Senior Securities
|
54
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| Item 4. |
Mine Safety Disclosures
|
54
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| Item 5. |
Other Information
|
54
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| Item 6. |
Exhibits
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55
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|
Signatures
|
58
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|
2
Table of Contents
ACNB CORPORATION
Glossary of Defined Acronyms and Terms
| ACL | Allowance for Credit Losses |
| ACNB Insurance Services | ACNB Insurance Services, Inc. |
| ACNB, Corporation or Company | ACNB Corporation |
| AFS | Available for Sale |
| ALCO | Asset Liability Committee |
| ASC | Accounting Standard Codification |
| ASU | Accounting Standard Update |
| ATM | Automatic Teller Machine |
| Bank | ACNB Bank |
| Basel III | Risk-based requirements and rules issued by federal banking agencies |
| bp or bps | Basis point(s) |
| CECL | Current Expected Credit Loss |
| CME | Chicago Mercantile Exchange |
| CRA | Community Reinvestment Act of 1977 |
| ETR | Effective Tax Rate |
| Exchange Act | Securities Exchange Act of 1934 |
| FASB | Financial Accounting Standards Board |
| FCA | Financial Conduct Authority |
| FCBI | Frederick County Bancorp, Inc. |
| FDIC | Federal Deposit Insurance Corporation |
| FHLB | Federal Home Loan Bank |
| FOMC | Federal Open Market Committee |
| FTE | Fully Taxable Equivalent |
| GAAP | U.S. Generally Accepted Accounting Principles |
| HTM | Held to Maturity |
| LIBOR | London Inter-Bank Offered Rate |
| Market Area | Southcentral Pennsylvania and Northern Maryland |
| Purchase Agreements | Subordinated Note Purchase Agreements |
| Purchasers | Institutional accredited investors and qualified institutional buyers |
| SBIC | Small Business Investment Company |
| SEC | Securities and Exchange Commission |
| SOFR | Secured Overnight Financing Rate |
| Subordinated Notes | 4.00% fixed-to-floating rate subordinated notes due March 31, 2031 |
| Traditions | Traditions Bancorp, Inc. |
3
Table of Contents
PART I - FINANCIAL INFORMATION
ACNB CORPORATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
| (Dollars in thousands, except per share data) |
September 30, 2024 |
December 31, 2023 |
||
| ASSETS | ||||
| Cash and due from banks | $ | 24,636 | $ | 21,442 |
| Interest-bearing deposits with banks | 33,456 | 44,516 | ||
| Total Cash and Cash Equivalents | 58,092 | 65,958 | ||
| Equity securities with readily determinable fair values | 947 | 928 | ||
| Investment securities available for sale, at estimated fair value | 418,079 | 451,693 | ||
|
Investment securities held to maturity, at amortized cost (fair value $59,038, $59,057)
|
64,578 | 64,600 | ||
| Loans held for sale | 1,080 | 280 | ||
| Total loans, net of unearned income | 1,677,112 | 1,627,988 | ||
| Less: Allowance for credit losses | (17,214) | (19,969) | ||
| Loans, net | 1,659,898 | 1,608,019 | ||
| Premises and equipment, net | 25,542 | 26,283 | ||
| Right of use asset | 2,110 | 2,615 | ||
| Restricted investment in bank stocks | 10,853 | 9,677 | ||
| Investment in bank-owned life insurance | 81,344 | 79,871 | ||
| Investments in low-income housing partnerships | 909 | 1,003 | ||
| Goodwill | 44,185 | 44,185 | ||
| Intangible assets, net | 8,142 | 9,082 | ||
| Foreclosed assets held for resale | 406 | 467 | ||
| Other assets | 44,749 | 54,186 | ||
| Total Assets | $ | 2,420,914 | $ | 2,418,847 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Deposits: | ||||
| Noninterest-bearing | $ | 463,501 | $ | 500,332 |
| Interest-bearing | 1,327,816 | 1,361,481 | ||
| Total Deposits | 1,791,317 | 1,861,813 | ||
| Short-term borrowings | 37,769 | 56,882 | ||
| Long-term borrowings | 255,322 | 195,292 | ||
| Lease liability | 2,110 | 2,615 | ||
| Allowance for unfunded commitments | 1,349 | 1,719 | ||
| Other liabilities | 26,292 | 23,065 | ||
| Total Liabilities | 2,114,159 | 2,141,386 | ||
| Stockholders' Equity: | ||||
|
Preferred stock, $2.50 par value; 20,000,000 shares authorized; no shares outstanding at September 30, 2024 and December 31, 2023
|
- | - | ||
|
Common stock, $2.50 par value; 20,000,000 shares authorized; 8,940,133 and 8,896,119 shares issued; 8,548,625 and 8,511,453 shares outstanding at September 30, 2024 and December 31, 2023, respectively
|
22,344 | 22,231 | ||
|
Treasury stock, at cost; 391,508 and 384,666 shares at September 30,
2024 and December 31, 2023, respectively |
(11,203) | (10,954) | ||
| Additional paid-in capital | 98,697 | 97,602 | ||
| Retained earnings | 230,752 | 213,491 | ||
| Accumulated other comprehensive loss | (33,835) | (44,909) | ||
| Total Stockholders' Equity | 306,755 | 277,461 | ||
| Total Liabilities and Stockholders' Equity | $ | 2,420,914 | $ | 2,418,847 |
The accompanying notes are an integral part of the Consolidated Financial Statements.
4
Table of Contents
| ACNB CORPORATION | ||||||||
| CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Dollars in thousands, except share data) | 2024 | 2023 | 2024 | 2023 | ||||
| INTEREST AND DIVIDEND INCOME | ||||||||
| Loans, including fees | ||||||||
| Taxable | $ | 23,108 | $ | 20,285 | $ | 67,253 | $ | 58,130 |
| Tax-exempt | 311 | 361 | 943 | 1,069 | ||||
| Investment Securities: | ||||||||
| Taxable | 2,617 | 2,477 | 8,193 | 8,451 | ||||
| Tax-exempt | 284 | 284 | 852 | 883 | ||||
| Dividends | 251 | 104 | 739 | 196 | ||||
| Other | 670 | 723 | 2,104 | 2,627 | ||||
| Total Interest and Dividend Income | 27,241 | 24,234 | 80,084 | 71,356 | ||||
| INTEREST EXPENSE | ||||||||
| Deposits | 3,112 | 928 | 7,915 | 1,887 | ||||
| Short-term borrowings | 204 | 439 | 847 | 564 | ||||
| Long-term borrowings | 2,983 | 1,122 | 8,823 | 2,078 | ||||
| Total Interest Expense | 6,299 | 2,489 | 17,585 | 4,529 | ||||
| Net Interest Income | 20,942 | 21,745 | 62,499 | 66,827 | ||||
| Provision for (reversal of) credit losses | 81 | 250 | (2,686) | 74 | ||||
| Provision for (reversal of) unfunded commitments | 40 | (171) | (370) | 226 | ||||
| Net Interest Income after Provisions for (Reversal of) Credit Losses and Unfunded Commitments | 20,821 | 21,666 | 65,555 | 66,527 | ||||
| NONINTEREST INCOME | ||||||||
| Insurance commissions | 2,787 | 2,629 | 7,649 | 7,371 | ||||
| Service charges on deposits | 1,048 | 1,000 | 3,060 | 2,951 | ||||
| Wealth management | 1,188 | 953 | 3,219 | 2,772 | ||||
| ATM debit card charges | 828 | 845 | 2,488 | 2,502 | ||||
| Earnings on investment in bank-owned life insurance | 503 | 473 | 1,473 | 1,399 | ||||
| Gain from mortgage loans held for sale | 112 | - | 194 | 31 | ||||
| Net gains (losses) on sales or calls of investment securities | - | - | 69 | (739) | ||||
| Net gains (losses) on equity securities | 28 | (27) | 19 | (22) | ||||
| Gain on assets held for sale | - | 14 | - | 337 | ||||
| Other | 339 | 410 | 756 | 873 | ||||
| Total Noninterest Income | 6,833 | 6,297 | 18,927 | 17,475 | ||||
| NONINTEREST EXPENSES | ||||||||
| Salaries and employee benefits | 11,017 | 10,069 | 32,611 | 30,335 | ||||
| Equipment | 1,698 | 1,554 | 4,997 | 4,784 | ||||
| Net occupancy | 945 | 942 | 3,066 | 2,981 | ||||
| Professional services | 409 | 617 | 1,554 | 1,600 | ||||
| FDIC and regulatory | 365 | 388 | 1,088 | 932 | ||||
| Other tax | 360 | 323 | 1,086 | 965 | ||||
| Intangible assets amortization | 304 | 352 | 940 | 1,072 | ||||
| Supplies and postage | 236 | 229 | 610 | 633 | ||||
| Marketing and corporate relations | 99 | 159 | 275 | 472 | ||||
| Merger-related | 1,137 | - | 1,160 | - | ||||
| Other | 1,674 | 1,703 | 4,910 | 5,125 | ||||
| Total Noninterest Expenses | 18,244 | 16,336 | 52,297 | 48,899 | ||||
| Income Before Income Taxes | 9,410 | 11,627 | 32,185 | 35,103 | ||||
| Provision for income taxes | 2,206 | 2,583 | 6,934 | 7,512 | ||||
| Net Income | $ | 7,204 | $ | 9,044 | $ | 25,251 | $ | 27,591 |
| PER SHARE DATA | ||||||||
| Basic earnings | $ | 0.85 | $ | 1.06 | $ | 2.97 | $ | 3.24 |
| Diluted earnings | $ | 0.84 | $ | 1.06 | $ | 2.96 | $ | 3.23 |
| Weighted average shares basic | 8,507,140 | 8,517,917 | 8,500,860 | 8,518,006 | ||||
| Weighted average shares diluted | 8,545,578 | 8,551,545 | 8,532,691 | 8,544,732 |
5
Table of Contents
ACNB CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Dollars in thousands) | 2024 | 2023 | 2024 | 2023 | ||||
| NET INCOME | $ | 7,204 | $ | 9,044 | $ | 25,251 | $ | 27,591 |
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| INVESTMENT SECURITIES | ||||||||
|
Unrealized gains (losses) arising during the period, net of income tax expense (benefit) of $3,621, $(2,133), $3,034 and $(3,575), respectively
|
12,334 | (7,033) | 10,331 | (8,288) | ||||
|
Reclassification adjustment for net AFS investment securities gains included in net income, net of income tax expense of $0, $0, $16 and $171, respectively
|
- | - | 53 | 556 | ||||
| Total unrealized gain (loss) on AFS investment securities | 12,334 | (7,033) | 10,384 | (7,732) | ||||
|
Amortization of unrealized losses on AFS investment securities transferred to HTM, net of income taxes of $63, $32, $189 and $110, respectively
|
215 | 244 | 645 | 731 | ||||
| PENSION | ||||||||
|
Amortization of pension net loss, transition liability, and prior service cost, net of income tax expense of $4, $52, $13 and $76, respectively
|
15 | 74 | 45 | 246 | ||||
| TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | 12,564 | (6,715) | 11,074 | (6,755) | ||||
| TOTAL COMPREHENSIVE INCOME | $ | 19,768 | $ | 2,329 | $ | 36,325 | $ | 20,836 |
The accompanying notes are an integral part of the Consolidated Financial Statements.
6
Table of Contents
ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Nine Months Ended September 30, 2024
| (Dollars in thousands, except per share data) | Common Stock | Treasury Stock | Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total Stockholders' Equity |
||||||
|
BALANCE - January 1, 2024
|
$ | 22,231 | $ | (10,954) | $ | 97,602 | $ | 213,491 | $ | (44,909) | $ | 277,461 |
| Net income | - | - | - | 6,768 | - | 6,768 | ||||||
| Other comprehensive loss, net of taxes | - | - | - | - | (1,915) | (1,915) | ||||||
|
Common stock shares issued (4,898 shares)
|
13 | - | 161 | - | - | 174 | ||||||
|
Repurchased shares (4,200 shares)
|
- | (147) | - | - | - | (147) | ||||||
|
Restricted stock grants, net of forfeitures and withheld for taxes (27,424 shares)
|
71 | - | (479) | - | - | (408) | ||||||
| Compensation expense for restricted shares | - | - | 534 | - | - | 534 | ||||||
|
Cash dividends declared ($0.30 per share)
|
- | - | - | (2,547) | - | (2,547) | ||||||
| BALANCE - March 31, 2024 | 22,315 | (11,101) | 97,818 | 217,712 | (46,824) | 279,920 | ||||||
| Net income | - | - | - | 11,279 | - | 11,279 | ||||||
| Other comprehensive income, net of taxes | - | - | - | - | 425 | 425 | ||||||
|
Common stock shares issued (6,054 shares)
|
15 | - | 171 | - | - | 186 | ||||||
| Compensation expense for restricted shares | - | - | 241 | - | - | 241 | ||||||
|
Cash dividends declared ($0.32 per share)
|
- | - | - | (2,720) | - | (2,720) | ||||||
| BALANCE - June 30, 2024 | 22,330 | (11,101) | 98,230 | 226,271 | (46,399) | 289,331 | ||||||
| Net income | - | - | - | 7,204 | - | 7,204 | ||||||
| Other comprehensive income, net of taxes | - | - | - | - | 12,564 | 12,564 | ||||||
|
Common stock shares issued (5,638 shares)
|
14 | - | 223 | - | - | 237 | ||||||
|
Repurchased shares (2,642 shares)
|
- | (102) | - | - | - | (102) | ||||||
| Compensation expense for restricted shares | - | - | 244 | - | - | 244 | ||||||
|
Cash dividends declared ($0.32 per share)
|
- | - | - | (2,723) | - | (2,723) | ||||||
| BALANCE - September 30, 2024 | $ | 22,344 | $ | (11,203) | $ | 98,697 | $ | 230,752 | $ | (33,835) | $ | 306,755 |
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Table of Contents
ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Nine Months Ended September 30, 2023
| (Dollars in thousands, except per share data) | Common Stock | Treasury Stock | Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total Stockholders' Equity |
||||||
| BALANCE - January 1, 2023 | $ | 22,086 | $ | (8,927) | $ | 96,022 | $ | 193,873 | $ | (58,012) | $ | 245,042 |
| Cumulative effect for adoption of Topic 326, net of tax | - | - | - | (2,368) | - | (2,368) | ||||||
| Net income | - | - | - | 9,023 | - | 9,023 | ||||||
| Other comprehensive income, net of taxes | - | - | - | - | 6,052 | 6,052 | ||||||
|
Common stock shares issued (5,889 shares)
|
15 | - | 173 | - | - | 188 | ||||||
|
Repurchased shares (850 shares)
|
- | (29) | - | - | - | (29) | ||||||
|
Restricted stock grants, net of forfeitures and withheld for taxes (43,074 shares)
|
97 | - | (97) | - | - | - | ||||||
| Compensation expense for restricted shares | - | - | 317 | - | - | 317 | ||||||
|
Cash dividends declared ($0.28 per share)
|
- | - | - | (2,384) | - | (2,384) | ||||||
| BALANCE - March 31, 2023 | 22,198 | (8,956) | 96,415 | 198,144 | (51,960) | 255,841 | ||||||
| Net income | - | - | - | 9,524 | - | 9,524 | ||||||
| Other comprehensive loss, net of taxes | - | - | - | - | (6,092) | (6,092) | ||||||
|
Common stock shares issued (5,526 shares)
|
14 | - | 171 | - | - | 185 | ||||||
|
Cash dividends declared ($0.28 per share)
|
- | - | - | (2,389) | - | (2,389) | ||||||
| BALANCE - June 30, 2023 | 22,212 | (8,956) | 96,586 | 205,279 | (58,052) | 257,069 | ||||||
| Net income | - | - | - | 9,044 | - | 9,044 | ||||||
| Other comprehensive loss, net of taxes | - | - | - | - | (6,715) | (6,715) | ||||||
|
Common stock shares issued (5,165 shares)
|
12 | - | 158 | - | - | 170 | ||||||
|
Repurchased shares (46,378 shares)
|
- | (1,546) | - | - | - | (1,546) | ||||||
|
Cash dividends declared ($0.28 per share)
|
- | - | - | (2,384) | - | (2,384) | ||||||
| BALANCE - September 30, 2023 | $ | 22,224 | $ | (10,502) | $ | 96,744 | $ | 211,939 | $ | (64,767) | $ | 255,638 |
The accompanying notes are an integral part of the Consolidated Financial Statements.
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Table of Contents
ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30, | ||||
| (In thousands) | 2024 | 2023 | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||
| Net income | $ | 25,251 | $ | 27,591 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Gain on sales of loans originated for sale | (194) | (31) | ||
| Gain on sales of assets held for sale | - | (337) | ||
| Earnings on investment in bank-owned life insurance | (1,473) | (1,399) | ||
| (Gain) loss on sales or calls of securities | (69) | 739 | ||
| (Gain) loss on equity securities | (19) | 22 | ||
| Restricted stock compensation expense | 1,019 | 317 | ||
| Depreciation and amortization | 2,268 | 2,559 | ||
| (Reversal of) provision for credit losses and unfunded commitments | (3,056) | 300 | ||
| Net amortization of investment securities premiums | 1,300 | 494 | ||
| Decrease (increase) in interest receivable | 93 | (812) | ||
| Increase in interest payable | 737 | 397 | ||
| Mortgage loans originated for sale | (9,010) | (1,191) | ||
| Proceeds from sales of loans originated for sale | 8,404 | 1,345 | ||
| Decrease in other assets | 10,954 | 1,414 | ||
| Increase in deferred tax asset | (4,144) | (4,436) | ||
| Increase in other liabilities | 2,015 | 5,019 | ||
| Net Cash Provided by Operating Activities | 34,076 | 31,991 | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||
| Proceeds from calls/maturities of investment securities held to maturity | 554 | 904 | ||
| Proceeds from calls/maturities of investment securities available for sale | 31,783 | 26,375 | ||
| Proceeds from sales of investment securities available for sale | 14,336 | 78,624 | ||
| Proceeds from sale of equity securities | - | 591 | ||
| Purchase of restricted investment in bank stocks | (1,176) | (3,848) | ||
| Net increase in loans | (49,193) | (77,486) | ||
| Acquisition of insurance books of business/agency | - | (174) | ||
| Capital expenditures | (587) | (174) | ||
| Proceeds from sales of assets held for sale | - | 3,730 | ||
| Net Cash (Used in) Provided by Investing Activities | (4,283) | 28,542 | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||
| Net decrease in noninterest-bearing deposits | (36,831) | (29,519) | ||
| Net decrease in interest-bearing deposits | (33,665) | (218,097) | ||
| Net decrease in short-term borrowings | (19,113) | (8,848) | ||
| Proceeds from long-term borrowings | 60,000 | 100,000 | ||
| Dividends paid | (7,990) | (7,157) | ||
| Common stock repurchased | (249) | (1,575) | ||
| Common stock issued, net of restricted stock forfeitures and withheld for taxes | 189 | 543 | ||
| Net Cash Used In Financing Activities | (37,659) | (164,653) | ||
| Net Decrease in Cash and Cash Equivalents | (7,866) | (104,120) | ||
| CASH AND CASH EQUIVALENTS - BEGINNING | 65,958 | 168,161 | ||
| CASH AND CASH EQUIVALENTS - ENDING | $ | 58,092 | $ | 64,041 |
| Supplemental disclosures of cash flow information | ||||
| Cash paid for interest | $ | 16,848 | $ | 3,717 |
| Cash paid for income taxes | 4,175 | 7,350 |
The accompanying notes are an integral part of the Consolidated Financial Statements.
9
Table of Contents
ACNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1- Basis of Presentation and Nature of Operations
ACNB Corporation, headquartered in Gettysburg, Pennsylvania, provides banking, insurance, and financial services to businesses and consumers through its wholly-owned subsidiaries, ACNB Bank and ACNB Insurance Services. The Bank engages in full-service commercial and consumer banking and wealth management services, including trust and retail brokerage, through its 27 community banking offices, including 18 community banking office locations in Adams, Cumberland, Franklin, Lancaster and York Counties, Pennsylvania, and nine community banking office locations in Carroll and Frederick Counties, Maryland. There are also loan production offices in York, Pennsylvania, and Hunt Valley, Maryland.
ACNB Insurance Services is a full-service insurance agency based in Westminster, Maryland, with additional locations in Jarrettsville, Maryland, and Gettysburg, Pennsylvania. The agency offers a broad range of property, casualty, health, life and disability insurance to both individual and commercial clients.
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation. All such adjustments are of a normal recurring nature. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023. The Corporation evaluates subsequent events through the filing date of this Form 10-Q with the SEC. The results of operations for the three and nine month periods ended September 30, 2024, are not necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. Reclassifications had no material effect on prior year net income or stockholders' equity.
Pending Merger
On July 23, 2024, ACNB entered into an Agreement and Plan of Merger with Traditions Bancorp, Inc., holding company for Traditions Bank, York, Pennsylvania, whereby ACNB will acquire Traditions and Traditions Bank in an all-stock transaction. Pursuant to the terms of the Definitive Agreement, Traditions shareholders will receive 0.7300 shares of ACNB common stock for each share of Traditions common stock that they own as of the closing date. Based on the 20-day Volume Weighted Average Price of ACNB common stock as of July 19, 2024, the transaction is valued at $73.5 million or $26.43 per share.
As of September 30, 2024 and December 31, 2023, Traditions had total assets of $860.0 million and $840.1 million, respectively, total loans of $683.2 million and $668.8 million, respectively, and total deposits of $740.0 million and $731.1 million, respectively. Common shares outstanding totaled 2,754,062 and 2,736,544 at September 30, 2024 and December 31, 2023, respectively. Traditions Bank operates eight full-service branches in South Central Pennsylvania. The transaction is subject to regulatory approvals and satisfaction of customary closing conditions, including approval from ACNB and Traditions shareholders. Currently, the transaction is expected to close in the first quarter of 2025.
Significant Accounting Policies
The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation's 2023 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2024.
Recently Issued Accounting Standards
In December 2022, the FASB issued ASU 2022-06, "Deferral of the Sunset Date of Reference Rate Reform (Topic 848)".This ASU extends the sunset date of ASC Topic 848 (Reference Rate Reform) to December 31, 2024, in response to the United Kingdom's FCA extension of the intended cessation date of LIBOR in the United States. The Corporation evaluated the impact of this standard, and believes that its adoption will not have a material impact on the Corporation's Consolidated Financial Statements.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280)". The amendments in this ASU are expected to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim
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basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-07 should be applied retrospectively to all periods presented on the financial statements. The Corporation adopted the amendments of ASU 2023-07 related to annual disclosure requirements effective January 1, 2024, and will present any newly required annual disclosures in its Annual Report on Form 10-K for the year ending December 31, 2024 and intends to adopt the amendments of ASU 2023-07 related to interim disclosure requirements effective January 1, 2025, and will present any newly required interim disclosures beginning with its Quarterly Report on Form 10-Q for the period ending March 31, 2025. Adoption of this standard is not expected to have a material impact on the Corporation's Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)". This ASU is intended to improve the disclosures for income taxes to address requests from investors, lenders, creditors and other allocators of capital that use the financial statements to make capital allocation decisions. The amendments in ASU 2023-09 will require consistent categories and greater disaggregation of information in the rate reconciliation disclosure as well as disclosure of income taxes paid disaggregated by jurisdiction. The amendments of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Corporation intends to adopt the amendments of ASU 2023-09 effective January 1, 2025, and will include the required disclosures in its Annual Report on Form 10-K for the year ending December 31, 2025. The Corporation is currently evaluating the impact of this standard, and believes that its adoption will not have a material impact on the Corporation's Consolidated Financial Statements.
Note 2 - Earnings Per Share and Restricted Stock
The Corporation has a simple capital structure. Basic earnings per share of common stock is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding less unvested restricted stock at the end of the period. Diluted earnings per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Weighted average shares outstanding (basic) | 8,507,140 | 8,517,917 | 8,500,860 | 8,518,006 | ||||
| Dilutive effect of unvested shares | 38,438 | 33,628 | 31,831 | 26,726 | ||||
| Weighted average shares outstanding (diluted) | 8,545,578 | 8,551,545 | 8,532,691 | 8,544,732 | ||||
| Per share: | ||||||||
| Basic | $ | 0.85 | $ | 1.06 | $ | 2.97 | $ | 3.24 |
| Diluted | 0.84 | 1.06 | 2.96 | 3.23 |
There were no antidilutive instruments at September 30, 2024 and 2023.
Stock Incentive Plan
On May 1, 2018, shareholders approved and ratified the ACNB Corporation 2018 Omnibus Stock Incentive Plan, effective as of March 20, 2018, in which awards shall not exceed, in the aggregate, 400,000 shares of common stock, plus any shares that were authorized, but not issued, under the ACNB Corporation 2009 Restricted Stock Plan. The ACNB Corporation 2009 Restricted Stock Plan expired by its own terms after 10 years on February 24, 2019. No further shares may be issued under this plan. The remaining 174,055 shares were transferred to the ACNB Corporation 2018 Omnibus Stock Incentive Plan.
As of September 30, 2024, 138,019 shares were issued under this plan, of which 38,438 were unvested. Plan expense is recognized over the vesting period of the stock issued and resulted in $244 thousand and $265 thousand of compensation expense during the three months ended September 30, 2024 and 2023, respectively. Compensation expense recognized during both the nine months ended September 30, 2024 and 2023 was $1.0 million.
Share Repurchase Plan
On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares
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of the Corporation's common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. During the three and nine months ended September 30, 2024 the Corporation repurchased 2,642 and 6,842 shares, respectively. There were 67,908 treasury shares purchased under this plan through September 30, 2024.
Note 3 - Investment Securities
Fair value of equity securities with readily determinable fair values at September 30, 2024 and December 31, 2023, are as follows:
| (In thousands) | Fair Value at Beginning of Period | Sales/reclassification | Gains (Losses) |
Losses on sales of securities |
Fair Value at End of Period |
|||||
| Nine Months Ended September 30, 2024 | ||||||||||
| CRA Mutual Fund | $ | 928 | $ | - | $ | 19 | $ | - | $ | 947 |
| Twelve Months Ended December 31, 2023 | ||||||||||
| CRA Mutual Fund | $ | 915 | $ | - | $ | 13 | $ | - | $ | 928 |
| Canapi Ventures SBIC Fund | 206 | 206 | - | - | - | |||||
| Stock in other banks | 598 | 592 | 5 | (11) | - | |||||
| $ | 1,719 | $ | 798 | $ | 18 | $ | (11) | $ | 928 |
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Amortized cost and fair value of securities were as follows:
| (In thousands) |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||
| September 30, 2024 | ||||||||
| Available for Sale | ||||||||
| U.S. Government and agencies | $ | 166,194 | $ | - | $ | 13,985 | $ | 152,209 |
| Collateralized mortgage obligations | 40,889 | - | 2,822 | 38,067 | ||||
| Residential mortgage-backed securities | 164,113 | 43 | 15,088 | 149,068 | ||||
| Commercial mortgage-backed securities | 65,566 | 803 | 3,472 | 62,897 | ||||
| Corporate bonds | 18,102 | - | 2,264 | 15,838 | ||||
| $ | 454,864 | $ | 846 | $ | 37,631 | $ | 418,079 | |
| Held to Maturity | ||||||||
| State and municipal | $ | 62,665 | $ | - | $ | 5,477 | 57,188 | |
| Residential mortgage-backed securities | 1,913 | - | 63 | 1,850 | ||||
| $ | 64,578 | $ | - | $ | 5,540 | $ | 59,038 | |
| December 31, 2023 | ||||||||
| Available for Sale | ||||||||
| U.S. Government and agencies | $ | 176,458 | $ | - | $ | 19,663 | $ | 156,795 |
| Collateralized mortgage obligations | 45,189 | - | 4,105 | 41,084 | ||||
| Residential mortgage-backed securities | 178,441 | 19 | 19,630 | 158,830 | ||||
| Commercial mortgage-backed securities | 69,498 | 344 | 4,552 | 65,290 | ||||
| Corporate bonds | 32,326 | 202 | 2,834 | 29,694 | ||||
| $ | 501,912 | $ | 565 | $ | 50,784 | $ | 451,693 | |
| Held to Maturity | ||||||||
| State and municipal | $ | 62,133 | $ | - | $ | 5,419 | $ | 56,714 |
| Residential mortgage-backed securities | 2,467 | - | 124 | 2,343 | ||||
| $ | 64,600 | $ | - | $ | 5,543 | $ | 59,057 |
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The following table shows the Corporation's investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2024, and December 31, 2023:
| Less than 12 Months | 12 Months or More | Total | ||||||||||
| (In thousands) |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||
| September 30, 2024 | ||||||||||||
| Available for Sale | ||||||||||||
| U.S. Government and agencies | $ | - | $ | - | $ | 152,209 | $ | 13,985 | $ | 152,209 | $ | 13,985 |
| Collateralized mortgage obligations | - | - | 38,067 | 2,822 | 38,067 | 2,822 | ||||||
| Residential mortgage-backed securities | - | - | 146,297 | 15,088 | 146,297 | 15,088 | ||||||
| Commercial mortgage-backed securities | - | - | 30,174 | 3,472 | 30,174 | 3,472 | ||||||
| Corporate bonds | - | - | 15,838 | 2,264 | 15,838 | 2,264 | ||||||
| $ | - | $ | - | $ | 382,585 | $ | 37,631 | $ | 382,585 | $ | 37,631 | |
| Held to Maturity | ||||||||||||
| State and municipal | $ | - | $ | - | $ | 57,188 | $ | 5,477 | $ | 57,188 | $ | 5,477 |
| Residential mortgage-backed securities | - | - | 1,850 | 63 | 1,850 | 63 | ||||||
| $ | - | $ | - | $ | 59,038 | $ | 5,540 | $ | 59,038 | $ | 5,540 | |
| December 31, 2023 | ||||||||||||
| Available for Sale | ||||||||||||
| U.S. Government and agencies | $ | - | $ | - | $ | 156,795 | $ | 19,663 | $ | 156,795 | $ | 19,663 |
| Collateralized mortgage obligations | - | - | 41,085 | 4,104 | 41,085 | 4,104 | ||||||
| Residential mortgage-backed securities | - | - | 156,295 | 19,630 | 156,295 | 19,630 | ||||||
| Commercial mortgage-backed securities | - | - | 33,063 | 4,553 | 33,063 | 4,553 | ||||||
| Corporate bonds | - | - | 15,279 | 2,834 | 15,279 | 2,834 | ||||||
| $ | - | $ | - | $ | 402,517 | $ | 50,784 | $ | 402,517 | $ | 50,784 | |
| Held to Maturity | ||||||||||||
| State and municipal | $ | - | $ | - | $ | 56,714 | $ | 5,419 | $ | 56,714 | $ | 5,419 |
| Residential mortgage-backed securities | - | - | 2,343 | 124 | 2,343 | 124 | ||||||
| $ | - | $ | - | $ | 59,057 | $ | 5,543 | $ | 59,057 | $ | 5,543 |
All mortgage-backed security investments are government sponsored enterprise pass-through instruments issued by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation or they are issued by Government National Mortgage Association which is backed by the U.S. government.
The Company evaluates AFS debt securities for impairment in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. There was no impairment on AFS debt securities as of September 30, 2024 and December 31, 2023. The Company evaluates HTM debt securities for expected credit losses at each measurement date to determine if an ACL is required. The Corporation did not have an ACL for HTM investment securities as of September 30, 2024 and December 31, 2023. In estimating credit events, management considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before anticipated recovery or if it does not expect to recover the entire amortized cost basis.
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Amortized cost and fair value at September 30, 2024, by contractual maturity, where applicable, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties. Securities not due at a single maturity date are shown separately.
| Available for Sale | Held to Maturity | |||||||
| (In thousands) |
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
||||
| 1 year or less | $ | 16,322 | $ | 16,029 | $ | - | $ | - |
| Over 1 year through 5 years | 110,053 | 102,347 | 4,191 | 3,824 | ||||
| Over 5 years through 10 years | 55,921 | 48,125 | 24,314 | 23,966 | ||||
| Over 10 years | 2,000 | 1,546 | 34,160 | 29,398 | ||||
| Mortgage-backed securities | 270,568 | 250,032 | 1,913 | 1,850 | ||||
| $ | 454,864 | $ | 418,079 | $ | 64,578 | $ | 59,038 |
The proceeds from sales and calls of securities and the associated gains and losses are listed below:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||
| Proceeds | $ | 15,908 | $ | - | $ | 46,119 | $ | 79,215 |
| Gross gains | - | - | 87 | 243 | ||||
| Gross losses | - | - | 18 | 982 |
At September 30, 2024, and December 31, 2023, securities with a carrying value of $204.4 million and $233.7 million, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.
Note 4 - Loans and Allowance for Credit Losses
The following table presents the composition of the loan portfolio:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| Commercial real estate | $ | 957,904 | $ | 898,709 |
| Residential mortgage | 397,994 | 394,189 | ||
| Commercial and industrial | 152,148 | 152,344 | ||
| Home equity lines of credit | 84,316 | 90,163 | ||
| Real estate construction | 75,953 | 84,341 | ||
| Consumer | 9,773 | 9,954 | ||
| Gross loans | 1,678,088 | 1,629,700 | ||
| Unearned income | (976) | (1,712) | ||
| Total loans, net of unearned income | $ | 1,677,112 | $ | 1,627,988 |
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One of the factors used to monitor the performance and credit quality of the loan portfolio is to analyze the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status:
| (In thousands) | 30-59 Days Past Due |
60-89 Days Past Due |
≥ 90 Days Past Due |
Total Past Due |
Current |
Total Loans Receivable |
Loans Receivable ≥ 90 Days and Accruing |
|||||||
| September 30, 2024 | ||||||||||||||
| Commercial real estate | $ | 318 | $ | - | $ | 346 | $ | 664 | $ | 957,240 | $ | 957,904 | $ | 32 |
| Residential mortgage | - | 585 | 375 | 960 | 397,034 | 397,994 | 375 | |||||||
| Commercial and industrial | 138 | 50 | 175 | 363 | 151,785 | 152,148 | 19 | |||||||
| Home equity lines of credit | 454 | - | - | 454 | 83,862 | 84,316 | - | |||||||
| Real estate construction | 15 | - | 12 | 27 | 75,926 | 75,953 | 12 | |||||||
| Consumer | 21 | - | - | 21 | 9,752 | 9,773 | - | |||||||
| Gross Loans | $ | 946 | $ | 635 | $ | 908 | $ | 2,489 | $ | 1,675,599 | $ | 1,678,088 | $ | 438 |
| (In thousands) | 30-59 Days Past Due |
60-89 Days Past Due |
≥ 90 Days Past Due |
Total Past Due |
Current |
Total Loans Receivable |
Loans Receivable ≥ 90 Days and Accruing |
|||||||
| December 31, 2023 | ||||||||||||||
| Commercial real estate | $ | 150 | $ | 347 | $ | - | $ | 497 | $ | 898,212 | $ | 898,709 | $ | - |
| Residential mortgage | 1,293 | 388 | 849 | 2,530 | 391,659 | 394,189 | 505 | |||||||
| Commercial and industrial | 50 | - | 159 | 209 | 152,135 | 152,344 | - | |||||||
| Home equity lines of credit | 414 | - | 654 | 1,068 | 89,095 | 90,163 | 654 | |||||||
| Real estate construction | 12 | - | - | 12 | 84,329 | 84,341 | - | |||||||
| Consumer | 8 | - | 3 | 11 | 9,943 | 9,954 | 3 | |||||||
| Gross Loans | $ | 1,927 | $ | 735 | $ | 1,665 | $ | 4,327 | $ | 1,625,373 | $ | 1,629,700 | $ | 1,162 |
Nonaccrual and Nonperforming Loans
Loans individually evaluated consist of nonaccrual loans, presented in the following table:
| (In thousands) | With a Related Allowance | Without a Related Allowance | Total | |||
| September 30, 2024 | ||||||
| Commercial real estate | $ | 314 | $ | 3,292 | $ | 3,606 |
| Commercial and industrial | 991 | 1,368 | 2,359 | |||
| Home equity lines of credit | - | 168 | 168 | |||
| $ | 1,305 | $ | 4,828 | $ | 6,133 | |
| December 31, 2023 | ||||||
| Commercial real estate | $ | 315 | $ | 1,164 | $ | 1,479 |
| Residential mortgage | - | 343 | 343 | |||
| Commercial and industrial | 1,004 | - | 1,004 | |||
| Home equity lines of credit | - | 185 | 185 | |||
| $ | 1,319 | $ | 1,692 | $ | 3,011 |
During both the three and nine months ended September 30, 2024 and 2023, no material amount of interest income was recognized on nonaccrual loans subsequent to their classification as nonaccrual.
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Total nonperforming loans are as follows:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| Nonaccrual loans | $ | 6,133 | $ | 3,011 |
| Greater than or equal to 90 days past due and accruing | 438 | 1,162 | ||
| Total nonperforming loans | $ | 6,571 | $ | 4,173 |
Collateral-Dependent Loans
A loan is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral's fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the collateral-dependent loan's carrying value to the collateral's fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent loans consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.
Changes in the fair value of the collateral for individually evaluated loans are reported as provision for credit losses or a reversal of provision for credit losses in the period of change. The following table presents the amortized cost basis of individually evaluated loans as of the periods presented:
| Type of Collateral | ||||
| (In thousands) | Business Assets | Real Estate | ||
| September 30, 2024 | ||||
| Commercial real estate | $ | - | $ | 3,606 |
| Commercial and industrial | 2,359 | - | ||
| Home equity lines of credit | - | 168 | ||
| Total | $ | 2,359 | $ | 3,774 |
| December 31, 2023 | ||||
| Commercial real estate | $ | - | $ | 1,479 |
| Residential mortgage | - | 343 | ||
| Commercial and industrial | 1,004 | - | ||
| Home equity lines of credit | - | 185 | ||
| Total | $ | 1,004 | $ | 2,007 |
Consumer residential mortgages and home equity lines of credit which are well secured by residential real estate properties and are in the process of collection are not considered nonaccrual, however, formal foreclosure proceedings are in process. These loans totaled $515 thousand at September 30, 2024 and $1.3 million at December 31, 2023 and are included in nonperforming loans if they are greater than or equal to 90 days past due.
Loan Modifications
The Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or combinations of the above. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.
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The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:
| (Dollars in thousands) | Combination Payment Deferral and Interest Only Payments | Percent of Class of Financing Receivable | ||
| Commercial real estate | $ | 2,293 | 0.2 | % |
| Commercial and industrial | 1,748 | 1.1 | % | |
| Total | $ | 4,041 |
During the three and nine months ended September 30, 2023, the Corporation did not modify any loans. During the nine months ended September 30, 2024 and 2023, the Corporation did not have any commitments to lend any additional funds on existing modified loans.
The following presents the performance of loans modified in the previous twelve months as of September 30, 2024:
| (In thousands) | Current | 30-89 Days Past Due |
≥ 90 Days Past Due |
Total Past Due | ||||
| Commercial real estate | $ | 2,293 | $ | - | $ | - | $ | - |
| Commercial and industrial | 1,967 | - | - | - | ||||
| Total | $ | 4,260 | $ | - | $ | - | $ | - |
As of September 30, 2024, the Corporation had no loans that defaulted during the period that had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification. For purposes of this disclosure, a default occurs when, within 12 months of the original modification, either a full or partial charge-off occurs or the loan becomes 90 days or more past due.
Allowance for Credit Losses
The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation's financial instruments over the life of those instruments as of the balance sheet date. The ACL consists of loans evaluated collectively and individually for expected credit losses. The Corporation considers the performance of the loan portfolio and its impact on the ACL and does not assign internal risk ratings to smaller balance, homogeneous loans such as certain residential mortgage, home equity lines of credit, construction loans to individuals secured by residential real estate and consumer loans. For these loans, the Corporation evaluates credit quality based on the aging status of the loan and designates as performing and nonperforming.
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The following summarizes designated internal risk categories by portfolio segment for loans assigned a risk rating and those evaluated based on the performance status:
| September 30, 2024 | ||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | |||||||||||||||
| (In thousands) | 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | |||||||||
| Internally Risk Rated: | ||||||||||||||||
| Commercial real estate | ||||||||||||||||
| Pass | $ | 97,426 | $ | 134,288 | $ | 164,910 | $ | 123,922 | $ | 56,029 | $ | 318,720 | $ | 18,020 | $ | 913,315 |
| Special Mention | 488 | 2,848 | 4,830 | 5,878 | 2,795 | 15,505 | 1,797 | 34,141 | ||||||||
| Substandard | - | - | 1,781 | - | 1,496 | 7,171 | - | 10,448 | ||||||||
| Total Commercial real estate | $ | 97,914 | $ | 137,136 | $ | 171,521 | $ | 129,800 | $ | 60,320 | $ | 341,396 | $ | 19,817 | $ | 957,904 |
| Residential mortgage | ||||||||||||||||
| Pass | $ | 18,113 | $ | 37,415 | $ | 23,683 | $ | 38,909 | $ | 13,743 | $ | 33,124 | $ | 419 | $ | 165,406 |
| Special Mention | - | 881 | 270 | 575 | 246 | 3,199 | 94 | 5,265 | ||||||||
| Substandard | - | - | - | - | - | 68 | - | 68 | ||||||||
| Total Residential Mortgage | $ | 18,113 | $ | 38,296 | $ | 23,953 | $ | 39,484 | $ | 13,989 | $ | 36,391 | $ | 513 | $ | 170,739 |
| Commercial and industrial | ||||||||||||||||
| Pass | $ | 8,979 | $ | 11,038 | $ | 20,545 | $ | 30,192 | $ | 13,511 | $ | 25,644 | $ | 33,010 | $ | 142,919 |
| Special Mention | 172 | 153 | 248 | 223 | 82 | 449 | 2,703 | 4,030 | ||||||||
| Substandard | - | 536 | 468 | 354 | 16 | 780 | 3,045 | 5,199 | ||||||||
| Total Commercial and industrial | $ | 9,151 | $ | 11,727 | $ | 21,261 | $ | 30,769 | $ | 13,609 | $ | 26,873 | $ | 38,758 | $ | 152,148 |
| Home equity lines of credit | ||||||||||||||||
| Pass | $ | - | $ | 296 | $ | 94 | $ | - | $ | - | $ | 281 | $ | 5,227 | $ | 5,898 |
| Special Mention | - | - | - | - | - | - | 696 | 696 | ||||||||
| Substandard | - | - | - | - | - | 174 | - | 174 | ||||||||
| Total Home equity lines of credit | $ | - | $ | 296 | $ | 94 | $ | - | $ | - | $ | 455 | $ | 5,923 | $ | 6,768 |
| Real estate construction | ||||||||||||||||
| Pass | $ | 9,985 | $ | 29,172 | $ | 16,397 | $ | 1,220 | $ | 306 | $ | 1,091 | $ | 8,739 | $ | 66,910 |
| Special Mention | - | 118 | 281 | - | - | 679 | 46 | 1,124 | ||||||||
| Substandard | - | - | - | - | - | 64 | - | 64 | ||||||||
| Total Real estate construction | $ | 9,985 | $ | 29,290 | $ | 16,678 | $ | 1,220 | $ | 306 | $ | 1,834 | $ | 8,785 | $ | 68,098 |
| Performance Rated: | ||||||||||||||||
| Residential mortgage | ||||||||||||||||
| Performing | $ | 12,390 | $ | 40,244 | $ | 41,284 | $ | 13,732 | $ | 14,879 | $ | 104,279 | $ | 72 | $ | 226,880 |
| Nonperforming | - | - | - | - | - | 375 | - | 375 | ||||||||
| Total Residential Mortgage | $ | 12,390 | $ | 40,244 | $ | 41,284 | $ | 13,732 | $ | 14,879 | $ | 104,654 | $ | 72 | $ | 227,255 |
| Home equity lines of credit | ||||||||||||||||
| Performing | $ | - | $ | 19 | $ | 35 | $ | - | $ | 12 | $ | 2,809 | $ | 74,673 | $ | 77,548 |
| Total Home equity lines of credit | $ | - | $ | 19 | $ | 35 | $ | - | $ | 12 | $ | 2,809 | $ | 74,673 | $ | 77,548 |
| Real estate construction | ||||||||||||||||
| Performing | $ | 4,240 | $ | 1,773 | $ | 565 | $ | 165 | $ | 193 | $ | 907 | $ | - | $ | 7,843 |
| Nonperforming | - | - | - | - | - | 12 | - | 12 | ||||||||
| Total Real estate construction | $ | 4,240 | $ | 1,773 | $ | 565 | $ | 165 | $ | 193 | $ | 919 | $ | - | $ | 7,855 |
| Consumer | ||||||||||||||||
| Performing | $ | 1,823 | $ | 1,710 | $ | 1,917 | $ | 552 | $ | 333 | $ | 904 | $ | 2,534 | $ | 9,773 |
| Total Consumer | $ | 1,823 | $ | 1,710 | $ | 1,917 | $ | 552 | $ | 333 | $ | 904 | $ | 2,534 | $ | 9,773 |
| Year-to-date gross charge-offs | $ | - | $ | - | $ | 9 | $ | - | $ | - | $ | 7 | $ | 147 | $ | 163 |
| Total Portfolio loans: | ||||||||||||||||
| Pass | $ | 134,503 | $ | 212,209 | $ | 225,629 | $ | 194,243 | $ | 83,589 | $ | 378,860 | $ | 65,415 | $ | 1,294,448 |
| Special Mention | 660 | 4,000 | 5,629 | 6,676 | 3,123 | 19,832 | 5,336 | 45,256 | ||||||||
| Substandard | - | 536 | 2,249 | 354 | 1,512 | 8,257 | 3,045 | 15,953 | ||||||||
| Performing | 18,453 | 43,746 | 43,801 | 14,449 | 15,417 | 108,899 | 77,279 | 322,044 | ||||||||
| Nonperforming | - | - | - | - | - | 387 | - | 387 | ||||||||
| Total Portfolio loans | $ | 153,616 | $ | 260,491 | $ | 277,308 | $ | 215,722 | $ | 103,641 | $ | 516,235 | $ | 151,075 | $ | 1,678,088 |
| Year-to-date gross charge-offs | $ | - | $ | - | $ | 9 | $ | - | $ | - | $ | 7 | $ | 147 | $ | 163 |
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| December 31, 2023 | ||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | Revolving Loans Amortized Cost Basis | |||||||||||||||
| (In thousands) | 2023 | 2022 | 2021 | 2020 | 2019 | Prior | Total | |||||||||
| Internally Risk Rated: | ||||||||||||||||
| Commercial real estate | ||||||||||||||||
| Pass | $ | 136,158 | $ | 152,767 | $ | 130,994 | $ | 60,918 | $ | 65,856 | $ | 287,026 | $ | 13,636 | $ | 847,355 |
| Special Mention | 1,927 | 6,385 | 5,920 | 1,904 | 8,222 | 16,244 | 1,994 | 42,596 | ||||||||
| Substandard | - | - | - | 1,530 | 704 | 6,524 | - | 8,758 | ||||||||
| Total Commercial real estate | $ | 138,085 | $ | 159,152 | $ | 136,914 | $ | 64,352 | $ | 74,782 | $ | 309,794 | $ | 15,630 | $ | 898,709 |
| Residential mortgage | ||||||||||||||||
| Pass | $ | 39,146 | $ | 27,612 | $ | 41,031 | $ | 14,758 | $ | 10,492 | $ | 27,274 | $ | 402 | $ | 160,715 |
| Special Mention | 588 | 82 | 593 | 397 | 826 | 2,457 | 62 | 5,005 | ||||||||
| Substandard | - | - | - | - | - | 218 | - | 218 | ||||||||
| Total Residential mortgage | $ | 39,734 | $ | 27,694 | $ | 41,624 | $ | 15,155 | $ | 11,318 | $ | 29,949 | $ | 464 | $ | 165,938 |
| Commercial and industrial | ||||||||||||||||
| Pass | $ | 12,319 | $ | 24,259 | $ | 34,830 | $ | 15,614 | $ | 13,922 | $ | 17,780 | $ | 25,147 | $ | 143,871 |
| Special Mention | 128 | 303 | 290 | 529 | 140 | 459 | 2,014 | 3,863 | ||||||||
| Substandard | 7 | 135 | 499 | 91 | 9 | 1,597 | 2,272 | 4,610 | ||||||||
| Total Commercial and industrial | $ | 12,454 | $ | 24,697 | $ | 35,619 | $ | 16,234 | $ | 14,071 | $ | 19,836 | $ | 29,433 | $ | 152,344 |
| Year-to-date gross charge-offs | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 110 | $ | - | $ | 110 |
| Home equity lines of credit | ||||||||||||||||
| Pass | $ | 300 | $ | 99 | $ | - | $ | - | $ | - | $ | 131 | $ | 5,235 | $ | 5,765 |
| Special Mention | - | - | - | - | - | - | 727 | 727 | ||||||||
| Substandard | - | - | - | - | - | 362 | - | 362 | ||||||||
| Total Home equity lines of credit | $ | 300 | $ | 99 | $ | - | $ | - | $ | - | $ | 493 | $ | 5,962 | $ | 6,854 |
| Real estate construction | ||||||||||||||||
| Pass | $ | 19,766 | $ | 39,758 | $ | 3,953 | $ | 1,160 | $ | - | $ | 2,604 | $ | 8,003 | $ | 75,244 |
| Special Mention | - | 465 | - | 92 | - | 725 | - | 1,282 | ||||||||
| Substandard | - | - | - | - | - | 69 | - | 69 | ||||||||
| Total Real estate construction | $ | 19,766 | $ | 40,223 | $ | 3,953 | $ | 1,252 | $ | - | $ | 3,398 | $ | 8,003 | $ | 76,595 |
| Performance Rated: | ||||||||||||||||
| Residential mortgage | ||||||||||||||||
| Performing | $ | 33,884 | $ | 45,221 | $ | 14,878 | $ | 16,184 | $ | 9,059 | $ | 108,021 | $ | 156 | $ | 227,403 |
| Nonperforming | - | - | - | - | - | 848 | - | 848 | ||||||||
| Total Residential mortgage | $ | 33,884 | $ | 45,221 | $ | 14,878 | $ | 16,184 | $ | 9,059 | $ | 108,869 | $ | 156 | $ | 228,251 |
| Home equity lines of credit | ||||||||||||||||
| Performing | $ | 23 | $ | 38 | $ | - | $ | 13 | $ | 94 | $ | 4,742 | $ | 77,745 | $ | 82,655 |
| Nonperforming | - | - | - | - | - | 92 | 562 | 654 | ||||||||
| Total Home equity lines of credit | $ | 23 | $ | 38 | $ | - | $ | 13 | $ | 94 | $ | 4,834 | $ | 78,307 | $ | 83,309 |
| Real estate construction | ||||||||||||||||
| Performing | $ | 5,571 | $ | 753 | $ | 175 | $ | 210 | $ | 170 | $ | 867 | $ | - | $ | 7,746 |
| Total Real estate construction | $ | 5,571 | $ | 753 | $ | 175 | $ | 210 | $ | 170 | $ | 867 | $ | - | $ | 7,746 |
| Consumer | ||||||||||||||||
| Performing | $ | 2,351 | $ | 2,685 | $ | 778 | $ | 522 | $ | 271 | $ | 1,085 | $ | 2,259 | $ | 9,951 |
| Nonperforming | - | - | - | - | - | - | 3 | 3 | ||||||||
| Total Consumer | $ | 2,351 | $ | 2,685 | $ | 778 | $ | 522 | $ | 271 | $ | 1,085 | $ | 2,262 | $ | 9,954 |
| Year-to-date gross charge-offs | $ | 48 | $ | 83 | $ | 42 | $ | 55 | $ | 23 | $ | 78 | $ | 67 | $ | 396 |
| Total Portfolio loans | ||||||||||||||||
| Pass | $ | 207,689 | $ | 244,495 | $ | 210,808 | $ | 92,450 | $ | 90,270 | $ | 334,815 | $ | 52,423 | $ | 1,232,950 |
| Special Mention | 2,643 | 7,235 | 6,803 | 2,922 | 9,188 | 19,885 | 4,797 | 53,473 | ||||||||
| Substandard | 7 | 135 | 499 | 1,621 | 713 | 8,770 | 2,272 | 14,017 | ||||||||
| Performing | 41,829 | 48,697 | 15,831 | 16,929 | 9,594 | 114,715 | 80,160 | 327,755 | ||||||||
| Nonperforming | - | - | - | - | - | 940 | 565 | 1,505 | ||||||||
| Total Portfolio loans | $ | 252,168 | $ | 300,562 | $ | 233,941 | $ | 113,922 | $ | 109,765 | $ | 479,125 | $ | 140,217 | $ | 1,629,700 |
| Year-to-date gross charge-offs | $ | 48 | $ | 83 | $ | 42 | $ | 55 | $ | 23 | $ | 188 | $ | 67 | $ | 506 |
During the three months ended June 30, 2024, the Corporation revised estimates driven by a realignment of the peer group used for the CECL allowance process, an update to loss driver factors from third-party data, and an update to the application of prepayment and curtailment rate studies since implementation of CECL on January 1, 2023. These estimates, which were based on more current information available as of June 30, 2024, drive input assumptions which are used in the determination of the Corporation's allowance for credit losses and the reserve for unfunded commitments. These updated estimates were the primary
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drivers for a $2.7 million and $370 thousand reversal of the provisions for credit losses and for unfunded commitments, respectively, for the nine months ended September 30, 2024.
The following table presents the activity in the ACL by loan portfolio segment:
| (In thousands) |
Commercial Real Estate |
Residential Mortgage |
Commercial and Industrial |
Home Equity Lines of Credit |
Real Estate Construction |
Consumer | Unallocated | Total | ||||||||
| Three Months Ended September 30, 2024 | ||||||||||||||||
| Beginning balance - July 1, 2024 | $ | 10,196 | $ | 2,839 | $ | 1,465 | $ | 312 | $ | 2,247 | $ | 103 | $ | - | $ | 17,162 |
| Charge-offs | - | - | - | - | - | (51) | - | (51) | ||||||||
| Recoveries | - | - | 6 | - | - | 16 | - | 22 | ||||||||
| Provisions (credits) | 196 | 31 | 301 | (16) | (467) | 36 | - | 81 | ||||||||
| Ending balance - September 30, 2024 | $ | 10,392 | $ | 2,870 | $ | 1,772 | $ | 296 | $ | 1,780 | $ | 104 | $ | - | $ | 17,214 |
| Nine Months Ended September 30, 2024 | ||||||||||||||||
| Beginning balance - January 1, 2024 | $ | 12,010 | $ | 3,303 | $ | 2,048 | $ | 397 | $ | 2,070 | $ | 141 | $ | - | $ | 19,969 |
| Charge-offs | - | - | - | - | - | (163) | - | (163) | ||||||||
| Recoveries | - | - | 24 | - | - | 70 | - | 94 | ||||||||
| Provisions (credits) | (1,618) | (433) | (300) | (101) | (290) | 56 | - | (2,686) | ||||||||
| Ending balance - September 30, 2024 | $ | 10,392 | $ | 2,870 | $ | 1,772 | $ | 296 | $ | 1,780 | $ | 104 | $ | - | $ | 17,214 |
| Three Months Ended September 30, 2023 | ||||||||||||||||
| Beginning balance - July 1, 2023 | $ | 11,728 | $ | 3,075 | $ | 1,941 | $ | 388 | $ | 1,885 | $ | 131 | $ | - | $ | 19,148 |
| Charge-offs | - | - | (81) | - | - | (109) | - | (190) | ||||||||
| Recoveries | - | - | 32 | - | - | 24 | - | 56 | ||||||||
| Provisions | 170 | 78 | (381) | 5 | 279 | 99 | - | 250 | ||||||||
| Ending balance - September 30, 2023 | $ | 11,898 | $ | 3,153 | $ | 1,511 | $ | 393 | $ | 2,164 | $ | 145 | $ | - | $ | 19,264 |
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| Beginning balance - January 1, 2023 | $ | 10,016 | $ | 3,029 | $ | 2,848 | $ | 347 | $ | 1,000 | $ | 376 | $ | 245 | $ | 17,861 |
| Impact of CECL adoption | 1,106 | 297 | (762) | 17 | 1,347 | (142) | (245) | 1,618 | ||||||||
| Charge-offs | - | - | (110) | - | - | (279) | - | (389) | ||||||||
| Recoveries | - | - | 42 | - | - | 58 | - | 100 | ||||||||
| Provisions | 776 | (173) | (507) | 29 | (183) | 132 | - | 74 | ||||||||
| Ending balance - September 30, 2023 | $ | 11,898 | $ | 3,153 | $ | 1,511 | $ | 393 | $ | 2,164 | $ | 145 | $ | - | $ | 19,264 |
Note 5 - Deposits
Deposits were comprised of the following for the periods presented:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| Noninterest-bearing demand deposits | $ | 463,501 | $ | 500,332 |
| Interest-bearing demand deposits | 509,930 | 524,289 | ||
| Money market | 249,197 | 264,907 | ||
| Savings | 311,958 | 340,134 | ||
| Total demand and savings | 1,534,586 | 1,629,662 | ||
| Time | 256,731 | 232,151 | ||
| Total deposits | $ | 1,791,317 | $ | 1,861,813 |
Time deposits include brokered deposits totaling $1.5 million at September 30, 2024, and none at December 31, 2023.
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Scheduled maturities of time deposits at September 30, 2024 are as follows:
| Time Deposits | ||||
| (In thousands) | Less than $250,000 | $250,000 or more | ||
| Less than 1 year | $ | 183,010 | $ | 44,229 |
| 1 - 2 years | 16,136 | 783 | ||
| 2 - 3 years | 7,589 | - | ||
| 3 - 4 years | 2,764 | - | ||
| 4 - 5 years | 2,130 | - | ||
| Thereafter | 90 | - | ||
| Total time deposits | $ | 211,719 | $ | 45,012 |
Note 6 - Borrowings
Short-term borrowings were comprised of the following for the periods presented:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| Securities sold under repurchase agreements | $ | 37,769 | $ | 26,882 |
| FHLB advance | - | 30,000 | ||
| $ | 37,769 | $ | 56,882 |
Borrowings with original maturities of one year or less are classified as short-term. Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are sweep accounts with next-day maturities utilized by larger commercial customers to earn interest on their funds. Securities are pledged to these customers in an amount at least equal to the outstanding balance. Under an agreement with the FHLB, the Bank has short-term borrowing capacity included within its maximum borrowing capacity. All FHLB advances are collateralized by a security agreement covering qualifying loans. In addition, all FHLB advances are secured by the FHLB capital stock owned by the Bank having a par value of $10.6 million at September 30, 2024. The Bank also has unsecured lines of credit that total $192.0 million with correspondent banks for overnight federal funds borrowings. There were no advances on these lines at September 30, 2024 and December 31, 2023.
Long-term borrowings were comprised of the following for the periods presented:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| FHLB fixed-rate advances maturing: | ||||
| 2026 | $ | 80,000 | $ | 80,000 |
| 2027 | 90,000 | 60,000 | ||
| 2028 | 35,000 | 35,000 | ||
| 2029 | 30,000 | - | ||
|
Trust preferred subordinated debt 1
|
5,322 | 5,292 | ||
| Subordinated debt | 15,000 | 15,000 | ||
| $ | 255,322 | $ | 195,292 |
___________________________
1 Net of purchase accounting fair value mark
The long-term FHLB advances have a weighted average rate of 4.52%, and are collateralized by the assets defined in the security agreement and FHLB capital stock described previously. Based on this collateral and ACNB's holding of FHLB stock, ACNB is eligible to borrow up to $920.1 million, of which $684.0 million was available at September 30, 2024.
The trust preferred subordinated debt is comprised of debt securities issued by FCBI in December 2006 and assumed by ACNB Corporation through the acquisition of FCBI. FCBI completed the private placement of an aggregate of $6.0 million of trust preferred securities. The interest rate on the subordinated debentures is adjusted quarterly to 163 bps over the three-month CME Term SOFR plus applicable tenor spread adjustment. On September 15, 2024, the most recent interest rate reset date, the interest rate was adjusted to 6.84% for the period ending December 15, 2024. The trust preferred securities mature on
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December 15, 2036, and may be redeemed at par, at the Corporation's option, on any interest payment date. The trust preferred subordinated debt is considered Tier 1 capital for the consolidated capital ratios.
On March 30, 2021, the Company entered into Purchase Agreements with the Purchasers pursuant to which the Company sold and issued $15.0 million in aggregate principal amount of its 4.00% fixed-to-floating rate subordinated notes due March 31, 2031. The Subordinated Notes bear interest at a fixed rate of 4.00% per year, from and including March 30, 2021 to, but excluding, March 31, 2026 or earlier redemption date. From and including March 31, 2026 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current 90-day average SOFR plus 329 bps. As provided in the Subordinated Notes, the interest rate on the Subordinated Notes during the applicable floating rate period may be determined based on a rate other than the 90-day average SOFR. The Subordinated Notes were issued by the Corporation to the Purchasers at a price equal to 100% of their face amount. The Subordinated Notes have a stated maturity of March 31, 2031, are redeemable by the Company at its option, in whole or in part, on or after March 30, 2026, and at any time upon the occurrences of certain events. The Subordinated Notes are considered Tier 2 capital for the consolidated capital ratios.
Note 7 - Fair Value Measurements
Fair value is the exchange price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.
Fair value measurement establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 - Quoted prices for similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).
An asset or liability's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
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The following tables present assets measured at fair value and the basis of measurement used at the periods presented:
| September 30, 2024 | |||||||||
| (In thousands) | Basis | Level 1 | Level 2 | Level 3 | Total | ||||
| Equity securities with readily determinable fair values | Recurring | $ | 947 | $ | - | $ | - | $ | 947 |
| AFS Investment Securities: | |||||||||
| U.S. Government and agencies | - | 152,209 | - | 152,209 | |||||
| Collateralized mortgage obligations | - | 38,067 | - | 38,067 | |||||
| Residential mortgage-backed securities | - | 149,068 | - | 149,068 | |||||
| Commercial mortgage-backed securities | - | 62,897 | - | 62,897 | |||||
| Corporate bonds | - | 15,838 | - | 15,838 | |||||
| Total AFS Investment Securities | Recurring | $ | - | $ | 418,079 | $ | - | $ | 418,079 |
| Loans held for sale | Recurring | - | 1,080 | - | 1,080 | ||||
| Individually evaluated loans | Non-recurring | - | - | 262 | 262 | ||||
| Foreclosed assets held for resale | Non-recurring | - | - | 406 | 406 |
| December 31, 2023 | |||||||||
| (In thousands) | Basis | Level 1 | Level 2 | Level 3 | Total | ||||
| Equity securities with readily determinable fair values | Recurring | $ | 928 | $ | - | $ | - | $ | 928 |
| AFS Investment Securities: | |||||||||
| U.S. Government and agencies | - | 156,795 | - | 156,795 | |||||
| Collateralized mortgage obligations | - | 41,084 | - | 41,084 | |||||
| Residential mortgage-backed securities | - | 158,830 | - | 158,830 | |||||
| Commercial mortgage-backed securities | - | 65,290 | - | 65,290 | |||||
| Corporate bonds | - | 29,694 | - | 29,694 | |||||
| Total AFS Investment Securities | Recurring | $ | - | $ | 451,693 | $ | - | $ | 451,693 |
| Loans held for sale | Recurring | - | 280 | - | 280 | ||||
| Individually evaluated loans | Non-recurring | - | - | 242 | 242 | ||||
| Foreclosed assets held for resale | Non-recurring | - | - | 467 | 467 |
The valuation techniques used to measure fair value for the items in the preceding tables are as follows:
Equity securities- The fair value of equity securities with readily determinable fair values is recorded on the Consolidated Statements of Condition, with realized and unrealized gains and losses reported in noninterest income on the Consolidated Statements of Income.
Available for sale investment securities- Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing. Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.
• U.S. Government and agencies- These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
• Collateralized mortgage obligations and Mortgage-backed securities- These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
• Corporate bonds- This category consists of subordinated and senior debt issued by financial institutions and are classified as Level 2 investments. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.
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Loans held for sale- This category includes mortgage loans held for sale that are measured at fair value utilizing Level 2 measurements. Fair values as of September 30, 2024 and December 31, 2023, were measured as the price that secondary market investors were offering for loans with similar characteristics. Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses are recognized through a valuation allowance by charges to income.
Individually evaluated loans- This category consists of loans that were individually evaluated for impairment and have a specific reserve. They are classified as Level 3 assets.
Foreclosed assets held for resale- This category consists of foreclosed assets that are held for resale and classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:
| (Dollars in thousands) | Fair Value Estimate |
Valuation Technique 1
|
Unobservable Input 2
|
Range | Weighted Average | |
| September 30, 2024 | ||||||
| Individually evaluated loans | $ | 262 | Appraisal of collateral | Appraisal adjustments |
(17) - (100)%
|
(81)% |
| Foreclosed assets held for resale | 406 | Appraisal of collateral | Appraisal adjustments | (53) | (53) | |
| December 31, 2023 | ||||||
| Individually evaluated loans | $ | 242 | Appraisal of collateral | Appraisal adjustments |
(33) - (100)%
|
(94)% |
| Foreclosed assets held for resale | 467 | Appraisal of collateral | Appraisal adjustments | (56) | (56) |
_______________________________
1Fair value is generally determined through management's estimate or independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.
2Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, and/or age of the appraisal.
The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation's assets and liabilities. Management uses its best judgment in estimating the fair value of the Corporation's financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation's disclosures and those of other companies may not be meaningful.
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The following tables present the carrying amount and the estimated fair value of the Corporation's financial instruments:
| September 30, 2024 | ||||||||||
| Carrying Amount | Estimated Fair Value | |||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||
| Financial assets: | ||||||||||
| Cash and due from banks | $ | 24,636 | $ | 24,636 | $ | 24,636 | $ | - | $ | - |
| Interest-bearing deposits with banks | 33,456 | 33,456 | 33,456 | - | - | |||||
| Equity securities with readily determinable fair values | 947 | 947 | 947 | - | - | |||||
| Investment securities AFS | 418,079 | 418,079 | - | 418,079 | - | |||||
| Investment securities HTM | 64,578 | 59,038 | - | 59,038 | - | |||||
| Loans held for sale | 1,080 | 1,080 | - | 1,080 | - | |||||
| Loans, net | 1,659,898 | 1,641,479 | - | - | 1,641,479 | |||||
| Accrued interest receivable | 7,987 | 7,987 | - | 7,987 | - | |||||
| Restricted investment in bank stocks | 10,853 | 10,853 | - | 10,853 | - | |||||
| Financial liabilities: | ||||||||||
| Demand deposits, savings, and money markets | $ | 1,534,586 | $ | 1,333,125 | $ | - | $ | 1,333,125 | $ | - |
| Time deposits | 256,731 | 250,936 | - | 250,936 | - | |||||
| Securities sold under repurchase agreements | 37,769 | 40,649 | - | 40,649 | - | |||||
| FHLB Advances | 235,000 | 240,277 | - | 240,277 | - | |||||
| Trust preferred and subordinated debt | 20,322 | 18,372 | - | 18,372 | - | |||||
| Accrued interest payable | 1,531 | 1,531 | - | 1,531 | - |
| December 31, 2023 | ||||||||||
| Carrying Amount | Estimated Fair Value | |||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||
| Financial assets: | ||||||||||
| Cash and due from banks | $ | 21,442 | $ | 21,442 | $ | 7,063 | $ | 14,379 | $ | - |
| Interest-bearing deposits with banks | 44,516 | 44,516 | 44,516 | - | - | |||||
| Equity securities with readily determinable fair values | 928 | 928 | 928 | - | - | |||||
| Investment securities AFS | 451,693 | 451,693 | - | 451,693 | - | |||||
| Investment securities HTM | 64,600 | 59,057 | - | 59,057 | - | |||||
| Loans held for sale | 280 | 280 | - | 280 | - | |||||
| Loans, net | 1,608,019 | 1,562,703 | - | - | 1,562,703 | |||||
| Accrued interest receivable | 8,080 | 8,080 | - | 8,080 | - | |||||
| Restricted investment in bank stocks | 9,677 | 9,677 | - | 9,677 | - | |||||
| Financial liabilities: | ||||||||||
| Demand deposits, savings, and money markets | $ | 1,629,662 | $ | 1,391,709 | $ | - | $ | 1,391,709 | $ | - |
| Time deposits | 232,151 | 221,770 | - | 221,770 | - | |||||
| Securities sold under repurchase agreements | 26,882 | 23,666 | - | 23,666 | - | |||||
| FHLB Advances | 205,000 | 206,950 | - | 206,950 | - | |||||
| Trust preferred and subordinated debt | 20,292 | 16,992 | - | 16,992 | - | |||||
| Accrued interest payable | 794 | 794 | - | 794 | - |
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Note 8 - Retirement Benefits
The components of net periodic benefit income related to the non-contributory, defined benefit pension plan were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||
| Service cost | $ | 107 | $ | 124 | $ | 321 | $ | 372 |
| Interest cost | 373 | 373 | 1,121 | 1,119 | ||||
| Expected return on plan assets | (712) | (663) | (2,136) | (1,989) | ||||
| Amortization of net loss | 20 | 98 | 58 | 294 | ||||
| Net Periodic Benefit Income | $ | (212) | $ | (68) | $ | (636) | $ | (204) |
The Corporation has determined that it will not be contributing to the defined benefit plan in 2024 based on current levels and expected returns on plan assets. Effective April 1, 2012, no inactive or former participant in the plan is eligible to again participate in the plan, and no employee hired after March 31, 2012, is eligible to participate in the plan.
Note 9 - Commitments and Contingencies
Commitments
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit (typically mortgages and commercial loans) and, to a lesser extent, standby letters of credit. To varying degrees, these instruments involve elements of credit and interest rate risk in excess of the amount recognized on the Consolidated Statements of Condition.
The Corporation's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments. The Corporation does not anticipate any material losses from these commitments.
Commitments to extend credit, including commitments to grant loans and unfunded commitments under lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extensions of credit, is based on management's credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property and equipment and income-producing commercial properties. On loans secured by real estate, the Corporation generally requires loan to value ratios of no greater than 80%.
Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements and similar transactions. The terms of the letters of credit vary and may have renewal features. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Corporation generally holds collateral and/or personal guarantees supporting those commitments for which collateral is deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral and the enforcement of guarantees would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.
The Corporation maintains a $5.0 million unsecured line of credit with a correspondent bank. The Corporation guarantees a note related to a $1.5 million commercial line of credit with a correspondent bank, with normal terms and conditions for such a line, for ACNB Insurance Services, the borrower. The commercial line of credit is for general working capital needs as they arise by the ACNB Insurance Services. The liability is recorded for the net drawn amount of this line, no further liability is recorded for the remaining line as to the guarantor's obligation as the guarantor would have full recourse from all assets of its wholly-owned subsidiary. There were no advances on these lines at September 30, 2024 and at December 31, 2023.
The Corporation has not been required to perform on any financial guarantees, and has not incurred any losses on its commitments during the past three years.
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Table of Contents
A summary of the Corporation's commitments were as follows:
| (In thousands) | September 30, 2024 | December 31, 2023 | ||
| Commitments to extend credit | $ | 363,631 | $ | 403,300 |
| Standby letters of credit | 14,362 | 21,029 |
Contingencies
The Corporation is subject to claims and lawsuits which arise primarily in the ordinary course of business. Based on information presently available and advice received from legal counsel representing the Corporation in connection with any such claims and lawsuits, it is the opinion of management that the disposition or ultimate determination of any such claims and lawsuits will not have a material adverse effect on the consolidated financial position, consolidated results of operations or liquidity of the Corporation.
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Table of Contents
Note 10 - Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of taxes, are as follows:
| (In thousands) | Unrealized (Losses) Gains on Securities |
Pension Liability |
Accumulated Other Comprehensive Loss |
|||
| Three Months Ended September 30, 2024 | ||||||
| Balance at July 1, 2024 | $ | (42,472) | $ | (3,927) | $ | (46,399) |
| Unrealized gain on AFS securities, net of tax | 12,334 | - | 12,334 | |||
| Amortization of unrealized losses on securities transferred to HTM, net of tax | 215 | - | 215 | |||
| Amortization of pension net loss, transition liability and prior service cost, net of tax | - | 15 | 15 | |||
| Net current period other comprehensive income | 12,549 | 15 | 12,564 | |||
| Balance at September 30, 2024 | $ | (29,923) | $ | (3,912) | $ | (33,835) |
| Nine Months Ended September 30, 2024 | ||||||
| Balance at December 31, 2023 | $ | (40,952) | $ | (3,957) | $ | (44,909) |
| Unrealized gain on AFS securities, net of tax | 10,331 | - | 10,331 | |||
| Realized gains on securities, net of tax | 53 | - | 53 | |||
| Amortization of unrealized losses on securities transferred to HTM, net of tax | 645 | - | 645 | |||
| Amortization of pension net loss, transition liability and prior service cost, net of tax | - | 45 | 45 | |||
| Net current period other comprehensive income | 11,029 | 45 | 11,074 | |||
| Balance at September 30, 2024 | $ | (29,923) | $ | (3,912) | $ | (33,835) |
| Three Months Ended September 30, 2023 | ||||||
| Balance at July 1, 2023 | $ | (52,946) | $ | (5,106) | $ | (58,052) |
| Unrealized loss on AFS securities, net of tax | (7,033) | - | (7,033) | |||
| Amortization of unrealized losses on securities transferred to HTM, net of tax | 244 | - | 244 | |||
| Amortization of pension net loss, transition liability and prior service cost, net of tax | - | 74 | 74 | |||
| Net current period other comprehensive (loss) income | (6,789) | 74 | (6,715) | |||
| Balance at September 30, 2023 | $ | (59,735) | $ | (5,032) | $ | (64,767) |
| Nine Months Ended September 30, 2023 | ||||||
| Balance at December 31, 2022 | $ | (52,734) | $ | (5,278) | $ | (58,012) |
| Unrealized loss on AFS securities, net of tax | (8,288) | - | (8,288) | |||
| Realized gains on securities, net of tax | 556 | - | 556 | |||
| Amortization of unrealized losses on securities transferred to HTM, net of tax | 731 | - | 731 | |||
| Amortization of pension net loss, transition liability and prior service cost, net of tax | - | 246 | 246 | |||
| Net current period other comprehensive (loss) income | (7,001) | 246 | (6,755) | |||
| Balance at September 30, 2023 | $ | (59,735) | $ | (5,032) | $ | (64,767) |
29
Note 11 - Segment Reporting
The Corporation has two reporting segments, the Bank and ACNB Insurance Services. ACNB Insurance Services is managed separately from the banking segment, which includes the Bank and related financial services that the Corporation offers through its banking subsidiary. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance to both commercial and individual clients.
Segment information as of and for the three month periods ended September 30, 2024 and 2023 is as follows:
| (In thousands) | Banking | Insurance | Total | |||
| 2024 | ||||||
| Interest income and other income from external customers | $ | 31,286 | $ | 2,788 | $ | 34,074 |
| Interest expense | 6,299 | - | 6,299 | |||
| Depreciation and amortization expense | 548 | 196 | 744 | |||
| Income before income taxes | 8,801 | 609 | 9,410 | |||
| Total assets | 2,396,726 | 24,188 | 2,420,914 | |||
| Goodwill | 35,800 | 8,385 | 44,185 | |||
| Capital expenditures | 222 | - | 222 | |||
| 2023 | ||||||
| Interest income and other income from external customers | $ | 28,080 | $ | 2,451 | $ | 30,531 |
| Interest expense | 2,489 | - | 2,489 | |||
| Depreciation and amortization expense | 613 | 212 | 825 | |||
| Income before income taxes | 11,107 | 520 | 11,627 | |||
| Total assets | 2,369,705 | 18,817 | 2,388,522 | |||
| Goodwill | 35,800 | 8,385 | 44,185 | |||
| Capital expenditures | 68 | - | 68 |
Segment information as of and for the nine month periods ended September 30, 2024 and 2023, is as follows:
| (In thousands) | Banking | Insurance | Total | |||
| 2024 | ||||||
| Interest income and other income from external customers | $ | 91,359 | $ | 7,652 | 99,011 | |
| Interest expense | 17,585 | - | 17,585 | |||
| Depreciation and amortization expense | 1,677 | 591 | 2,268 | |||
| Income before income taxes | 30,810 | 1,375 | 32,185 | |||
| Total assets | 2,396,726 | 24,188 | 2,420,914 | |||
| Goodwill | 35,800 | 8,385 | 44,185 | |||
| Capital expenditures | 556 | 31 | 587 | |||
| 2023 | ||||||
| Interest income and other income from external customers | $ | 81,638 | $ | 7,193 | $ | 88,831 |
| Interest expense | 4,529 | - | 4,529 | |||
| Depreciation and amortization | 1,925 | 634 | 2,559 | |||
| Income before income taxes | 33,508 | 1,595 | 35,103 | |||
| Total assets | 2,369,705 | 18,817 | 2,388,522 | |||
| Goodwill | 35,800 | 8,385 | 44,185 | |||
| Capital expenditures | 168 | 6 | 174 |
30
ACNB CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the significant changes in the financial condition, results of operations, comprehensive income, capital resources, and liquidity presented in its accompanying Consolidated Financial Statements for ACNB Corporation, a financial holding company. Please read this discussion in conjunction with the Consolidated Financial Statements and disclosures included herein. Current performance does not guarantee, assure or indicate similar performance in the future.
Forward-Looking Statements
In addition to historical information, this Form 10-Q may contain forward-looking statements. Examples of forward-looking statements include, but are not limited to, (a) projections or statements regarding future earnings, expenses, net interest income, noninterest income, earnings or loss per share, asset mix and quality, growth prospects, capital structure, and other financial terms, (b) statements of plans and objectives of Management or the Board of Directors, and (c) statements of assumptions, such as economic conditions in the Corporation's Market Areas. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "intends", "will", "should", "anticipates", or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy. Forward-looking statements are subject to certain risks and uncertainties such as national, regional and local economic conditions, competitive factors, and regulatory limitations. Actual results may differ materially from those projected in the forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: short-term and long-term effects of inflation and rising costs on the Corporation, customers and economy; legislative and regulatory changes; banking system instability caused by failures and continuing financial uncertainty of various banks which may adversely impact the Corporation and its securities and loan values, deposit stability, capital adequacy, financial condition, operations, liquidity, and results of operations; effects of governmental and fiscal policies, as well as legislative and regulatory changes; effects of new laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) and their application with which the Corporation and its subsidiaries must comply; impacts of the capital and liquidity requirements of the Basel III standards or any similar standards; effects of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters; ineffectiveness of the business strategy due to changes in current or future market conditions; future actions or inactions of the United States government, including the effects of short-term and long-term federal budget and tax negotiations and a failure to increase the government debt limit or a prolonged shutdown of the federal government; effects of economic conditions particularly with regard to the negative impact of any pandemic, epidemic or health-related crisis and the responses thereto on the operations of the Corporation and current customers, specifically the effect of the economy on loan customers' ability to repay loans; effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; inflation, securities market and monetary fluctuations; risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities, and interest rate protection agreements, as well as interest rate risks; difficulties in acquisitions and integrating and operating acquired business operations, including information technology difficulties; challenges in establishing and maintaining operations in new markets; effects of technology changes; effects of general economic conditions and more specifically in the Corporation's Market Areas; failure of assumptions underlying the establishment of reserves for credit losses and estimations of values of collateral and various financial assets and liabilities; acts of war or terrorism or geopolitical instability; disruption of credit and equity markets; ability to manage current levels of impaired assets; loss of certain key officers; ability to maintain the value and image of the Corporation's brand and protect the Corporation's intellectual property rights; continued relationships with major customers; and, potential impacts to the Corporation from continually evolving cybersecurity and other technological risks and attacks, including additional costs, reputational damage, regulatory penalties, and financial losses. Management considers subsequent events occurring after the balance sheet date for matters which may require adjustments to, or disclosure in, the Consolidated Financial Statements. We caution readers not to place undue reliance on these forward-looking statements. They only reflect Management's analysis as of this date. The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances. Please carefully review the risk factors described in other documents the Corporation files from time to time with the SEC, including the Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q. Please also carefully review any Current Reports on Form 8-K filed by the Corporation with the SEC.
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Executive Overview
ACNB Corporation is the financial holding company for the wholly-owned subsidiaries of ACNB Bank and ACNB Insurance Services. ACNB Bank provides a full range of retail and commercial financial services in Pennsylvania and Maryland primarily through its network of 27 community banking offices. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance serving personal and commercial clients through office locations in Westminster and Jarrettsville, Maryland, and Gettysburg, Pennsylvania and is licensed to do business in 46 states.
The primary source of the Corporation's revenues is net interest income derived from interest earned on loans and investments, less deposit and borrowing funding costs. Revenues are influenced by general economic factors, including market interest rates, the economies of the markets served, stock market conditions, as well as competitive forces within the markets. The Corporation also generates revenue through commissions and fees earned on various services and financial products offered to its customers and through gains on sales of assets, such as loans, investments and properties. The Corporation incurs expenses to generate the revenue through provision for credit losses, noninterest expense and income taxes. The Corporation's overall strategy is to increase loan growth in its local markets, while maintaining a reasonable funding base by offering competitive deposit products and services.
The following table presents a summary of the Corporation's earnings and selected performance and asset quality ratios:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (Dollars in thousands, except per share data) | 2024 | 2023 | 2024 | 2023 | ||||
| Net income | $ | 7,204 | $ | 9,044 | $ | 25,251 | $ | 27,591 |
| Diluted earnings per share | $ | 0.84 | $ | 1.06 | $ | 2.96 | $ | 3.23 |
| Cash dividends declared | $ | 0.32 | $ | 0.28 | $ | 0.94 | $ | 0.84 |
| Return on average assets (annualized) | 1.17 | % | 1.52 | % | 1.38 | % | 1.55 | % |
| Return on average equity (annualized) | 9.63 | % | 13.84 | % | 11.79 | % | 14.38 | % |
|
Net interest margin 1
|
3.77 | % | 4.01 | % | 3.79 | % | 4.11 | % |
| Non-performing assets to total assets | 0.29 | % | 0.17 | % | 0.29 | % | 0.17 | % |
| Net charge-offs to average loans outstanding (annualized) | 0.01 | % | 0.03 | % | 0.01 | % | 0.02 | % |
| Allowance for credit losses to total loans, net of unearned income | 1.03 | % | 1.19 | % | 1.03 | % | 1.19 | % |
___________________________________________________
1 Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.
Summary Financial Results
•Net Income- Net income for the three months ended September 30, 2024 was $7.2 million compared to net income of $9.0 million for the same period of the prior year, a decrease of $1.8 million, or 20.3%. Diluted earnings per share for the three months ended September 30, 2024 and 2023 were $0.84 and $1.06, respectively, resulting in a 20.8% decrease. Thedecrease in net income for the three months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by higher noninterest income. Net income for the nine months ended September 30, 2024 was $25.3 million compared to $27.6 million for the same period of the prior year, a decrease of $2.3 million or 8.5%. Diluted earnings per share for the nine months ended September 30, 2024 and 2023 were $2.96 and $3.23, respectively, resulting in an 8.4% decrease. Thedecrease in net income for the nine months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by a reversal of the provision for credit losses and unfunded commitments and an increase in noninterest income.
•Net Interest Income- Net interest income was $20.9 million for the three months ended September 30, 2024 compared to $21.7 million for the same period of 2023, a decrease of $803 thousand, or 3.7%. For the nine months ended September 30, 2024, net interest income was $62.5 million compared to $66.8 million for the same period of the prior year, a decrease of $4.3 million, or 6.5%. The decline in net interest income was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs.
◦Net Interest Margin- The Corporation's FTE net interest margin decreased to 3.77% for the three months ended September 30, 2024 compared to 4.01% in the same period of 2023, a decrease of 24 bps. For the nine months ended September 30, 2024, the net interest margin decreased to 3.79% compared to 4.11% for the same period of the prior year, a decrease of 32 bps.
32
◦Yield on Average Earning Assets - For the three months ended September 30, 2024, the yield on average earning assets was 4.90%, an increase of 44 bps compared to the same period of the prior year, and was 4.84% for the nine months ended September 30, 2024, an increase of 45 bps compared to the same period of the prior year.
◦Loan Growth- Average loans grew $87.2 million, or 5.5%, for the three months ended September 30, 2024 compared to the same period of the prior year. For the nine months ended September 30, 2024, average loans grew $110.3 million, or 7.1%, compared to the same period of the prior year. As described in more detail below, the growth was driven by an increase in the commercial real estate portfolio.
◦Deposit Decline- Average interest-bearing deposits decreased $54.4 million, or 3.9%, for the three months ended September 30, 2024 compared to the same period of the prior year; however, average time deposit balances increased $45.9 million, or 21.6%, due to ongoing promotions. During the same period of 2024, average noninterest-bearing deposits decreased $64.6 million, or 11.9%, compared to the same period of the prior year. For the nine months ended September 30, 2024, average interest-bearing deposits decreased $132.5 million, or 9.0%, and average noninterest-bearing deposits decreased $67.1 million, or 12.2%, compared to the same period of the prior year. Average time deposits, included in average interest-bearing deposits, increased $20.3 million, or 8.6%, for the nine months ended September 30, 2024 compared to the same period in the prior year as a result of ongoing promotions.
•Asset Quality - Asset quality metrics continue to be stable despite increases in non-performing loans during the three months ended September 30, 2024. The provisions for credit losses and unfunded commitments were $81 thousand and $40 thousand, respectively, for the three months ended September 30, 2024 compared to a provision for credit losses of $250 thousand and a $171 thousand reversal of the provision for unfunded commitments for the same period of the prior year. For the nine months ended September 30, 2024, the provisions for credit losses and unfunded commitments were a reversal of $2.7 million and $370 thousand, respectively, compared to a $74 thousand and $226 thousand provisions for credit losses and unfunded commitments, respectively, for the same period of the prior year.
◦Non-performing loans were $6.6 million, or 0.39%, of total loans at September 30, 2024 compared to $3.6 million, or 0.22%, of total loans at September 30, 2023. The increase in non-performing loans was primarily the result of one long-standing commercial relationship in the healthcare industry, comprised of both owner-occupied commercial real estate and commercial and industrial loans.
◦Annualized net charge-offs for the three months ended September 30, 2024 were 0.01% of total average loans compared to 0.03% for the same period of 2023. For the nine months ended September 30, 2024 and 2023 the annualized net charge-offs were 0.01% and 0.02%, respectively, of total average loans.
•Noninterest income- Noninterest income was $6.8 million for the three months ended September 30, 2024 an increase of $536 thousand, or 8.5% from $6.3 million for the same period of 2023. The increase was driven primarily by higher wealth management income, insurance commissions and gain from mortgage loans held for sale compared to the same period of the prior year. For the nine months ended September 30, 2024 noninterest income was $18.9 million and $17.5 million for the same period of the prior year. The increase was driven primarily by higher wealth management income, higher insurance commissions, gain from mortgage loans held for sale and a net gain on sales of securities in the current period compared to a net loss in the same period of 2023.
•Noninterest expenses - Noninterest expenses increased to $18.2 million, or 11.7%, for the three months ended September 30, 2024 compared to $16.3 million in the same period of the prior year. The increase was driven primarily by merger-related expenses, higher salary and employee benefits expense, partially offset by decreases in professional services and marketing and corporate relations. For the nine months ended September 30, 2024, noninterest expenses increased to $52.3 million, or by 6.9%, from $48.9 million in the same period of 2023. The increase was driven primarily by higher salary and employee benefits expense, merger-related expenses, FDIC and regulatory, and other tax, partially offset by decreases in marketing and corporate relations and other.
A more thorough discussion of the Corporation's results of operations and financial condition is included in the following pages.
CRITICAL ACCOUNTING POLICIES
The accounting policies that the Corporation's management deems to be most important to the portrayal of its financial condition and results of operations, and that require management's most difficult, subjective or complex judgment, often result
33
in the need to make estimates about the effect of such matters which are inherently uncertain. The following accounting estimate is deemed to be critical by management:
Allowance for Credit Losses- The ACL represents an amount which, in management's judgment, is adequate to absorb expected credit losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for credit losses, which is recorded as a current period operating expense.
Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management.
Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes in the interest rate environment which may directly impact prepayment and curtailment rate assumption, and changes in the financial condition of borrowers.
RESULTS OF OPERATIONS
Three months ended September 30, 2024 compared to three months ended September 30, 2023
Net income for the three months ended September 30, 2024 was $7.2 million compared to net income of $9.0 million for the same period of the prior year, a decrease of $1.8 million, or 20.3%. Diluted earnings per share for the three months ended September 30, 2024 and 2023 were $0.84 and $1.06, respectively, resulting in a 20.8% decrease. Thedecrease in net income for the three months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by higher noninterest income.
Net Interest Income
Net interest income totaled $20.9 million for the three months ended September 30, 2024 compared to $21.7 million for the same period of the prior year, a decrease of $803 thousand or 3.7%. The FTE net interest margin for the three months ended September 30, 2024 was 3.77%, a 24 bps decrease from 4.01% for the same period of the prior year. The decrease in FTE net interest margin was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 3, "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q. The following table provides a comparative average balance sheet and net interest income analysis for the periods presented. The discussion following this table is based on these taxable-equivalent amounts.
34
| Three Months Ended September 30, | ||||||||||||
| 2024 | 2023 | |||||||||||
| (Dollars in thousands) | Average Balance |
Interest 1
|
Yield/ Rate |
Average Balance |
Interest 1
|
Yield/ Rate |
||||||
| ASSETS | ||||||||||||
| Loans: | ||||||||||||
| Taxable | $ | 1,618,879 | $ | 23,108 | 5.68 | % | $ | 1,520,134 | $ | 20,285 | 5.29 | % |
| Tax-exempt | 62,401 | 394 | 2.51 | 73,995 | 457 | 2.45 | ||||||
|
Total Loans 2
|
1,681,280 | 23,502 | 5.56 | 1,594,129 | 20,742 | 5.16 | ||||||
| Investment Securities: | ||||||||||||
| Taxable | 441,135 | 2,868 | 2.59 | 466,402 | 2,581 | 2.20 | ||||||
| Tax-exempt | 54,549 | 359 | 2.62 | 55,027 | 359 | 2.59 | ||||||
|
Total Investments 3
|
495,684 | 3,227 | 2.59 | 521,429 | 2,940 | 2.24 | ||||||
| Interest-bearing deposits with banks | 48,794 | 670 | 5.46 | 53,324 | 723 | 5.38 | ||||||
| Total Earning Assets | 2,225,758 | 27,399 | 4.90 | 2,168,882 | 24,405 | 4.46 | ||||||
| Cash and due from banks | 21,684 | 23,783 | ||||||||||
| Premises and equipment | 25,716 | 25,980 | ||||||||||
| Other assets | 184,105 | 165,821 | ||||||||||
| Allowance for credit losses | (17,147) | (19,101) | ||||||||||
| Total Assets | $ | 2,440,116 | $ | 2,365,365 | ||||||||
| LIABILITIES | ||||||||||||
| Interest-bearing demand deposits | $ | 518,368 | $ | 552 | 0.42 | % | $ | 571,314 | $ | 185 | 0.13 | % |
| Money markets | 246,653 | 692 | 1.12 | 245,899 | 312 | 0.50 | ||||||
| Savings deposits | 318,291 | 26 | 0.03 | 366,398 | 30 | 0.03 | ||||||
| Time deposits | 258,053 | 1,842 | 2.84 | 212,159 | 401 | 0.75 | ||||||
| Total Interest-Bearing Deposits | 1,341,365 | 3,112 | 0.92 | 1,395,770 | 928 | 0.26 | ||||||
| Short-term borrowings | 38,666 | 204 | 2.10 | 66,942 | 439 | 2.60 | ||||||
| Long-term borrowings | 255,316 | 2,983 | 4.65 | 94,554 | 1,122 | 4.71 | ||||||
| Total Borrowings | 293,982 | 3,187 | 4.31 | 161,496 | 1,561 | 3.83 | ||||||
| Total Interest-Bearing Liabilities | 1,635,347 | 6,299 | 1.53 | 1,557,266 | 2,489 | 0.63 | ||||||
| Noninterest-bearing demand deposits | 477,350 | 541,995 | ||||||||||
| Other liabilities | 29,946 | 6,820 | ||||||||||
| Stockholders' Equity | 297,473 | 259,284 | ||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,440,116 | $ | 2,365,365 | ||||||||
| Taxable Equivalent Net Interest Income | 21,100 | 21,916 | ||||||||||
| Taxable Equivalent Adjustment | (158) | (171) | ||||||||||
| Net Interest Income | $ | 20,942 | $ | 21,745 | ||||||||
| Cost of Funds | 1.19 | % | 0.47 | % | ||||||||
| FTE Net Interest Margin | 3.77 | % | 4.01 | % |
1Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.
2Average balances include non-accrual loans and are net of unearned income.
3Average balance of investment securities is computed at fair value.
35
The following table analyzes the relative impact on FTE net interest income attributed to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates for the three months ended September 30, 2024 compared to the same period in 2023:
| 2024 versus 2023 | ||||||
| (Dollars in thousands) | Volume |
Yield/Rate 1
|
Net | |||
| INTEREST EARNING ASSETS | ||||||
| Loans | ||||||
| Taxable | $ | 1,313 | $ | 1,510 | $ | 2,823 |
| Tax-exempt | (71) | 8 | (63) | |||
|
Total Loans 2
|
1,242 | 1,518 | 2,760 | |||
| Securities | ||||||
| Taxable securities | (140) | 427 | 287 | |||
| Tax-exempt securities | (3) | 3 | - | |||
| Total Securities | (143) | 430 | 287 | |||
| Interest-bearing deposits with banks | (61) | 8 | (53) | |||
| Total | $ | 1,038 | $ | 1,956 | $ | 2,994 |
| INTEREST BEARING LIABILITIES | ||||||
| Interest bearing demand deposits | $ | (17) | $ | 384 | $ | 367 |
| Money markets | 1 | 379 | 380 | |||
| Savings deposits | (4) | - | (4) | |||
| Time deposits | 87 | 1,354 | 1,441 | |||
| Total Interest-Bearing Deposits | 67 | 2,117 | 2,184 | |||
| Short-term borrowings | (185) | (50) | (235) | |||
| Long-term borrowings | 1,903 | (42) | 1,861 | |||
| Total Borrowings | 1,718 | (92) | 1,626 | |||
| Total | 1,785 | 2,025 | 3,810 | |||
| Change in Net Interest Income | $ | (747) | $ | (69) | $ | (816) |
______________________________
1The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column.
2Based on average balances and includes non-accrual loans and are net of unearned income.
Total FTE interest income increased $3.0 million, or 12.3%, during the three months ended September 30, 2024 compared to the same period of the prior year. ACNB experienced a $2.0 million increase in FTE interest income due to an increase in the yield on interest earning assets and $1.0 million attributable to an increase in the average balance of interest earning assets. FTE interest income on total loans increased $2.8 million, or 13.3%, compared to the same period of 2023. The yield on total loans increased 40 bps, contributing $1.5 million to the increase. Average loans increased $87.2 million, or 5.5%, contributing $1.2 million to the increase in FTE interest income. FTE interest income on investment securities increased $287 thousand, or 9.8%, driven by a higher yield on investment securities partially offset by a lower volume of investment securities. FTE interest income on interest-bearing deposits with banks declined $53 thousand, or 7.3%, attributable to lower average balances of interest-bearing cash used to fund loan growth and deposit outflows offset slightly by a higher interest rate environment.
Total interest expense increased $3.8 million, or 153.1%, during the three months ended September 30, 2024 compared to the same period of the prior year. Total average interest-bearing deposits decreased $54.4 million, or 3.9%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023; however, average time deposit balances increased $45.9 million, or 21.6%, due to ongoing promotions. Interest expense increased $2.1 million due to higher rates on interest-bearing deposits. The cost of interest-bearing deposits was 0.92% for the three months ended September 30, 2024, an increase of 66 bps from the three months ended September 30, 2023. The largest increases in rates were in time deposits and money markets which increased 209 and 62 bps, respectively. Total average borrowings increased $132.5 million, or 82.0%, for the three months ended September 30, 2024 compared to the same period of the prior year, contributing $1.7 million to the increase in interest expense.
36
Provision for Credit Losses and Unfunded Commitments
The provisions for credit losses and unfunded commitments were $81 thousand and $40 thousand, respectively, for the three months ended September 30, 2024, compared to a provision for credit losses of $250 thousand and a reversal of unfunded commitments of $171 thousand for the same period of the prior year. The determination of the provisions was a result of the analysis of the adequacy of the ACL and unfunded commitments calculations. Each quarter, the Corporation assesses risks and reserves required compared with the balances in the allowance for credit losses and unfunded commitments.
Noninterest Income
The following table presents the components of noninterest income:
| Three Months Ended September 30, | Increase (Decrease) | |||||||
| (In thousands) | 2024 | 2023 | $ | % | ||||
| NONINTEREST INCOME | ||||||||
| Insurance commissions | $ | 2,787 | $ | 2,629 | $ | 158 | 6.0 | % |
| Service charges on deposits | 1,048 | 1,000 | 48 | 4.8 | ||||
| Wealth management | 1,188 | 953 | 235 | 24.7 | ||||
| ATM debit card charges | 828 | 845 | (17) | (2.0) | ||||
| Earnings on investment in bank-owned life insurance | 503 | 473 | 30 | 6.3 | ||||
| Gain from mortgage loans held for sale | 112 | - | 112 | 100.0 | ||||
| Net gains (losses) on equity securities | 28 | (27) | 55 | 203.7 | ||||
| Gain on assets held for sale | - | 14 | (14) | (100.0) | ||||
| Other | 339 | 410 | (71) | (17.3) | ||||
| Total Noninterest Income | $ | 6,833 | $ | 6,297 | $ | 536 | 8.5 | % |
Total noninterest income was $6.8 million for the three months ended September 30, 2024 compared to $6.3 million for the same period of the prior year, a $536 thousand, or 8.5%, increase. The more significant fluctuations by category are explained below:
•Insurance commissions increased $158 thousand, or 6.0%, compared to the same period of the prior year driven primarily by growth in commissions on policy renewals and new business.
•Wealth management income for the three months ended September 30, 2024 increased $235 thousand, or 24.7%, compared to the same period of the prior year driven primarily by portfolio market appreciation, estate income and new business generation.
•Gain from mortgage loans held for sale totaled $112 thousand compared to none in the same period of the prior year.
•Net gains on equity securities totaled $28 thousand compared to losses of $27 thousand in the same period of the prior year.
37
Noninterest Expenses
The following table presents the components of noninterest expense:
| Three Months Ended September 30, | Increase (Decrease) | |||||||
| (In thousands) | 2024 | 2023 | $ | % | ||||
| NONINTEREST EXPENSES | ||||||||
| Salaries and employee benefits | $ | 11,017 | $ | 10,069 | $ | 948 | 9.4 | % |
| Equipment | 1,698 | 1,554 | 144 | 9.3 | ||||
| Net occupancy | 945 | 942 | 3 | 0.3 | ||||
| Professional services | 409 | 617 | (208) | (33.7) | ||||
| FDIC and regulatory | 365 | 388 | (23) | (5.9) | ||||
| Other tax | 360 | 323 | 37 | 11.5 | ||||
| Intangible assets amortization | 304 | 352 | (48) | (13.6) | ||||
| Supplies and postage | 236 | 229 | 7 | 3.1 | ||||
| Marketing and corporate relations | 99 | 159 | (60) | (37.7) | ||||
| Merger-related | 1,137 | - | 1,137 | 100.0 | ||||
| Other | 1,674 | 1,703 | (29) | (1.7) | ||||
| Total Noninterest Expenses | $ | 18,244 | $ | 16,336 | $ | 1,908 | 11.7 | % |
Noninterest expenses totaled $18.2 million during the three months ended September 30, 2024, an 11.7% increase compared to the same period of the prior year. The more significant fluctuations by category are explained below:
•Salaries and employee benefits, the largest component of noninterest expenses, increased 9.4% during the three months ended September 30, 2024 to $11.0 million compared to $10.1 million in the same period of the prior year. The increase was driven primarily by higher employee health insurance expense and higher base wages.
•Equipment expenses increased $144 thousand, or 9.3%, driven primarily by higher core system processing expenses and incremental purchases of office equipment.
•Professional services decreased $208 thousand, or 33.7%, driven primarily by lower recruiting expenses for talent acquisition and consulting expenses.
•Marketing and corporate relations decreased $60 thousand, or 37.7%, driven primarily by rebranding expenses incurred for the Bank's Maryland banking locations during the same period of the prior year.
•Merger-related expenses included legal, external accounting, loan review and advisory fees incurred for the Traditions acquisition. The acquisition was reported on Form 8-K filed with the SEC on July 24, 2024.
Provision for Income Taxes
The Corporation recognized income taxes of $2.2 million during the three months ended September 30, 2024 compared to $2.6 million during the same period of the prior year. The provision for income taxes for the three months ended September 30, 2024 reflects a combined Federal and State ETR of 23.4% compared to an ETR of 22.2% for the same period of the prior year. Any variances from the federal statutory rate of 21% are generally due to tax-free income, which includes interest income on tax-free loans and investment securities and income from bank-owned life insurance policies, federal income tax credits, and the impact of non-tax deductible expense. Additionally, ACNB has incurred non-deductible costs related to the pending acquisition of Traditions Bank which are recorded within merger-related costs on the Consolidated Statements of Income.
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
Net income for the nine months ended September 30, 2024 was $25.3 million compared to $27.6 million for the same period of the prior year, a decrease of $2.3 million or 8.5%. Diluted earnings per share for the nine months ended September 30, 2024 and 2023 were $2.96 and $3.23, respectively, resulting in an 8.4% decrease. Thedecrease in net income for the nine months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including
38
merger-related expenses, partially offset by a reversal of the provision for credit losses and unfunded commitments and an increase in noninterest income.
Net Interest Income
Net interest income totaled $62.5 million for the nine months ended September 30, 2024 compared to $66.8 million for the same period of the prior year, a decrease of $4.3 million, or 6.5%. The FTE net interest margin for the nine months ended September 30, 2024 was 3.79%, a 32 bps decrease from 4.11% for the same period of the prior year. The decrease in FTE net interest margin was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 3, "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q. The following table provides a comparative average balance sheet and net interest income analysis for the periods presented. The discussion following this table is based on these taxable-equivalent amounts.
39
| Nine Months Ended September 30, | ||||||||||||
| 2024 | 2023 | |||||||||||
| (Dollars in thousands) | Average Balance |
Interest 1
|
Yield/ Rate |
Average Balance |
Interest 1
|
Yield/ Rate |
||||||
| ASSETS | ||||||||||||
| Loans: | ||||||||||||
| Taxable | $ | 1,601,520 | $ | 67,253 | 5.61 | % | $ | 1,479,690 | $ | 58,130 | 5.25 | % |
| Tax-exempt | 64,161 | 1,194 | 2.49 | 75,657 | 1,353 | 2.39 | ||||||
|
Total Loans 2
|
1,665,681 | 68,447 | 5.49 | 1,555,347 | 59,483 | 5.11 | ||||||
| Investment Securities: | ||||||||||||
| Taxable | 450,297 | 8,932 | 2.65 | 507,061 | 8,647 | 2.28 | ||||||
| Tax-exempt | 54,644 | 1,078 | 2.64 | 55,307 | 1,118 | 2.70 | ||||||
|
Total Investments 3
|
504,941 | 10,010 | 2.65 | 562,368 | 9,765 | 2.32 | ||||||
| Interest-bearing deposits with banks | 51,258 | 2,104 | 5.48 | 71,645 | 2,627 | 4.90 | ||||||
| Total Earning Assets | 2,221,880 | 80,561 | 4.84 | 2,189,360 | 71,875 | 4.39 | ||||||
| Cash and due from banks | 21,091 | 30,891 | ||||||||||
| Premises and equipment | 25,939 | 26,415 | ||||||||||
| Other assets | 186,330 | 159,544 | ||||||||||
| Allowance for credit losses | (19,071) | (18,807) | ||||||||||
| Total Assets | $ | 2,436,169 | $ | 2,387,403 | ||||||||
| LIABILITIES | ||||||||||||
| Interest-bearing demand deposits | $ | 514,757 | $ | 1,092 | 0.28 | % | $ | 580,180 | $ | 690 | 0.16 | % |
| Money markets | 247,710 | 1,841 | 0.99 | 276,154 | 277 | 0.13 | ||||||
| Savings deposits | 326,895 | 84 | 0.03 | 385,753 | 94 | 0.03 | ||||||
| Time deposits | 255,203 | 4,898 | 2.56 | 234,951 | 826 | 0.47 | ||||||
| Total Interest-Bearing Deposits | 1,344,565 | 7,915 | 0.79 | 1,477,038 | 1,887 | 0.17 | ||||||
| Short-term borrowings | 40,993 | 847 | 2.76 | 47,852 | 564 | 1.58 | ||||||
| Long-term borrowings | 253,116 | 8,823 | 4.66 | 58,333 | 2,078 | 4.76 | ||||||
| Total Borrowings | 294,109 | 9,670 | 4.39 | 106,185 | 2,642 | 3.33 | ||||||
| Total Interest-Bearing Liabilities | 1,638,674 | 17,585 | 1.43 | 1,583,223 | 4,529 | 0.38 | ||||||
| Noninterest-bearing demand deposits | 483,095 | 550,206 | ||||||||||
| Other liabilities | 28,406 | (2,552) | ||||||||||
| Stockholders' Equity | 285,994 | 256,526 | ||||||||||
| Total Liabilities and Stockholders' Equity | $ | 2,436,169 | $ | 2,387,403 | ||||||||
| Taxable Equivalent Net Interest Income | 62,976 | 67,346 | ||||||||||
| Taxable Equivalent Adjustment | (477) | (519) | ||||||||||
| Net Interest Income | $ | 62,499 | $ | 66,827 | ||||||||
| Cost of Funds | 1.11 | % | 0.28 | % | ||||||||
| FTE Net Interest Margin | 3.79 | % | 4.11 | % |
1Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.
2Average balances include non-accrual loans and are net of unearned income.
3Average balance of investment securities is computed at fair value.
40
The following table analyzes the relative impact on FTE net interest income attributed to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates for the nine months ended September 30, 2024compared to the same period in 2023:
| 2024 versus 2023 | ||||||
| (Dollars in thousands) | Volume |
Yield/Rate 1
|
Net | |||
| INTEREST EARNING ASSETS | ||||||
| Loans | ||||||
| Taxable | $ | 4,788 | $ | 4,335 | $ | 9,123 |
| Tax-exempt | (206) | 47 | (159) | |||
|
Total Loans 2
|
4,582 | 4,382 | 8,964 | |||
| Securities | ||||||
| Taxable securities | (969) | 1,254 | 285 | |||
| Tax-exempt securities | (13) | (27) | (40) | |||
| Total Securities | (982) | 1,227 | 245 | |||
| Interest-bearing deposits with banks | (748) | 225 | (523) | |||
| Total | $ | 2,852 | $ | 5,834 | $ | 8,686 |
| INTEREST BEARING LIABILITIES | ||||||
| Interest bearing demand deposits | $ | (78) | $ | 480 | $ | 402 |
| Money markets | (28) | 1,592 | 1,564 | |||
| Savings deposits | (13) | 3 | (10) | |||
| Time deposits | 71 | 4,001 | 4,072 | |||
| Total Interest-Bearing Deposits | (48) | 6,076 | 6,028 | |||
| Short-term borrowings | (81) | 364 | 283 | |||
| Long-term borrowings | 6,941 | (196) | 6,745 | |||
| Total Borrowings | 6,860 | 168 | 7,028 | |||
| Total | 6,812 | 6,244 | 13,056 | |||
| Change in Net Interest Income | $ | (3,960) | $ | (410) | $ | (4,370) |
______________________________
1The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column.
2Based on average balances and includes non-accrual loans and are net of unearned income.
Total FTE interest income increased $8.7 million, or 12.1%, during the nine months ended September 30, 2024 compared to the same period of the prior year. ACNB experienced a $5.8 million increase in FTE interest income due to an increase in the yield on interest earning assets and a $2.9 million increase attributable to higher volume. Average loans increased $110.3 million, or 7.1%, contributing $4.6 million to the increase in FTE interest income. The average yield on loans increased 38 bps, contributing $4.4 million to the increase in FTE interest income. FTE interest income on investment securities increased $245 thousand driven primarily by a higher yield on investment securities partially offset by a lower volume of investment securities. FTE interest income on interest-bearing deposits with banks declined $523 thousand, or 19.9%, attributable to lower average balances of interest-bearing cash used to fund loan growth and deposit outflows offset slightly by a higher interest rate environment.
Total interest expense increased $13.1 million, or 288.3%, during the nine months ended September 30, 2024 compared to the same period of the prior year. The increase was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs. Total average borrowings increased $187.9 million, or 177.0%, for the nine months ended September 30, 2024 compared to the same period of the prior year, contributing $6.9 million to the increase in interest expense. Total average interest-bearing deposits decreased $132.5 million, or 9.0%, for the nine months ended September 30, 2024 compared to the same period of the prior year; however, average time deposit balances increased $20.3 million, or 8.6%, due to ongoing promotions. The average cost of interest-bearing deposits increased 62 bps for the nine months ended September 30, 2024 compared to the same period of the prior year, contributing $6.1 million to interest expense. The largest increases in rates were in time deposits and money markets which increased 209 and 86 bps, respectively.
41
Provision for Credit Losses and Unfunded Commitments
During the nine months ended September 30, 2024, there were reversals of $2.7 million and $370 thousand for the provisions for credit losses and for unfunded commitments, respectively, compared to provisions for credit losses and unfunded commitments of $74 thousand and $226 thousand, respectively, for the same period of the prior year. During the nine months ended September 30, 2024, the Corporation revised estimates driven by a realignment of the peer group used for the CECL allowance process, an update to loss driver factors from third-party data, and an update to the application of prepayment and curtailment rate studies since implementation of CECL on January 1, 2023. These estimates, which were based on more current information available as of June 30, 2024, drove input assumptions which were used in the determination of the Corporation's allowance for credit losses and the reserve for unfunded commitments. These updated estimates were the primary drivers in the decrease in the provision for credit losses and unfunded commitments for the nine months ended September 30, 2024 compared to the same period of the prior year. Each quarter, the Corporation assesses risks and reserves required compared with the balances in the allowance for credit losses and unfunded commitments.
Noninterest Income
The following table presents the components of noninterest income:
| Nine Months Ended September 30, | Increase (Decrease) | |||||||
| (In thousands) | 2024 | 2023 | $ | % | ||||
| NONINTEREST INCOME | ||||||||
| Insurance commissions | $ | 7,649 | $ | 7,371 | $ | 278 | 3.8 | % |
| Service charges on deposits | 3,060 | 2,951 | 109 | 3.7 | ||||
| Wealth management | 3,219 | 2,772 | 447 | 16.1 | ||||
| ATM debit card charges | 2,488 | 2,502 | (14) | (0.6) | ||||
| Earnings on investment in bank-owned life insurance | 1,473 | 1,399 | 74 | 5.3 | ||||
| Gain from mortgage loans held for sale | 194 | 31 | 163 | 525.8 | ||||
| Net gains (losses) on sales or calls of securities | 69 | (739) | 808 | 109.3 | ||||
| Net gains (losses) on equity securities | 19 | (22) | 41 | 186.4 | ||||
| Gain on assets held for sale | - | 337 | (337) | (100.0) | ||||
| Other | 756 | 873 | (117) | (13.4) | ||||
| Total Noninterest Income | $ | 18,927 | $ | 17,475 | $ | 1,452 | 8.3 | % |
Total noninterest income was $18.9 million for nine months ended September 30, 2024 compared to $17.5 million for the same period of 2023, a $1.5 million, or 8.3%, increase. The more significant fluctuations by category are explained below:
•Insurance commissions increased $278 thousand, or 3.8%, compared to the same period of the prior year driven primarily by growth in commissions on policy renewals and new business, partially offset by lower contingent income.
•Wealth management income for the nine months ended September 30, 2024 increased $447 thousand, or 16.1%, compared to the same period of the prior year driven primarily by portfolio market appreciation, estate income and new business generation.
•Net gains (losses) on sales or calls of securities increased $808 thousand as a result of a gain of $69 thousand for the nine months ended September 30, 2024 compared to a loss of $739 thousand in the same period of the prior year.
•There were no gains on assets held for sale for nine months ended September 30, 2024 compared to $337 thousand for the same period of the prior year as a result of the sale of three community banking offices in the prior year.
42
Noninterest Expenses
The following table presents the components of noninterest expense:
| Nine Months Ended September 30, | Increase (Decrease) | |||||||
| (In thousands) | 2024 | 2023 | $ | % | ||||
| NONINTEREST EXPENSES | ||||||||
| Salaries and employee benefits | $ | 32,611 | $ | 30,335 | $ | 2,276 | 7.5 | % |
| Equipment | 4,997 | 4,784 | 213 | 4.5 | ||||
| Net occupancy | 3,066 | 2,981 | 85 | 2.9 | ||||
| Professional services | 1,554 | 1,600 | (46) | (2.9) | ||||
| FDIC and regulatory | 1,088 | 932 | 156 | 16.7 | ||||
| Other tax | 1,086 | 965 | 121 | 12.5 | ||||
| Intangible assets amortization | 940 | 1,072 | (132) | (12.3) | ||||
| Supplies and postage | 610 | 633 | (23) | (3.6) | ||||
| Marketing and corporate relations | 275 | 472 | (197) | (41.7) | ||||
| Merger-related | 1,160 | - | 1,160 | 100.0 | ||||
| Other | 4,910 | 5,125 | (215) | (4.2) | ||||
| Total Noninterest Expenses | $ | 52,297 | $ | 48,899 | $ | 3,398 | 6.9 | % |
Noninterest expenses totaled $52.3 million during the nine months ended September 30, 2024, a 6.9% increase compared to the same period of 2023. The more significant fluctuations by category are explained below:
•Salaries and employee benefits, the largest component of noninterest expenses, increased $2.3 million, or 7.5%, to $32.6 million for the nine months ended September 30, 2024. The increase was driven primarily by higher base wages, employee health insurance expense and incentive payment accruals.
•Professional services decreased $46 thousand, or 2.9%, driven primarily by lower legal fees, timing of internal audit expenses and lower recruiting expenses for talent acquisition.
•FDIC and regulatory increased $156 thousand, or 16.7%, as a result of a higher FDIC assessment rate for 2024.
•Marketing and corporate relations decreased $197 thousand, or 41.7%, driven primarily by the rebranding expenses incurred for the Bank's Maryland banking locations during the same period of the prior year.
•Other noninterest expense decreased $215 thousand, or 4.2%, driven primarily by decreases in third-party vendors costs and a loss related to the write-off of a limited partnership investment in the prior year.
•Merger-related expenses included legal, external auditing, loan review and advisory fees incurred for the Traditions acquisition.
Provision for Income Taxes
The Corporation recognized income taxes of $6.9 million for the nine months ended September 30, 2024 compared to $7.5 million during the same period of the prior year. The provision for income taxes for the nine months ended September 30, 2024 reflects a combined Federal and State ETR of 21.5% compared to an ETR of 21.4% for the same period of the prior year. Any variances from the federal statutory rate of 21% are generally due to tax-free income, which includes interest income on tax-free loans and investment securities and income from life insurance policies, federal income tax credits, and the impact of non-tax deductible expense. Additionally, ACNB has incurred non-deductible costs related to the pending acquisition of Traditions Bank which are recorded within merger-related costs on the Consolidated Statements of Income.
43
FINANCIAL CONDITION
Assets totaled $2.42 billion at both September 30, 2024 and December 31, 2023.
Investment Securities
ACNB uses investment securities to manage interest rate risk, provide collateral for certain funding products, provide liquidity and generate interest and dividend income. The investment portfolio is comprised of U.S. Government and agencies, mortgage-backed, state and municipal, and corporate securities. These securities provide the appropriate characteristics with respect to credit quality, yield and maturity relative to the management of the overall balance sheet.
Total investment securities were $483.6 million at September 30, 2024 compared to $517.2 million at December 31, 2023, a decrease of 6.5%. The Corporation sold securities and allowed the portfolio to naturally cash flow to support loan growth and offset deposit outflows during the first nine months of 2024 as a result of general balance sheet management. At September 30, 2024, the securities balance included a net unrealized loss on AFS securities of $36.8 million on amortized cost of $454.9 million compared to a net unrealized loss of $50.2 million on amortized cost of $501.9 million at December 31, 2023. At September 30, 2024, the securities balance included HTM securities with an amortized cost of $64.6 million and a fair value of $59.0 million as compared to an amortized cost of $64.6 million and a fair value of $59.1 million at December 31, 2023.
The Corporation does not own investments consisting of pools of Alt-A or subprime mortgages, private label mortgage-backed securities, or trust preferred investments.
Loans
The following table presents the composition of the loan portfolio as follows:
| Increase (Decrease) | ||||||||
| (In thousands) | September 30, 2024 | December 31, 2023 | $ | % | ||||
| Commercial real estate | $ | 957,904 | $ | 898,709 | $ | 59,195 | 6.6 | % |
| Residential mortgage | 397,994 | 394,189 | 3,805 | 1.0 | ||||
| Commercial and industrial | 152,148 | 152,344 | (196) | (0.1) | ||||
| Home equity lines of credit | 84,316 | 90,163 | (5,847) | (6.5) | ||||
| Real estate construction | 75,953 | 84,341 | (8,388) | (9.9) | ||||
| Consumer | 9,773 | 9,954 | (181) | (1.8) | ||||
| Gross loans | 1,678,088 | 1,629,700 | 48,388 | 3.0 | ||||
| Unearned income | (976) | (1,712) | 736 | 43.0 | ||||
| Total Loans, Net of Unearned Income | $ | 1,677,112 | $ | 1,627,988 | $ | 49,124 | 3.0 | % |
Total loans, net of unearned income, outstanding increased $49.1 million, or 3.0%, from December 31, 2023 to September 30, 2024. The increase was driven by growth in the commercial real estate portfolio. The growth in the commercial real estate portfolio was spread throughout ACNB's geographic footprint and across various property types. The collateral for these loans is primarily spread across our Pennsylvania and Maryland market areas. Despite the intense competition in the Corporation's Market Areas, management continues to focus on asset quality and disciplined underwriting standards in the loan origination process. ACNB does not have a significant concentration of credit risk with any single borrower, industry or geographic location. Most of the Corporation's lending activities are with customers located within the Bank's Market Area.
The commercial real estate portfolio grew $59.2 million, or 6.6%, in 2024. The collateral for these loans is primarily spread across Pennsylvania and Maryland, 55.6% and 42.8%, respectively, at September 30, 2024, compared to 53.1% and 44.5%, respectively, at September 30, 2023. Less than 3% of the portfolio is for real estate in Urban areas such as Baltimore, Maryland and Philadelphia, Pennsylvania. The largest sectors of the commercial real estate portfolio are retail and mixed-use commercial rental units, office complexes and hotels, motels and bed and breakfast entities. Non-owner occupied commercial real estate represented 61.7% of the commercial real estate portfolio. Non-owner occupied commercial real estate borrowers are geographically dispersed throughout ACNB's Market Area and are leasing commercial properties to a varied group of tenants including medical offices, retail space, and other commercial purpose facilities. Because of the varied nature of the tenants, in aggregate, management believes that these loans present an acceptable risk when compared to commercial loans in general.
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The following chart details the percentage of the various categories included in the portfolio:
___________________________________________
1 Constitutes over 40 loan categories that do not fit into the categories presented above
The concentration of non-owner occupied commercial real estate, construction, and multi-family was 206.4% of total capital of the Bank as of September 30, 2024.
Allowance for Credit Losses and Asset Quality
The ACL at September 30, 2024 was $17.2 million, or 1.03% of total loans, net of unearned income as compared to $20.0 million, or 1.23% of loans, at December 31, 2023 and $19.3 million, or 1.19% of loans, at September 30, 2023.
Changes in the ACL were as follows for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | ||||
| Beginning balance | $ | 17,162 | $ | 19,148 | $ | 19,969 | $ | 17,861 |
| Impact of CECL adoption | - | - | - | 1,618 | ||||
| Provision for (reversal of) credit losses | 81 | 250 | (2,686) | 74 | ||||
| Loans charged-off | (51) | (190) | (163) | (389) | ||||
| Recoveries on charged-off loans | 22 | 56 | 94 | 100 | ||||
| Ending balance | $ | 17,214 | $ | 19,264 | $ | 17,214 | $ | 19,264 |
| Net charge-offs to average loans (annualized) | 0.01 | % | 0.03 | % | 0.01 | % | 0.02 | % |
Loans greater than or equal to 90 days past due and accruing were $438 thousand as of September 30, 2024 and $1.2 million as of December 31, 2023. Nonaccrual loans totaled $6.1 million and $3.0 million as of September 30, 2024 and December 31, 2023, respectively. Nonaccrual loans increased $3.7 million during the three months ended September 30, 2024 primarily the result of one long-standing commercial relationship in the healthcare industry, comprised of both owner-occupied commercial real estate and commercial and industrial loans. The ratio of non-performing assets to total assets was 0.29% at September 30, 2024 compared to 0.19% at December 31, 2023 and 0.17% at September 30, 2023.
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Information on nonaccrual loans, by collateral type rather than loan segment, at September 30, 2024, as compared to December 31, 2023, is as follows:
| (Dollars in thousands) |
Number of Credit Relationships |
Balance |
Current Specific Loss Allocations |
Current Year Charge-Offs |
Location | Originated | |||
| September 30, 2024 | |||||||||
| Owner occupied commercial real estate | 6 | $ | 3,606 | $ | 138 | $ | - | In market | 2006-2022 |
| Commercial and industrial | 4 | 2,359 | 905 | - | In market | 2009-2023 | |||
| Home equity lines of credit | 1 | 168 | - | - | In market | 2009 | |||
| Total | 11 | $ | 6,133 | $ | 1,043 | $ | - | ||
| December 31, 2023 | |||||||||
| Owner occupied commercial real estate | 7 | $ | 1,822 | $ | 175 | $ | - | In market | 2006-2019 |
| Commercial and industrial | 4 | 1,004 | 901 | - | In market | 2014-2021 | |||
| Home equity lines of credit | 1 | 185 | - | - | In market | 2009 | |||
| Total | 12 | $ | 3,011 | $ | 1,076 | $ | - |
All nonaccrual loans are to borrowers located within ACNB's Market Area and were originated by ACNB's banking subsidiary.
Deposits
Deposits were comprised of the following for the periods presented:
| Increase (Decrease) | ||||||||
| (In thousands) | September 30, 2024 | December 31, 2023 | $ | % | ||||
| Noninterest-bearing demand deposits | $ | 463,501 | $ | 500,332 | $ | (36,831) | (7.4) | % |
| Interest-bearing demand deposits | 509,930 | 524,289 | (14,359) | (2.7) | ||||
| Money market | 249,197 | 264,907 | (15,710) | (5.9) | ||||
| Savings | 311,958 | 340,134 | (28,176) | (8.3) | ||||
| Total demand and savings | 1,534,586 | 1,629,662 | (95,076) | (5.8) | ||||
| Time | 256,731 | 232,151 | 24,580 | 10.6 | ||||
| Total deposits | $ | 1,791,317 | $ | 1,861,813 | $ | (70,496) | (3.8) | % |
ACNB relies on deposits as a primary source of funds for lending activities with total deposits of $1.79 billion as of September 30, 2024. Deposits decreased by $70.5 million, or 3.8%, from December 31, 2023 to September 30, 2024 driven primarily by an outflow of municipal deposits. Historically, deposit balances fluctuate reflecting different balance levels held by local companies, government units and school districts during different times of the year. Included in total deposits at September 30, 2024 were municipal deposits totaling $137.4 million, or 7.7%, compared to $176.6 million, or 9.5%, at December 31, 2023. Time deposits increased $24.6 million, or 10.6%, as a result of ongoing deposit promotions that occurred during the first nine months of 2024. Time deposits include brokered deposits totaling $1.5 million at September 30, 2024 and none at December 31, 2023. The loan-to-deposit ratio was 93.62% at September 30, 2024 compared to 87.44% at December 31, 2023.
ACNB's deposit pricing function employs a disciplined pricing approach based upon liquidity needs and alternative funding rates, but also strives to price deposits to be competitive with relevant local competition, including local government investment trusts, credit unions and larger regional banks. Interest-bearing deposit costs for the nine months ended September 30, 2024 were 0.79% compared to 0.17% for the same period of the prior year. The increase in the interest-bearing costs was driven by ongoing deposit promotions that occurred during the first nine months of 2024. Based on total Bank deposits outstanding, consumer and commercial constituted approximately 58% and 42%, respectively, of total Bank deposits as of September 30, 2024. The ratio of uninsured and non-collateralized Bank deposits to total Bank deposits was approximately 19% at
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September 30, 2024. As of September 30, 2024, cash on hand, the fair value of unencumbered investment securities and collateralized borrowing capacities at the FHLB and the Federal Reserve discount window at the Bank were 310.5% of uninsured and non-collateralized Bank deposits. At September 30, 2024, deposits from the 20 largest unrelated depositors, excluding internal accounts, of the Bank totaled $166.3 million, or 9.2%, of total Bank deposits compared to $192.7 million, or 10.3%, of total Bank deposits at December 31, 2023.
Borrowings
Short-term borrowings are comprised primarily of securities sold under agreements to repurchase and short-term borrowings from the FHLB. As of September 30, 2024, short-term borrowings were $37.8 million, a decrease of $19.1 million, or 33.6%, compared to $56.9 million at December 31, 2023. Agreements to repurchase accounts are within the commercial and local government customer base and have attributes similar to core deposits. Investment securities are pledged in sufficient amounts to collateralize these agreements. Compared to December 31, 2023, securities sold under repurchase agreements balances increased by $10.9 million, or 40.5%, due to normal changes in the cash flow position of ACNB's commercial and local government customer base. There were no short-term FHLB borrowings at September 30, 2024 compared to $30.0 million at December 31, 2023. Short-term FHLB borrowings are used to supplement Bank funding from seasonal and daily fluctuations in the deposit base. A $25.0 million short-term FHLB borrowing was paid off during the quarter.
Long-term borrowings consist of longer-term advances from the FHLB, trust preferred subordinated debt and subordinated debt. Long-term borrowings totaled $255.3 million at September 30, 2024 compared to $195.3 million at December 31, 2023. During the first nine months of 2024, the bank borrowed $60.0 million from the FHLB at a weighted average fixed rate of 4.30% for a weighted average term of 4.00 years to fund deposit outflows and loan growth. Further borrowings will be used when necessary for a variety of risk management and funding purposes. Please refer to the Liquiditydiscussion below for more information on the Corporation's ability to borrow.
Capital
ACNB's capital management strategies have been developed to provide an appropriate rate of return, in the opinion of management, to shareholders, while maintaining levels above its internal minimums and "well-capitalized" regulatory position in relationship to its risk exposure. Total stockholders' equity was $306.8 million at September 30, 2024 compared to $277.5 million at December 31, 2023. The primary source of additional capital to ACNB is earnings retention, which represents net income less dividends declared and common stock repurchases. During the first nine months of 2024, ACNB retained $17.3 million, or 68.4%, of its net income compared to $20.4 million, or 74.1%, for the same period of 2023. Cash dividends paid to ACNB Corporation stockholders during the first nine months of 2024 totaled $8.0 million, or $0.94 per common share. The dividend payout ratio was 31.64% for the first nine months of 2024. Comparatively, during the first nine months of 2023, ACNB paid cash dividends of $7.2 million, or $0.84 per common share and the dividend payout ratio was 25.94%.
ACNB Corporation has a Dividend Reinvestment and Stock Purchase Plan that provides registered holders of ACNB Corporation common stock with a convenient way to purchase additional shares of common stock by permitting participants in the plan to automatically reinvest cash dividends on all or a portion of the shares owned and to make quarterly voluntary cash payments under the terms of the plan. Participation in the plan is voluntary, and there are eligibility requirements to participate in the plan. During the nine months ended September 30, 2024, 16,590 shares were issued under this plan with proceeds in the amount of $597 thousand and during the nine months September 30, 2023, 16,580 shares were issued under this plan with proceeds in the amount of $543 thousand.
On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a new plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares of the Corporation's common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. As of September 30, 2024, 67,908 shares of common stock have been repurchased under this new plan.
Regulatory Capital
The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation's Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-
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balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Minimum regulatory capital requirements established by Basel III rules require the Corporation and the Bank to:
•Meet a minimum Tier 1 leverage capital ratio of 4.0% of average assets;
•Meet a minimum Common Equity Tier 1 capital ratio of 4.5% of risk-weighted assets;
•Meet a minimum Tier 1 capital ratio of 6.0% of risk-weighted assets;
•Meet a minimum Total capital ratio of 8.0% of risk-weighted assets;
•Maintain a "capital conservation buffer" of 2.5% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus; and,
•Comply with the definition of capital to improve the ability of regulatory capital instruments to absorb losses.
The capital ratios are as follows:
| Actual |
For Capital Adequacy Purposes 1
|
To Be Well Capitalized
Under Prompt
Corrective Action
Regulations 2
|
||||
| September 30, 2024 | ||||||
| Tier 1 Leverage Capital (to average assets) | ||||||
| ACNB Corporation | 12.46 | % | 4.00 | % | N/A | |
| ACNB Bank | 11.82 | % | 4.00 | % | 5.00 | % |
| Common Equity Tier 1 Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 16.07 | % | 4.50 | % | N/A | |
| ACNB Bank | 15.71 | % | 4.50 | % | 6.50 | % |
| Tier 1 Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 16.36 | % | 6.00 | % | N/A | |
| ACNB Bank | 15.71 | % | 6.00 | % | 8.00 | % |
| Total Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 18.15 | % | 8.00 | % | N/A | |
| ACNB Bank | 16.69 | % | 8.00 | % | 10.00 | % |
| December 31, 2023 | ||||||
| Tier 1 Leverage Capital (to average assets) | ||||||
| ACNB Corporation | 11.57 | % | 4.00 | % | N/A | |
| ACNB Bank | 11.12 | % | 4.00 | % | 5.00 | % |
| Common Equity Tier 1 Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 15.16 | % | 4.50 | % | N/A | |
| ACNB Bank | 14.86 | % | 4.50 | % | 6.50 | % |
| Tier 1 Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 15.46 | % | 6.00 | % | N/A | |
| ACNB Bank | 14.86 | % | 6.00 | % | 8.00 | % |
| Total Capital (to risk-weighted assets) | ||||||
| ACNB Corporation | 17.41 | % | 8.00 | % | N/A | |
| ACNB Bank | 15.99 | % | 8.00 | % | 10.00 | % |
___________________________
1 Ratios do not include capital conservation buffer.
2N/A - Not applicable as "well capitalized" applies only to banks.
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Liquidity
Effective liquidity management ensures the cash flow requirements of depositors and borrowers as well as the operating cash needs of ACNB are met. ACNB's funds are available from a variety of sources, including assets that are readily convertible such as interest-bearing deposits with banks, maturities and repayments from the securities portfolio, scheduled repayments of loans receivable, the core deposit base, the ability to raise brokered deposits, and the ability to borrow from the FHLB, Federal Reserve Discount Window and unsecured Federal Funds line providers.
At September 30, 2024, ACNB's banking subsidiary had borrowing capacity of approximately $920.1 million from the FHLB, of which $684.0 million was available. At September 30, 2024, ACNB's banking subsidiary could borrow approximately $65.1 million from the Discount Window, of which the full amount was available. The underlying collateral at the Discount Window is made up of eligible loan collateral held in a joint-custody account under the Bank's name.
ACNB's banking subsidiary maintains several unsecured Fed Funds lines with correspondent banks. As of September 30, 2024, Fed Funds line capacity at the banking subsidiary was $192.0 million, of which the full amount was available. ACNB Corporation maintains a $5.0 million unsecured line of credit with a correspondent bank, all of which was available for borrowing as of September 30, 2024. The Corporation also executed a guaranty for a note related to a $1.5 million commercial line of credit from a local bank, with customary terms and conditions for such a line, for ACNB Insurance Services, the borrower and a wholly-owned subsidiary of ACNB Corporation. The commercial line of credit is for general working capital needs as they arise by ACNB Insurance Services and did not have any outstanding balance as of September 30, 2024.
Another source of liquidity is securities sold under repurchase agreements to customers of ACNB's banking subsidiary totaling approximately $37.8 million and $26.9 million at September 30, 2024, and December 31, 2023, respectively. These agreements vary in balance according to the cash flow needs of customers and competing accounts at other financial organizations.
The liquidity of the parent company also represents an important aspect of liquidity management. The parent company's cash outflows consist principally of dividends to shareholders and corporate expenses. The main source of funding for the parent company is the dividends it receives from its subsidiaries. Federal and state banking regulations place certain legal restrictions and other practicable safety and soundness restrictions on dividends paid to the parent company from the subsidiary bank.
ACNB manages liquidity by monitoring projected cash inflows and outflows on a daily basis, and believes it has sufficient funding sources to maintain sufficient liquidity under varying degrees of business conditions for liquidity and capital resource requirements for all material short- and long-term cash requirements from known contractual and other obligations.
Off-Balance Sheet Arrangements
The Corporation is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and, to a lesser extent, standby letters of credit. At September 30, 2024, the Corporation had unfunded outstanding commitments to extend credit of $363.6 million and outstanding standby letters of credit of $14.4 million. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of ACNB's ALCO, with direct oversight from the board of directors, is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition and duration, market risk exposures arising from changing economic conditions, and liquidity risk.
Market risk comprises exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks. Specific to the banking industry, one of the greatest risk exposures is to that of changing market interest rates. The primary objective of monitoring ACNB's interest rate sensitivity risk is to provide management the flexibility necessary to manage the balance sheet to minimize adverse changes in net interest income as a result of changes in the direction and level of interest rates. FOMC monetary policy, economic uncertainty, and fiscal policy changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years.
ACNB's ALCO is a management committee responsible for monitoring and managing interest rate risk within approved policy limits utilizing earnings sensitivity simulation and economic value-at-risk models. These models are highly dependent on
49
various assumptions, which change regularly as the balance sheet composition and market interest rates change. The key assumptions and strategies employed are analyzed, reviewed and documented at least annually by the ALCO as well as provided to the Board.
Interest Rate Risk
Interest rate risk is the exposure to fluctuations in the Bank's future earnings (earnings at risk) and value (value at risk) resulting from changes in interest rates. This exposure results from differences between the amounts of interest-earning assets and interest-bearing liabilities that reprice within a specified time period as a result of scheduled maturities, scheduled and unscheduled repayments, the propensity of borrowers and depositors to react to changes in their economic interests, and contractual loan interest rate changes.
Management attempts to manage the level of repricing and maturity mismatch through its asset/liability management processes so that fluctuations in net interest income are maintained within policy limits across a range of market conditions while satisfying liquidity and capital requirements. Management recognizes that a certain amount of interest rate risk is inherent, appropriate, and necessary to ensure the Bank's profitability. Thus, the goal of the Bank's interest rate risk management is to minimize the fluctuations of net interest income across all interest rate scenarios.
Management endeavors to control the exposure to changes in interest rates by understanding, reviewing, and making decisions based on its risk position. The Bank primarily uses its securities portfolio, FHLB advances and brokered deposits to manage its interest rate risk position. Additionally, pricing, promotion, and product development activities are directed in an effort to emphasize the loan and deposit repricing characteristics that best meet current interest rate risk objectives.
ACNB uses simulation analysis to assess earnings at risk and net present value analysis to assess value at risk. These methods allow management to regularly monitor both the direction and magnitude of its interest rate risk exposure. These analyses require numerous assumptions including, but are not limited to, changes in balance sheet mix, prepayment rates on loans and securities, cash flows and repricing of all financial instruments, changes in volumes and pricing, future shapes of the yield curve, relationship of market interest rates to each other (basis risk), credit spread, and deposit sensitivity. Assumptions are based on management's best estimates, but may not accurately reflect actual results under certain changes in interest rates due to the timing, magnitude, and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and providing a relative gauge of the Corporation's interest rate risk position over time.
ACNB's ALCO operates under management policies, approved by the board of directors, which define guidelines and limits on the level of risk. The ALCO committee meets regularly and reviews its interest rate risk position and monitors various liquidity ratios to ensure a satisfactory liquidity position. By utilizing the analyses, management can determine changes that may need to be made to the asset and liability mixes to mitigate the change in net interest income under various interest rate scenarios. Management continually evaluates the condition of the economy, the pattern of market interest rates, and other economic data to inform the committee. Regulatory authorities also monitor the Corporation's interest rate risk position along with other liquidity ratios.
Net Interest Income Sensitivity
Simulation analysis evaluates the effect of upward and downward changes in market interest rates on future net interest income. The analysis involves changing the interest rates used in determining net interest income over the next twelve months. The resulting percentage change in net interest income in various rate scenarios is an indication of Corporation's short-term interest rate risk. The analysis assumes recent pricing trends in new loan and deposit volumes will continue while balances remain constant. Additional assumptions are applied to modify pricing under the various rate scenarios.
The simulation analysis results are presented in the table below. At September 30, 2024, results in the falling interest rate scenario project a decrease in net interest income. The Bank is currently modestly asset-sensitive according to the model as interest-earning assets are expected to reprice faster than interest-bearing liabilities.
Economic Value
Net present value analysis provides information on the risk inherent in the balance sheet that might not be considered in the simulation analysis due to the short time horizon used. The net present value of the balance sheet incorporates the discounted present value of expected asset cash flows minus the discounted present value of expected liability cash flows. The analysis involves changing the interest rates used in determining the expected cash flows and in discounting the cash flows. The
50
resulting percentage change in net present value in various rate scenarios is an indication of the longer-term repricing risk and options embedded in the balance sheet.
The results at September 30, 2024 and December 31, 2023 are reflected below. Funding cost and repricing speed will continue to be a factor in the results of the model. The behavior of the business and retail clients also varies across the rate scenarios, which is reflected in the results. To improve comparability across periods, the Bank strives to follow best practices related to the assumption setting and maintains the size and mix of the period end balance sheet; thus, the results do not reflect actions management may take through the normal course of business that would impact results.
| 12-Month Earnings at Risk Ramps | ||||||
| % Change in Net Interest Income | ||||||
| Change in Market Interest Rates (bps) | September 30, 2024 | December 31, 2023 | Policy Limits | |||
| (200) | (1.6) | % | (2.9) | % | (10.0) | % |
| (100) | (1.5) | % | (1.6) | % | (5.0) | % |
| 100 | 1.1 | % | 0.3 | % | (5.0) | % |
| 200 | 1.3 | % | 0.4 | % | (10.0) | % |
| Value at Risk Ramps | |||||
| % Change in Market Value | |||||
| Change in Market Interest Rates (bps) | September 30, 2024 | December 31, 2023 | Policy Limits | ||
| (200) | (19.0) | % | (17.8) | % | (35.0)% |
| (100) | (7.6) | % | (6.4) | % | (20.0)% |
| 100 | 2.2 | % | 1.9 | % | (20.0)% |
| 200 | 1.2 | % | 1.1 | % | (35.0)% |
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in periodic SEC filings.
Disclosure controls and procedures are Corporation controls and other procedures that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.
There were no changes in the Corporation's internal control over financial reporting during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
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PART II - OTHER INFORMATION
ACNB CORPORATION
ITEM 1 - LEGAL PROCEEDINGS
As of September 30, 2024, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which ACNB or its subsidiaries are a party or by which any of their assets are the subject, which could have a material adverse effect on ACNB or its subsidiaries or their results of operations. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation or its subsidiaries by governmental authorities.
ITEM 1A - RISK FACTORS
In addition to the risk factors previously disclosed in Part I, Item 1A. Risk Factors of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023, management has identified the following additional risk factors:
RISKS RELATING TO THE MERGER OF TRADITIONS BANCORP, INC. INTO ACNB CORPORATION
ACNB INCURRED AND WILL CONTINUE TO INCUR SIGNIFICANT TRANSACTION AND MERGER-RELATED COSTS IN CONNECTION WITH THE MERGER.
ACNB incurred and expects to continue to incur costs associated with combining the operations of the two companies. ACNB is formulating and executing on detailed integration plans to deliver planned synergies. Additional unanticipated costs may be incurred in the integration of the businesses of ACNB and Traditions. Whether or not the merger is consummated, ACNB will incur substantial expenses, such as financial advisory, legal, accounting, printing, and contract termination fees, in pursuing the merger. Although ACNB expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.
SOME OF THE CONDITIONS TO CLOSING OF THE MERGER MAY RESULT IN DELAY OR PREVENT COMPLETION OF THE MERGER, WHICH MAY ADVERSELY AFFECT THE VALUE OF ACNB'S SECURITIES.
Completion of the merger is conditioned upon the receipt of approvals by ACNB and Traditions shareholders, certain governmental consents and approvals, including consents and approvals required by the Federal Reserve Board, FDIC, and Pennsylvania Department of Banking and Securities. Failure to obtain these approvals and consents would prevent consummation of the merger. Even if the approvals are obtained, the effort involved may delay consummation of the merger. Governmental authorities may also impose conditions in connection with the merger that may adversely affect the combined company's operations after the merger. However, ACNB is not required to take any action or agree to any condition or restriction in connection with obtaining any approvals that would reasonably be expected to have a material adverse effect on ACNB or the combined company.
THE MERGER MAY DISTRACT ACNB'S MANAGEMENT TEAM FROM THEIR OTHER RESPONSIBILITIES.
The merger could cause the management of ACNB to focus their time and energies on matters related to the merger that otherwise would be directed to the Corporation's business and operations. Any such distraction on the part of management, if significant, could affect management's ability to service existing business, develop new business, and adversely affect the combined company's business and earnings following the merger.
IF THE MERGER IS NOT COMPLETED, ACNB WILL HAVE INCURRED SUBSTANTIAL EXPENSES WITHOUT REALIZING THE EXPECTED BENEFITS.
ACNB will incur substantial expenses in connection with the merger. The completion of the merger depends on the satisfaction of specified conditions and the receipt of regulatory approvals. ACNB cannot guarantee that these conditions will be met. If the merger is not completed, these expenses could have a material adverse impact on the financial condition of ACNB because it would not have realized the expected benefits from the merger.
In addition, if the merger is not completed, ACNB may experience negative reactions from the financial markets and from their respective customers and employees. ACNB also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against ACNB to perform its obligations under the reorganization agreement. If the merger is not completed, ACNB cannot assure its shareholders that the risks described above will not materialize and will not materially affect the business, financial results, and stock price of ACNB.
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LITIGATION AGAINST ACNB OR TRADITIONS, OR THE MEMBERS OF ACNB OR TRADITIONS BOARD OF DIRECTORS, COULD PREVENT OR DELAY THE COMPLETION OF THE MERGER.
While ACNB and Traditions believe that any claims that may be asserted by purported shareholder plaintiffs related to the merger would be without merit, the results of any such potential legal proceedings are difficult to predict and such legal proceedings could delay or prevent the merger from being completed in a timely manner. If litigation were to be commenced related to the merger, such litigation could affect the likelihood of obtaining the required approvals from ACNB shareholders and Traditions shareholders. Moreover, any litigation could be time consuming and expensive, and could divert the attention of the management of ACNB and Traditions away from their regular business. Any lawsuit adversely resolved against the ACNB, Traditions, or members of ACNB or Traditions board of directors could have a material adverse effect on each party's business, financial condition, results of operations and future prospects.
POST-MERGER INTEGRATION AND CHANGE OF ACNB'S HISTORICAL BUSINESS MODEL MAY FAIL TO ACHIEVE EXPECTED RESULTS.
The success of the transaction depends heavily on a smooth integration and post-merger operations of the combined company. Benefits of the transaction to shareholders may not be realized if the post-merger integration is not well executed or well received by each company's historical customers.
ACNB MAY FAIL TO REALIZE THE COST SAVINGS IT EXPECTS TO ACHIEVE FROM THE MERGER.
The success of the merger will depend, in part, on ACNB's ability to realize the estimated cost savings from combining the businesses of ACNB and Traditions. While ACNB believes that the cost savings estimates are achievable, it is possible that the potential cost savings could be more difficult to achieve than ACNB anticipates. ACNB's cost savings estimates also depend on its ability to combine the businesses of ACNB and Traditions in a manner that permits those cost savings to be realized. If ACNB's estimates are incorrect or it is unable to combine the two companies successfully, the anticipated cost savings may not be realized fully or at all, or may take longer to realize than expected.
COMBINING ACNB AND TRADITIONS MAY BE MORE DIFFICULT, COSTLY, OR TIME-CONSUMING THAN EXPECTED.
ACNB and Traditions have operated and, until the completion of the merger, will continue to operate independently. The integration process could result in the loss of key employees, disruption of each company's ongoing business, and inconsistencies in standards, controls, procedures and policies that adversely affect either company's ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. As with any merger of financial institutions, there also may be disruptions that cause ACNB and Traditions to lose customers or cause customers to withdraw their deposits from ACNB or Traditions, or have other unintended consequences, that could have a material adverse effect on ACNB's financial condition and results of operations.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On May 5, 2009, shareholders approved and adopted the amendment to the Articles of Incorporation of ACNB Corporation to authorize up to 20,000,000 shares of preferred stock, par value $2.50 per share. As of September 30, 2024, there were no issued or outstanding shares of preferred stock.
On May 1, 2018, shareholders approved and ratified the ACNB Corporation 2018 Omnibus Stock Incentive Plan, effective as of March 20, 2018, in which awards shall not exceed, in the aggregate, 400,000 shares of common stock, plus any shares that were authorized, but not issued, under the ACNB Corporation 2009 Restricted Stock Plan. As of September 30, 2024, there were 138,019 shares issued under this plan. The maximum number of shares that may yet be granted under this plan is 436,036. The Corporation's Registration Statement under the Securities Act of 1933 on Form S-8 for the ACNB Corporation 2018 Omnibus Stock Incentive Plan was filed with the Securities and Exchange Commission on March 8, 2019. In addition, on March 8, 2019, the Corporation filed Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 for the ACNB Corporation 2009 Restricted Stock Plan to add the ACNB Corporation 2018 Omnibus Stock Incentive Plan to the registration statement to reflect that the remaining unissued shares under the 2009 Restricted Stock Plan may instead be issued under the 2018 Omnibus Stock Incentive Plan.
On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a new plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares of the Corporation's common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. There were 2,642 shares repurchased during the three months ended September 30, 2024. As of September 30, 2024, 67,908 shares of common stock had been repurchased under this plan.
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Following is a summary of the Corporation's purchases of common stock during the third quarter of 2024:
| Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plan | Maximum number of shares that may yet be purchased under the plan | |||
| July 1 - July 31, 2024 | - | $ | - | - | 65,266 | 190,309 |
| August 1 - August 31, 2024 | 2,583 | $ | 38.59 | (39) | 67,849 | 187,726 |
| September 1 - September 31, 2024 | 59 | $ | 38.99 | (39) | 67,908 | 187,667 |
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES -NOTHING TO REPORT.
ITEM 4 - MINE SAFETY DISCLOSURES -NOT APPLICABLE.
ITEM 5 - OTHER INFORMATION
During the three months ended September 30, 2024, no director or officer of the Corporation adopted or terminated a "Rule 10b5-1 trading agreement" or a "non-Rule 10b5-1 trading agreement" as each term is defined in Item 408(a) of Regulation S-K.
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ITEM 6 - EXHIBITS
The following exhibits are included in this report:
| Exhibit 2.1 | ||
| Exhibit 2.2 | ||
| Exhibit 2.3 | ||
| Exhibit 2.4 | ||
| Exhibit 3(i) | ||
| Exhibit 3(ii) | ||
| Exhibit 4.1 | ||
| Exhibit 10.1 | ||
| Exhibit 10.2 | ||
| Exhibit 10.3 | ||
| Exhibit 10.4 | ||
| Exhibit 10.5 | ||
| Exhibit 10.6 | ||
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| Exhibit 10.7 | |
| Exhibit 10.8 | |
| Exhibit 10.9 | |
| Exhibit 10.10 | |
| Exhibit 10.11 | |
| Exhibit 10.12 | |
| Exhibit 10.13 | |
| Exhibit 10.14 | |
| Exhibit 10.15 | |
| Exhibit 10.16 | |
| Exhibit 10.17 | |
| Exhibit 10.18 | |
| Exhibit 10.19 | |
| Exhibit 10.20 | |
| Exhibit 10.21 | |
| Exhibit 10.22 | |
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| Exhibit 10.23 | ||
| Exhibit 10.24 | ||
| Exhibit 10.25 | ||
| Exhibit 10.26 | ||
| Exhibit 10.27 | ||
| Exhibit 10.28 | ||
| Exhibit 10.29 | ||
| Exhibit 10.30 | ||
| Exhibit 10.31 | ||
| Exhibit 31.1 |
Chief Executive Officer Certification of Quarterly Report on Form 10-Q.
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| Exhibit 31.2 |
Chief Financial Officer Certification of Quarterly Report on Form 10-Q.
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| Exhibit 32.1 |
Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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| Exhibit 32.2 |
Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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| Exhibit 101.LAB | XBRL Taxonomy Extension Label Linkbase. | |
| Exhibit 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. | |
| Exhibit 101.INS | XBRL Instance Document - The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| Exhibit 101.SCH | XBRL Taxonomy Extension Schema. | |
| Exhibit 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |
| Exhibit 101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |
| Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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ACNB CORPORATION(Registrant)
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| Date: | November 7, 2024 | /s/ James P. Helt | |
| James P. Helt | |||
| President & Chief Executive Officer | |||
| /s/ Jason H. Weber | |||
| Jason H. Weber | |||
| Executive Vice President/Treasurer & | |||
| Chief Financial Officer (Principal Financial Officer) |
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