ACNB Corporation Reports 2020 Third Quarter Financial Results

Irene L. Joffman

Third Quarter and Year-To-Date Highlights

  • Net income for the three months ended September 30, 2020, totaled $6,771,000, which is an increase of $461,000 or 7.3% over comparable period results for the three months ended September 30, 2019. Basic earnings per share was $0.79 and $0.89 for the three months ended September 30, 2020 and 2019, respectively.
  • Net income for the nine months ended September 30, 2020, totaled $11,345,000, with basic earnings per share of $1.32. This reflects a decrease of $7,295,000 or 39.1% below comparable period results for the nine months ended September 30, 2019, and is due primarily to one-time merger-related expenses of $5,965,000 and a higher provision for loan losses of $8,100,000 as a result of a previously-reported, large unanticipated charge-off of one loan relationship during the first quarter of 2020 and the increased risk due to the Coronavirus Disease 2019 (COVID-19) pandemic. Without the nonrecurring expenses related to the acquisition of FCBI, as well as the corresponding tax impact at the marginal tax rate, net income (non-GAAP) would have been $15,918,000, or $1.85 basic earnings per share, for the nine months ended September 30, 2020.
  • Effective January 11, 2020, ACNB Corporation acquired Frederick County Bancorp, Inc. (FCBI) and its wholly-owned subsidiary, Frederick County Bank, headquartered in Frederick, MD, with systems conversions completed in March 2020. This transaction resulted in the addition of $443,425,000 in assets, $329,312,000 in loans, $374,058,000 in deposits, $22,528,000 in goodwill, and $57,280,000 in equity to ACNB Corporation’s balance sheet.
  • ACNB Corporation responded to, and continues to address, the impact of the COVID-19 pandemic with a focused and responsive plan to meet the needs of the Corporation’s customers and communities, as well as to maintain a high level of operational performance while protecting valued staff members. Due to COVID-19 customer impacts, as of June 30, 2020, ACNB Bank reported approved loan modifications and deferrals for 466 loans totaling $234,600,000 in principal balances, representing 13.5% of the total loan portfolio. As of September 30, 2020, ACNB Bank has outstanding approvals for loan modifications and deferrals for 65 loans totaling $64,800,000 in principal balances, representing 3.8% of the total loan portfolio. 
  • Net interest income for the nine months ended September 30, 2020, totaled $54,166,000, which is an increase of $9,486,000 or 21.2% over comparable period results for the nine months ended September 30, 2019, and an indication of the strength of ACNB Corporation’s community banking model including strategic inorganic growth.
  • Total loans outstanding were $1,700,883,000 at September 30, 2020, as compared to $1,288,285,000 at September 30, 2019, for an increase of 32.0% including loans acquired from FCBI of $329,312,000 and Paycheck Protection Program (PPP) loans originated of $160,857,603.   
  • Total deposits were $2,115,576,000 at September 30, 2020, as compared to $1,417,610,000 at September 30, 2019, for an increase of 49.2% including deposits acquired from FCBI of $374,058,000.
  • Quarterly cash dividends paid to ACNB Corporation shareholders in the first nine months of 2020 totaled $6,509,000 or $0.75 per share. It was recently announced the cash dividend declared for the fourth quarter of 2020 is $0.25 per share—resulting in a total of $1.00 per share to be paid to ACNB Corporation shareholders for the year of 2020, an increase over the $0.98 per share paid for the year of 2019.

GETTYSBURG, Pa, Oct. 28, 2020 (GLOBE NEWSWIRE) — ACNB Corporation (NASDAQ: ACNB), financial holding company for ACNB Bank and Russell Insurance Group, Inc., announced financial results for the three months ended September 30, 2020, with net income of $6,771,000. Compared to net income of $6,310,000 for the three months ended September 30, 2019, this is an increase of $461,000 or 7.3% over comparable period results, primarily due to higher net interest income. Basic earnings per share was $0.79 and $0.89 for the three months ended September 30, 2020 and 2019, respectively, which is a decrease of $0.10 or 11.2%.

The Corporation reported net income of $11,345,000 for the nine months ended September 30, 2020. Compared to net income of $18,640,000 for the nine months ended September 30, 2019, this is a decrease of $7,295,000 or 39.1% below comparable period results. Basic earnings per share was $1.32 and $2.64 for the nine months ended September 30, 2020 and 2019, respectively, which is a decrease of $1.32 or 50.0%. These results are primarily attributable to one-time merger-related expenses of $5,965,000 and a higher provision for loan losses of $8,100,000 as a result of a previously-reported, large unanticipated charge-off of one loan relationship during the first quarter of 2020 and the increased risk due to the COVID-19 pandemic. Without the nonrecurring expenses related to the acquisition of FCBI, as well as the corresponding tax impact at the marginal tax rate, net income (non-GAAP) would have been $15,918,000, or $1.85 basic earnings per share, for the nine months ended September 30, 2020.

“The year of 2020 has been unprecedented and challenging for the financial services industry due to the COVID-19 pandemic. ACNB Corporation is no exception, but proved resilient in responding to customer and community needs during this ongoing health crisis. This is only possible due to the steadfast commitment and dedication of the staff members at ACNB Corporation’s subsidiaries, ACNB Bank and Russell Insurance Group, Inc.,” said James P. Helt, ACNB Corporation President & Chief Executive Officer. “Financially, this pandemic has taken its toll on the economy with many businesses struggling and unemployment rates still elevated in the Corporation’s Pennsylvania and Maryland markets. However, customer requests for loan modifications and deferrals have improved, which is an encouraging sign.”

Mr. Helt continued, “As we approach the end of 2020, there is still uncertainty on the health, political and economic fronts. At ACNB Corporation, we are looking ahead to 2021 and planning for the future founded upon our vision to be the independent financial services provider of choice in the core markets served by building relationships and finding solutions. This vision has proven trustworthy in the past as ACNB Corporation faced difficult times and made hard decisions over the decades. This time is no different, as we take deliberate steps forward for the benefit of customers, employees, shareholders and the many communities served throughout our footprint.”

Revenues

Total revenues, defined as net interest income plus noninterest income, for the first three quarters of 2020 were $68,237,000, or a 16.9% increase over total revenues of $58,381,000 for the first three quarters of 2019. Total interest income for the first nine months of 2020 was $63,818,000, or an increase of 22.6%, as compared to total interest income of $52,037,000 for the first nine months of 2019.

Loans

Total loans outstanding were $1,700,883,000 at September 30, 2020. Loans outstanding increased by $428,282,000, or 33.7%, from December 31, 2019, and by $412,598,000, or 32.0%, from September 30, 2019 to September 30, 2020, including $329,312,000 in loans acquired through FCBI. Loan growth is largely attributable to the FCBI acquisition, net of selling new residential mortgages in the secondary market and early payoffs of loans, as well as active participation in the Small Business Administration’s Paycheck Protection Program. Year over year, organic loan growth is primarily in the commercial loan portfolio with a focus on asset quality and disciplined underwriting standards despite the intense competition in the Corporation’s market areas. As a result of the previously-reported, large unanticipated charge-off of one loan relationship and increased risk from COVID-19, combined with normal and anticipated credit losses in the portfolio, the provision for loan losses for the first nine months of 2020 was $8,100,000.

Deposits

Total deposits were $2,115,576,000 at September 30, 2020. Deposits increased by $703,316,000, or 49.8%, from December 31, 2019, and by $697,966,000, or 49.2%, from September 30, 2019 to September 30, 2020, including $374,058,000 in deposits acquired through FCBI. Year over year, organic deposit growth is largely attributable to PPP proceeds deposited to customer accounts and increased balances in a broad base of accounts from a lack of economic activity due to COVID-19.

Net Interest Income and Margin

Net interest income rose by $9,486,000 to $54,166,000 for the first nine months of 2020, which is an increase of 21.2% compared to the first nine months of 2019. The net interest margin for the first nine months of 2020 was 3.42%, compared to 3.87% for the same period of 2019. Both net interest income and the net interest margin were impacted by lower market yields in the first nine months of 2020. The lower market yields negatively affected the net interest margin as new loans replaced paydowns on existing loans and variable rate loans reset to new current rates.

Noninterest Income

Noninterest income for the first nine months of 2020 was $14,071,000, an increase of $370,000, or 2.7%, from the first nine months of 2019. The increase includes revenue from wealth management activities, which grew 7.7% from the first nine months of 2019 to the first nine months of 2020.

Noninterest Expense

Noninterest expense for the first nine months of 2020 was $46,222,000, an increase of $11,302,000, or 32.4%, from the same period in 2019. Nonrecurring acquisition and integration expenses related to the acquisition of FCBI were $5,965,000 for the first nine months of 2020. Salaries and employee benefits expense increased by $4,237,000 from the first nine months of 2019, which is primarily attributable to higher staffing levels from the FCBI acquisition and additional staff hired to support revenue generation across all business lines.

Dividends

Quarterly cash dividends paid to ACNB Corporation shareholders in the first nine months of 2020 totaled $6,509,000, or $0.75 per share. In the first nine months of 2019, ACNB Corporation paid $0.73 per share for total dividends paid to shareholders in the amount of $5,151,000. When comparing the first nine months of 2019 to the first nine months of 2020, the increase in total dividends paid is also a result of the addition of new shareholders from the FCBI acquisition in January 2020.

COVID-19 Pandemic

As previously reported, ACNB Corporation implemented numerous initiatives to support and protect employees and customers during the COVID-19 pandemic. These efforts continue as the organization responds to changes in the operating environment with varying levels of business activity in its regions of operation in Pennsylvania and Maryland. Current information and guidelines related to ACNB Bank’s ongoing COVID-19 initiatives and communications are available at acnb.com. As of June 30, 2020, ACNB Bank reported approved loan modifications and deferrals for 466 loans totaling $234,600,000 in principal balances, representing 13.5% of the total loan portfolio. As of September 30, 2020, ACNB Bank has outstanding approvals for loan modifications and deferrals for 65 loans totaling $64,800,000 in principal balances, representing 3.8% of the total loan portfolio.

Paycheck Protection Program

ACNB Corporation’s banking subsidiary, ACNB Bank, serves as an active participant in the PPP, as authorized initially by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As of September 30, 2020, ACNB Bank closed and funded 1,440 loans totaling $160,857,603, resulting in approximately $6,000,000 in fee income of which $1,411,000 was recognized through September 30, 2020, with the remainder to be recognized in upcoming quarters.

About ACNB Corporation

ACNB Corporation, headquartered in Gettysburg, PA, is the $2.5 billion financial holding company for the wholly-owned subsidiaries of ACNB Bank, Gettysburg, PA, and Russell Insurance Group, Inc., Westminster, MD. Originally founded in 1857, ACNB Bank serves its marketplace with banking and wealth management services, including trust and retail brokerage, via a network of 21 community banking offices, located in the four southcentral Pennsylvania counties of Adams, Cumberland, Franklin and York, as well as loan offices in Lancaster and York, PA, and Hunt Valley, MD. As divisions of ACNB Bank operating in Maryland, FCB Bank and NWSB Bank serve the local marketplace with a network of five and seven community banking offices located in Frederick County and Carroll County, MD, respectively. Russell Insurance Group, Inc., the Corporation’s insurance subsidiary, is a full-service agency with licenses in 44 states. The agency offers a broad range of property, casualty, health, life and disability insurance serving personal and commercial clients through office locations in Westminster, Germantown and Jarrettsville, MD, and Gettysburg, PA. For more information regarding ACNB Corporation and its subsidiaries, please visit acnb.com.

Non-GAAP Financial Measures

ACNB Corporation uses non-GAAP financial measures to provide information useful to investors in understanding our operating performance and trends, and to facilitate comparisons with the performance of our peers. Management uses these measures internally to assess and better understand our underlying business performance and trends related to core business activities. The non-GAAP financial measures and key performance indicators we use may differ from the non-GAAP financial measures and key performance indicators other financial institutions use to measure their performance and trends.

Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results prepared in accordance with GAAP. In the event of such a disclosure or release, the Securities and Exchange Commission’s (SEC) Regulation G requires: (i) the presentation of the most directly comparable financial measure calculated and presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP financial measure presented and the most directly comparable financial measure calculated and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP operating measures to the most directly comparable GAAP financial measures are included in the tables at the end of this release.

Management believes merger-related expenses are not organic costs attendant to operations and facilities. These charges principally represent expenses to satisfy contractual obligations of the acquired entity, without any useful benefit to us, to convert and consolidate the entity’s records, systems and data onto our platforms, and professional fees related to the transaction. These costs are specific to each individual transaction and may vary significantly based on the size and complexity of the transaction.

SAFE HARBOR AND FORWARD-LOOKING STATEMENTS – Should there be a material subsequent event prior to the filing of the Quarterly Report on Form 10-Q with the Securities and Exchange Commission, the financial information reported in this press release is subject to change to reflect the subsequent event. In addition to historical information, this press release 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, other 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 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: the effects of governmental and fiscal policies, as well as legislative and regulatory changes; the effects of new laws and regulations, specifically the impact of the Tax Cuts and Jobs Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act; impacts of the capital and liquidity requirements of the Basel III standards; the 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- 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; the effects of economic conditions particularly with regard to the negative impact of severe, wide-ranging and continuing disruptions caused by the spread of Coronavirus Disease 2019 (COVID-19) 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; the effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; the 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; the effects of technology changes; volatilities in the securities markets; the effect of general economic conditions and more specifically in the Corporation’s market areas; the failure of assumptions underlying the establishment of reserves for loan losses
and estimations of values of collateral and various financial assets and liabilities; acts of war or terrorism; disruption of credit and equity markets; the ability to manage current levels of impaired assets; the loss of certain key officers; the 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. 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 Quarterly Reports on Form 10-Q. Please also carefully review any Current Reports on Form 8-K filed by the Corporation with the SEC.

ACNB CORPORATION
Financial Highlights

Unaudited Consolidated Condensed Statements of Income
Dollars in thousands, except per share data


























  Three Months Ended September 30 ,   Nine Months Ended September 30,
    2020     2019     2020     2019
INCOME STATEMENT DATA              
Interest income $ 21,324   $ 17,697   $ 63,818   $ 52,037
Interest expense   2,958     2,652     9,652     7,357
Net interest income   18,366     15,045     54,166     44,680
Provision for loan losses   1,550     150     8,100     425
Net interest income after provision for loan losses   16,816     14,895     46,066     44,255
Noninterest income   5,012     4,941     14,071     13,701
Merger-related expenses       516     5,965     516
Noninterest expense   13,310     11,458     40,257     34,404
Income before income taxes   8,518     7,862     13,915     23,036
Provision for income taxes   1,747     1,552     2,570     4,396
Net income $ 6,771   $ 6,310   $ 11,345   $ 18,640
Basic earnings per share $ 0.79   $ 0.89   $ 1.32   $ 2.64
               
NON-GAAP MEASURES              
INCOME STATEMENT DATA              
Net income $ 6,771   $ 6,310   $ 11,345   $ 18,640
Merger-related expenses, net of income taxes       396     4,573     396
Adjusted net income (non-GAAP)* $ 6,771   $ 6,706   $ 15,918   $ 19,036
Adjusted basic earnings per share (non-GAAP)* $ 0.79   $ 0.95   $ 1.85   $ 2.70
               
*See Non-GAAP Financial Measures above.              
               

Unaudited Selected Financial Data
Dollars in thousands, except per share data























    September 30, 2020   September 30, 2019   December 31, 2019
BALANCE SHEET DATA            
Assets   $ 2,503,049     $ 1,735,849     $ 1,720,253  
Securities   $ 329,157     $ 209,153     $ 212,177  
Loans, total   $ 1,700,883     $ 1,288,285     $ 1,272,601  
Allowance for loan losses   $ 19,200     $ 13,924     $ 13,835  
Deposits   $ 2,115,576     $ 1,417,610     $ 1,412,260  
Borrowings   $ 109,834     $ 113,577     $ 99,731  
Stockholders’ equity   $ 256,723     $ 186,074     $ 189,516  
COMMON SHARE DATA            
Basic earnings per share   $ 1.32     $ 2.64     $ 3.36  
Cash dividends paid per share   $ 0.75     $ 0.73     $ 0.98  
Book value per share   $ 29.50     $ 26.30     $ 26.77  
Number of common shares outstanding   8,703,313     7,074,539     7,079,359  
SELECTED RATIOS            
Return on average assets   0.66 %   1.49 %   1.40 %
Return on average equity   6.13 %   14.25 %   13.33 %
Non-performing loans to total loans   0.51 %   0.38 %   0.40 %
Net charge-offs to average loans outstanding   0.16 %   0.04 %   0.06 %
Allowance for loan losses to non-acquired loans (non-GAAP)*   1.52 %   1.26 %   1.26 %
Allowance for loan losses to total loans   1.13 %   1.08 %   1.09 %
Allowance for loan losses to non-performing loans   222.53 %   285.50 %   269.27 %

* See Non-GAAP Financial Measures above.

Contact: Lynda L. Glass
EVP/Secretary &
Chief Governance Officer
717.339.5085
[email protected]

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