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 Sept 30, 1995 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 SEPT 30, 1995
Common Stock 5,316,122
($2.50 par value)
Page 1 of 11
ACNB CORPORATION
INDEX
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
Sept 30, 1995 and December 31, 1994 and
Sept 30, 1994 3
Consolidated Condensed Statements of Income
Nine Months Ended Sept 30, 1995 and 1994 4
Consolidated Statements of Cash Flows
Nine Months Ended Sept 30, 1995 and 1994 5
Notes to Consolidated Condensed Financial
Statements 6-7
Management's Discussion and Analysis of the
Financial Condition and Results of Operation 8-10
Part II.Other Information 11
Page 2
PART I FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
September 30 December 31 September 30
1995 1994 1994
ASSETS (000 omitted)
Cash and Due from Banks 13,409 12,919 13,848
Investment Securities
U.S. Treasury 59,523 96,140 101,574
U.S. Government Agencies and
Corporations 46,000 45,000 46,990
State and Municipal 962 1,509 2,630
Other Investments 2,480 2,256 3,231
______ ______ ______
Total Investment Securities 108,965 144,905 154,425
Federal Funds Sold 100 100 200
Loans 324,923 305,922 294,530
Less: Reserve for Loan Losses (3,292) (3,370) (3,384)
_______ _______ _______
Net Loans 321,631 302,552 291,146
Premises and Equipment 5,875 5,874 5,884
Other Real Estate 769 1,037 828
Other Assets 5,177 4,645 5,552
________ ________ ________
TOTAL ASSETS $455,926 $472,032 $471,883
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing 41,335 38,639 39,647
Interest Bearing 342,773 350,159 365,652
_______ _______ _______
Total Deposits 384,108 388,798 405,299
Securities Sold Under
Agreement To Repurchase 17,197 14,613 15,524
Borrowing Federal Home Loan Bank 350 16,800 0
Demand Notes U.S. Treasury 450 450 450
Other Liabilities 3,086 2,724 2,011
_______ _______ _______
TOTAL LIABILITIES 405,191 423,385 423,284
SHAREHOLDERS EQUITY
Common Stock ($2.50 par value)
20,000,000 shares authorized:
5,316,122 shares issued and
outstanding at 6/30/95 13,290 13,290 13,370
Surplus 4,511 4,511 5,002
Retained Earnings 32,934 30,846 30,227
______ ______ ______
TOTAL SHAREHOLDERS EQUITY 50,735 48,647 48,599
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $455,926 $472,032 $471,883
======== ======== ========
See accompanying notes to financial statements.
Page 3
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
Sept 30 Sept 30
1995 1994 1995 1994
(000 omitted) (000 omitted)
INTEREST INCOME
Loan Interest and Fees 6,656 5,757 19,265 17,057
Interest and Dividends on
Investment Securities 1,426 1,786 4,606 5,390
Interest on Federal Funds Sold 1 106 4 364
Interest on Balances with
Depository Institutions 63 16 72 90
_____ _____ _____ _____
TOTAL INTEREST INCOME 8,146 7,665 23,947 22,901
INTEREST EXPENSE
Deposits 3,510 3,002 9,899 9,031
Other Borrowed Funds 203 85 782 231
_____ _____ _____ _____
TOTAL INTEREST EXPENSE 3,713 3,087 10,681 9,262
NET INTEREST INCOME 4,433 4,578 13,266 13,639
Provision for Loan Losses 0 0 0 0
NET INTEREST INCOME AFTER PROVISION _____ _____ _____ _____
FOR LOAN LOSSES 4,433 4,578 13,266 13,639
OTHER INCOME
Trust Department 74 64 226 203
Service Charges on Deposit Accounts 178 154 479 445
Other Operating Income 140 126 463 441
Securities Gains 0 0 0 0
_____ _____ _____ _____
TOTAL OTHER INCOME 392 344 1,168 1,089
OTHER EXPENSES
Salaries and Employee Benefits 1,349 1,289 4,154 3,847
Premises and Fixed Assets 427 309 1,136 1,000
Other Expenses 548 811 2,179 2,330
_____ _____ _____ _____
TOTAL OTHER EXPENSE 2,324 2,409 7,469 7,177
INCOME BEFORE INCOME TAX 2,501 2,513 6,965 7,551
Applicable Income Tax 819 827 2,272 2,461
_____ _____ _____ _____
NET INCOME $1,682 $1,686 $4,693 $5,090
===== ===== ===== =====
EARNINGS PER SHARE* $0.32 $0.32 $0.88 $0.95
DIVIDENDS PER SHARE* 0.17 0.15 0.49 0.44
*Based on 5,316,122 shares outstanding in 1995 and 5,347,836 in 1994.
See accompanying notes to financial statements.
Page 4
ACNB CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
Nine months ended
Sept 30
1995 1994
(000 omitted)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received 23,871 23,330
Fees and Commissions Received 1,483 1,399
Interest Paid (9,604) (9,273)
Cash Paid to Suppliers and Employees (7,401) (6,714)
Income Taxes Paid (2,781) (2,421)
Net Cash Provided by Operating Activities 5,568 6,321
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with Other Banks 40,785 36,057
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (5,474) (44,106)
Principal Collected on Loans 51,053 68,750
Loans Made to Customers (69,870) (80,163)
Capital Expenditures (411) (823)
Net Cash Used in Investing Activities 16,083 (20,285)
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts (14,612) 9,391
Proceeds from Sale of Certificates of Deposit 33,436 9,754
Payments for Maturing Certificates of Deposit (20,930) (21,810)
Dividends Paid (2,605) (2,353)
Increase (Decrease) in Borrowings (16,450) 0
Net Cash Provided by Financing Activities (21,161) (5,018)
Net Increase in Cash and Cash Equivalents 490 (18,982)
Cash and Cash Equivalents: Beginning of Period 13,019 33,030
End of Period 13,509 14,048
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 4,693 5,090
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 416 329
Provision for Possible Credit Losses 0 0
Provision for Deferred Taxes 88 (67)
Amortization of Investment Securities Premiums 638 1,409
Increase (Decrease) in Taxes Payable (597) 107
(Increase) Decrease in Interest Receivable (293) (670)
Increase (Decrease) in Interest Payable 1,077 (11)
Increase (Decrease) in Accrued Expenses (44) 485
(Increase) Decrease in Other Assets (298) (345)
Increase (Decrease) in Other Liabilities (112) (6)
Net Cash Provided by Operating Activities 5,568 6,321
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.
Page 5
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 September 30, 1995 and 1994 and
December 31, 1994 and the results of its operations for the nine months ended
September 30, 1995 and 1994 and changes in financial position for the nine
months then ended. All such adjustments 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 1994 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 September 30,
1995 and December 31, 1994 were as follows:
9/30/95 12/31/94
Amortized Fair Amortized Fair
Cost Value Cost Value
(000 omitted)
U.S. Treasury 59,523 59,488 96,140 93,762
U.S. Government Agencies
and Corporations 46,000 45,637 45,000 43,080
State and Municipal 962 964 1,509 1,506
Other Investments 2,480 2,480 2,256 2,256
_______ _______ _______ _______
TOTAL $108,965 $108,569 $144,905 $140,604
======= ======= ======= =======
Income earned on investment securities was as follows:
Nine Months Ended Sept 30
1995 1994
(000 omitted)
U.S. Treasury 2,767 3,723
U.S. Government Agencies
and Corporations 1,667 1,482
State and Municipal 58 82
Other Investments 114 103
______ ______
$4,606 $5,390
====== ======
Page 6
3. Gross loans are summarized as follows:
Sept 30 December 31
1995 1994
(000 omitted)
Real Estate 284,778 268,944
Real Estate Construction 13,261 12,632
Commercial and Industrial 9,688 10,785
Consumer 17,196 17,444
-------- -------
Gross Loans 324,923 309,805
Less: Unearned Discount --- 3,883
________ ________
Total Loans $324,923 $305,922
======== ========
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 six month periods ended September 30, 1995 and 1994 were 5,347,836
and 5,316,122 respectively.
5. Dividends per share were $0.49 and $0.44 for the nine month periods ended
September 30, 1995 and 1994 respectively. This represented a 56% payout of
net income in 1995 and a 46% payout in 1994.
6. The results of operations for the nine month periods ended September 30, 1995
and 1994 are not necessarily indicative of the results to be expected for the
full year.
Page 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's net income for the first nine months of 1995 was $4,693,000, a
decrease of 7.8% from $5,090,000 in 1994. Return on Average Total Assets was
1.36% for the first nine months of 1995 compared with 1.43% for the same period
of 1994. Return on Average Shareholders Equity was 12.52% for the nine months
ended Sept 30, 1995 compared with 14.29% for 1994.
The decline in 1995 earnings, compared to the same period in 1994, is due to
weaker net interest income and increased other expenses. Net interest income is
down $373,000 for the first nine months of 1995 compared to 1994 and other
expenses (salaries and fixed assets) are up $270,000. The monthly expense for
FDIC insurance declined from $74,000 to $13,000 beginning in June of 1995.
Exclusive of that change other expenses would be up $474,000.
The rapid rise in interest rates and increased competition for deposits along
with greater personnel and other noninterest expenses have combined to continue
pressure on net income. Although the corporation is asset sensitive deposit
rates have risen more rapidly than loan rates. Coupled with a marked shift from
savings accounts to time accounts this rise has prevented new loan growth from
adding to net income during the first nine months. In addition, the corporation
has opened a new office in a supermarket/discount store and upgraded mortgage
marketing capabilities to prepare for the future. These added costs have already
begun to flow through the income statement but the benefits will be realized
over the long term.
Earnings per share was $.88 in 1995 and $.95 in 1994, while the dividend
increased from $.44 to $.49 in 1995.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Taxable equivalent)
Nine months Ended
9/30/95 9/30/94
Rate Rate
Earning Assets 7.27% 6.72%
Interest Bearing Liabilities 3.88 3.19
Interest Rate Spread 3.39 3.53
Interest Expense as a % of earning assets 3.23 2.71
Net Yield on Earning Assets 4.04 4.01
Page 8
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.
The Net Yield on Earning Assets for the first nine months of 1995 was up 3 basis
points compared to the same period in 1994. This is a result of improved loan
demand and a shift to loans from lower yielding government securities. Net yield
as income is down due to a lower earning asset base. This was caused by a runoff
in deposits during the last quarter of 1994 and continued during the first
quarter of 1995.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
Reserve for Possible Loan Losses
(In thousands) Nine Months Ended
9/30/95 9/30/94
Balance at Beginning of Period 3,370 3,581
Provision Charged to Expense 0 0
Loans Charged Off 96 237
Recoveries 18 40
Balance at End of Period 3,292 3,384
Ratios:
Net Charge-offs to:
Net Income 1.66% 3.87%
Total Loans .02 .07
Reserve for Possible Loan Losses 2.37 5.82
Reserve for Possible Loan Losses to:
Total Loans 1.01 1.15
Page 9
The Reserve for Possible Loan Losses at Sept 30, 1995 totaled $3,292,000 (1.01%
of Total Loans), a decrease of $92,000 from $3,384,000 (1.15% of Total Loans) at
the end of the first nine months of 1994. Loans past due 90 days and still
accruing amounted to $1,972,000 and non-accrual loans totaled $1,211,000 as of
9/30/95.The ratio of non-performing assets plus other real estate owned to total
assets was .87% at 9/30/95. All 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 $2,219,000 at yearend 1994 while
non-accruals stood at $854,000. 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 $1,083,000 in non-accrual loans, was approx-
imately $77,000 for the first nine months of 1995.
CAPITAL MANAGEMENT
Total Shareholders' Equity amounted to $50,735,000 at 9/30/95 compared to
$48,599,000 at 9/30/94, an increase of $2,156,000 or 4.4% over that period. The
ratio of Total Shareholders' Equity to Total Assets was 10.30% at 9/30/94,
10.31% at 12/31/94, and 11.13% at 9/30/95. The leverage ratio was 11.06% at
9/30/95 while the total risk-based capital ratio was 21.86% at year end 1994.
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 9.5% of total assets at 9/30/95. This mix of assets would
be readily available for funding any cash requirements.
As of 9/30/95 rate sensitive assets were 127% of rate sensitive liabilities at
one month, 114% at six months, and 129% 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.
Page 10
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 Sept 30, 1995.
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
October 27, 1995 ______________________________
(date) Ronald L. Hankey
President
____________________________
John W. Krichten
Secretary/Treasurer
Page 11