ACNB (ACNB) - 2024 Q2 - Quarterly Results

Financial Highlights ACNB Corporation reported strong Q2 2024 net income of $11.3 million, driven by a $3.2 million provision reversal, with improved asset quality and the first linked-quarter increase in net interest margin and total deposits Q2 2024 Key Financial Results | Metric | Q2 2024 | Q2 2023 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income | $11.3 million | $9.5 million | $6.8 million | | Diluted EPS | $1.32 | $1.12 | $0.80 | | Return on Average Assets | 1.86% | 1.62% | 1.12% | | Return on Average Equity | 16.12% | 14.74% | 9.76% | - The quarter's results were significantly impacted by a $3.2 million reversal of the provision for credit losses and unfunded commitments[2] - Total loans grew to $1.68 billion, up 0.9% from Q1 2024 and 6.7% from Q2 2023[3] - FTE net interest margin was 3.82%, marking the first linked-quarter increase after four consecutive quarterly declines, though down from 4.11% in Q2 2023[3] - Total deposits increased by $3.4 million from the previous quarter to $1.84 billion, representing the first linked-quarter increase after nine consecutive quarterly declines[4] - Asset quality improved, with the non-performing loans to total loans ratio decreasing to 0.19% from 0.24% in Q1 2024 and 0.23% in Q2 2023[4] Management Commentary Management expressed satisfaction with strong Q2 2024 results, highlighting profitability focus, robust loan demand, excellent asset quality, and improved net interest margin - Management attributes the strong results to a continued focus on profitability and execution of the strategic plan[6] - Key positive trends highlighted include strong loan demand, stellar asset quality, improved net interest margin, and lower quarter-over-quarter noninterest expenses[6] - The company is cautiously optimistic for the remainder of 2024, relying on its strong capital, liquidity, and asset quality to deliver value to stakeholders[6] Financial Performance Analysis Q2 2024 financial performance showed year-over-year net interest income decline due to margin compression, but linked-quarter improvement, with noninterest income growth and controlled expenses Net Interest Income and Margin Net interest income was $21.0 million, down 4.7% year-over-year due to margin compression, but increased 1.8% linked-quarter, with FTE net interest margin at 3.82% Net Interest Income and Margin Performance | Metric | Q2 2024 | Q2 2023 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $21.0M | $22.0M | $20.6M | | FTE Net Interest Margin | 3.82% | 4.11% | 3.77% | - The year-over-year decrease in NIM was primarily caused by a $198.6 million increase in average borrowings and a 133 basis point rise in the average rate paid on borrowings[7] - The linked-quarter increase in NIM was driven by a 16 basis point increase in the average yield on loans (to 5.53%) and recognition of nonaccrual interest income from a large relationship payoff[8][9] Noninterest Income Noninterest income reached $6.4 million in Q2 2024, increasing 3.8% year-over-year and 13.4% quarter-over-quarter, driven by insurance and wealth management Noninterest Income Breakdown (Q2 2024 vs Q2 2023) | Category | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Noninterest Income | $6.4M | $6.2M | +3.8% | | Insurance Commissions | $2.7M | $2.8M | -$93k | | Wealth Management Income | $1.1M | $1.0M | +$90k | | Net (losses) gains on securities | $0 | ($546k) | +$546k | - Compared to Q1 2024, noninterest income increased by $760 thousand (13.4%), mainly from higher insurance and wealth management income[11] Noninterest Expense Noninterest expense was $16.4 million, up 0.7% year-over-year, but decreased significantly by 7.2% quarter-over-quarter, primarily due to lower salaries and benefits - Year-over-year, noninterest expense increased by $110 thousand, driven by a $602 thousand rise in salaries and benefits, offset by reductions in other operating expenses and professional services[12] - Quarter-over-quarter, noninterest expense fell by $1.3 million (7.2%), with the largest decrease of $742 thousand in salaries and employee benefits[13] Balance Sheet Analysis The balance sheet as of June 30, 2024, showed continued loan growth, stable asset quality, a slight linked-quarter deposit increase, and increased borrowings Loans and Asset Quality Total loans reached $1.68 billion, growing 6.7% year-over-year, with strong asset quality, a 0.19% non-performing loan ratio, and a $3.0 million provision reversal Loan Portfolio Growth | Date | Total Loans | Change from prior period | | :--- | :--- | :--- | | June 30, 2024 | $1.68 billion | +0.9% (QoQ) / +6.7% (YoY) | | March 31, 2024 | $1.66 billion | - | | June 30, 2023 | $1.57 billion | - | - Loan growth was primarily driven by the commercial real estate portfolio in the company's core markets of Pennsylvania and Maryland[15] Asset Quality Metrics | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Non-performing loans / Total loans | 0.19% | 0.24% | 0.23% | | Annualized net charge-offs | 0.00% | 0.00% | 0.02% | - A reversal of the provision for credit losses of $3.0 million was recorded in Q2 2024, compared to a $223 thousand provision in Q1 2024, due to updated CECL model assumptions[16] Deposits and Borrowings Total deposits were $1.84 billion, up 0.2% linked-quarter but down 6.4% year-over-year, while total borrowings surged to $304.3 million, up 129.3% Deposit and Borrowing Balances | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Deposits | $1.84 billion | $1.84 billion | $1.96 billion | | Total Borrowings | $304.3 million | $272.6 million | $132.7 million | - The ratio of uninsured and non-collateralized deposits to total deposits at ACNB Bank was approximately 18.68% at June 30, 2024[17] Stockholders' Equity, Dividends and Share Repurchases Total stockholders' equity increased to $289.3 million, with tangible book value per share at $27.82, and a quarterly cash dividend of $0.32 per share declared Stockholders' Equity and Per Share Data | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $289.3M | $279.9M | $257.1M | | Tangible Book Value Per Share | $27.82 | $26.70 | $23.83 | - The Board declared a quarterly cash dividend of $0.32 per share, a $0.04 or 14.3% increase compared to the dividend in Q2 2023[20] - No shares of ACNB common stock were repurchased during the three months ended June 30, 2024[20] Financial Statements and Data This section presents detailed unaudited financial tables, including selected quarterly data, consolidated balance sheets, income statements, and average balances, yields, and rates analysis Selected Financial Data This section summarizes key balance sheet, income statement, profitability, capital, and credit quality metrics for the five quarters ending June 30, 2024 - This table provides a five-quarter trend analysis of key financial metrics, including assets, loans, deposits, net income, EPS, profitability ratios, and credit quality[26] Consolidated Balance Sheet This section details the company's assets, liabilities, and stockholders' equity as of June 30, 2024, with comparative data for prior periods Key Balance Sheet Items (June 30, 2024) | Item | Amount (in thousands) | | :--- | :--- | | Total Assets | $2,457,753 | | Loans, net | $1,662,438 | | Total Deposits | $1,838,588 | | Total Liabilities | $2,168,422 | | Total Stockholders' Equity | $289,331 | Consolidated Income Statements This section provides a detailed breakdown of revenues and expenses for the three and six months ended June 30, 2024, with comparative 2023 data - This statement details the components of net interest income, noninterest income, and noninterest expenses, leading to the net income calculation for the three and six-month periods ending June 30, 2024 and 2023[31] Average Balances, Yields and Rates This section analyzes average asset and liability balances, interest income/expense, and average yields/rates on a fully taxable equivalent basis for recent periods - These tables provide a detailed breakdown of the components driving the net interest margin, including average balances and yields on earning assets and costs of interest-bearing liabilities[33][36] Non-GAAP Reconciliation This section reconciles non-GAAP financial measures, including tangible book value per share, tangible common equity to tangible assets, and the efficiency ratio - The report reconciles GAAP stockholders' equity to tangible common stockholders' equity by excluding goodwill and intangible assets[39] Key Non-GAAP Metrics (Q2 2024) | Metric | Value | | :--- | :--- | | Tangible book value per share | $27.82 | | Tangible common equity to tangible assets | 9.84% | | Efficiency ratio | 58.69% | About ACNB Corporation ACNB Corporation is a $2.46 billion financial holding company operating ACNB Bank with 26 offices and ACNB Insurance Services, Inc - ACNB Corporation is the financial holding company for ACNB Bank and ACNB Insurance Services, Inc[21] - The company has total assets of $2.46 billion and serves communities in Pennsylvania and Maryland through a network of 26 banking offices and three loan offices[21] Safe Harbor and Forward-Looking Statements This section provides a legal disclaimer for forward-looking statements, cautioning that future results are subject to various risks and uncertainties - The press release contains forward-looking statements regarding future performance, which are subject to risks and uncertainties[22] - Key risks include inflation, banking instability, governmental policies, interest rate changes, and cybersecurity threats[22][23] - The company does not commit to updating forward-looking statements and directs readers to its SEC filings for a more detailed discussion of risk factors[23]