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 June 30, 1996 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 JUNE 30, 1996
----- ----------------------------
Common Stock 5,301,182
($2.50 par value)
Page 1 of 11
<PAGE>
ACNB CORPORATION
INDEX
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
June 30, 1996 and December 31, 1995 and
June 30, 1995 3
Consolidated Condensed Statements of Income
Six Months Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 6-7
Management's Discussion and Analysis of the
Financial Condition and Results of Operation 8-10
Part II. Other Information 11
Page 2
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PART I
FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
June 30 December 31 June 30
1996 1995 1995
---- ---- ----
ASSETS (000 omitted)
Cash and Due from Banks $ 26,045 $ 22,900 $ 11,729
Investment Securities
U.S. Treasury 43,157 47,400 67,717
U.S. Government Agencies and
Corporations 62,971 54,000 43,000
State and Municipal 925 962 1,465
Other Investments 2,570 2,480 2,480
_________ _________ _________
Total Investment Securities 109,623 104,842 114,662
Federal Funds Sold 100 100 100
Loans 319,430 324,002 322,136
Less: Reserve for Loan Losses (3,242) (3,274) (3,296)
_________ _________ _________
Net Loans 316,188 320,728 318,840
Premises and Equipment 5,556 5,767 5,949
Other Real Estate 813 689 769
Other Assets 6,223 4,327 4,715
_________ _________ _________
TOTAL ASSETS $ 464,548 $ 459,353 $ 456,764
========= ========= =========
LIABILITIES
Deposits
Noninterest Bearing 45,183 44,318 39,569
Interest Bearing 355,156 347,925 345,456
_________ _________ _________
Total Deposits 400,339 392,243 385,025
Securities Sold Under
Agreement To Repurchase 13,930 13,203 15,549
Borrowing Federal Home Loan Bank 0 0 3,550
Demand Notes U.S. Treasury 450 199 450
Other Liabilities 2,347 2,245 2,233
_________ _________ _________
TOTAL LIABILITIES 417,066 407,890 406,807
SHAREHOLDERS EQUITY
Common Stock ($2.50 par value)
20,000,000 shares authorized:
5,301,182 shares issued and
outstanding at 6/30/96 13,253 13,269 13,290
Surplus 4,306 4,396 4,511
Retained Earnings 29,923 33,798 32,156
_________ _________ _________
TOTAL SHAREHOLDERS EQUITY 47,482 51,463 49,957
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $ 464,548 $ 459,353 $ 456,764
========= ========= =========
See accompanying notes to financial statements.
Page 3
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ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
(000 omitted) (000 omitted)
INTEREST INCOME
Loan Interest and Fees $ 6,579 $ 6,462 $ 13,146 $ 12,609
Interest and Dividends on
Investment Securities 1,489 1,530 2,841 3,180
Interest on Federal Funds Sold 2 2 3 3
Interest on Balances with
Depository Institutions 232 8 434 9
_______ _______ _______ _______
TOTAL INTEREST INCOME 8,302 8,002 16,424 15,801
INTEREST EXPENSE
Deposits 3,568 3,342 7,133 6,389
Other Borrowed Funds 153 268 287 579
_______ _______ _______ _______
TOTAL INTEREST EXPENSE 3,721 3,610 7,420 6,968
NET INTEREST INCOME 4,581 4,392 9,004 8,833
Provision for Loan Losses 0 0 0 0
NET INTEREST INCOME AFTER PROVISION _____ _____ _____ _____
FOR LOAN LOSSES 4,581 4,392 9,004 8,833
OTHER INCOME
Trust Department 86 85 189 152
Service Charges on Deposit Accounts 190 155 366 301
Other Operating Income 150 104 276 323
Securities Gains 0 0 0 0
_______ _______ _______ _______
TOTAL OTHER INCOME 426 344 831 776
OTHER EXPENSES
Salaries and Employee Benefits 1,427 1,400 2,909 2,805
Premises and Fixed Assets 424 345 844 709
Other Expenses 691 819 1,266 1,631
_______ _______ _______ _______
TOTAL OTHER EXPENSE 2,542 2,564 5,019 5,145
INCOME BEFORE INCOME TAX 2,465 2,172 4,816 4,464
Applicable Income Tax 810 706 1,580 1,453
_______ _______ _______ _______
NET INCOME $ 1,655 $ 1,466 $ 3,236 $ 3,011
======= ======= ======= =======
EARNINGS PER SHARE* $ 0.31 $ 0.28 $ 0.61 $ 0.57
DIVIDENDS PER SHARE* 0.17 0.16 1.34 0.32
*Based on 5,304,939 shares outstanding in 1996 and 5,316,122 in 1995.
See accompanying notes to financial statements.
Page 4
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ACNB CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
Six months ended
June 30
1996 1995
---- ----
(000 omitted)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received $16,338 $16,499
Fees and Commissions Received 1,063 992
Interest Paid (7,395) (6,660)
Cash Paid to Suppliers and Employees (6,453) (5,377)
Income Taxes Paid (1,555) (2,296)
Net Cash Provided by Operating Activities 1,998 3,158
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with Other Banks 27,266 30,285
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (32,290) (474)
Principal Collected on Loans 41,592 32,573
Loans Made to Customers (37,180) (48,597)
Capital Expenditures (97) (347)
Net Cash Used in Investing Activities (709) 13,440
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts 1,434 (11,357)
Proceeds from Sale of Certificates of Deposit 22,857 21,117
Payments for Maturing Certificates of Deposit (15,468) (12,597)
Dividends Paid (7,111) (1,701)
Increase (Decrease) in Borrowings 251 (13,250)
Repurchase of Common Stock (107) 0
Net Cash Provided by Financing Activities 1,856 (17,788)
Net Increase in Cash and Cash Equivalents 3,145 (1,190)
Cash and Cash Equivalents: Beginning of Period 23,000 13,019
End of Period 26,145 11,829
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 3,236 3,011
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 312 276
Provision for Possible Credit Losses 0 0
Provision for Deferred Taxes 87 88
Amortization of Investment Securities Premiums 243 440
Increase (Decrease) in Taxes Payable (62) (931)
(Increase) Decrease in Interest Receivable (300) 473
Increase (Decrease) in Interest Payable 25 308
Increase (Decrease) in Accrued Expenses 131 (75)
(Increase) Decrease in Other Assets (1,873) (429)
Increase (Decrease) in Other Liabilities 199 (3)
Net Cash Provided by Operating Activities 1,998 3,158
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
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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 June 30, 1996
and 1995 and December 31, 1995 and the results of its operations for
the six months ended June 30, 1996 and 1995 and changes in
financial position for the six 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 1995 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
June 30, 1996 and December 31, 1995 were as follows:
6/30/96 12/31/95
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
(000 omitted)
U.S. Treasury $ 43,157 $ 43,281 $ 47,400 $ 47,779
U.S. Government Agencies
and Corporations 62,971 62,496 54,000 53,921
State and Municipal 925 926 962 964
Other Investments 2,570 2,570 2,480 2,480
________ ________ ________ ________
TOTAL $109,623 $109,273 $104,842 $105,144
======== ======== ======== ========
Income earned on investment securities was as follows:
Six Months Ended June 30
1996 1995
---- ----
(000 omitted)
U.S. Treasury $1,235 $1,956
U.S. Government Agencies
and Corporations 1,492 1,109
State and Municipal 33 41
Other Investments 81 74
______ ______
$2,841 $3,180
====== ======
Page 6
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3. Gross loans are summarized as follows:
June 30 December 31
1996 1995
---- ----
(000 omitted)
Real Estate $283,583 $285,817
Real Estate Construction 10,813 12,951
Commercial and Industrial 9,889 9,268
Consumer 15,145 15,966
_______ _______
Gross Loans 319,430 324,002
Less: Unearned Discount -- --
________ ________
Total Loans $319,430 $324,002
======== ========
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 six month periods ended June 30, 1996 and 1995
were 5,304,939 and 5,316,122 respectively.
5. Dividends per share were $1.34 and $0.32 for the six month periods ended
June 30, 1996 and 1995 respectively. This represented a 220% payout of net
income in 1996 and a 56% payout in 1995. The 1996 dividend includes a $1.00
special dividend paid in January 1996.
6. The results of operations for the six month periods ended June 30, 1996 and
1995 are not necessarily indicative of the results to be expected for the
full year.
Page 7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Corporation's net income for the first six months of 1996 was
$3,236,000, an increase of 7.5% from $3,011,000 in 1995. Return on Average Total
Assets was 1.42% for the first six months of 1996 compared with 1.32% for the
same period of 1995. Return on Average Shareholders Equity was 13.68% for the
six months ended June 30, 1996 compared with 12.24% for 1995.
The increase of 7.5% in 1996 earnings, compared to the same period in 1995,
is due to increased net interest income and decreased other expenses. Net
interest income is up $171,000 for the first six months of 1996 compared to
1995, other expenses (salaries and fixed assets) are up $239,000, and other
miscellaneous expenses are down $365,000. Six month expense for FDIC insurance
declined from $447,000 in 1995 to $1,000 in 1996. Exclusive of that change other
miscellaneous expenses would be up $82,000.
The Corporation's balance sheet indicates moderate growth of 1% in total
assets in 1996 compared to a 3% decline in 1995. While this is somewhat
misleading because the decline in shareholders equity, caused by the special
$1.00 dividend paid in January 1996, offset positive deposit growth, total
growth has not been robust. Loan demand has also been more sensitive to market
conditions and is down 1% from June 30, 1995 to June 30, 1996 and down almost 2%
since December 31, 1995.
Earnings per share was $.61 in 1996 and $.57 in 1995, while the regular
dividend increased from $.32 to $.34 in 1996.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSET
Six months Ended
6/30/96 6/30/95
Rate Rate
---- ----
Earning Assets 7.51% 7.17%
Interest Bearing Liabilities 4.07 3.80
Interest Rate Spread 3.44 3.36
Net Yield on Earning Assets 4.11 3.98
Page 8
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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 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.
The Net Yield on Earning Assets, for the first six months of 1996, was up
13 basis points compared to the same period in 1995. This is a result of
improved yields on government securities and lower cost of certificates of
deposit. Net yield as income has improved as higher securities yields and
slightly lower deposit costs have begun to work through the Corporation's asset
and liability mix.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
Reserve for Possible Loan Losses
(In thousands)
Six Months Ended
6/30/96 6/30/95
------- -------
Balance at Beginning of Period $3,274 $3,370
Provision Charged to Expense 0 0
Loans Charged Off 89 86
Recoveries 37 12
Balance at End of Period 3,242 3,296
Ratios:
Net Charge-offs to:
Net Income .99% 2.46%
Total Loans .01 .02
Reserve for Possible Loan Losses .99 2.25
Reserve for Possible Loan Losses to:
Total Loans 1.01 1.02
Page 9
<PAGE>
The Reserve for Possible Loan Losses at June 30, 1996 totaled $3,242,000
(1.01% of Total Loans), a decrease of $54,000 from $3,296,000 (1.02% of Total
Loans) at the end of the first six months of 1995. Loans past due 90 days and
still accruing amounted to $2,507,000 and non-accrual loans totaled $1,174,000
as of 6/30/96. The ratio of non-performing assets plus other real estate owned
to total assets was .97% at 6/30/96. All 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 $2,620,000 at yearend 1995
while non-accruals stood at $1,303,000. 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 $1,239,000 in non-accrual loans, was
approximately $56,000 for the first six months of 1996.
CAPITAL MANAGEMENT
Total Shareholders' Equity amounted to $47,482,000 at 6/30/96 compared to
$49,957,000 at 6/30/95, a decrease of $2,475,000 or 5% over that period. The
ratio of Total Shareholders' Equity to Total Assets was 10.94% at 6/30/95,
11.20% at 12/31/95, and 10.22% at 6/30/96. The leverage ratio was 10.36% at
6/30/96 while the total risk-based capital ratio was 19.22%. The reduction in
the capital ratios from yearend 1995 to 6/30/96 was caused by the special
dividend of $1.00 per share paid in january 1996.
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 15.1% of total assets at 6/30/96. This mix of
assets would be readily available for funding any cash requirements.
As of 3/31/96 the cumulative asset sensitive gap was 19% of total assets at
one month, 21.5% at six months, and 33.9% at one year. Adjustable rate
mortgages, which have an annual interest rate cap of 2%, are considered rate
sensitive. Passbook savings and NOW accounts are carried in the one to five year
category while half of money market deposit accounts are spread over the four to
twelve month category and the other half are shown to mature in the one to three
year category.
Page 10
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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 June 30, 1996.
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
July 31, 1996 ------------------------------------
(date) Ronald L. Hankey
President
/s/ JOHN W. KRICHTEN
------------------------------------
John W. Krichten
Secretary/Treasurer
Page 11
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,721
<INT-BEARING-DEPOSITS> 13,324
<FED-FUNDS-SOLD> 100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 109,623
<INVESTMENTS-MARKET> 109,273
<LOANS> 319,430
<ALLOWANCE> 3,242
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<DEPOSITS> 400,339
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,347
<LONG-TERM> 0
0
0
<COMMON> 13,253
<OTHER-SE> 34,229
<TOTAL-LIABILITIES-AND-EQUITY> 464,548
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<EXPENSE-OTHER> 5,019
<INCOME-PRETAX> 4,816
<INCOME-PRE-EXTRAORDINARY> 4,816
<EXTRAORDINARY> 0
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