<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 March 31, 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 MARCH 31, 1995
Common Stock ($2.50 par value) 5,316,122
Page 1 of 11
<PAGE>
ACNB CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Consolidated Condensed Balance Sheets
March 31, 1995 and December 31, 1994 and
March 31, 1994 3
Consolidated Condensed Statements of Income
Three Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1995 and 1994 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>
Page 2
<PAGE>
PART I FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
March 31 December 31 March 31
1995 1994 1994
ASSETS (000 omitted)
<S> <C> <C> <C>
Cash and Due from Banks 12,271 12,919 12,738
Investment Securities
U.S. Treasury 77,922 96,140 109,463
U.S. Government Agencies and
Corporations 43,000 45,000 37,725
State and Municipal 1,720 1,509 2,889
Other Investments 2,420 2,256 2,733
------ ------ ------
Total Investment Securities 125,062 144,905 152,810
Federal Funds Sold 100 100 17,675
Loans 314,021 305,922 282,358
Less: Reserve for Loan Losses (3,349) (3,370) (3,415)
------- ------- -------
Net Loans 310,672 302,552 278,943
Premises and Equipment 5,943 5,874 5,526
Other Real Estate 999 1,037 663
Other Assets 5,323 4,645 5,563
-------- -------- --------
TOTAL ASSETS $460,370 $472,032 $473,918
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing 38,718 38,639 35,318
Interest Bearing 346,182 350,159 379,211
------- ------- -------
Total Deposits 384,900 388,798 414,529
Securities Sold Under
Agreement To Repurchase 14,010 14,613 8,969
Borrowing Federal Home Loan Bank 8,400 16,800 -
Demand Notes U.S. Treasury 272 450 450
Other Liabilities 3,446 2,724 3,189
------- ------- -------
TOTAL LIABILITIES 411,028 423,385 427,137
SHAREHOLDERS EQUITY
Common Stock ($2.50 par value)
20,000,000 shares authorized:
5,316,122 shares issued and
outstanding at 3/31/95 13,290 13,290 13,370
Surplus 4,511 4,511 5,002
Retained Earnings 31,541 30,846 28,409
------ ------ ------
TOTAL SHAREHOLDERS EQUITY 49,342 48,647 46,781
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $460,370 $472,032 $473,918
======== ======== =======
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31
1995 1994
(000 omitted)
<S> <C> <C>
INTEREST INCOME
Loan Interest and Fees 6,147 5,669
Interest and Dividends on
Investment Securities 1,650 1,755
Interest on Federal Funds Sold 1 146
Interest on Balances with
Depository Institutions 1 38
----- -----
TOTAL INTEREST INCOME 7,799 7,608
INTEREST EXPENSE
Deposits 3,047 3,070
Other Borrowed Funds 311 77
----- -----
TOTAL INTEREST EXPENSE 3,358 3,147
NET INTEREST INCOME 4,441 4,461
Provision for Loan Losses 0 0
NET INTEREST INCOME AFTER PROVISION ----- -----
FOR LOAN LOSSES 4,441 4,461
OTHER INCOME
Trust Department 67 65
Service Charges on Deposit Accounts 146 120
Other Operating Income 219 240
Securities Gains 0 0
----- -----
TOTAL OTHER INCOME 432 425
OTHER EXPENSES
Salaries and Employee Benefits 1,405 1,291
Premises and Fixed Assets 364 369
Other Expenses 812 749
----- -----
TOTAL OTHER EXPENSE 2,581 2,409
INCOME BEFORE INCOME TAX 2,292 2,477
Applicable Income Tax 747 782
----- -----
NET INCOME $1,545 $1,695
===== =====
EARNINGS PER SHARE* $0.29 $0.32
DIVIDENDS PER SHARE* 0.16 0.15
</TABLE>
*Based on 5,316,122 shares outstanding in 1995 and 5,347,836 in 1994.
See accompanying notes to financial statements.
Page 4
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended
March 31
1995 1994
(000 omitted)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received 7,751 7,461
Fees and Commissions Received 521 524
Interest Paid (2,511) (2,421)
Cash Paid to Suppliers and Employees (3,048) (2,575)
Income Taxes Paid (764) 0
Net Cash Provided by Operating Activities 1,949 2,989
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with other Banks 20,035 20,061
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (414) (25,610)
Principal Collected on Loans 16,156 20,756
Loans Made to Customers (24,239) (19,798)
Capital Expenditures (205) (250)
Net Cash Used in Investing Activities 11,333 (4,841)
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts (8,727) 3,041
Proceeds from Sale of Certificates of Deposit 9,237 3,421
Payments for Maturing Certificates of Deposit (5,011) (6,452)
Dividends Paid (851) (775)
Increase (Decrease) in Borrowings (8,578) 0
Net Cash Provided by Financing Activities (13,930) (765)
Net Increase in Cash and Cash Equivalents (648) (2,617)
Cash and Cash Equivalents: Beginning of Period 13,019 33,030
End of Period 12,371 30,413
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 1,545 1,695
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 137 111
Provision for Possible Credit Losses 0 0
Provision for Deferred Taxes 88 (67)
Amortization of Investment Securities Premiums 223 507
Increase (Decrease) in Taxes Payable (105) 849
(Increase) Decrease in Interest Receivable (182) (555)
Increase (Decrease) in Interest Payable 847 726
Increase (Decrease) in Accrued Expenses (6) 233
(Increase) Decrease in Other Assets (597) (507)
Increase (Decrease) in Deferred Loan Production Costs (1) (3)
Net Cash Provided by Operating Activities 1,949 2,989
</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.
Page 5
<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 March 31, 1995 and 1994 and December
31, 1994 and the results of its operations for the three months ended March
31, 1995 and 1994 and changes in financial position for the three 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 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 March 31, 1995
and December 31, 1994 were as follows:
<TABLE>
<CAPTION>
3/31/95 12/31/94
Amortized Fair Amortized Fair
Cost Value Cost Value
(000 omitted)
<S> <C> <C> <C> <C>
U.S. Treasury 77,922 76,806 96,140 93,762
U.S. Government Agencies
and Corporations 43,000 41,857 45,000 43,080
State and Municipal 1,720 1,719 1,509 1,506
Other Investments 2,420 2,420 2,256 2,256
------- ------- ------- -------
TOTAL $125,062 $122,802 $144,905 $140,604
======= ======= ======= =======
</TABLE>
Income earned on investment securities was as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
1995 1994
(000 omitted)
<S> <C> <C>
U.S. Treasury 1,040 1,321
U.S. Government Agencies
and Corporations 553 373
State and Municipal 21 34
Other Investments 36 27
------ ------
$1,650 $1,755
====== ======
</TABLE>
Page 6
<PAGE>
3. Gross loans are summarized as follows:
<TABLE>
<CAPTION>
March 31 December 31
1995 1994
<S> <C> <C>
(000 omitted)
Real Estate 273,804 268,944
Real Estate Construction 13,091 12,632
Commercial and Industrial 10,409 10,785
Consumer 16,717 17,444
------- -------
Gross Loans 314,021 309,805
Less: Unearned Discount --- 3,883
-------- --------
Total Loans $314,021 $305,922
======== ========
</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 three month periods ended March 31, 1995 and 1994 were 5,347,836 and
5,316,122 respectively.
5. Dividends per share were $0.16 and $0.15 for the three month periods ended
March 31, 1995 and 1994 respectively. This represented a 55.2% payout of net
income in 1995 and a 46.0% payout in 1994.
6. The results of operations for the three month periods ended March 31, 1995
and 1994 are not necessarily indicative of the results to be expected for the
full year.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's net income for the first three months of 1995 was $1,545,000,
a decrease of 8.8% from $1,695,000 in 1994. Return on Average Total Assets was
1.34% for the first three months of 1995 compared with 1.43% for the same period
of 1994. Return on Average Shareholders Equity was 12.54% for the three months
ended March 31, 1995 compared with 14.55% 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 $20,000 for the first three months of 1995 compared to 1994 and other
expenses (salaries and fixed assets) are up $172,000.
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 quarter. 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 $.29 in 1995 and $.32 in 1994, while the dividend
increased from $.15 to $.16 in 1995.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
(Taxable equivalent)
<TABLE>
<CAPTION>
Three months Ended
3/31/95 3/31/94
Rate Rate
<S> <C> <C>
Earning Assets 7.08% 6.71%
Interest Bearing Liabilities 3.62 3.24
Interest Rate Spread 3.46 3.47
Interest Expense as a % of earning assets 3.04 2.76
Net Yield on Earning Assets 4.04 3.95
</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.
Page 8
<PAGE>
The Net Yield on Earning Assets for the first three months of 1995 was up 9
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
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
3/31/95 3/31/95
<S> <C> <C>
Balance at Beginning of Period 3,370 3,581
Provision Charged to Expense 0 0
Loans Charged Off 27 193
Recoveries 6 27
Balance at End of Period 3,349 3,415
Ratios:
Net Charge-offs to:
Net Income 1.36% 9.79%
Total Loans .01 .06
Reserve for Possible Loan Losses .63 4.86
Reserve for Possible Loan Losses to:
Total Loans 1.07 1.21
</TABLE>
The Reserve for Possible Loan Losses at March 31, 1995 totaled $3,349,000 (1.07%
of Total Loans), a decrease of $66,000 from $3,415,000 (1.21% of Total Loans) at
the end of the first three months of 1994. Loans past due 90 days and still
accruing amounted to $1,980,000 and non-accrual loans totaled $850,000 as of
3/31/95.The ratio of non-performing assets plus other real estate owned to total
assets was .83% at 3/31/95. $454,000 of the bank's other real estate total of
$999,000 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 $2,219,000 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 $852,000 in non-accrual loans, was approximately
$19,000 for the first three months of 1995.
Page 9
<PAGE>
CAPITAL MANAGEMENT
Total Shareholders' Equity amounted to $49,342,000 at 3/31/95 compared to
$46,781,000 at 3/31/94, an increase of $2,561,000 or 5.5% over that period. The
ratio of Total Shareholders' Equity to Total Assets was 9.87% at 3/31/94, 10.31%
at 12/31/94, and 10.72% at 3/31/95. The leverage ratio was 10.72% at 3/31/95
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 11.3% of total assets at 3/31/95. This mix of assets
would be readily available for funding any cash requirements.
As of 3/31/95 rate sensitive assets were 108% of rate sensitive liabilities at
one month, 108% at six months, and 122% 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
<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 March 31, 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
May 1, 1995 /s/ Ronald L. Hankey
(date) -------------------------------------
Ronald L. Hankey
President
/s/ John W. Krichten
-------------------------------------
John W. Krichten
Secretary/Treasurer
Page 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 12,271
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 125,062
<INVESTMENTS-MARKET> 122,802
<LOANS> 314,021
<ALLOWANCE> 3,349
<TOTAL-ASSETS> 460,370
<DEPOSITS> 384,900
<SHORT-TERM> 22,682
<LIABILITIES-OTHER> 3,446
<LONG-TERM> 0
<COMMON> 13,290
0
0
<OTHER-SE> 36,052
<TOTAL-LIABILITIES-AND-EQUITY> 49,342
<INTEREST-LOAN> 6,147
<INTEREST-INVEST> 1,650
<INTEREST-OTHER> 2
<INTEREST-TOTAL> 7,799
<INTEREST-DEPOSIT> 3,047
<INTEREST-EXPENSE> 3,358
<INTEREST-INCOME-NET> 4,441
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,581
<INCOME-PRETAX> 2,292
<INCOME-PRE-EXTRAORDINARY> 2,292
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,545
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 4.04
<LOANS-NON> 850
<LOANS-PAST> 1,980
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,370
<CHARGE-OFFS> 27
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 3,349
<ALLOWANCE-DOMESTIC> 3,349
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
