FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For quarter ended March 31, 1994 Commission file no. 0-11783
__________________
ACNB CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2233457
(state or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
675 OLD HARRISBURG ROAD, GETTYSBURG, PA 17325
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 717-334-3161
Indicate by checkmark 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 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--X No--.
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 31, 1994
Common Stock ($5.00 par value) 2,673,918
Page 1 of 11
ACNB CORPORATION
INDEX
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
March 31, 1994 and December 31, 1993 and
March 31, 1993 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1994 and 1993 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993 5
Notes to Consolidated Condensed Financial
Statements 6-7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations 8-10
Part II.Other Information 11
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PART I FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
March 31 December 31 March 31
1994 1993 1993
ASSETS (000 omitted)
Cash and Due from Banks 12,738 15,970 11,168
Investment Securities
U.S. Treasury 109,463 118,982 90,077
U.S. Government Agencies and
Corporations 37,725 23,787 22,249
State and Municipal 2,889 1,296 1,405
Other Investments 2,733 3,737 7,365
-------- -------- --------
Total Investment Securities 152,810 147,802 121,096
Federal Funds Sold 17,675 17,060 14,340
Loans 282,358 283,298 290,734
Less: Reserve for Loan Losses (3,415) (3,581) (3,491)
-------- -------- --------
Net Loans 278,943 279,717 287,243
Premises and Equipment 5,526 5,384 4,354
Other Real Estate 663 850 936
Other Assets 5,563 4,632 4,982
-------- -------- --------
TOTAL ASSETS $473,918 $471,415 $444,119
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing 35,318 37,042 29,292
Interest Bearing 379,211 375,644 363,218
-------- -------- --------
Total Deposits 414,529 412,686 392,510
Securities Sold Under Agreement
To Repurchase 8,969 10,802 4,715
Demand Notes U.S. Treasury 450 450 450
Other Liabilities 3,189 1,615 3,332
-------- -------- --------
TOTAL LIABILITIES 427,137 425,553 401,007
SHAREHOLDERS EQUITY
Common Stock ($5 par value)
10,000,000 shares authorized:
2,673,918 shares issued and
outstanding at 12/31/93 13,370 13,370 13,370
Surplus 5,002 5,002 5,002
Retained Earnings 28,409 27,490 24,740
-------- -------- --------
TOTAL SHAREHOLDERS EQUITY 46,781 45,862 43,112
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $473,918 $471,415 $444,119
======== ======== ========
See accompanying notes to financial statements.
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ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31
1994 1993
(000 omitted)
INTEREST INCOME
Loan Interest and Fees 5,669 6,306
Interest and Dividends on
Investment Securities 1,755 1,703
Interest on Federal Funds Sold 146 121
Interest on Balances with
Depository Institutions 38 48
----- -----
TOTAL INTEREST INCOME 7,608 8,178
INTEREST EXPENSE
Deposits 3,070 3,552
Other Borrowed Funds 77 34
----- -----
TOTAL INTEREST EXPENSE 3,147 3,586
NET INTEREST INCOME 4,461 4,592
Provision for Loan Losses 0 105
NET INTEREST INCOME AFTER PROVISION ----- -----
FOR LOAN LOSSES 4,461 4,487
OTHER INCOME
Trust Department 65 44
Service Charges on Deposit Accounts 120 142
Other Operating Income 240 169
Securities Gains 0 93
----- -----
TOTAL OTHER INCOME 425 448
OTHER EXPENSES
Salaries and Employee Benefits 1,291 1,209
Premises and Fixed Assets 369 285
Other Expenses 749 725
----- -----
TOTAL OTHER EXPENSE 2,409 2,219
INCOME BEFORE INCOME TAX 2,477 2,716
Applicable Income Tax 782 913
----- -----
NET INCOME $1,695 $1,803
===== =====
EARNINGS PER SHARE* $0.63 $0.67
DIVIDENDS PER SHARE* 0.29 0.27
*Based on 2,673,918 shares outstanding in 1994 and 1993.
See accompanying notes to financial statements.
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ACNB CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
Three months ended
Mar 31
1994 1993
(000 omitted)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received 7,461 8,619
Fees and Commissions Received 524 585
Interest Paid (2,421) (2,938)
Cash Paid to Suppliers and Employees (2,575) (2,485)
Income Taxes Paid 0 (155)
Net Cash Provided by Operating Activities 2,989 3,626
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with Other Banks 20,061 13,473
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (25,610) (13,644)
Principal Collected on Loans 20,756 22,598
Loans Made to Customers (19,798) (25,380)
Capital Expenditures (250) (304)
Net Cash Used in Investing Activities (4,841) (3,257)
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts 3,041 (2,417)
Proceeds from Sale of Certificates of Deposit 3,421 3,468
Payments for Maturing Certificates of Deposit (6,452) (10,553)
Dividends Paid (775) (722)
Net Cash Provided by Financing Activities (765) (10,224)
Net Increase in Cash and Cash Equivalents (2,617) (9,855)
Cash and Cash Equivalents: Beginning of Period 33,030 35,363
End of Period 30,413 25,508
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 1,695 1,803
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 111 100
Provision for Possible Credit Losses 0 105
Provision for Deferred Taxes (67) 209
Amortization of Investment Securities Premiums 507 512
Increase (Decrease) in Taxes Payable 849 549
(Increase) Decrease in Interest Receivable (555) 66
Increase (Decrease) in Interest Payable 726 648
Increase (Decrease) in Accrued Expenses 233 134
(Increase) Decrease in Other Assets (507) (486)
Increase (Decrease) in Deferred Loan Production Costs (3) (14)
Net Cash Provided by Operating Activities 2,989 3,626
DISCLOSURE OF ACCOUNTING POLICY
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods.
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ACNB CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present
fairly ACNB Corporation's financial position as of March 31, 1994
and 1993 and December 31, 1993 and the results of its operations for
the three months ended March 31, 1994 and 1993 and changes in
financial position for the three months then ended. All such adjust-
ments are of a normal recurring nature.
The accounting policies followed by the company are set forth in Note
A to the company's financial statements in the 1993 ACNB Corporation
Annual Report and Form 10-K filed with the Securities and Exchange
Commission under file no. 0-11783.
2. The book and approximate market values of securities owned at
March 31, 1994 and December 31, 1993 were as follows:
3/31/94 12/31/93
Amortized Fair Amortized Fair
Cost Value Cost Value
(000 omitted)
U.S. Treasury 109,463 108,497 118,982 119,379
U.S. Government Agencies
and Corporations 37,725 37,314 23,787 23,821
State and Municipal 2,889 2,887 1,296 1,301
Other Investments 2,733 2,745 3,737 3,767
------- ------- ------- -------
TOTAL $152,810 $151,443 $147,802 $148,268
======= ======= ======= =======
Income earned on investment securities was as follows:
Three Months Ended March 31
1994 1993
(000 omitted)
U.S. Treasury 1,321 1,319
U.S. Government Agencies
and Corporations 373 239
State and Municipal 34 23
Other Investments 27 122
------ ------
$1,755 $1,703
====== ======
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3. Gross loans are summarized as follows:
March 31 December 31
1994 1993
(000 omitted)
Real Estate 251,510 250,242
Real Estate Construction 4,300 4,791
Commercial and Industrial 13,003 14,100
Consumer 17,231 17,950
------- -------
Gross Loans 286,044 287,083
Less: Unearned Discount 3,686 3,785
-------- --------
Total Loans $282,358 $283,298
======== ========
4. Earnings per share are based on the weighted average number of shares
of stock outstanding during each period. Weighted average shares out-
standing for the three month periods ended March 31, 1994 and 1993
were 2,673,918.
5. Dividends per share were $0.29 and $0.27 for the three month periods
ended March 31, 1994 and 1993 respectively. This represented a
46.0% payout of net income in 1994 and a 40.3% payout in 1993.
6. The results of operations for the three month periods ended March
31, 1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's net income for the first three months of 1994 was
$1,695,000, a decrease of 6.0% from $1,803,000 in 1993. Return on Average
Total Assets was 1.43% for the first three months of 1994 compared with 1.62%
for the same period of 1993. Return on Average Shareholders Equity was 14.55%
for the three months ended March 31, 1994 compared with 16.84% for 1993.
The decline in 1994 earnings, compared to the same period in 1993, is due to
weaker net interest income, lack of securities gains, and increased other
expenses. Net interest income is down $131,000 for the first three months of
1994 compared to 1993, securities gains are down $93,000 from last year's total,
and other expenses (salaries and fixed assets) are up $190,000.
The Corporation is facing intensified competition in its search for residential
mortgages and has been unable to increase loan totals for the past several
years. This has taken its toll on net interest margin and that measure has
dropped 37 basis points compared to first quarter of 1993. This, coupled with a
lack of securities gains and increased expenses, will continue to put pressure
on earnings throughout 1994.
Earnings per share was $.63 in 1994 and $.67 in 1993, while the dividend
increased from $.27 to $.29 in 1994.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Taxable equivalent)
Three months Ended
3/31/94 3/31/93
Rate Rate
Earning Assets 6.71% 7.66%
Interest Bearing Liabilities 3.24 3.89
Interest Rate Spread 3.47 3.77
Interest Expense as a % of earning assets 2.76 3.34
Net Yield on Earning Assets 3.95 4.32
Net Yield on Earning Assets is the difference, stated in percentages, between
the interest earned on loans and other investments and the interest paid on
deposits and other sources of funds. The rate on earning assets is adjusted to
a "taxable equivalent" basis to recognize the income tax savings on tax exempt
items such as interest on municipal securities. The Net Yield on Earning Assets
is one of the best analytical tools available to demonstrate the effect of
interest rate changes on the Corporation's earning capacity.
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The Net Yield on Earning Assets for the first three months of 1994 was down 37
basis points compared to the same period in 1993. This is a direct result of
lower loan demand and increased competition in the Corporation's home mortgage
market. Until loan volume recovers, and the bank can book higher yielding
assets, net yield on earning assets will remain under pressure.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
Reserve for Possible Loan Losses
(In thousands) Three Months Ended
3/31/94 3/31/93
Balance at Beginning of Period 3,581 2,417
Provision Charged to Expense 0 105
Loans Charged Off 193 35
Recoveries 27 4
Balance at End of Period 3,415 3,491
Ratios:
Net Charge-offs to:
Net Income 9.79% 1.72%
Total Loans .06 .01
Reserve for Possible Loan Losses 4.86 .89
Reserve for Possible Loan Losses to:
Total Loans 1.21 1.20
The Reserve for Possible Loan Losses at March 31, 1994 totaled $3,415,000 (1.21%
of Total Loans), a decrease of $76,000 from $3,491,000 (1.20% of Total Loans) at
the end of the first three months of 1993. Loans past due 90 days and still
accruing amounted to $2,795,000 and non-accrual loans totaled $1,032,000 as of
3/31/94.The ratio of non-performing assets plus other real estate owned to total
assets was .95% at 3/31/94. $454,000 of the bank's other real estate total of
$663,000 has been sold and represents interest paying loans but are carried here
for regulatory purposes. All other properties are carried at the lower of market
or book value and are not considered to represent significant threat of loss to
the bank.
Loans past due 90 days and still accruing were $2,614,000 at yearend 1993 while
non-accruals stood at $977,000. The bulk of the Corporation's real estate
loans are in owner occupied dwellings but it is hoped that internal loan
review procedures will be effective in recognizing and helping correct any
real estate lending problems that may occur due to current economic
conditions. Interest not accrued, due to an average of $1,005,000 in non-
accrual loans, was approximately $19,000 for the first three months of 1994.
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CAPITAL MANAGEMENT
Total Shareholders' Equity amounted to $46,781,000 at 3/31/94 compared to
$43,112,000 at 3/31/93, an increase of $3,669,000 or 8.5% over that period. The
ratio of Total Shareholders' Equity to Total Assets was 9.71% at 3/31/93, 9.73%
at 12/31/93, and 9.87% at 3/31/94. The leverage ratio was 9.89% at 3/31/94 while
the total risk-based capital ratio was 22.51% at year end 1993.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation's liquidity is adequate. Liquid assets (cash and due from banks,
federal funds sold, money market instruments, and investment securities maturing
within one year) equal 17.9% of total assets at 3/31/94. This mix of assets
would be readily available for funding any cash requirements.
As of 3/31/94 rate sensitive assets were 117% of rate sensitive liabilities at
one month, 97% at six months, and 118% at one year. Adjustable rate mortgages,
which have an annual interest rate cap of 2%, are considered rate sensitive.
The core deposit portion of passbook savings and NOW accounts are carried in
the over one year category while the rate sensitive amount is spread over the
one month and six month categories.
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(b) There were no reports on Form 8-K filed for the three month period
ended March 31, 1994.
SIGNATURES
Pursuant to the requirements 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.
ACNB CORPORATION
/s/ Ronald L. Hankey
April 29, 1994 ------------------------------
(date) Ronald L. Hankey
President
/s/ John W. Krichten
------------------------------
John W. Krichten
Secretary/Treasurer
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