ACNB (US:ACNB)2025-03-14 15:09Regulatory Changes - Dodd-Frank permanently increased the maximum deposit insurance amount to $250 thousand per depositor [60]. - The FDIC is required to increase the reserve ratio of the Deposit Insurance Fund from 1.15% to 1.35% of insured deposits by 2020 [60]. - Dodd-Frank mandates a minimum common equity Tier 1 capital ratio of 4.5% for financial institutions [77]. - The minimum Tier 1 capital to risk-weighted assets ratio is set at 6.0% [77]. - The minimum total capital ratio to total risk-weighted assets is established at 8.0% [77]. - The minimum leverage ratio of Tier 1 capital to average total consolidated assets is required to be 4.0% [77]. - Dodd-Frank prohibits excessive compensation for executives of depository institutions with assets over $1.0 billion [61]. - The Consumer Financial Protection Bureau (CFPB) has authority over depository institutions with $10 billion or more in assets [66]. - The CFPB requires mortgage lenders to determine a consumer's ability to repay based on verified information [67]. - Dodd-Frank allows states to adopt more stringent consumer protection laws than federal standards [66]. Financial Performance - ACNB Corporation's net interest income for 2024 was $83.6 million, a decrease of $4.8 million, or 5.4%, compared to $88.3 million in 2023 [196]. - The FTE net interest margin for 2024 was 3.79%, down 28 basis points from 4.07% in 2023 [196]. - Total earning assets increased to $2.22 billion in 2024, with interest income rising by $10.8 million, or 11.1%, compared to 2023 [197]. - Average loans increased by $94.9 million, or 6.0%, with FTE interest income on loans rising by $10.9 million, or 13.4% [197]. - ACNB Corporation's total assets reached $2.44 billion as of December 31, 2024 [196]. - Noninterest income totaled $24.7 million in 2024, a $6.3 million, or 34.1% increase compared to 2023, driven by growth in insurance commissions and wealth management [201]. - Total noninterest expenses rose to $70.7 million in 2024, a $4.6 million, or 7.0% increase from 2023 [203]. - The provision for income taxes was $8.6 million in 2024, reflecting an effective tax rate (ETR) of 21.2% compared to 20.5% in 2023 [204]. Asset and Liability Management - The corporation's total interest-bearing liabilities amounted to $1.64 billion in 2024, with total interest expense increasing significantly [196]. - Total interest expense increased by $15.5 million, or 186.7%, in 2024 compared to 2023, primarily due to higher cost of funds and long-term borrowings [198]. - Average rate paid on interest-bearing deposits rose to 0.83%, an increase of 58 basis points in 2024, with time deposits and money markets increasing by 196 and 62 basis points, respectively [198]. - Total average borrowings increased by $162.5 million, or 127.2%, during 2024, primarily funding loan growth and deposit outflows [198]. - Long-term borrowings increased by $60.0 million, or 30.7%, to $255.3 million as of December 31, 2024, primarily to fund loan growth [239]. Loan Portfolio and Credit Quality - Total loans, net of unearned income, increased by $54.9 million, or 3.4%, in 2024, driven mainly by growth in commercial real estate and residential mortgage portfolios [213]. - The commercial real estate portfolio grew by $70.8 million, or 7.9%, with 56.0% of collateral in Pennsylvania and 42.1% in Maryland as of December 31, 2024 [214]. - Residential real estate mortgages totaled $402.0 million, an increase of $7.8 million, or 2.0%, in 2024, including $45.5 million in junior liens [216]. - Commercial and industrial loans decreased by $11.4 million, or 7.5%, totaling $140.9 million in 2024 [217]. - Total nonperforming assets increased to $7.25 million in 2024 from $4.64 million in 2023, with nonperforming loans to total loans ratio at 0.40% [224]. - The allowance for credit losses to nonperforming loans ratio decreased to 253.67 in 2024 from 478.53 in 2023 [224]. - Total internally risk-rated loans were $1.36 billion as of December 31, 2024, with a related allowance for credit losses of $15.1 million [226]. - The allowance for credit losses (ACL) was $17.28 million as of December 31, 2024, down from $19.97 million in 2023, reflecting a reversal of $2.4 million in provisions for credit losses [232]. Capital and Equity - Total stockholders' equity rose to $303.3 million at December 31, 2024, compared to $277.5 million in 2023, primarily due to earnings retention [240]. - ACNB retained $21.1 million, or 66.4%, of its net income in 2024, slightly down from $22.0 million, or 69.4%, in 2023 [240]. - Quarterly cash dividends paid in 2024 totaled $10.7 million, or $1.26 per common share, representing a 10.5% increase from $9.7 million, or $1.14 per share in 2023 [240]. Deposits and Funding - Total deposits decreased by $69.3 million, or 3.7%, to $1.79 billion as of December 31, 2024, with total demand and savings deposits down by $110.2 million, or 6.8% [236]. - Time deposits increased by $40.9 million, or 17.6%, to $273.0 million, partially offsetting the decline in total deposits [235]. - The loan-to-deposit ratio was 93.89% at December 31, 2024, indicating a strong reliance on deposits for lending activities [236]. - Municipal deposits decreased to $111.0 million, or 6.2% of total deposits, from $176.6 million, or 9.5%, in 2023, due to public entities reinvesting excess funds elsewhere [237]. Capital Adequacy - The banking subsidiary's Tier 1 leverage ratio increased to 12.03% in 2024 from 11.12% in 2023, exceeding the minimum requirement of 5.00% [244]. - Common Tier 1 capital ratio rose to 16.03% in 2024, up from 14.86% in 2023, surpassing the minimum requirement of 6.50% [244]. - Total risk-based capital ratio improved to 17.02% in 2024 compared to 15.99% in 2023, well above the minimum requirement of 10.00% [244]. - The banking subsidiary is categorized as "well capitalized" for regulatory purposes as of December 31, 2024 [244]. Liquidity and Funding Sources - As of December 31, 2024, the banking subsidiary had borrowing capacity of $926.5 million from the FHLB, with $690.4 million available [247]. - The banking subsidiary maintained a Fed Funds line capacity of $192.0 million, with the full amount available as of December 31, 2024 [248]. - Unfunded outstanding commitments to extend credit amounted to $372.8 million as of December 31, 2024 [253]. - Securities sold under repurchase agreements totaled $15.8 million at December 31, 2024, down from $26.9 million in 2023 [250]. - The parent company has a $5.0 million unsecured line of credit available as of December 31, 2024 [249]. - ACNB believes it has sufficient funding sources to maintain liquidity under varying business conditions [252].