ACNB Corporation
11/05/2026 | Press release | Distributed by Public on 11/05/2026 13:43
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the significant changes in the financial condition, results of operations, comprehensive income, capital resources and liquidity presented in its accompanying Consolidated Financial Statements for ACNB Corporation, a financial holding company. Please read this discussion in conjunction with the Consolidated Financial Statements and disclosures included herein. Current performance does not guarantee, assure or indicate similar performance in the future.
Forward-Looking Statements
In addition to historical information, this Form 10-Q may contain forward-looking statements. Examples of forward-looking statements include, but are not limited to, (a) projections or statements regarding future earnings, expenses, net interest income, noninterest income, earnings or loss per share, asset mix and quality, growth prospects, capital structure, and other financial terms, (b) statements of plans and objectives of Management or the Board of Directors, and (c) statements of assumptions, such as economic conditions in the Corporation's Market Areas. Such forward-looking statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "intends", "will", "should", "anticipates", or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy. Forward-looking statements are subject to certain risks and uncertainties such as national, regional and local economic conditions, competitive factors, and regulatory limitations. Actual results may differ materially from those projected in the forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: short-term and long-term effects of inflation and rising costs on the Corporation, customers and economy; legislative and regulatory changes; banking system instability caused by failures and financial uncertainty of various banks which may adversely impact the Corporation and its securities and loan values, deposit stability, capital adequacy, financial condition, operations, liquidity, and results of operations; effects of governmental and fiscal policies, as well as legislative and regulatory changes; effects of new laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) and their application with which the Corporation and its subsidiaries must comply; impacts of the capital and liquidity requirements of the Basel III standards or any similar standards; effects of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters; ineffectiveness of the business strategy due to changes in current or future market conditions; future actions or inactions of the United States government, including the effects of short-term and long-term federal budget and tax negotiations and a failure to increase the government debt limit or a prolonged shutdown of the federal government; effects of economic conditions particularly with regard to the negative impact of any pandemic, epidemic or health-related crisis and the responses thereto on the operations of the Corporation and current customers, specifically the effect of the economy on loan customers' ability to repay loans; effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; inflation, securities market and monetary fluctuations; risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities, and interest rate protection agreements, as well as interest rate risks; difficulties in acquisitions and integrating and operating acquired business operations, including information technology difficulties; challenges in establishing and maintaining operations in new markets; effects of technology changes; effects of general economic conditions and more specifically in the Corporation's Market Areas; failure of assumptions underlying the establishment of reserves for credit losses and estimations of values of collateral and various financial assets and liabilities; acts of war or terrorism or geopolitical instability; disruption of credit and equity markets; ability to manage current levels of impaired assets; loss of certain key officers; ability to maintain the value and image of the Corporation's brand and protect the Corporation's intellectual property rights; continued relationships with major customers; potential impacts to the Corporation from continually evolving cybersecurity and other technological risks and attacks, including additional costs, reputational damage, regulatory penalties, and financial losses; and, trade and tariff uncertainties and volatility. Management considers subsequent events occurring after the balance sheet date for matters which may require adjustments to, or disclosure in, the Consolidated Financial Statements. We caution readers not to place undue reliance on these forward-looking statements. They only reflect Management's analysis as of this date. The Corporation does not revise or update these forward-looking statements to reflect events or changed circumstances. Please carefully review the risk factors described in other documents the Corporation files from time to time with the SEC, including the Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q. Please also carefully review any Current Reports on Form 8-K filed by the Corporation with the SEC.
Executive Overview
ACNB Corporation is the financial holding company for the wholly-owned subsidiaries of ACNB Bank and ACNB Insurance Services. ACNB Bank provides a full range of retail and commercial financial services in Pennsylvania and Maryland primarily through its network of 33 community banking offices and two loan production offices. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance serving personal and commercial clients through office locations in Westminster, Maryland, and Gettysburg, Pennsylvania and is licensed to do business in 46 states.
The primary source of the Corporation's revenues is net interest income derived from interest earned on loans and investments, less deposit and borrowing funding costs. Revenues are influenced by general economic factors, including market interest rates, the economies of the markets served, stock market conditions, as well as competitive forces within the markets. The Corporation also generates revenue through commissions and fees earned on various services and financial products offered to its customers and through gains on sales of assets such as loans, investments and properties. The Corporation incurs expenses to generate the revenue through provision for credit losses, noninterest expense and income taxes. The Corporation's overall strategy is to increase loan growth in its local markets while maintaining a reasonable funding base by offering competitive deposit products and services.
Financial results for the nine months ended September 30, 2025 were impacted by two discrete items that were related to the Acquisition of Traditions Bancorp, Inc. which was completed on February 1, 2025: a provision for credit losses on non-PCD loans of $4.2 million, net of taxes, and merger-related expenses totaling $7.9 million, net of taxes. Financial results for the nine months ended September 30, 2025 include ACNB's standalone results for the month of January 2025.
The following table presents a summary of the Corporation's earnings and selected performance and asset quality ratios:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (Dollars in thousands, except per share data) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Net income | $ | 15,727 | $ | 14,870 | $ | 44,644 | $ | 26,246 | |||||||||||||||
| Diluted earnings per share | $ | 1.55 | $ | 1.42 | $ | 4.36 | $ | 2.56 | |||||||||||||||
| Cash dividends declared | $ | 0.42 | $ | 0.34 | $ | 1.72 | $ | 1.00 | |||||||||||||||
| Return on average assets (annualized) | 1.87 | % | 1.80 | % | 1.81 | % | 1.11 | % | |||||||||||||||
| Return on average equity (annualized) | 14.67 | % | 14.66 | % | 14.06 | % | 9.12 | % | |||||||||||||||
|
Net interest margin1
|
4.56 | % | 4.27 | % | 4.53 | % | 4.19 | % | |||||||||||||||
|
Non-performing loans to total loans, net of unearned income2
|
0.45 | % | 0.43 | % | 0.45 | % | 0.43 | % | |||||||||||||||
|
Non-performing assets to total assets3
|
0.34 | % | 0.31 | % | 0.34 | % | 0.31 | % | |||||||||||||||
| Net charge-offs to average loans outstanding (annualized) | 0.02 | % | 0.02 | % | 0.01 | % | 0.01 | % | |||||||||||||||
| Allowance for credit losses to total loans, net of unearned income | 1.04 | % | 1.01 | % | 1.04 | % | 1.01 | % | |||||||||||||||
1 Income on interest-earning assets has been computed on an FTE basis using the 21% federal income tax statutory rate.
2 Non-performing loans consists of loans on nonaccrual status and loans greater than 90 days past due and still accruing interest.
3 Non-performing assets consists of non-performing loans and foreclosed assets held for resale.
Summary Financial Results
•Net Interest Income - Net interest income was $34.8 million for the three months ended September 30, 2026 compared to $32.1 million for the same period of 2025, an increase of $2.6 million. For the nine months ended September 30, 2026, net interest income was $101.3 million compared to $90.2 million for the same period of 2025, an increase of $11.1 million. The increase in net interest income was driven primarily by loan growth and loans and investment securities funded at higher rates than those that paid off or matured, and the continued benefit of lower funding costs. In addition, the yield on investment securities during the nine months ended September 30, 2026 compared to the same period in the prior year was impacted by a repositioning of the investment securities portfolio completed during the three months ended December 31, 2025.
◦Net Interest Margin - FTE net interest margin increased to 4.56% for the three months ended September 30, 2026 compared to 4.27% in the same period of 2025, an increase of 29 bps. FTE net interest margin increased to 4.53% for the nine months ended September 30, 2026 compared to 4.19% in the same period of 2025, an increase of 34 bps. The accretion impact of acquisition accounting adjustments on loans and deposits from the
Acquisition was $1.6 million and $2.1 million for the three months ended September 30, 2026 and 2025, respectively, and $5.2 million and $5.8 million for the nine months ended September 30, 2026 and 2025, respectively.
◦Loan Growth - Average loans increased $60.6 million for the three months ended September 30, 2026, compared to the same period of 2025, driven primarily by growth in the commercial real estate portfolio and increased $104.6 million for the nine months ended September 30, 2026, compared to the same period of 2025 driven primarily by growth in the commercial real estate portfolio and the Acquisition.
◦Deposit Growth - Average noninterest-bearing deposits increased $21.6 million and $27.7 million for the three and nine months ended September 30, 2026, respectively, compared to the same periods of 2025 driven primarily by promotional incentives on commercial checking accounts and the Acquisition. Average interest-bearing deposits increased $1.4 million for three months ended September 30, 2026 compared to the same period of 2025 driven primarily by an increase in time deposits due to ongoing promotions and organic growth in interest-bearing demand deposits partially offset by attrition of higher cost money market deposits from the Acquisition. Average interest-bearing deposits increased $45.9 million for the nine months ended September 30, 2026 compared to the same period of 2025 driven primarily by the timing of the Acquisition.
◦Yield on Average Earning Assets - For the three and nine months ended September 30, 2026, the yields on average earning assets were 5.88% and 5.84%, respectively, an increase of 24 and 26 bps compared to the same periods of 2025.
◦Rate on Average Interest-bearing Liabilities - For the three and nine months ended September 30, 2026, the rates on average interest-bearing liabilities were 1.80% and 1.76%, respectively, a decrease of 3 and 8 bps, respectively, compared to the same periods of 2025.
•Asset Quality - The allowance for credit losses was $25.0 million at September 30, 2026, compared to $23.7 million at December 31, 2025. The increase was driven primarily by a specific allowance allocation on a relationship in the commercial and industrial portfolio and, to a lesser extent, loan growth; Management does not believe the increase is indicative of a general weakness in the overall loan portfolio but rather the increase is driven primarily by an isolated credit issue specific to an individual borrower.
◦Annualized net charge-offs to total average loans outstanding for both the three and nine months ended September 30, 2026 and 2025 were 0.02% and 0.01%, respectively.
◦Non-performing loans were $10.7 million, or 0.45%, of total loans at September 30, 2026 compared to $10.0 million, or 0.43%, of total loans at September 30, 2025. The increase was driven primarily by the migration of four loans to three unrelated borrowers totaling $1.4 million to nonaccrual and an increase in greater than or equal to 90 days past due and accruing partially offset by charge-offs, the movement of several loans to foreclosed assets held for resale and paydowns.
•Noninterest income - Noninterest income was $9.0 million and $26.1 million for the three and nine months ended September 30, 2026, respectively, an increase of $621 thousand and $1.8 million, respectively, for the same periods of 2025. The increase for the three months ended September 30, 2026 was driven primarily by the gain on life insurance proceeds as the result of a death benefit received, partially offset by lower gain from mortgage loans held for sale. In addition to the impact of the Acquisition, the increase for the nine months ended September 30, 2026 compared to the same period of 2025 was driven primarily by the gain on life insurance proceeds, earnings on investment in bank-owned life insurance and higher wealth management income.
•Noninterest expenses - Noninterest expense was $23.2 million and $70.0 million for the three and nine months ended September 30, 2026, respectively, an increase of $859 thousand and a decrease of $7.1 million for the same periods of 2025, respectively. The increase was driven primarily by higher salaries and employee benefits expenses and professional services expenses partially offset by merger-related expenses due to the Acquisition during the three months ended September 30, 2025. The decrease for the nine months ended September 30, 2026 was driven primarily by merger-related expenses due to the Acquisition.
A more thorough discussion of the Corporation's results of operations and financial condition is included in the following pages.
CRITICAL ACCOUNTING ESTIMATES
The accounting policies that the Corporation's management deems to be most important to the portrayal of its financial condition and results of operations because they require management's most difficult, subjective or complex judgment often result in the need to make estimates about the effect of such matters which are inherently uncertain. The following accounting estimate is deemed to be critical by management:
Allowance for Credit Losses - The ACL represents an amount which, in management's judgment, is adequate to absorb expected credit losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (reversal of) credit losses, which is recorded as a current period operating expense.
Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management.
Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes in the interest rate environment which may directly impact prepayment and curtailment rate assumption, and changes in the financial condition of borrowers. As of September 30, 2026, the Company believes that its ACL was adequate.
RESULTS OF OPERATIONS
Three months ended September 30, 2026 compared to three months ended September 30, 2025
Net income for the three months ended September 30, 2026 was $15.7 million, or $1.55 diluted earnings per share, compared to net income of $14.9 million, or $1.42 diluted earnings per share for the same period of 2025, an increase of $857 thousand, or $0.13 diluted earnings per share. The financial results for the three months ended September 30, 2025 were impacted by merger-related expenses, net of taxes, totaling $131 thousand.
Net Interest Income
Net interest income totaled $34.8 million for the three months ended September 30, 2026 compared to $32.1 million for the same period of 2025, an increase of $2.6 million. The FTE net interest margin for the three months ended September 30, 2026 was 4.56%, a 29 bps increase from 4.27% for the same period of 2025. The increase in net interest income and FTE net interest margin was driven primarily by loan growth, higher yielding assets and the continued benefit of lower funding costs. In addition, the repositioning of the investment securities portfolio completed during the three months ended December 31, 2025 contributed to higher yields. The accretion impact of acquisition accounting adjustments on loans and deposits from the Acquisition was $1.6 million and $2.1 million for the three months ended September 30, 2026 and 2025, respectively. The Corporation manages the risk associated with changes in interest rates through the techniques described within Item 3, "Quantitative and Qualitative Disclosures About Market Risk" in this Quarterly Report on Form 10-Q.
The following table provides a comparative average Consolidated Statement of Condition and net interest income analysis for the periods presented. Interest income and yields are presented on an FTE basis. The discussion following this table is based on these tax equivalent amounts.
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance |
Interest 1
|
Yield/ Rate |
Average Balance |
Interest 1
|
Yield/ Rate |
|||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
| Taxable | $ | 2,362,793 | $ | 38,776 | 6.51 | % | $ | 2,298,054 | $ | 36,961 | 6.38 | % | |||||||||||||||||||||||
| Tax-exempt | 54,497 | 452 | 3.29 | 58,587 | 410 | 2.78 | |||||||||||||||||||||||||||||
|
Total Loans 2
|
2,417,290 | 39,228 | 6.44 | 2,356,641 | 37,371 | 6.29 | |||||||||||||||||||||||||||||
| Investment Securities: | |||||||||||||||||||||||||||||||||||
| Taxable | 488,625 | 4,711 | 3.83 | 485,309 | 3,762 | 3.08 | |||||||||||||||||||||||||||||
| Tax-exempt | 55,863 | 409 | 2.90 | 53,165 | 356 | 2.66 | |||||||||||||||||||||||||||||
|
Total Investment Securities 3
|
544,488 | 5,120 | 3.73 | 538,474 | 4,118 | 3.03 | |||||||||||||||||||||||||||||
| Interest-bearing deposits with banks | 81,724 | 784 | 3.81 | 103,290 | 1,162 | 4.46 | |||||||||||||||||||||||||||||
| Total Earning Assets | 3,043,502 | 45,132 | 5.88 | 2,998,405 | 42,651 | 5.64 | |||||||||||||||||||||||||||||
| Cash and due from banks | 27,793 | 26,709 | |||||||||||||||||||||||||||||||||
| Premises and equipment | 28,066 | 31,514 | |||||||||||||||||||||||||||||||||
| Other assets | 256,267 | 245,899 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses | (23,981) | (24,312) | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 3,331,647 | $ | 3,278,215 | |||||||||||||||||||||||||||||||
| LIABILITIES | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 641,483 | $ | 652 | 0.40 | % | $ | 616,565 | $ | 570 | 0.37 | % | |||||||||||||||||||||||
| Money markets | 480,604 | 2,282 | 1.88 | 510,655 | 2,530 | 1.97 | |||||||||||||||||||||||||||||
| Savings deposits | 331,158 | 27 | 0.03 | 335,083 | 26 | 0.03 | |||||||||||||||||||||||||||||
| Time deposits | 465,062 | 3,698 | 3.15 | 454,625 | 3,746 | 3.27 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Deposits | 1,918,307 | 6,659 | 1.38 | 1,916,928 | 6,872 | 1.42 | |||||||||||||||||||||||||||||
| Short-term borrowings | 115,889 | 969 | 3.32 | 70,389 | 513 | 2.89 | |||||||||||||||||||||||||||||
| Long-term borrowings | 214,900 | 2,548 | 4.70 | 255,358 | 2,968 | 4.61 | |||||||||||||||||||||||||||||
| Total Borrowings | 330,789 | 3,517 | 4.22 | 325,747 | 3,481 | 4.24 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Liabilities | 2,249,096 | 10,176 | 1.80 | 2,242,675 | 10,353 | 1.83 | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 615,423 | 593,800 | |||||||||||||||||||||||||||||||||
| Other liabilities | 41,690 | 39,397 | |||||||||||||||||||||||||||||||||
| Stockholders' Equity | 425,438 | 402,343 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 3,331,647 | $ | 3,278,215 | |||||||||||||||||||||||||||||||
| Taxable Equivalent Net Interest Income | 34,956 | 32,298 | |||||||||||||||||||||||||||||||||
| Taxable Equivalent Adjustment | (181) | (161) | |||||||||||||||||||||||||||||||||
| Net Interest Income | $ | 34,775 | $ | 32,137 | |||||||||||||||||||||||||||||||
| Cost of Funds | 1.41 | % | 1.45 | % | |||||||||||||||||||||||||||||||
| FTE Net Interest Margin | 4.56 | % | 4.27 | % | |||||||||||||||||||||||||||||||
1 Income on interest-earning assets has been computed on an FTE basis using the 21% federal income tax statutory rate.
2 Average balances include non-accrual loans and are net of unearned income.
3 Average balance of investment securities is computed at fair value.
The following table analyzes the relative impact on FTE net interest income attributed to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates for the three months ended September 30, 2026 compared to the same period of 2025:
| 2026 versus 2025 | |||||||||||||||||
| (Dollars in thousands) | Volume |
Yield/Rate 1
|
Net | ||||||||||||||
| INTEREST-EARNING ASSETS | |||||||||||||||||
| Loans: | |||||||||||||||||
| Taxable | $ | 1,041 | $ | 774 | $ | 1,815 | |||||||||||
| Tax-exempt | (29) | 71 | 42 | ||||||||||||||
|
Total Loans 2
|
1,012 | 845 | 1,857 | ||||||||||||||
| Investment Securities | |||||||||||||||||
| Taxable | 26 | 923 | 949 | ||||||||||||||
| Tax-exempt | 18 | 35 | 53 | ||||||||||||||
|
Total Investment Securities 3
|
44 | 958 | 1,002 | ||||||||||||||
| Interest-bearing deposits with banks | (242) | (136) | (378) | ||||||||||||||
| Total | $ | 814 | $ | 1,667 | $ | 2,481 | |||||||||||
| INTEREST-BEARING LIABILITIES | |||||||||||||||||
| Interest-bearing demand deposits | $ | 23 | $ | 59 | $ | 82 | |||||||||||
| Money markets | (149) | (99) | (248) | ||||||||||||||
| Savings deposits | - | 1 | 1 | ||||||||||||||
| Time deposits | 86 | (134) | (48) | ||||||||||||||
| Total Interest-Bearing Deposits | (40) | (173) | (213) | ||||||||||||||
| Short-term borrowings | 331 | 125 | 456 | ||||||||||||||
| Long-term borrowings | (470) | 50 | (420) | ||||||||||||||
| Total Borrowings | (139) | 175 | 36 | ||||||||||||||
| Total | (179) | 2 | (177) | ||||||||||||||
| Change in Net Interest Income | $ | 993 | $ | 1,665 | $ | 2,658 | |||||||||||
__________________________________________________________________
1 The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column.
2 Based on average balances and includes non-accrual loans and are net of unearned income.
3 Average balance of investment securities is computed at fair value.
Total FTE interest income increased $2.5 million during the three months ended September 30, 2026 compared to the same period of 2025, driven primarily by an increase in yield of interest-earning assets, which was driven primarily by the repositioning of the investment securities portfolio, as well as loans and investment securities funded at higher rates than those that paid off or matured. Also contributing to the increase was growth of $60.6 million in average loan balances primarily in the commercial real estate portfolio.
Total interest expense decreased $177 thousand during the three months ended September 30, 2026 compared to the same period of 2025, driven primarily by lower average balances and costs of interest-bearing deposits, mainly a result of attrition of higher cost money market and time deposits that were from the Acquisition, as well as lower average borrowings.
Provision for Credit Losses and Unfunded Commitments
The provision for credit losses was $1.1 million for the three months ended September 30, 2026 compared to a reversal of $584 thousand for the same period of 2025, and was driven primarily by a specific allowance allocation on a relationship in the commercial and industrial portfolio and, to a lesser extent, loan growth; management does not believe the increase is indicative of a general weakness in the overall loan portfolio but rather the increase is driven primarily by an isolated credit issue specific to an individual borrower. The reversal of the provision for unfunded commitments was $170 thousand for the three months ended September 30, 2026 compared to a reversal of $145 thousand for the same period of 2025 driven primarily by a reduction in exposure. The Corporation assesses risks and reserves required compared with the balances in the ACL and unfunded commitments on a quarterly basis.
Noninterest Income
The following table presents the components of noninterest income:
|
Three Months Ended September 30,
|
Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | $ | % | |||||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||
| Insurance commissions | $ | 2,667 | $ | 2,545 | $ | 122 | 4.8 | % | |||||||||||||||
| Gain from mortgage loans held for sale | 1,000 | 1,463 | (463) | (31.6) | |||||||||||||||||||
| Service charges on deposits | 1,304 | 1,286 | 18 | 1.4 | |||||||||||||||||||
| Wealth management | 1,253 | 1,125 | 128 | 11.4 | |||||||||||||||||||
| ATM debit card charges | 932 | 904 | 28 | 3.1 | |||||||||||||||||||
| Earnings on investment in bank-owned life insurance | 776 | 651 | 125 | 19.2 | |||||||||||||||||||
| Gain on life insurance proceeds | 687 | - | 687 | 100.0 | |||||||||||||||||||
| Other | 448 | 428 | 20 | 4.7 | |||||||||||||||||||
| Net (losses) gains on equity securities | (35) | 9 | (44) | N/M | |||||||||||||||||||
| Total Noninterest Income | $ | 9,032 | $ | 8,411 | $ | 621 | 7.4 | % | |||||||||||||||
The more significant variations by category:
•The decrease in gain from mortgage loans held for sale was driven primarily by a decrease in loan originations as a result of rate volatility
•The increase in wealth management was driven primarily by growth in assets under management due to new business generation and positive market impacts
•The increase in earnings on investment in bank-owned life insurance was driven primarily by the purchase of new policies in the fourth quarter of 2025
•The gain on life insurance proceeds was the result of a death benefit received on life insurance policies in the current quarter for a former officer
Noninterest Expenses
The following table presents the components of noninterest expense:
|
Three Months Ended September 30,
|
Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | $ | % | |||||||||||||||||||
| NONINTEREST EXPENSES | |||||||||||||||||||||||
| Salaries and employee benefits | $ | 14,055 | $ | 13,191 | $ | 864 | 6.5 | % | |||||||||||||||
| Equipment | 2,313 | 2,302 | 11 | 0.5 | |||||||||||||||||||
| Net occupancy | 1,208 | 1,217 | (9) | (0.7) | |||||||||||||||||||
| Intangible assets amortization | 1,017 | 1,129 | (112) | (9.9) | |||||||||||||||||||
| Professional services | 801 | 588 | 213 | 36.2 | |||||||||||||||||||
| Other tax | 661 | 561 | 100 | 17.8 | |||||||||||||||||||
| FDIC and regulatory | 440 | 457 | (17) | (3.7) | |||||||||||||||||||
| Merger-related | - | 169 | (169) | (100.0) | |||||||||||||||||||
| Other | 2,725 | 2,747 | (22) | (0.8) | |||||||||||||||||||
| Total Noninterest Expenses | $ | 23,220 | $ | 22,361 | $ | 859 | 3.8 | % | |||||||||||||||
The more significant fluctuations by category:
•The increase in salaries and employee benefits was driven primarily by higher incentive compensation expenses, merit increases and higher employee insurance expense
•The increase in professional services was driven primarily by higher legal and advisory services related to corporate initiative expenses, including software modernization and employee stock purchase plan fees
•The increase in other tax was driven primarily by asset and capital growth
•The decrease in merger-related was driven by the lack of Acquisition related expenses in the current period
Income Taxes
The Corporation recognized income tax expense of $4.0 million during both the three months ended September 30, 2026 and 2025. The provision for income taxes reflects a combined Federal and State ETR of 20.1% and 21.4% for the three months ended September 30, 2026 and 2025, respectively. The variances from the federal statutory rate of 21% are generally due to tax-free income, which includes, but not limited to, interest income on tax-free loans and investment securities, income from bank-owned life insurance policies, death benefits received on life insurance policies, federal income tax credits and the impact of non-tax deductible expenses such as certain merger-related costs and state taxes.
Nine months ended September 30, 2026 compared to nine months ended September 30, 2025
Net income for the nine months ended September 30, 2026 was $44.6 million, or $4.36 diluted earnings per share, compared to net income of $26.2 million, or $2.56 diluted earnings per share for the same period of 2025, an increase of $18.4 million and $1.80 diluted earnings per share. The increase in net income for the nine months ended September 30, 2026 was driven primarily by higher net interest income and the impact of two discrete items for the nine months ended September 30, 2025 that were related to the Acquisition: a provision for credit losses on non-PCD loans of $4.2 million, net of taxes, and merger-related expenses totaling $7.9 million, net of taxes. Financial results for the nine months ended September 30, 2025 include ACNB's standalone results for the month of January 2025.
Net Interest Income
Net interest income totaled $101.3 million for the nine months ended September 30, 2026 compared to $90.2 million for the same period of 2025, an increase of $11.1 million. The FTE net interest margin for the nine months ended September 30, 2026 was 4.53%, a 34 bps increase from 4.19% for the same period of 2025. The increases were driven primarily by loan growth and loans and investment securities funded at higher rates than those that paid off or matured, and the continued benefit of lower funding costs. In addition, the yield on investment securities was impacted by a repositioning of the investment securities portfolio completed during the three months ended December 31, 2025. The accretion impact of acquisition accounting adjustments on loans and deposits from the Acquisition was $5.2 million and $5.8 million for the nine months ended September 30, 2026 and 2025, respectively.
The following table provides a comparative average balance sheet and net interest income analysis for the periods presented. The discussion following this table is based on these taxable-equivalent amounts.
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | Average Balance |
Interest 1
|
Yield/ Rate |
Average Balance |
Interest 1
|
Yield/ Rate |
|||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||
| Loans: | |||||||||||||||||||||||||||||||||||
| Taxable | $ | 2,333,318 | $ | 112,961 | 6.47 | % | $ | 2,225,652 | $ | 105,192 | 6.32 | % | |||||||||||||||||||||||
| Tax-exempt | 55,401 | 1,322 | 3.19 | 58,489 | 1,181 | 2.70 | |||||||||||||||||||||||||||||
|
Total Loans 2
|
2,388,719 | 114,283 | 6.40 | 2,284,141 | 106,373 | 6.23 | |||||||||||||||||||||||||||||
| Investment Securities: | |||||||||||||||||||||||||||||||||||
| Taxable | 491,035 | 13,895 | 3.78 | 472,212 | 10,594 | 3.00 | |||||||||||||||||||||||||||||
| Tax-exempt | 55,948 | 1,211 | 2.89 | 54,023 | 1,078 | 2.67 | |||||||||||||||||||||||||||||
|
Total Investment Securities 3
|
546,983 | 15,106 | 3.69 | 526,235 | 11,672 | 2.97 | |||||||||||||||||||||||||||||
| Interest-bearing deposits with banks | 71,573 | 2,011 | 3.76 | 84,717 | 2,785 | 4.40 | |||||||||||||||||||||||||||||
| Total Earning Assets | 3,007,275 | 131,400 | 5.84 | 2,895,093 | 120,830 | 5.58 | |||||||||||||||||||||||||||||
| Cash and due from banks | 26,046 | 24,330 | |||||||||||||||||||||||||||||||||
| Premises and equipment | 29,135 | 31,151 | |||||||||||||||||||||||||||||||||
| Other assets | 253,678 | 242,143 | |||||||||||||||||||||||||||||||||
| Allowance for credit losses | (23,742) | (22,971) | |||||||||||||||||||||||||||||||||
| Total Assets | $ | 3,292,392 | $ | 3,169,746 | |||||||||||||||||||||||||||||||
| LIABILITIES | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 636,141 | $ | 1,707 | 0.36 | % | $ | 601,064 | $ | 1,608 | 0.36 | % | |||||||||||||||||||||||
| Money markets | 486,636 | 6,775 | 1.86 | 498,468 | 7,220 | 1.94 | |||||||||||||||||||||||||||||
| Savings deposits | 333,987 | 79 | 0.03 | 336,185 | 80 | 0.03 | |||||||||||||||||||||||||||||
| Time deposits | 471,306 | 11,099 | 3.15 | 446,482 | 11,244 | 3.37 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Deposits | 1,928,070 | 19,660 | 1.36 | 1,882,199 | 20,152 | 1.43 | |||||||||||||||||||||||||||||
| Short-term borrowings | 88,057 | 2,084 | 3.16 | 51,324 | 1,148 | 2.99 | |||||||||||||||||||||||||||||
| Long-term borrowings | 224,500 | 7,832 | 4.66 | 256,080 | 8,817 | 4.60 | |||||||||||||||||||||||||||||
| Total Borrowings | 312,557 | 9,916 | 4.24 | 307,404 | 9,965 | 4.33 | |||||||||||||||||||||||||||||
| Total Interest-Bearing Liabilities | 2,240,627 | 29,576 | 1.76 | 2,189,603 | 30,117 | 1.84 | |||||||||||||||||||||||||||||
| Noninterest-bearing demand deposits | 584,712 | 556,992 | |||||||||||||||||||||||||||||||||
| Other liabilities | 42,548 | 38,543 | |||||||||||||||||||||||||||||||||
| Stockholders' Equity | 424,505 | 384,608 | |||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 3,292,392 | $ | 3,169,746 | |||||||||||||||||||||||||||||||
| Taxable Equivalent Net Interest Income | 101,824 | 90,713 | |||||||||||||||||||||||||||||||||
| Taxable Equivalent Adjustment | (532) | (474) | |||||||||||||||||||||||||||||||||
| Net Interest Income | $ | 101,292 | $ | 90,239 | |||||||||||||||||||||||||||||||
| Cost of Funds | 1.40 | % | 1.47 | % | |||||||||||||||||||||||||||||||
| FTE Net Interest Margin | 4.53 | % | 4.19 | % | |||||||||||||||||||||||||||||||
__________________________________________________________________
1 Income on interest-earning assets has been computed on an FTE basis using the 21% federal income tax statutory rate.
2 Average balances include non-accrual loans and are net of unearned income.
3 Average balance of investment securities is computed at fair value.
The following table analyzes the relative impact on FTE net interest income attributed to changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates for the nine months ended September 30, 2026 compared to the same period of 2025:
| 2026 versus 2025 | |||||||||||||||||
| (Dollars in thousands) | Volume |
Yield/Rate 1
|
Net | ||||||||||||||
| INTEREST-EARNING ASSETS | |||||||||||||||||
| Loans | |||||||||||||||||
| Taxable | $ | 5,089 | $ | 2,680 | $ | 7,769 | |||||||||||
| Tax-exempt | (62) | 203 | 141 | ||||||||||||||
|
Total Loans 2
|
5,027 | 2,883 | 7,910 | ||||||||||||||
| Investment Securities | |||||||||||||||||
| Taxable | 422 | 2,879 | 3,301 | ||||||||||||||
| Tax-exempt | 38 | 95 | 133 | ||||||||||||||
|
Total Investment Securities 3
|
460 | 2,974 | 3,434 | ||||||||||||||
| Interest-bearing deposits with banks | (433) | (341) | (774) | ||||||||||||||
| Total | $ | 5,054 | $ | 5,516 | $ | 10,570 | |||||||||||
| INTEREST-BEARING LIABILITIES | |||||||||||||||||
| Interest-bearing demand deposits | $ | 94 | $ | 5 | $ | 99 | |||||||||||
| Money markets | (172) | (273) | (445) | ||||||||||||||
| Savings deposits | - | (1) | (1) | ||||||||||||||
| Time deposits | 626 | (771) | (145) | ||||||||||||||
| Total Interest-Bearing Deposits | 548 | (1,040) | (492) | ||||||||||||||
| Short-term borrowings | 821 | 115 | 936 | ||||||||||||||
| Long-term borrowings | (1,087) | 102 | (985) | ||||||||||||||
| Total Borrowings | (266) | 217 | (49) | ||||||||||||||
| Total | 282 | (823) | (541) | ||||||||||||||
| Change in Net Interest Income | $ | 4,772 | $ | 6,339 | $ | 11,111 | |||||||||||
__________________________________________________________________
1 The effect of changing volume and rate, which cannot be segregated, has been allocated entirely to the rate column.
2 Based on average balances and includes non-accrual loans and are net of unearned income.
3 Average balance of investment securities is computed at fair value.
Total FTE interest income increased $10.6 million during the nine months ended September 30, 2026 compared to the same period of 2025 driven primarily by loan growth and higher yielding assets. Average loan balances grew $104.6 million concentrated in the commercial real estate portfolio. The repositioning of the investment securities portfolio which was completed during the three months ended December 31, 2025 contributed to higher yields on the investment securities portfolio.
Total interest expense decreased $541 thousand during the nine months ended September 30, 2026 compared to the same period of 2025 driven primarily by lower average costs of interest-bearing deposits, as a result of attrition of higher cost money market and time deposits from the Acquisition. The average cost of interest-bearing deposits was 1.36% for the nine months ended September 30, 2026, a decrease of 7 bps compared to the same period of 2025.
Provision for Credit Losses and Unfunded Commitments
The provision for credit losses was $1.6 million for the nine months ended September 30, 2026 compared to $5.2 million for the same period of 2025. The 2025 provision expense was driven primarily by a provision for credit losses of $5.5 million for acquired non-PCD loans, and the provision for 2026 was driven primarily by a specific allowance allocation on a relationship in the commercial and industrial portfolio and, to a lesser extent, loan growth. The provision for unfunded commitments was a reversal of $290 thousand compared to a reversal of $979 thousand for the same period of 2025. The reversal of the provision for unfunded commitments for the nine months ended September 30, 2025 was impacted by the incorporation of post-COVID
data which resulted in lower loss rates utilized within the Bank's ACL model. The Corporation assesses risks and reserves required compared with the balances in the ACL and unfunded commitments on a quarterly basis.
Noninterest Income
The following table presents the components of noninterest income:
| Nine Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | $ | % | |||||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||
| Insurance commissions | $ | 7,786 | $ | 7,600 | $ | 186 | 2.4 | % | |||||||||||||||
| Gain from mortgage loans held for sale | 3,689 | 3,893 | (204) | (5.2) | |||||||||||||||||||
| Service charges on deposits | 3,782 | 3,559 | 223 | 6.3 | |||||||||||||||||||
| Wealth management | 3,604 | 3,275 | 329 | 10.0 | |||||||||||||||||||
| ATM debit card charges | 2,771 | 2,640 | 131 | 5.0 | |||||||||||||||||||
| Earnings on investment in bank-owned life insurance | 2,269 | 1,858 | 411 | 22.1 | |||||||||||||||||||
| Gain on assets held for sale | 177 | - | 177 | 100.0 | |||||||||||||||||||
| Gain on life insurance proceeds | 861 | 285 | 576 | N/M | |||||||||||||||||||
| Other | 1,182 | 1,119 | 63 | 5.6 | |||||||||||||||||||
| Net gains on sales or calls of investment securities | 49 | 22 | 27 | 122.7 | |||||||||||||||||||
| Net (losses) gains on equity securities | (46) | 26 | (72) | N/M | |||||||||||||||||||
| Total Noninterest Income | $ | 26,124 | $ | 24,277 | $ | 1,847 | 7.6 | % | |||||||||||||||
The more significant variations by category:
•The increase in wealth management was driven primarily by growth in assets under management due to new business generation and positive market impacts
•The increase in earnings on investment in bank-owned life insurance was driven primarily by the purchase of new policies in the fourth quarter of 2025
•The increase in gain on assets HFS was the result of a sale of a building previously used by ACNB Insurance Services
•Gain on life insurance proceeds for both periods was the result of death benefits received on life insurance policies for former officers/director
Noninterest Expenses
The following table presents the components of noninterest expense:
| Nine Months Ended September 30, | Increase (Decrease) | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | $ | % | |||||||||||||||||||
| NONINTEREST EXPENSES | |||||||||||||||||||||||
| Salaries and employee benefits | $ | 41,843 | $ | 39,745 | $ | 2,098 | 5.3 | % | |||||||||||||||
| Equipment | 7,465 | 7,121 | 344 | 4.8 | |||||||||||||||||||
| Net occupancy | 3,950 | 3,936 | 14 | 0.4 | |||||||||||||||||||
| Intangible assets amortization | 3,101 | 3,127 | (26) | (0.8) | |||||||||||||||||||
| Professional services | 2,215 | 1,908 | 307 | 16.1 | |||||||||||||||||||
| Other tax | 1,555 | 1,308 | 247 | 18.9 | |||||||||||||||||||
| FDIC and regulatory | 1,341 | 1,293 | 48 | 3.7 | |||||||||||||||||||
| Merger-related | - | 10,143 | (10,143) | (100.0) | |||||||||||||||||||
| Other | 8,490 | 8,481 | 9 | 0.1 | |||||||||||||||||||
| Total Noninterest Expenses | $ | 69,960 | $ | 77,062 | $ | (7,102) | (9.2) | % | |||||||||||||||
The more significant fluctuations by category:
•The increase in salaries and employee benefits was driven primarily by an increased number of employees attributable to the Acquisition, merit increases, and higher incentive compensation, restricted stock expense, mortgage commissions and employee health insurance expense
•The increase in equipment was driven primarily by the Acquisition and the implementation of additional products into the core processing system
•The increase in professional services was driven primarily by higher legal and advisory services related to corporate initiative expenses, including software modernization and employee stock purchase plan fees
•The increase in other tax was driven primarily by asset and capital growth
•The decrease in merger-related was driven by the lack of Acquisition-related expenses in the current period
Income Taxes
The Corporation recognized income taxes of $11.6 million for the nine months ended September 30, 2026 compared to $7.0 million during the same period of 2025. The provision for income taxes for the nine months ended September 30, 2026 and 2025 reflect a combined Federal and State ETR of 20.6% and 21.1%, respectively. The variances from the federal statutory rate of 21% are generally due to tax-free income, which includes, but is not limited to, interest income on tax-free loans and investment securities, income from bank-owned life insurance policies, death benefits received on life insurance policies, federal income tax credits and the impact of non-tax deductible expenses such as certain merger-related costs and state taxes.
FINANCIAL CONDITION
Investment Securities
ACNB uses investment securities to manage interest rate risk, provide collateral for certain funding products, provide liquidity and generate interest and dividend income. The investment securities provide the appropriate characteristics with respect to credit quality, yield and maturity relative to the management of the overall Consolidated Statements of Condition.
Total investment securities were $514.2 million at September 30, 2026 compared to $531.1 million at December 31, 2025. At September 30, 2026, the investment securities balance included a net unrealized loss on AFS investment securities of $47.6 million on amortized cost of $498.4 million compared to a net unrealized loss of $24.2 million on amortized cost of $491.1 million at December 31, 2025. At September 30, 2026, the investment securities balance included HTM investment securities with an amortized cost of $62.5 million and a fair value of $51.6 million as compared to an amortized cost of $63.3 million and a fair value of $57.5 million at December 31, 2025.
The Corporation does not own investments consisting of pools of Alt-A or subprime mortgages, private label mortgage-backed securities, or trust preferred investments.
Loans
The following table presents the composition of the loan portfolio:
| Increase (Decrease) | |||||||||||||||||||||||
| (In thousands) | September 30, 2026 | December 31, 2025 | $ | % | |||||||||||||||||||
| Commercial real estate | $ | 1,324,489 | $ | 1,273,813 | $ | 50,676 | 4.0 | % | |||||||||||||||
| Residential mortgage | 605,815 | 599,051 | 6,764 | 1.1 | |||||||||||||||||||
| Commercial and industrial | 217,195 | 205,452 | 11,743 | 5.7 | |||||||||||||||||||
| Home equity lines of credit | 122,840 | 127,341 | (4,501) | (3.5) | |||||||||||||||||||
| Real estate construction | 128,349 | 116,680 | 11,669 | 10.0 | |||||||||||||||||||
| Consumer | 10,252 | 10,140 | 112 | 1.1 | |||||||||||||||||||
| Gross loans | 2,408,940 | 2,332,477 | 76,463 | 3.3 | |||||||||||||||||||
| Unearned income | (2,429) | (1,963) | (466) | (23.7) | |||||||||||||||||||
| Total loans, net of unearned income | $ | 2,406,511 | $ | 2,330,514 | $ | 75,997 | 3.3 | % | |||||||||||||||
Total loans, net of unearned income, increased $76.0 million, or 3.3%, from December 31, 2025 to September 30, 2026. The increase was driven primarily by growth in the commercial real estate, commercial and industrial and real estate construction portfolios. Total acquisition accounting adjustments on loans were $12.9 million and $18.2 million at September 30, 2026 and December 31, 2025, respectively. The majority of the loan acquisition accounting adjustments are expected to accrete back through as income as loans amortize and pay off. ACNB does not have a significant concentration of credit risk with any single borrower, industry, or geographic location other than within its Market Area.
The commercial real estate portfolio, which includes farmland, multifamily, owner-occupied and non-owner occupied commercial real estate, grew $50.7 million, or 4.0%, compared to December 31, 2025 driven primarily by farmland ($42.0 million), owner-occupied balances ($18.0 million) and multifamily ($12.3 million) partially offset by a decrease in non-owner occupied balances ($24.6 million). The following data related to the commercial real estate portfolio through the breakout charts excludes the impact of the acquisition accounting adjustments on loans. The collateral for these loans is primarily spread across Pennsylvania and Maryland at 66.3% and 31.5%, respectively, as of September 30, 2026, compared to 65.8% and 32.1%, respectively, as of December 31, 2025. Less than 2% of the portfolio is for real estate in urban areas of Baltimore, Maryland and Philadelphia, Pennsylvania. The largest sectors of the commercial real estate portfolio are retail and mixed-use commercial rental units, office complexes, apartment complexes and hotels, motels and bed and breakfast entities. Non-owner occupied commercial real estate represented 63.1% of the commercial real estate portfolio. Non-owner occupied commercial real estate borrowers are geographically dispersed throughout ACNB's Market Area and are leasing commercial properties to a varied group of tenants including medical offices, retail space, and other commercial purpose facilities. Because of the varied nature of the tenants, in aggregate, management believes that these loans present an acceptable risk when compared to commercial loans in general.
The following chart details the percentage of the various categories included in the portfolio:
_____________________________________________________________
1 Constitutes over 40 loan categories that do not fit into the categories presented above, with no loan category representing more than 3% of the total.
The concentration of non-owner occupied commercial real estate, construction and multi-family was 224.7% of total risk-based capital of the Bank as of September 30, 2026 compared to 239.0% of total risk-based capital of the Bank as of December 31, 2025.
Residential real estate mortgages totaled $605.8 million, an increase of $6.8 million, or 1.1%, compared to December 31, 2025. Included in the residential real estate mortgages are $230.4 million of commercial loans and $58.5 million of consumer loans secured by residential real estate mortgages. Approximately 85% of the first liens have a loan to value, based on the current balance to the origination value of the property, of 80% or lower. Total residential real estate mortgages include $48.8 million of junior liens. Junior liens inherently have more credit risk by virtue of the fact that another financial institution may have a
senior security position in the case of foreclosure liquidation of collateral to extinguish the debt.
Commercial and industrial totaled $217.2 million, an increase of $11.7 million, or 5.7%, compared to December 31, 2025 driven primarily by three new relationships in the Lancaster and Berks regions.
Allowance for Credit Losses and Asset Quality
The ACL at September 30, 2026 was $25.0 million, or 1.04% of total loans, net of unearned income, as compared to $23.7 million, or 1.02% of loans, at December 31, 2025 and $23.7 million, or 1.01% of loans, at September 30, 2025.
Changes in the ACL were as follows for the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||
| Beginning balance | $ | 24,006 | $ | 24,353 | $ | 23,672 | $ | 17,280 | |||||||||||||||
| Initial allowance established for acquired PCD loans | - | - | - | 1,464 | |||||||||||||||||||
| Provision for (reversal of) credit losses | 1,073 | (584) | 1,551 | 5,156 | |||||||||||||||||||
| Loans charged-off | (138) | (133) | (412) | (304) | |||||||||||||||||||
| Recoveries on charged-off loans | 35 | 24 | 165 | 64 | |||||||||||||||||||
| Ending balance | $ | 24,976 | $ | 23,660 | $ | 24,976 | $ | 23,660 | |||||||||||||||
| Net charge-offs to average loans (annualized) | 0.02 | % | 0.02 | % | 0.01 | % | 0.01 | % | |||||||||||||||
| Allowance for credit losses to total loans | 1.04 | % | 1.01 | % | 1.04 | % | 1.01 | % | |||||||||||||||
Information on nonaccrual loans, by collateral type rather than loan segment is as follows:
| (Dollars in thousands) |
Number of Credit Relationships |
Balance |
Current Specific Loss Allocations |
Current Year Charge-Offs |
Location | Originated | |||||||||||||||||||||||||||||
| September 30, 2026 | |||||||||||||||||||||||||||||||||||
| Commercial real estate | 9 | $ | 2,859 | $ | - | $ | - | In market | 2006-2022 | ||||||||||||||||||||||||||
| Business assets | 6 | 2,761 | 838 | - | In market | 2009-2023 | |||||||||||||||||||||||||||||
| Residential real estate | 6 | 1,767 | 49 | - | In market | 2019-2022 | |||||||||||||||||||||||||||||
| Total | 21 | $ | 7,387 | $ | 887 | $ | - | ||||||||||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Commercial real estate | 10 | $ | 3,961 | $ | - | $ | - | In market | 2006-2024 | ||||||||||||||||||||||||||
| Business assets | 5 | 1,971 | 259 | - | In market | 2009-2023 | |||||||||||||||||||||||||||||
| Residential real estate | 6 | 1,935 | 131 | - | In market | 2019-2022 | |||||||||||||||||||||||||||||
| Total | 21 | $ | 7,867 | $ | 390 | $ | - | ||||||||||||||||||||||||||||
Nonaccrual loans decreased $480 thousand from December 31, 2025 to September 30, 2026 driven primarily by the movement of several loans to foreclosed assets held for resale and a pay-off. All nonaccrual loans are to borrowers located within ACNB's Market Area and were originated by ACNB's banking subsidiary or were part of a previous acquisition.
Assets Held for Sale
Assets HFS totaled $2.3 million at September 30, 2026 and was comprised of a building in Maryland that the Corporation intends to sell.
Deposits
Deposits were comprised of the following:
| Increase (Decrease) | |||||||||||||||||||||||
| (In thousands) | September 30, 2026 | December 31, 2025 | $ | % | |||||||||||||||||||
| Noninterest-bearing demand deposits | $ | 612,620 | $ | 553,855 | $ | 58,765 | 10.6 | % | |||||||||||||||
| Interest-bearing demand deposits | 630,912 | 623,620 | 7,292 | 1.2 | |||||||||||||||||||
| Money market | 480,430 | 485,808 | (5,378) | (1.1) | |||||||||||||||||||
| Savings | 329,269 | 333,973 | (4,704) | (1.4) | |||||||||||||||||||
| Total demand and savings | 2,053,231 | 1,997,256 | 55,975 | 2.8 | |||||||||||||||||||
| Time | 455,732 | 452,929 | 2,803 | 0.6 | |||||||||||||||||||
| Total deposits | $ | 2,508,963 | $ | 2,450,185 | $ | 58,778 | 2.4 | % | |||||||||||||||
ACNB relies on deposits as a primary source of funds for lending activities. The increase in deposits from December 31, 2025 to September 30, 2026 was driven primarily by the increase in noninterest-bearing demand deposits and interest-bearing demand deposits. The increase in noninterest-bearing demand deposits was driven primarily by promotional incentives on commercial checking accounts and a seasonal influx of municipal deposits. The increase in interest-bearing demand deposits was driven primarily by an influx of seasonal municipal deposits. Historically, deposit balances fluctuate reflecting different balance levels held by local companies, government units and school districts during different times of the year. Included in total deposits at September 30, 2026 were municipal deposits totaling $136.4 million, or 5.4%, of total deposits compared to $119.3 million, or 4.9%, of total deposits at December 31, 2025. Time deposits included $45.0 million of brokered time deposits compared to $59.1 million at December 31, 2025, a decrease of $14.1 million. The loan-to-deposit ratio was 95.92% at September 30, 2026 compared to 95.12% at December 31, 2025.
ACNB's deposit pricing function employs a disciplined pricing approach based upon liquidity needs and alternative funding rates, but also strives to price deposits to be competitive with local competition, including local government investment trusts, credit unions and larger regional banks. Based on total Bank deposits outstanding, consumer and commercial constituted approximately 59% and 41%, respectively, of total Bank deposits as of September 30, 2026 compared to approximately 61% and 39%, respectively, as of December 31, 2025. The ratio of uninsured and non-collateralized Bank deposits to total Bank deposits was 18.7% at September 30, 2026. As of September 30, 2026, cash on hand, the fair value of unencumbered investment securities and collateralized borrowing capacities at the FHLB and the Discount Window at the Bank were 322.0% of uninsured and non-collateralized Bank deposits. At September 30, 2026, deposits from the 20 largest external unrelated depositors of the Bank totaled $181.4 million, or 7.2%, of total Bank deposits compared to $177.2 million, or 7.2%, of total Bank deposits at December 31, 2025.
Borrowings
Short-term borrowings are comprised of securities sold under agreements to repurchase, short-term borrowings from the FHLB and federal funds purchased. Agreements to repurchase accounts are within the commercial and local government customer base and have attributes similar to core deposits. Investment securities are pledged in sufficient amounts to collateralize these agreements. Short-term FHLB borrowings are used for general balance sheet management. As of September 30, 2026, short-term borrowings were $116.5 million, an increase of $51.8 million compared to $64.7 million at December 31, 2025. Short-term FHLB advances were $90.0 million at September 30, 2026 compared to $45.0 million at December 31, 2025, the increase from prior periods was used to fund loan growth. Compared to December 31, 2025, securities sold under repurchase agreements balances increased by $3.6 million, or 22.1%, due to normal changes in the cash flow position of ACNB's commercial and local government customer base.
Long-term borrowings consist of longer-term advances from the FHLB, trust preferred subordinated debt and subordinated debt. Long-term borrowings totaled $214.9 million at September 30, 2026 compared to $255.4 million at December 31, 2025. During the nine months ended September 30, 2026 the Company paid off $40.0 million of long-term FHLB borrowings. On March 12, 2026, the Company sold and issued $15.0 million in aggregate principal amount 5.875% fixed-to-floating rate subordinated notes due March 15, 2036. On March 31, 2026, the Company redeemed the $15.0 million in aggregate principal amount 4.00% fixed-to-floating rate subordinated notes that were issued on March 30, 2021. Additional borrowings will be used when necessary for a variety of risk management and funding purposes. See the Liquidity discussion below for more information on the Corporation's ability to borrow.
Capital
ACNB's capital management strategies are developed to provide an appropriate risk-adjusted rate of return, in the opinion of management, to shareholders, while maintaining levels above its internal minimums and "well-capitalized" regulatory position in relationship to its risk exposure. Total stockholders' equity was $420.5 million at September 30, 2026 compared to $420.0 million at December 31, 2025. The increase to stockholders' equity was driven by net income of $44.6 million, common stock shares issued of $750 thousand and compensation expense for restricted shares and ESPP of $1.6 million partially offset by cash dividends paid to ACNB Corporation stockholders of $17.5 million, common stock repurchases of $13.5 million and a $15.5 million change in other comprehensive losses driven primarily by unrealized losses in AFS investment securities.
ACNB Corporation has a Dividend Reinvestment and Stock Purchase Plan that provides registered holders of ACNB Corporation common stock with a convenient way to purchase additional shares of common stock by permitting participants in the plan to automatically reinvest cash dividends on all or a portion of the shares owned and to make quarterly voluntary cash payments under the terms of the plan. Participation in the plan is voluntary, and there are eligibility requirements to participate in the plan. During the nine months ended September 30, 2026, 16,753 shares were issued under this plan with proceeds in the amount of $926 thousand.
Regulatory Capital
The Corporation and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Corporation's Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain OBS items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Minimum regulatory capital requirements established by Basel III rules require the Corporation and the Bank to:
•Meet a minimum Tier 1 leverage capital ratio of 4.0% of average assets;
•Meet a minimum Common Equity Tier 1 capital ratio of 4.5% of risk-weighted assets;
•Meet a minimum Tier 1 capital ratio of 6.0% of risk-weighted assets;
•Meet a minimum Total capital ratio of 8.0% of risk-weighted assets;
•Maintain a "capital conservation buffer" of 2.5% above the minimum risk-based capital requirements, which must be maintained to avoid restrictions on capital distributions and certain discretionary bonus; and,
•Comply with the definition of capital to improve the ability of regulatory capital instruments to absorb losses.
The capital ratios are as follows:
| Actual |
For Capital Adequacy Purposes 1
|
To Be Well Capitalized
Under Prompt Corrective Action Regulations 2
|
|||||||||||||||
| September 30, 2026 | |||||||||||||||||
| Tier 1 Leverage Capital (to average assets) | |||||||||||||||||
| ACNB Corporation | 11.77 | % | 4.00 | % | N/A | ||||||||||||
| ACNB Bank | 11.47 | % | 4.00 | % | 5.00 | % | |||||||||||
| Common Equity Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 15.01 | % | 4.50 | % | N/A | ||||||||||||
| ACNB Bank | 14.83 | % | 4.50 | % | 6.50 | % | |||||||||||
| Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 15.23 | % | 6.00 | % | N/A | ||||||||||||
| ACNB Bank | 14.83 | % | 6.00 | % | 8.00 | % | |||||||||||
| Total Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 16.81 | % | 8.00 | % | N/A | ||||||||||||
| ACNB Bank | 15.84 | % | 8.00 | % | 10.00 | % | |||||||||||
| December 31, 2025 | |||||||||||||||||
| Tier 1 Leverage Capital (to average assets) | |||||||||||||||||
| ACNB Corporation | 11.40 | % | 4.00 | % | N/A | ||||||||||||
| ACNB Bank | 10.92 | % | 4.00 | % | 5.00 | % | |||||||||||
| Common Equity Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 14.74 | % | 4.50 | % | N/A | ||||||||||||
| ACNB Bank | 14.32 | % | 4.50 | % | 6.50 | % | |||||||||||
| Tier 1 Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 14.96 | % | 6.00 | % | N/A | ||||||||||||
| ACNB Bank | 14.32 | % | 6.00 | % | 8.00 | % | |||||||||||
| Total Capital (to risk-weighted assets) | |||||||||||||||||
| ACNB Corporation | 16.54 | % | 8.00 | % | N/A | ||||||||||||
| ACNB Bank | 15.30 | % | 8.00 | % | 10.00 | % | |||||||||||
__________________________________________________________________
1 Ratios do not include capital conservation buffer.
2 N/A - Not applicable as "well capitalized" applies only to banks.
Liquidity
Effective liquidity management ensures the cash flow requirements of depositors and borrowers as well as the operating cash needs of ACNB are met. ACNB's funds are available from a variety of sources, including assets that are readily convertible such as interest-bearing deposits with banks, maturities and repayments from the securities portfolio, scheduled repayments of loans receivable, the core deposit base, the ability to raise brokered deposits and the ability to borrow from the FHLB, Discount Window and unsecured Federal Funds line providers.
At September 30, 2026, ACNB's banking subsidiary had borrowing capacity of approximately $1.32 billion from the FHLB, of which $1.03 billion was available. At September 30, 2026, ACNB's banking subsidiary could borrow approximately $61.7 million from the Discount Window, of which the full amount was available. The underlying collateral at the Discount Window is made up of eligible loan collateral held in a joint-custody account under the Bank's name.
ACNB's banking subsidiary maintains several unsecured Federal Funds lines with correspondent banks. As of September 30, 2026, Federal Funds line capacity at the banking subsidiary was $192.0 million, of which the full amount was available. ACNB maintains a $5.0 million unsecured line of credit with a correspondent bank, all of which was available for borrowing as of September 30, 2026. The Corporation also executed a guaranty for a note related to a $1.5 million commercial line of credit from a local bank, with customary terms and conditions for such a line, for ACNB Insurance Services, the borrower and a wholly-owned subsidiary of ACNB Corporation. The commercial line of credit is for general working capital needs as they arise by ACNB Insurance Services.
Another source of liquidity is securities sold under repurchase agreements to customers of ACNB's banking subsidiary totaling $19.7 million and $16.1 million at September 30, 2026 and December 31, 2025, respectively. These agreements vary in balance according to the cash flow needs of customers and competing accounts at other financial organizations.
The liquidity of the parent company also represents an important aspect of liquidity management. The parent company's cash outflows consist principally of dividends to shareholders, common stock repurchases and corporate expenses. The main source of funding for the parent company is the dividends it receives from its subsidiaries. Federal and state banking regulations place certain legal restrictions and other practicable safety and soundness restrictions on dividends paid to the parent company from the subsidiary bank.
ACNB manages liquidity by monitoring projected cash inflows and outflows on a daily basis, and believes it has sufficient funding sources to maintain sufficient liquidity under varying degrees of business conditions for liquidity and capital resource requirements for all material short- and long-term cash requirements from known contractual and other obligations.
Off-Balance Sheet Arrangements
The Corporation is party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and, to a lesser extent, standby letters of credit. At September 30, 2026, the Corporation had unfunded outstanding commitments to extend credit of $527.6 million and outstanding standby letters of credit of $22.5 million. Because these commitments generally have fixed expiration dates and many will expire without being drawn upon, the total commitment level does not necessarily represent future cash requirements.
ACNB Corporation published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 19:43 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]