GETTYSBURG, Pa., Oct. 27, 2023 (GLOBE NEWSWIRE) — ACNB Corporation (NASDAQ: ACNB), financial holding company for ACNB Bank and ACNB Insurance Services, Inc., announced financial results for the quarter ended September 30, 2023 with net income of $9.0 million, a decrease of $1.3 million, or 12.4%, compared to net income of $10.3 million for the three months ended September 30, 2022. For the three months ended September 30, 2023 and 2022, basic and diluted earnings per share were $1.06 and $1.20, respectively, which is a decrease of $0.14 per share, or 11.7%. The current quarter net income of $9.0 million decreased $480 thousand, or 5.0%, compared to net income of $9.5 million for the quarter ended June 30, 2023. The current quarter basic and diluted earnings per share decreased $0.06 per share, or 5.4%, compared to the prior quarter.
2023 Third Quarter Highlights
- Return on average assets was 1.52% and return on average equity was 13.84%.
- Fully taxable equivalent (“FTE”) net interest margin was 4.01% compared to 4.11% for the prior quarter and 3.60% for the comparable quarter last year.
- Efficiency ratio1 was 56.97% compared to 55.52% for the prior quarter and 52.45% from the comparable quarter last year.
- Total loans outstanding were $1.62 billion at September 30, 2023, an increase of $42.1 million, or 2.7%, from June 30, 2023 and an increase of $88.8 million, or 5.8% from September 30, 2022.
- Total non-performing loans to loans held-for-investment was 0.22% compared to 0.23% for the prior quarter and 0.26% for the comparable quarter of last year. Net charge-offs to average loans (annualized) was 0.03% compared to 0.02% for the prior quarter and 0.26% for the comparable quarter last year.
- The loan to deposit ratio was 82.8% for the most recent quarter. The ratio of uninsured and non-collateralized deposits to total deposits was approximately 17.4% at ACNB Bank for the most recent quarter.
- Tangible common equity to tangible assets ratio1 of 8.65% for the most recent quarter compared to 8.75% for the prior quarter and 6.83% for the comparable quarter last year. The net unrealized loss on the available for sale securities portfolio was $75.2 million at September 30, 2023 compared to a net unrealized loss of $66.1 million at June 30, 2023 and a net unrealized loss of $68.8 million at September 30, 2022.
1 – Non-GAAP financial measure. Please refer to the calculation on the page titled “Non-GAAP Reconciliation” at the end of this document.
“We are pleased to announce strong results for the third quarter of 2023 which reflect our continued focus on profitability.” said ACNB Corporation President and Chief Executive Officer James P. Helt. “Our team is delivering on its commitment to expertly serve the credit needs of our consumer and business customers while adhering to disciplined underwriting criteria. This commitment combined with a slowdown in loan prepayments due to the continued higher interest rate environment contributed to the positive loan growth this quarter. We also saw meaningful year-over-year increases in non-interest income as a result of other activities, including commissions from insurance sales and wealth management services. Asset quality remains a fundamental strength of the Corporation, and our results demonstrate that the Corporation is highly profitable in many key metrics, particularly return on average assets and return on average equity.”
Mr. Helt continued, “These solid operating results have enabled ACNB Corporation to generate sufficient capital to simultaneously invest back into the systems and resources that will allow us to continue to serve our customers in the future, as well as return capital to our shareholders in the form of stock repurchases and by increasing regular quarterly cash dividends by 7.1% to $0.30 per share of common stock, as was recently announced. We remain focused on our Vision to be the independent financial services provider of choice in the communities served by building relationships and finding solutions. As we look ahead to the final quarter of 2023, we are cautiously optimistic that our strong capital position, ample liquidity, and comprehensive menu of financial products and services will enable us to deliver on our commitment to success for the benefit of our many stakeholders.”
Net Interest Income and Margin
Net interest income for the three months ended September 30, 2023 totaled $21.7 million, a decrease of $775 thousand, or 3.4%, over the comparable quarter last year. The FTE net interest margin was 4.01%, an increase of 41 basis points from 3.60% for the comparable quarter last year. Paycheck Protection Program (“PPP”) fees and purchase accounting accretion for the three months ended September 30, 2023 totaled $208 thousand compared to $853 thousand for the comparable quarter last year. There were no PPP fees for the three months ended September 30, 2023 compared to $24 thousand for the comparable quarter last year. The decline in net interest income was driven primarily by a decrease in earning assets, an increase in the cost of funds, and a decrease in purchase accounting accretion.
Compared to the prior quarter, net interest income decreased $245 thousand, or 1.1%, driven primarily by an increase in the cost of funds and, to a lesser extent, a decrease in purchase accounting accretion. The FTE net interest margin decreased 10 basis points as funding cost increases out-paced the increases in the yields on interest-earning assets. Purchase accounting accretion for the three months ended September 30, 2023 totaled $208 thousand compared to $250 thousand for the prior quarter.
The average rate paid on interest-bearing deposits was 0.26% for the three months ended September 30, 2023, an increase of 13 basis points from the prior quarter and an increase of 12 basis points from the comparable quarter last year. The average rate paid on total borrowings was 3.83% for the three months ended September 30, 2023, an increase of 68 basis points from the prior quarter and an increase of 218 basis points from the comparable quarter last year. The average yield on interest-earning assets was 4.46% for the three months ended September 30, 2023, an increase of 13 basis points from the prior quarter and an increase of 72 basis points from the comparable quarter last year.
Noninterest Income
Noninterest income for the three months ended September 30, 2023 was $6.3 million, an increase of $448 thousand, or 7.7%, from the comparable quarter last year. The increase was driven primarily by an increase of $200 thousand in commissions from insurance sales due to organic growth, an increase of $130 thousand in income from fiduciary, investment management and brokerage activities, due to strong market returns and new business generation, and an increase in earnings on investment in bank-owned life insurance of $111 thousand due to the additional purchase of bank-owned life insurance in the third quarter of 2022. These increases were partially offset by lower service charges on deposit accounts of $82 thousand and lower income from mortgage loans held for sale of $42 thousand.
Compared to the prior quarter, noninterest income increased $103 thousand, or 1.7%. The second quarter of 2023 included a $323 thousand gain from the sale of three previously closed community banking offices and $553 thousand of contingent commissions earned in 2022, partially offset by losses of $546 thousand from the sale of securities.
Noninterest Expense
Noninterest expense for the three months ended September 30, 2023 was $16.3 million, an increase of $1.0 million, or 6.6%, from the comparable quarter last year. The increase was driven primarily by increases in salaries and employee benefits, other operating, FDIC and regulatory and marketing and corporate relations expenses. Salaries and employee benefits expense was $10.1 million for the three months ended September 30, 2023 compared to $9.3 million for the comparable quarter last year. The increase in salaries and employee benefits expense was driven primarily by a general increase in base wages and commissions and an increase to incentive compensation. Other operating expense was $1.7 million for the three months ended September 30, 2023 compared to $1.5 million for the comparable quarter last year. The increase in other operating expenses was driven primarily by an increase in director-related fees of $97 thousand. FDIC and regulatory expense increased $125 thousand driven primarily by the timing of FDIC assessment recognition. Marketing and corporate relations expense was $159 thousand for the three months ended September 30, 2023 compared to $57 thousand for the comparable quarter last year. The increase was driven primarily by rebranding expenses of ACNB Bank’s Maryland banking locations.
Compared to the prior quarter, noninterest expense increased $55 thousand, or 0.34%, driven primarily by an increase in salary and employee benefits and FDIC and regulatory expenses partially offset by a decrease in other operating, equipment and net occupancy expenses. Salaries and employee benefits expense was $10.1 million for the three months ended September 30, 2023 compared to $9.8 million for the prior quarter. The increase in salaries and employee benefits expense was driven primarily by a general increase in base wages and commissions and an increase to incentive compensation. FDIC and regulatory expense increased $93 thousand driven primarily by the timing of FDIC assessment recognition. Other operating expense was $1.7 million for the three months ended September 30, 2023 compared to $1.9 million for the prior quarter. The decrease in other operating expense was driven primarily by a loss of $142 thousand recognized in the prior quarter as a result of writing off an investment in a title company. Equipment and net occupancy expenses were down primarily due to the timing of core processing costs and a decrease in maintenance and building repair expenses.
Loans and Asset Quality
Total loans outstanding were $1.62 billion at September 30, 2023, an increase of $42.1 million, or 2.7%, from June 30, 2023 and an increase of $88.8 million, or 5.8%, from September 30, 2022. The increase in both periods was driven mainly by growth in the commercial loan portfolio in our core markets.
Asset quality metrics continue to be stable. The provision for credit losses was $250 thousand and the provision for unfunded commitments was a reversal of $171 thousand for the three months ended September 30, 2023 compared to a reversal of provision for credit losses of $273 thousand and a provision for unfunded commitments of $121 thousand for the prior quarter. Non-performing loans were $3.6 million, or 0.22%, of total loans at September 30, 2023 compared to $3.7 million, or 0.23%, of total loans at June 30, 2023 and $3.9 million, or 0.26%, of total loans at September 30, 2022. Annualized net charge-offs for the three months ended September 30, 2023 were 0.03% of total average loans compared to 0.02% for the prior quarter and 0.26% for the comparable quarter last year.
Deposits and Borrowings
Total deposits were $2.0 billion at September 30, 2023. Deposits decreased by $12.4 million, or 0.6%, since June 30, 2023 and decreased by $384.9 million, or 16.5%, from September 30, 2022. Given ACNB’s funding level, Management continued to restrain deposit rates despite an increase in market interest rates and an increase in rates by competitors. As a result, total deposits declined during both periods as customers continued to seek higher yielding alternative deposit and investment products.
Total interest-bearing deposits were $1.4 billion at September 30, 2023. Interest-bearing deposits decreased by $8.2 million, or 0.6%, from June 30, 2023 and by $361.0 million, or 20.7%, from September 30, 2022. Brokered deposits were $30.0 million at September 30, 2023 compared to none at both June 30, 2023 and September 30, 2022. Total non-interest bearing deposits were $565.5 million at September 30, 2023. Non-interest bearing deposits decreased by $4.2 million, or 0.7%, from June 30, 2023 and decreased by $23.9 million, or 4.1%, from September 30, 2022. Compared to the prior quarter end, total borrowings increased $20.7 million at September 30, 2023 primarily to fund loan growth.
Stockholders’ Equity, Dividends and Share Repurchases
Total stockholders’ equity was $255.6 million at September 30, 2023 compared to $257.1 million at June 30, 2023 and $232.4 million at September 30, 2022. Tangible book value1 per share was $23.80, $23.83 and $20.86 at September 30, 2023, June 30, 2023 and September 30, 2022, respectively.
On October 19, 2023, the Board of Directors approved and declared a regular quarterly cash dividend of $0.30 per share of ACNB Corporation common stock payable on December 15, 2023, to shareholders of record as of December 1, 2023. This per share amount reflects a 7.1% increase, or $0.02, over the prior quarter’s cash dividend of $0.28 per share of common stock.
In addition, ACNB repurchased 46,378 shares of ACNB common stock during the three months ended September 30, 2023 at a cost of $1.5 million compared to no shares of ACNB common stock during the prior quarter and 109,931 shares of ACNB common stock during the comparable quarter last year at a cost of $3.8 million.
About ACNB Corporation
ACNB Corporation, headquartered in Gettysburg, PA, is the $2.4 billion financial holding company for the wholly-owned subsidiaries of ACNB Bank, Gettysburg, PA, and ACNB Insurance Services, 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 26 community banking offices and three loan offices located in the Pennsylvania counties of Adams, Cumberland, Franklin, Lancaster and York and the Maryland counties of Baltimore, Carroll and Frederick. ACNB Insurance Services, Inc. is a full-service insurance 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 and Jarrettsville, MD, and Gettysburg, PA. For more information regarding ACNB Corporation and its subsidiaries, please visit investor.acnb.com.
