<PAGE>
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, 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 SEPT 30, 1994
Common Stock ($5.00 par value) 2,673,918
Page 1 of 11
<PAGE>
ACNB CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Consolidated Condensed Balance Sheets
Sept 30, 1994 and December 31, 1993 and
Sept 30, 1993 3
Consolidated Condensed Statements of Income
Nine Months Ended Sept 30, 1994 and 1993 4
Consolidated Statements of Cash Flows
Nine Months Ended Sept 30, 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
</TABLE>
-2-
<PAGE>
ACBN CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
Sept 30 December 31 Sept 30
1994 1993 1993
(000 omitted)
<S> <C> <C> <C>
ASSETS
Cash and Due from Banks 13,848 15,970 11,370
Investment Securities
U.S. Treasury 101,574 118,982 116,216
U.S. Government Agencies and
Corporations 46,990 23,787 21,918
State and Municipal 2,630 1,296 1,347
Other Investments 3,231 3,737 4,495
------ ------ ------
Total Investment Securities 154,425 147,802 143,976
Federal Funds Sold 200 17,060 9,475
Loans 294,530 283,298 288,099
Less: Reserve for Loan Losses (3,384) (3,581) (3,606)
------- ------- -------
Net Loans 291,146 279,717 284,493
Premises and Equipment 5,884 5,384 5,035
Other Real Estate 828 850 1,064
Other Assets 5,552 4,632 5,517
-------- -------- --------
TOTAL ASSETS $471,883 $471,415 $460,930
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing 39,647 37,042 35,129
Interest Bearing 365,652 375,644 369,169
------- ------- -------
Total Deposits 405,299 412,686 404,298
Securities Sold Under Agreement
To Repurchase and Federal Funds 15,524 10,802 8,407
Demand Notes U.S. Treasury 450 450 450
Other Liabilities 2,011 1,615 2,702
------- ------- -------
TOTAL LIABILITIES 423,284 425,553 415,857
SHAREHOLDERS EQUITY
Common Stock ($5 par value)
10,000,000 shares authorized:
2,673,918 shares issued and
outstanding at 9/30/94 13,370 13,370 13,370
Surplus 5,002 5,002 5,002
Retained Earnings 30,227 27,490 26,701
------ ------ ------
TOTAL SHAREHOLDERS EQUITY 48,599 45,862 45,073
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $471,883 $471,415 $460,930
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept 30 Sept 30
1994 1993 1994 1993
(000 omitted) (000 omitted)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loan Interest and Fees 5,757 6,154 17,057 18,820
Interest and Dividends on
Investment Securities 1,786 1,606 5,390 4,934
Interest on Federal Funds Sold 106 182 364 438
Interest on Balances with
Depository Institutions 16 29 90 122
----- ----- ----- -----
TOTAL INTEREST INCOME 7,665 7,971 22,901 24,314
INTEREST EXPENSE
Deposits 3,002 3,431 9,031 10,441
Other Borrowed Funds 85 53 231 132
----- ----- ----- -----
TOTAL INTEREST EXPENSE 3,087 3,484 9,262 10,573
NET INTEREST INCOME 4,578 4,487 13,639 13,741
Provision for Loan Losses 0 105 0 315
NET INTEREST INCOME AFTER PROVISION ----- ----- ----- -----
FOR LOAN LOSSES 4,578 4,382 13,639 13,426
OTHER INCOME
Trust Department 64 96 203 191
Service Charges on Deposit Accounts 154 137 445 425
Other Operating Income 126 142 441 461
Securities Gains 0 0 0 93
----- ----- ----- -----
TOTAL OTHER INCOME 344 375 1,089 1,170
OTHER EXPENSES
Salaries and Employee Benefits 1,289 1,212 3,847 3,661
Premises and Fixed Assets 309 303 1,000 879
Other Expenses 811 744 2,330 2,200
----- ----- ----- -----
TOTAL OTHER EXPENSE 2,409 2,259 7,177 6,740
INCOME BEFORE INCOME TAX 2,513 2,498 7,551 7,856
Applicable Income Tax 827 814 2,461 2,621
----- ----- ----- -----
NET INCOME $1,686 $1,684 $5,090 $5,235
===== ===== ===== =====
EARNINGS PER SHARE* $0.63 $0.63 $1.90 $1.96
DIVIDENDS PER SHARE* 0.30 0.28 $0.88 0.82
</TABLE>
*Based on 2,673,918 shares outstanding in 1994 and 1993.
See accompanying notes to financial statements.
-4-
<PAGE>
ACBN CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
Sept 30
1994 1993
(000 omitted)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received 23,330 25,261
Fees and Commissions Received 1,399 1,556
Interest Paid (9,273) (9,905)
Cash Paid to Suppliers and Employees (6,714) (6,646)
Income Taxes Paid (2,421) (2,772)
Net Cash Provided by Operating Activities 6,321 7,494
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with Other Banks 36,057 39,404
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (44,106) (63,647)
Principal Collected on Loans 68,750 74,058
Loans Made to Customers (80,163) (74,448)
Capital Expenditures (823) (1,164)
Net Cash Used in Investing Activities (20,285) (25,797)
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts 9,391 15,593
Proceeds from Sale of Certificates of Deposit 9,754 10,660
Payments for Maturing Certificates of Deposit (21,810) (20,275)
Dividends Paid (2,353) (2,193)
Net Cash Provided by Financing Activities (5,018) 3,785
Net Increase in Cash and Cash Equivalents (18,982) (14,518)
Cash and Cash Equivalents: Beginning of Period 33,030 35,363
End of Period 14,048 20,845
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 5,090 5,235
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 329 299
Provision for Possible Credit Losses 0 315
Provision for Deferred Taxes (67) 18
Amortization of Investment Securities Premiums 1,409 1,329
Increase (Decrease) in Taxes Payable 107 (169)
(Increase) Decrease in Interest Receivable (670) 5
Increase (Decrease) in Interest Payable (11) 668
Increase (Decrease) in Accrued Expenses 485 257
(Increase) Decrease in Other Assets (345) (428)
Increase (Decrease) in Deferred Loan Production Costs (6) (35)
Net Cash Provided by Operating Activities 6,321 7,494
</TABLE>
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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<PAGE>
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 Sept 30, 1994
and 1993 and December 31, 1993 and the results of its operations for
the nine months ended Sept 30, 1994 and 1993 and changes in
financial position for the nine 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
Sept 30, 1994 and December 31, 1993 were as follows:
<TABLE>
<CAPTION>
9/30/94 12/31/93
Amortized Fair Amortized Fair
Cost Value Cost Value
(000 omitted)
<S> <C> <C> <C> <C>
U.S. Treasury 101,574 99,741 118,982 119,379
U.S. Government Agencies
and Corporations 46,990 45,978 23,787 23,821
State and Municipal 2,630 2,627 1,296 1,301
Other Investments 3,231 3,232 3,737 3,767
_______ _______ _______ _______
TOTAL $154,425 $151,578 $147,802 $148,268
======= ======= ======= =======
</TABLE>
Income earned on investment securities was as follows:
<TABLE>
<CAPTION>
Nine Months Ended Sept 30
1994 1993
(000 omitted)
<S> <C> <C>
U.S. Treasury 3,723 3,873
U.S. Government Agencies
and Corporations 1,482 706
State and Municipal 82 62
Other Investments 103 293
______ ______
$5,390 $4,934
====== ======
</TABLE>
-6-
<PAGE>
3. Gross loans are summarized as follows:
<TABLE>
<CAPTION>
Sept 30 December 31
1994 1993
(000 omitted)
<S> <C> <C>
Real Estate 259,705 250,242
Real Estate Construction 8,570 4,791
Commercial and Industrial 11,744 14,100
Consumer 18,318 17,950
_______ _______
Gross Loans 298,337 287,083
Less: Unearned Discount 3,807 3,785
________ ________
Total Loans $294,530 $283,298
======== ========
</TABLE>
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 nine month periods ended Sept
30, 1994 and 1993 were 2,673,918.
5. Dividends per share were $0.88 and $0.82 for the nine month periods
ended Sept 30, 1994 and 1993 respectively. This represented a
46.3% payout of net income in 1994 and a 41.8% payout in 1993.
6. The results of operations for the nine month periods ended Sept
30, 1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.
SUBSEQUENT EVENTS
On October 26, 1994 the corporation repurchased 15,857 shares of its
own common stock on the open market. They were purchased for $570,852
($36 per share). The repurchased shares have been retired.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's net income for the first nine months of 1994 was $5,090,000, a
decrease of 2.8% from $5,235,000 in 1993. Return on Average Total Assets was
1.43% for the first nine months of 1994 compared with 1.54% for the same period
of 1993. Return on Average Shareholders Equity was 14.29% for the nine months
ended Sept 30, 1994 compared with 15.90% 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 $102,000 for the first nine 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 $437,000.
The Corporation is facing intensified competition in its search for residential
mortgages and, until third quarter 1994, 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 22 basis points compared to the first nine months 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 $1.90 in 1994 and $1.96 in 1993, while the dividend
increased from $.82 to $.88 in 1994.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Taxable equivalent)
<TABLE>
<CAPTION>
Nine months Ended
9/30/94 9/30/93
Rate Rate
<S> <C> <C>
Earning Assets 6.72% 7.46%
Interest Bearing Liabilities 3.19 3.77
Interest Rate Spread 3.53 3.69
Interest Expense as a % of earning assets 2.71 3.23
Net Yield on Earning Assets 4.01 4.23
</TABLE>
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.
-8-
<PAGE>
The Net Yield on Earning Assets for the first nine months of 1994 was down 22
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. Loan volume improved in the third quarter and the bank booked higher
yielding assets. Net yield on earning assets will remain under pressure but it
has improved slightly from the 4.00% recorded at the end of the first six months
of this year.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
Reserve for Possible Loan Losses
(In thousands) Nine Months Ended
9/30/94 9/30/93
<S> <C> <C>
Balance at Beginning of Period 3,581 3,417
Provision Charged to Expense 0 315
Loans Charged Off 237 159
Recoveries 40 33
Balance at End of Period 3,384 3,606
Ratios:
Net Charge-offs to:
Net Income 3.87% 2.41%
Total Loans .07 .04
Reserve for Possible Loan Losses 5.82 3.49
Reserve for Possible Loan Losses to:
Total Loans 1.15 1.25
</TABLE>
The Reserve for Possible Loan Losses at Sept 30, 1994 totaled $3,384,000 (1.15%
of Total Loans), a decrease of $222,000 from $3,606,000 (1.25% of Total Loans)
at the end of the first nine months of 1993. Loans past due 90 days and still
accruing amounted to $1,934,000 and non-accrual loans totaled $942,000 as of
9/30/94.The ratio of non-performing assets plus other real estate owned to total
assets was .78% at 9/30/94. $454,000 of the bank's other real estate total of
$828,000 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 $992,000 in non-accrual loans, was approximately
$59,000 for the first nine months of 1994.
-9-
<PAGE>
CAPITAL MANAGEMENT
Total Shareholders' Equity amounted to $48,599,000 at 9/30/94 compared to
$45,073,000 at 9/30/93, an increase of $3,526,000 or 7.8% over that period. The
ratio of Total Shareholders' Equity to Total Assets was 9.78% at 9/30/93, 9.73%
at 12/31/93, and 10.30% at 9/30/94. The leverage ratio was 10.25% at 9/30/94
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 20.7% of total assets at 9/30/94. This mix of assets
would be readily available for funding any cash requirements.
As of 9/30/94 rate sensitive assets were 98% of rate sensitive liabilities at
one month, 113% at six months, and 126% 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.
-10-
<PAGE>
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, 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
October 28, 1994 ______________________________
(date) Ronald L. Hankey
President
/s/ John W. Krichten
______________________________
John W. Krichten
Secretary/Treasurer
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 12,846
<INT-BEARING-DEPOSITS> 1,002
<FED-FUNDS-SOLD> 200
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 154,425
<INVESTMENTS-MARKET> 151,578
<LOANS> 294,530
<ALLOWANCE> 3,384
<TOTAL-ASSETS> 471,883
<DEPOSITS> 405,299
<SHORT-TERM> 15,974
<LIABILITIES-OTHER> 2,011
<LONG-TERM> 0
<COMMON> 13,370
0
0
<OTHER-SE> 35,229
<TOTAL-LIABILITIES-AND-EQUITY> 471,883
<INTEREST-LOAN> 17,057
<INTEREST-INVEST> 5,390
<INTEREST-OTHER> 454
<INTEREST-TOTAL> 22,901
<INTEREST-DEPOSIT> 9,031
<INTEREST-EXPENSE> 9,262
<INTEREST-INCOME-NET> 13,639
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,177
<INCOME-PRETAX> 7,551
<INCOME-PRE-EXTRAORDINARY> 7,551
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,090
<EPS-PRIMARY> 1.90
<EPS-DILUTED> 1.90
<YIELD-ACTUAL> 4.01
<LOANS-NON> 942
<LOANS-PAST> 1934
<LOANS-TROUBLED> 346
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,581
<CHARGE-OFFS> 237
<RECOVERIES> 40
<ALLOWANCE-CLOSE> 3,384
<ALLOWANCE-DOMESTIC> 3,384
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
