ACNB (US:ACNB)2025-08-07 19:18Part I – Financial Information Item 1. Consolidated Financial Statements This section presents ACNB Corporation's unaudited consolidated financial statements, reflecting significant asset, loan, and deposit growth primarily from the Traditions Bancorp acquisition, with Q2 2025 net income at $11.6 million and six-month net income at $11.4 million, impacted by merger expenses Consolidated Statements of Condition (Unaudited) Total assets significantly increased to $3.26 billion at June 30, 2025, primarily due to the Traditions Bancorp acquisition, driving growth in loans, deposits, and goodwill | (Dollars in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $3,259,528 | $2,394,830 | | Total Cash and Cash Equivalents | $103,109 | $47,262 | | Loans, net | $2,317,463 | $1,665,630 | | Goodwill | $64,449 | $44,185 | | Total Liabilities | $2,864,377 | $2,091,557 | | Total Deposits | $2,524,541 | $1,792,501 | | Total Stockholders' Equity | $395,151 | $303,273 | Consolidated Statements of Income (Unaudited) Net income for Q2 2025 was $11.6 million, a slight increase, while six-month net income decreased to $11.4 million due to $10.0 million in merger expenses and a $5.7 million provision for credit losses | (Dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $31,012 | $20,964 | $58,102 | $41,557 | | Provision for credit losses | ($228) | ($2,990) | $5,740 | ($2,767) | | Total Noninterest Income | $8,682 | $6,427 | $15,866 | $12,094 | | Total Noninterest Expenses | $25,366 | $16,391 | $54,701 | $34,053 | | Merger-related Expenses | $1,943 | $23 | $9,974 | $23 | | Net Income | $11,648 | $11,279 | $11,376 | $18,047 | Per Share Data | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | | $1.11 | $1.32 | $1.12 | $2.12 | | $1.11 | $1.32 | $1.12 | $2.12 | Notes to Consolidated Financial Statements These notes provide detailed disclosures, highlighting the Traditions Bancorp acquisition on February 1, 2025, which significantly impacted financial statements, including investment securities, loans, credit losses, and goodwill - Effective February 1, 2025, ACNB closed the acquisition of Traditions Bancorp, Inc. for $83.8 million, issuing 2,035,246 shares of common stock1829 - The acquisition resulted in recording $20.3 million in goodwill and $18.9 million in core deposit intangibles3238 - During Q1 2025, the company changed its accounting policy for loans held for sale to fair value to better reflect mortgage banking activities22 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes financial performance and condition, highlighting the Traditions Bancorp acquisition as the primary driver of balance sheet growth and the $11.4 million six-month net income, impacted by credit loss provisions and merger expenses - The acquisition of Traditions Bancorp, effective February 1, 2025, contributed $877.7 million in assets, $648.5 million in loans, and $741.5 million in deposits119 - Financial results for the six months ended June 30, 2025, were significantly impacted by a $4.2 million (net of taxes) provision for credit losses on non-PCD loans and $7.8 million (net of taxes) in merger-related expenses119 Performance Ratios (Annualized) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | | 0.74% | 1.49% | | 6.11% | 12.95% | | 4.14% | 3.79% | Results of Operations Q2 2025 net income slightly increased to $11.6 million, driven by higher net interest income, while six-month net income decreased to $11.4 million due to a $5.7 million provision for credit losses and $10.0 million in merger expenses - Q2 2025 vs Q2 2024: Net interest income increased by $10.0 million to $31.0 million, with FTE net interest margin expanding by 39 bps to 4.21%, including a $2.2 million accretion impact128 - Six Months 2025 vs 2024: Net interest income increased by $16.5 million to $58.1 million, with FTE net interest margin expanding by 35 bps to 4.14%, including a $3.7 million accretion impact143 - For the six months ended June 30, 2025, the provision for credit losses was $5.7 million, primarily due to establishing a $5.5 million allowance for acquired non-PCD loans, contrasting with a $2.8 million reversal in 2024149150 Financial Condition Total assets reached $3.26 billion at June 30, 2025, a significant increase driven by the Traditions acquisition, with loans growing to $2.34 billion and deposits to $2.52 billion, while capital ratios remained strong | (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total loans, net of unearned income | $2,341,816 | $1,682,910 | | Total deposits | $2,524,541 | $1,792,501 | | Total stockholders' equity | $395,151 | $303,273 | - The allowance for credit losses (ACL) increased to $24.4 million at June 30, 2025, from $17.3 million at year-end 2024, primarily due to an initial ACL of $5.5 million for non-PCD loans and $1.5 million for accruing PCD loans from the acquisition166 - The ratio of uninsured and non-collateralized Bank deposits to total Bank deposits was 20.3% at June 30, 2025, with available liquidity sources at 297.9% of these uninsured deposits171 Item 3. Quantitative and Qualitative Disclosures about Market Risk ACNB manages interest rate risk through ALCO, with a 100 bps rate decrease projected to reduce net interest income by 0.7% and economic value of equity by 4.0%, remaining within policy limits 12-Month Earnings at Risk (Net Interest Income Sensitivity) | Change in Market Interest Rates (bps) | % Change in NII (June 30, 2025) | Policy Limits | | :--- | :--- | :--- | | (200) | (0.7)% | (10.0)% | | (100) | (0.7)% | (5.0)% | | 100 | 0.3% | (5.0)% | | 200 | (0.2)% | (10.0)% | Value at Risk (Economic Value of Equity Sensitivity) | Change in Market Interest Rates (bps) | % Change in Market Value (June 30, 2025) | Policy Limits | | :--- | :--- | :--- | | (200) | (11.6)% | (35.0)% | | (100) | (4.0)% | (20.0)% | | 100 | (0.1)% | (20.0)% | | 200 | (2.3)% | (35.0)% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate reporting, with no material changes to internal control over financial reporting during Q2 2025 - The Chief Executive Officer and Chief Financial Officer concluded that the Corporation's disclosure controls and procedures are effective as of the end of the period covered by the report201 - No material changes were made to the Corporation's internal control over financial reporting during the three months ended June 30, 2025203 Part II – Other Information Item 1. Legal Proceedings As of June 30, 2025, ACNB Corporation was not party to any material pending legal proceedings, with no expected material adverse effects from routine litigation - There were no material pending legal proceedings, other than ordinary routine litigation, as of June 30, 2025205 Item 1A. Risk Factors No material changes to risk factors from the 2024 10-K, except for a new risk concerning the adverse impact of changes in trade policies and tariffs on business and asset quality - A new risk factor was added concerning the adverse impact of changes to trade policies and tariffs on the business and its customers, which could negatively affect asset quality and financial performance206 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Board approved a new plan on June 18, 2025, to repurchase up to 314,000 shares, superseding prior plans, with 71,592 shares repurchased during Q2 2025 under the previous plan - On June 18, 2025, the Board of Directors approved a new plan to repurchase up to 314,000 shares of common stock, replacing all earlier plans209 Common Stock Purchases - Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - April 30, 2025 | 68,256 | $39.43 | | May 1 - May 31, 2025 | 760 | $40.99 | | June 1 - June 30, 2025 | 2,576 | $40.95 | | Total Q2 2025 | 71,592 | | Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading agreement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading agreement during the second quarter of 2025213 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including various agreements, compensation plans, and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and various agreements related to acquisitions, compensation, and debt214216