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美國
證券和 交易委員會
華盛頓特區20549
 
表格10-Q 
（標記一）
☒    根據1934年證券交易法第13或15(d)條，本季度報告 
截至本季度末2024年9月30日

或者

☐ 根據1934年證券交易法第13或15(d)節的轉型報告書
過渡期從______到______

佣金文件號 1-35015
 
ACNb 公司
（根據其章程規定的準確名稱）
賓夕法尼亞州 23-2233457
（國家或其他管轄區的 （IRS僱主
公司成立或組織） 唯一識別號碼）
16號林肯廣場, 葛底斯堡, 賓夕法尼亞州
 17325
，（主要行政辦公地址） (郵政編碼)
註冊人的電話號碼，包括區號： (717) 334-3161

在法案第12(b)條的規定下注冊的證券：
每個類別的名稱 交易代碼註冊交易所的名稱
普通股份，每股面值2.5美元 ACNB納斯達克交易所（NASDAQ）
 
請打鉤表示註冊申請人（1）在過去12個月內（或註冊申請人被要求提交此類報告的較短期間內）是否已提交證券交易所1934年法案第13或15（d）節規定必須提交的所有報告，並且（2）在過去90天內是否已受到此類提交要求的約束。 Yes ☒ 否 ☐
 
請用複選標記表示，登記者是否在過去12個月內通過電子方式提交了每個互動數據文件，根據《S-t法規》第405條規定（本章第232.405條）（或根據要求提交此類文件的更短期間）。Yes ☒ 否 ☐
 
請用複選標記指示註冊人是大型加速存盤器、加速存盤器、非加速存盤器、較小的報告公司或新興增長公司。請參閱《交易所法案》規則 120億.2 中對「大型加速存盤器」、「加速存盤器」、「較小的報告公司」和「新興增長公司」的定義。
大型加速報告人☐ 加速文件提交人 ☒
非加速文件提交人☐小型報告公司☐
新興成長公司☐
 
如果新興成長型企業，檢查標記是否該註冊機構已選擇不使用交易所法第13(a)條規定的任何新的或修訂的財務會計準則的過渡期。 ☐

請用複選標記表示，是否申報人爲殼公司（如《交易所法》第120億.2條所定義）。是 ☐
沒有☒
 
2024年10月30日，註冊公司普通股的流通在外股數爲 8,548,625.


目錄
ACNb 公司
目錄
第I部分-財務信息
項目1。
事項二
第3項。
事項4。
第II部分-其他信息
項目1。
項目1A。
事項二
第3項。
事項4。
項目5。
項目6。
#
2
目錄

ACNb 公司
已定義首字母縮寫詞彙表
ACL信用減值準備
ACNb保險服務ACNb保險服務公司
ACNb，公司或企業ACNb公司
可供出售金融資產可供出售
資產負債管理委員會資產負債管理委員會
ASC會計標準法規彙編
會計準則更新會計準則更新
自動取款機自動取款機
銀行ACNb銀行
巴塞爾協議三聯邦銀行監管機構發佈的基於風險的要求和規定
bp或bps點子（點）
CECL（Current expected credit losses，預期信貸損失）當前預期信貸損失
CME的一合併股份將在加拿大證券交易所（"CSE"）上市，股票代碼仍爲"CME"，新CUSIP號爲136369402，新ISIN號爲CA1363694029，其交易將於2024年4月22日左右的市場開放交易。芝加哥商品交易所
CRA1977年的社區再投資法案
安特吉有效稅率
使擁有公司註冊證券類別10%以上股權的官員、董事或實際股東代表簽署人遞交表格3、4和5（包括修正版及有關聯合遞交協議）,符合證券交易法案第16(a)條及其下屬規則規定的要求；1934年證券交易法
FASB財務會計準則委員會
FCA金融行爲監管局
FCBIFrederick County Bancorp, Inc.
聯邦存款保險公司聯邦存款保險公司
FHLB聯邦住房貸款銀行
聯邦公開市場委員會聯儲局公開市場委員會
全額應稅當量Fully Taxable Equivalent
通用會計準則美國通用會計原則
保留至到期持有到到期日
倫敦銀行同業拆借利率倫敦同業拆放利率
市場領域賓夕法尼亞南部和馬里蘭北部
股票認購協議次級債券購買協議
購買者機構投資者和合格的機構買家
SBIC小型企業投資公司
SEC證券交易委員會
SOFR擔保隔夜融資利率
(a)4.00%固定至浮動利率下級票據，截止日期爲2031年3月31日
傳統Traditions Bancorp, Inc.
3
目錄
第一部分 - 財務信息
 

ACNb 公司
基本報表 - 項目1
資產負債表 (未經審計)
（除每股數據外，萬元美元）截至2023年9月30日年 度報告
2024		截至12月31日公允價值
2023
資產  
現金和存放在銀行的款項$24,636 $21,442 
銀行存款（含利息）33,456 44,516 
現金及現金等價物總額58,092 65,958 
具明確定公允價值的權益證券947 928 
可供出售的投資證券，按估計公允價值計量418,079 451,693 
持有至到期的投資證券，按攤薄成本計量（公允價值$59,038, $59,057)
64,578 64,600 
待售貸款1,080 280 
減去未賺取收入的總貸款數1,677,112 1,627,988 
減：應收賬款壞賬準備(17,214)(19,969)
貸款，淨額1,659,898 1,608,019 
資產和設備淨值25,542 26,283 
使用權資產2,110 2,615 
限制性銀行股票投資10,853 9,677 
投資於銀行所有的人壽保險81,344 79,871 
投資於低收入房屋合作伙伴關係909 1,003 
商譽44,185 44,185 
無形資產, 淨額8,142 9,082 
用於轉售的被查封資產406 467 
其他44,749 54,186 
總資產$2,420,914 $2,418,847 
負債和股東權益  
存款：  
非計息帳戶$463,501 $500,332 
計息帳戶1,327,816 1,361,481 
存款總額1,791,317 1,861,813 
短期借款37,769 56,882 
長期借款255,322 195,292 
租賃負債2,110 2,615 
未撥款承諾準備金1,349 1,719 
其他負債26,292 23,065 
總負債2,114,159 2,141,386 
股東權益：  
優先股，$0.00012.50每股面值; 20,000,000 no 2024年9月30日和2023年12月31日的流通股總數
— — 
普通股，每股面值爲 $0.0001；2.50每股面值; 20,000,000 8,940,133 和 8,896,119發行股票;8,548,625 和 8,511,453 截至2024年9月30日和2023年12月31日的流通股份分別爲
22,344 22,231 
即期收購庫藏股；截至2022年9月25日，共計157,773股，截至2022年6月26日，共計157,087股。391,508 和 384,666 在9月30日持有股票
2024年和2023年12月31日分別持有
(11,203)(10,954)
額外實收資本98,697 97,602 
保留盈餘230,752 213,491 
累計其他綜合損失(33,835)(44,909)
股東權益合計306,755 277,461 
負債及股東權益合計$2,420,914 $2,418,847 
The accompanying notes are an integral part of the Consolidated Financial Statements.
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 ACNB CORPORATION
 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands, except share data)2024202320242023
INTEREST AND DIVIDEND INCOME  
Loans, including fees
Taxable$23,108 $20,285 $67,253 $58,130 
Tax-exempt311 361 943 1,069 
Investment Securities:  
Taxable2,617 2,477 8,193 8,451 
Tax-exempt284 284 852 883 
Dividends251 104 739 196 
Other670 723 2,104 2,627 
Total Interest and Dividend Income27,241 24,234 80,084 71,356 
INTEREST EXPENSE  
Deposits3,112 928 7,915 1,887 
Short-term borrowings204 439 847 564 
Long-term borrowings2,983 1,122 8,823 2,078 
Total Interest Expense6,299 2,489 17,585 4,529 
Net Interest Income20,942 21,745 62,499 66,827 
Provision for (reversal of) credit losses81 250 (2,686)74 
Provision for (reversal of) unfunded commitments40 (171)(370)226 
Net Interest Income after Provisions for (Reversal of) Credit Losses and Unfunded Commitments20,821 21,666 65,555 66,527 
NONINTEREST INCOME  
Insurance commissions2,787 2,629 7,649 7,371 
Service charges on deposits1,048 1,000 3,060 2,951 
Wealth management1,188 953 3,219 2,772 
ATM debit card charges828 845 2,488 2,502 
Earnings on investment in bank-owned life insurance503 473 1,473 1,399 
Gain from mortgage loans held for sale112 — 194 31 
Net gains (losses) on sales or calls of investment securities— — 69 (739)
Net gains (losses) on equity securities28 (27)19 (22)
Gain on assets held for sale— 14 — 337 
Other339 410 756 873 
Total Noninterest Income6,833 6,297 18,927 17,475 
NONINTEREST EXPENSES  
Salaries and employee benefits11,017 10,069 32,611 30,335 
Equipment1,698 1,554 4,997 4,784 
Net occupancy945 942 3,066 2,981 
Professional services409 617 1,554 1,600 
FDIC and regulatory365 388 1,088 932 
Other tax360 323 1,086 965 
Intangible assets amortization304 352 940 1,072 
Supplies and postage236 229 610 633 
Marketing and corporate relations99 159 275 472 
Merger-related1,137 — 1,160 — 
Other1,674 1,703 4,910 5,125 
Total Noninterest Expenses18,244 16,336 52,297 48,899 
Income Before Income Taxes9,410 11,627 32,185 35,103 
Provision for income taxes2,206 2,583 6,934 7,512 
Net Income$7,204 $9,044 $25,251 $27,591 
PER SHARE DATA  
Basic earnings $0.85 $1.06 $2.97 $3.24 
Diluted earnings$0.84 $1.06 $2.96 $3.23 
Weighted average shares basic8,507,140 8,517,917 8,500,860 8,518,006 
Weighted average shares diluted8,545,578 8,551,545 8,532,691 8,544,732 
The accompanying notes are an integral part of the Consolidated Financial Statements.
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ACNB CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

 Three Months Ended September 30,Nine Months Ended September 30,
(Dollars in thousands)2024202320242023
NET INCOME$7,204 $9,044 $25,251 $27,591 
OTHER COMPREHENSIVE INCOME (LOSS)  
INVESTMENT SECURITIES  
Unrealized gains (losses) arising during the period, net of income tax expense (benefit) of $3,621, $(2,133), $3,034 and $(3,575), respectively
12,334 (7,033)10,331 (8,288)
Reclassification adjustment for net AFS investment securities gains included in net income, net of income tax expense of $0, $0, $16 and $171, respectively
— — 53 556 
Total unrealized gain (loss) on AFS investment securities12,334 (7,033)10,384 (7,732)
Amortization of unrealized losses on AFS investment securities transferred to HTM, net of income taxes of $63, $32, $189 and $110, respectively
215 244 645 731 
PENSION  
Amortization of pension net loss, transition liability, and prior service cost, net of income tax expense of $4, $52, $13 and $76, respectively
15 74 45 246 
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 12,564 (6,715)11,074 (6,755)
TOTAL COMPREHENSIVE INCOME $19,768 $2,329 $36,325 $20,836 
 
The accompanying notes are an integral part of the Consolidated Financial Statements.



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ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
Nine Months Ended September 30, 2024
(Dollars in thousands, except per share data)Common StockTreasury StockAdditional Paid-in CapitalRetained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Equity
BALANCE – January 1, 2024
$22,231 $(10,954)$97,602 $213,491 $(44,909)$277,461 
Net income— — — 6,768 — 6,768 
Other comprehensive loss, net of taxes— — — — (1,915)(1,915)
Common stock shares issued (4,898 shares)
13 — 161 — — 174 
Repurchased shares (4,200 shares)
— (147)— — — (147)
Restricted stock grants, net of forfeitures and withheld for taxes (27,424 shares)
71 — (479)— — (408)
Compensation expense for restricted shares— — 534 — — 534 
Cash dividends declared ($0.30 per share)
— — — (2,547)— (2,547)
BALANCE – March 31, 202422,315 (11,101)97,818 217,712 (46,824)279,920 
Net income— — — 11,279 — 11,279 
Other comprehensive income, net of taxes— — — — 425 425 
Common stock shares issued (6,054 shares)
15 — 171 — — 186 
Compensation expense for restricted shares— — 241 — — 241 
Cash dividends declared ($0.32 per share)
— — — (2,720)— (2,720)
BALANCE – June 30, 202422,330 (11,101)98,230 226,271 (46,399)289,331 
Net income— — — 7,204 — 7,204 
Other comprehensive income, net of taxes— — — — 12,564 12,564 
Common stock shares issued (5,638 shares)
14 — 223 — — 237 
Repurchased shares (2,642 shares)
— (102)— — — (102)
Compensation expense for restricted shares— — 244 — — 244 
Cash dividends declared ($0.32 per share)
— — — (2,723)— (2,723)
BALANCE – September 30, 2024$22,344 $(11,203)$98,697 $230,752 $(33,835)$306,755 

























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ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
Nine Months Ended September 30, 2023
(Dollars in thousands, except per share data)Common StockTreasury StockAdditional Paid-in CapitalRetained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Stockholders’
Equity
BALANCE – January 1, 2023$22,086 $(8,927)$96,022 $193,873 $(58,012)$245,042 
Cumulative effect for adoption of Topic 326, net of tax— — — (2,368)— (2,368)
Net income— — — 9,023 — 9,023 
Other comprehensive income, net of taxes— — — — 6,052 6,052 
Common stock shares issued (5,889 shares)
15 — 173 — — 188 
Repurchased shares (850 shares)
— (29)— — — (29)
Restricted stock grants, net of forfeitures and withheld for taxes (43,074 shares)
97 — (97)— — — 
Compensation expense for restricted shares— — 317 — — 317 
Cash dividends declared ($0.28 per share)
— — — (2,384)— (2,384)
BALANCE – March 31, 202322,198 (8,956)96,415 198,144 (51,960)255,841 
Net income— — — 9,524 — 9,524 
Other comprehensive loss, net of taxes— — — — (6,092)(6,092)
Common stock shares issued (5,526 shares)
14 — 171 — — 185 
Cash dividends declared ($0.28 per share)
— — — (2,389)— (2,389)
BALANCE – June 30, 202322,212 (8,956)96,586 205,279 (58,052)257,069 
Net income— — — 9,044 — 9,044 
Other comprehensive loss, net of taxes— — — — (6,715)(6,715)
Common stock shares issued (5,165 shares)
12 — 158 — — 170 
Repurchased shares (46,378 shares)
— (1,546)— — — (1,546)
Cash dividends declared ($0.28 per share)
— — — (2,384)— (2,384)
BALANCE – September 30, 2023$22,224 $(10,502)$96,744 $211,939 $(64,767)$255,638 

The accompanying notes are an integral part of the Consolidated Financial Statements.
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ACNB CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
(In thousands)20242023
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$25,251 $27,591 
Adjustments to reconcile net income to net cash provided by operating activities:  
Gain on sales of loans originated for sale(194)(31)
Gain on sales of assets held for sale— (337)
Earnings on investment in bank-owned life insurance(1,473)(1,399)
(Gain) loss on sales or calls of securities(69)739 
(Gain) loss on equity securities(19)22 
Restricted stock compensation expense1,019 317 
Depreciation and amortization2,268 2,559 
(Reversal of) provision for credit losses and unfunded commitments(3,056)300 
Net amortization of investment securities premiums1,300 494 
Decrease (increase) in interest receivable93 (812)
Increase in interest payable737 397 
Mortgage loans originated for sale(9,010)(1,191)
Proceeds from sales of loans originated for sale8,404 1,345 
Decrease in other assets10,954 1,414 
Increase in deferred tax asset(4,144)(4,436)
Increase in other liabilities2,015 5,019 
Net Cash Provided by Operating Activities34,076 31,991 
CASH FLOWS FROM INVESTING ACTIVITIES  
Proceeds from calls/maturities of investment securities held to maturity554 904 
Proceeds from calls/maturities of investment securities available for sale31,783 26,375 
Proceeds from sales of investment securities available for sale14,336 78,624 
Proceeds from sale of equity securities— 591 
Purchase of restricted investment in bank stocks(1,176)(3,848)
Net increase in loans(49,193)(77,486)
Acquisition of insurance books of business/agency— (174)
Capital expenditures(587)(174)
Proceeds from sales of assets held for sale— 3,730 
Net Cash (Used in) Provided by Investing Activities(4,283)28,542 
CASH FLOWS FROM FINANCING ACTIVITIES  
Net decrease in noninterest-bearing deposits(36,831)(29,519)
Net decrease in interest-bearing deposits(33,665)(218,097)
Net decrease in short-term borrowings(19,113)(8,848)
Proceeds from long-term borrowings60,000 100,000 
Dividends paid(7,990)(7,157)
Common stock repurchased(249)(1,575)
Common stock issued, net of restricted stock forfeitures and withheld for taxes189 543 
Net Cash Used In Financing Activities(37,659)(164,653)
Net Decrease in Cash and Cash Equivalents(7,866)(104,120)
CASH AND CASH EQUIVALENTS — BEGINNING65,958 168,161 
CASH AND CASH EQUIVALENTS — ENDING$58,092 $64,041 
Supplemental disclosures of cash flow information
Cash paid for interest$16,848 $3,717 
Cash paid for income taxes4,175 7,350 

 The accompanying notes are an integral part of the Consolidated Financial Statements.
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ACNB CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -    Basis of Presentation and Nature of Operations
 
ACNB Corporation, headquartered in Gettysburg, Pennsylvania, provides banking, insurance, and financial services to businesses and consumers through its wholly-owned subsidiaries, ACNB Bank and ACNB Insurance Services. The Bank engages in full-service commercial and consumer banking and wealth management services, including trust and retail brokerage, through its 27 community banking offices, including 18 community banking office locations in Adams, Cumberland, Franklin, Lancaster and York Counties, Pennsylvania, and nine community banking office locations in Carroll and Frederick Counties, Maryland. There are also loan production offices in York, Pennsylvania, and Hunt Valley, Maryland.

ACNB Insurance Services is a full-service insurance agency based in Westminster, Maryland, with additional locations in Jarrettsville, Maryland, and Gettysburg, Pennsylvania. The agency offers a broad range of property, casualty, health, life and disability insurance to both individual and commercial clients.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation. All such adjustments are of a normal recurring nature. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023. The Corporation evaluates subsequent events through the filing date of this Form 10-Q with the SEC. The results of operations for the three and nine month periods ended September 30, 2024, are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. Reclassifications had no material effect on prior year net income or stockholders’ equity.

Pending Merger

On July 23, 2024, ACNB entered into an Agreement and Plan of Merger with Traditions Bancorp, Inc., holding company for Traditions Bank, York, Pennsylvania, whereby ACNB will acquire Traditions and Traditions Bank in an all-stock transaction. Pursuant to the terms of the Definitive Agreement, Traditions shareholders will receive 0.7300 shares of ACNB common stock for each share of Traditions common stock that they own as of the closing date. Based on the 20-day Volume Weighted Average Price of ACNB common stock as of July 19, 2024, the transaction is valued at $73.5 million or $26.43 per share.

As of September 30, 2024 and December 31, 2023, Traditions had total assets of $860.0 million and $840.1 million, respectively, total loans of $683.2 million and $668.8 million, respectively, and total deposits of $740.0 million and $731.1 million, respectively. Common shares outstanding totaled 2,754,062 and 2,736,544 at September 30, 2024 and December 31, 2023, respectively. Traditions Bank operates eight full-service branches in South Central Pennsylvania. The transaction is subject to regulatory approvals and satisfaction of customary closing conditions, including approval from ACNB and Traditions shareholders. Currently, the transaction is expected to close in the first quarter of 2025.

Significant Accounting Policies

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation’s 2023 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2024.

Recently Issued Accounting Standards

In December 2022, the FASB issued ASU 2022-06, “Deferral of the Sunset Date of Reference Rate Reform (Topic 848)”. This ASU extends the sunset date of ASC Topic 848 (Reference Rate Reform) to December 31, 2024, in response to the United Kingdom’s FCA extension of the intended cessation date of LIBOR in the United States. The Corporation evaluated the impact of this standard, and believes that its adoption will not have a material impact on the Corporation’s Consolidated Financial Statements.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280)”. The amendments in this ASU are expected to improve financial reporting by requiring disclosure of incremental segment information on an annual and interim
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basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in ASU 2023-07 should be applied retrospectively to all periods presented on the financial statements. The Corporation adopted the amendments of ASU 2023-07 related to annual disclosure requirements effective January 1, 2024, and will present any newly required annual disclosures in its Annual Report on Form 10-K for the year ending December 31, 2024 and intends to adopt the amendments of ASU 2023-07 related to interim disclosure requirements effective January 1, 2025, and will present any newly required interim disclosures beginning with its Quarterly Report on Form 10-Q for the period ending March 31, 2025. Adoption of this standard is not expected to have a material impact on the Corporation’s Consolidated Financial Statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740)”. This ASU is intended to improve the disclosures for income taxes to address requests from investors, lenders, creditors and other allocators of capital that use the financial statements to make capital allocation decisions. The amendments in ASU 2023-09 will require consistent categories and greater disaggregation of information in the rate reconciliation disclosure as well as disclosure of income taxes paid disaggregated by jurisdiction. The amendments of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Corporation intends to adopt the amendments of ASU 2023-09 effective January 1, 2025, and will include the required disclosures in its Annual Report on Form 10-K for the year ending December 31, 2025. The Corporation is currently evaluating the impact of this standard, and believes that its adoption will not have a material impact on the Corporation’s Consolidated Financial Statements.

Note 2 -    Earnings Per Share and Restricted Stock
 
The Corporation has a simple capital structure. Basic earnings per share of common stock is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding less unvested restricted stock at the end of the period. Diluted earnings per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.

Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Weighted average shares outstanding (basic)8,507,140 8,517,917 8,500,860 8,518,006 
Dilutive effect of unvested shares38,438 33,628 31,831 26,726 
Weighted average shares outstanding (diluted)8,545,578 8,551,545 8,532,691 8,544,732 
Per share:
Basic$0.85 $1.06 $2.97 $3.24 
Diluted0.84 1.06 2.96 3.23 

There were no antidilutive instruments at September 30, 2024 and 2023.

Stock Incentive Plan

On May 1, 2018, shareholders approved and ratified the ACNB Corporation 2018 Omnibus Stock Incentive Plan, effective as of March 20, 2018, in which awards shall not exceed, in the aggregate, 400,000 shares of common stock, plus any shares that were authorized, but not issued, under the ACNB Corporation 2009 Restricted Stock Plan. The ACNB Corporation 2009 Restricted Stock Plan expired by its own terms after 10 years on February 24, 2019. No further shares may be issued under this plan. The remaining 174,055 shares were transferred to the ACNB Corporation 2018 Omnibus Stock Incentive Plan.

As of September 30, 2024, 138,019 shares were issued under this plan, of which 38,438 were unvested. Plan expense is recognized over the vesting period of the stock issued and resulted in $244 thousand and $265 thousand of compensation expense during the three months ended September 30, 2024 and 2023, respectively. Compensation expense recognized during both the nine months ended September 30, 2024 and 2023 was $1.0 million.

Share Repurchase Plan
On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares
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of the Corporation’s common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. During the three and nine months ended September 30, 2024 the Corporation repurchased 2,642 and 6,842 shares, respectively. There were 67,908 treasury shares purchased under this plan through September 30, 2024.

Note 3 - Investment Securities
 
Fair value of equity securities with readily determinable fair values at September 30, 2024 and December 31, 2023, are as follows:
(In thousands)Fair Value at Beginning of PeriodSales/reclassificationGains (Losses)Losses on
sales of securities		Fair Value
at End of Period
Nine Months Ended September 30, 2024
CRA Mutual Fund$928 $— $19 $— $947 
Twelve Months Ended December 31, 2023
CRA Mutual Fund$915 $— $13 $— $928 
Canapi Ventures SBIC Fund206 206 — — — 
Stock in other banks598 592 5 (11)— 
$1,719 $798 $18 $(11)$928 
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Amortized cost and fair value of securities were as follows:
(In thousands)Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
September 30, 2024
Available for Sale    
U.S. Government and agencies$166,194 $— $13,985 $152,209 
Collateralized mortgage obligations40,889 — 2,822 38,067 
Residential mortgage-backed securities164,113 43 15,088 149,068 
Commercial mortgage-backed securities65,566 803 3,472 62,897 
Corporate bonds18,102 — 2,264 15,838 
$454,864 $846 $37,631 $418,079 
Held to Maturity
State and municipal$62,665 $— $5,477 57,188 
Residential mortgage-backed securities1,913 — 63 1,850 
$64,578 $— $5,540 $59,038 
December 31, 2023    
Available for Sale
U.S. Government and agencies$176,458 $— $19,663 $156,795 
Collateralized mortgage obligations45,189 — 4,105 41,084 
Residential mortgage-backed securities178,441 19 19,630 158,830 
Commercial mortgage-backed securities69,498 344 4,552 65,290 
Corporate bonds32,326 202 2,834 29,694 
 $501,912 $565 $50,784 $451,693 
Held to Maturity
State and municipal$62,133 $— $5,419 $56,714 
Residential mortgage-backed securities2,467 — 124 2,343 
$64,600 $— $5,543 $59,057 


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The following table shows the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2024, and December 31, 2023:
 Less than 12 Months12 Months or MoreTotal
(In thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
September 30, 2024      
Available for Sale      
U.S. Government and agencies$— $— $152,209 $13,985 $152,209 $13,985 
Collateralized mortgage obligations— — 38,067 2,822 38,067 2,822 
Residential mortgage-backed securities— — 146,297 15,088 146,297 15,088 
Commercial mortgage-backed securities— — 30,174 3,472 30,174 3,472 
Corporate bonds— — 15,838 2,264 15,838 2,264 
$— $— $382,585 $37,631 $382,585 $37,631 
Held to Maturity
State and municipal$— $— $57,188 $5,477 $57,188 $5,477 
Residential mortgage-backed securities— — 1,850 63 1,850 63 
$— $— $59,038 $5,540 $59,038 $5,540 
December 31, 2023
Available for Sale      
U.S. Government and agencies$— $— $156,795 $19,663 $156,795 $19,663 
Collateralized mortgage obligations— — 41,085 4,104 41,085 4,104 
Residential mortgage-backed securities— — 156,295 19,630 156,295 19,630 
Commercial mortgage-backed securities— — 33,063 4,553 33,063 4,553 
Corporate bonds— — 15,279 2,834 15,279 2,834 
 $— $— $402,517 $50,784 $402,517 $50,784 
Held to Maturity
State and municipal$— $— $56,714 $5,419 $56,714 $5,419 
Residential mortgage-backed securities— — 2,343 124 2,343 124 
$— $— $59,057 $5,543 $59,057 $5,543 

All mortgage-backed security investments are government sponsored enterprise pass-through instruments issued by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation or they are issued by Government National Mortgage Association which is backed by the U.S. government.

The Company evaluates AFS debt securities for impairment in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. There was no impairment on AFS debt securities as of September 30, 2024 and December 31, 2023. The Company evaluates HTM debt securities for expected credit losses at each measurement date to determine if an ACL is required. The Corporation did not have an ACL for HTM investment securities as of September 30, 2024 and December 31, 2023. In estimating credit events, management considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before anticipated recovery or if it does not expect to recover the entire amortized cost basis.
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Amortized cost and fair value at September 30, 2024, by contractual maturity, where applicable, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties. Securities not due at a single maturity date are shown separately.
 Available for SaleHeld to Maturity
(In thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
1 year or less$16,322 $16,029 $— $— 
Over 1 year through 5 years110,053 102,347 4,191 3,824 
Over 5 years through 10 years55,921 48,125 24,314 23,966 
Over 10 years2,000 1,546 34,160 29,398 
Mortgage-backed securities270,568 250,032 1,913 1,850 
 $454,864 $418,079 $64,578 $59,038 

The proceeds from sales and calls of securities and the associated gains and losses are listed below:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Proceeds$15,908 $— $46,119 $79,215 
Gross gains— — 87 243 
Gross losses— — 18 982 

At September 30, 2024, and December 31, 2023, securities with a carrying value of $204.4 million and $233.7 million, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.

Note 4 -    Loans and Allowance for Credit Losses
 
The following table presents the composition of the loan portfolio:

(In thousands)September 30, 2024December 31, 2023
Commercial real estate$957,904 $898,709 
Residential mortgage397,994 394,189 
Commercial and industrial152,148 152,344 
Home equity lines of credit84,316 90,163 
Real estate construction75,953 84,341 
Consumer9,773 9,954 
Gross loans1,678,088 1,629,700 
Unearned income(976)(1,712)
Total loans, net of unearned income$1,677,112 $1,627,988 

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One of the factors used to monitor the performance and credit quality of the loan portfolio is to analyze the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status:
(In thousands)30–59 Days Past Due60–89 Days
Past Due		≥ 90 Days
Past Due		Total Past
Due		CurrentTotal Loans
Receivable		Loans
Receivable
≥ 90 Days
and
Accruing
September 30, 2024
Commercial real estate$318 $— $346 $664 $957,240 $957,904 $32 
Residential mortgage— 585 375 960 397,034 397,994 375 
Commercial and industrial138 50 175 363 151,785 152,148 19 
Home equity lines of credit454 — — 454 83,862 84,316 — 
Real estate construction15 — 12 27 75,926 75,953 12 
Consumer21 — — 21 9,752 9,773 — 
Gross Loans$946 $635 $908 $2,489 $1,675,599 $1,678,088 $438 

(In thousands)30–59 Days Past Due60–89 Days
Past Due		≥ 90 Days
Past Due		Total Past
Due		CurrentTotal Loans
Receivable		Loans
Receivable
≥ 90 Days
and
Accruing
December 31, 2023
Commercial real estate$150 $347 $— $497 $898,212 $898,709 $— 
Residential mortgage1,293 388 849 2,530 391,659 394,189 505 
Commercial and industrial50 — 159 209 152,135 152,344 — 
Home equity lines of credit414 — 654 1,068 89,095 90,163 654 
Real estate construction12 — — 12 84,329 84,341 — 
Consumer8 — 3 11 9,943 9,954 3 
Gross Loans$1,927 $735 $1,665 $4,327 $1,625,373 $1,629,700 $1,162 

Nonaccrual and Nonperforming Loans

Loans individually evaluated consist of nonaccrual loans, presented in the following table: 

(In thousands)With a Related AllowanceWithout a Related AllowanceTotal
September 30, 2024
Commercial real estate$314 $3,292 $3,606 
Commercial and industrial991 1,368 2,359 
Home equity lines of credit— 168 168 
 $1,305 $4,828 $6,133 
December 31, 2023
Commercial real estate$315 $1,164 $1,479 
Residential mortgage— 343 343 
Commercial and industrial1,004 — 1,004 
Home equity lines of credit— 185 185 
$1,319 $1,692 $3,011 

During both the three and nine months ended September 30, 2024 and 2023, no material amount of interest income was recognized on nonaccrual loans subsequent to their classification as nonaccrual.

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Total nonperforming loans are as follows:
(In thousands)September 30, 2024December 31, 2023
Nonaccrual loans$6,133 $3,011 
Greater than or equal to 90 days past due and accruing438 1,162 
Total nonperforming loans$6,571 $4,173 
Collateral-Dependent Loans
A loan is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the collateral-dependent loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent loans consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.

Changes in the fair value of the collateral for individually evaluated loans are reported as provision for credit losses or a reversal of provision for credit losses in the period of change. The following table presents the amortized cost basis of individually evaluated loans as of the periods presented:
Type of Collateral
(In thousands)Business AssetsReal Estate
September 30, 2024
Commercial real estate$— $3,606 
Commercial and industrial2,359 — 
Home equity lines of credit— 168 
Total$2,359 $3,774 
December 31, 2023
Commercial real estate$— $1,479 
Residential mortgage— 343 
Commercial and industrial1,004 — 
Home equity lines of credit— 185 
Total$1,004 $2,007 

Consumer residential mortgages and home equity lines of credit which are well secured by residential real estate properties and are in the process of collection are not considered nonaccrual, however, formal foreclosure proceedings are in process. These loans totaled $515 thousand at September 30, 2024 and $1.3 million at December 31, 2023 and are included in nonperforming loans if they are greater than or equal to 90 days past due.

Loan Modifications

The Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or combinations of the above. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.
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The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:
(Dollars in thousands)Combination Payment Deferral and Interest Only PaymentsPercent of Class of Financing Receivable
Commercial real estate$2,293 0.2 %
Commercial and industrial1,748 1.1 %
Total$4,041 

During the three and nine months ended September 30, 2023, the Corporation did not modify any loans. During the nine months ended September 30, 2024 and 2023, the Corporation did not have any commitments to lend any additional funds on existing modified loans.

The following presents the performance of loans modified in the previous twelve months as of September 30, 2024:

(In thousands)Current30-89 Days Past Due≥ 90 Days
Past Due		Total Past Due
Commercial real estate$2,293 $— $— $— 
Commercial and industrial1,967 — — — 
Total$4,260 $— $— $— 

As of September 30, 2024, the Corporation had no loans that defaulted during the period that had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification. For purposes of this disclosure, a default occurs when, within 12 months of the original modification, either a full or partial charge-off occurs or the loan becomes 90 days or more past due.

Allowance for Credit Losses

The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation’s financial instruments over the life of those instruments as of the balance sheet date. The ACL consists of loans evaluated collectively and individually for expected credit losses. The Corporation considers the performance of the loan portfolio and its impact on the ACL and does not assign internal risk ratings to smaller balance, homogeneous loans such as certain residential mortgage, home equity lines of credit, construction loans to individuals secured by residential real estate and consumer loans. For these loans, the Corporation evaluates credit quality based on the aging status of the loan and designates as performing and nonperforming.

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The following summarizes designated internal risk categories by portfolio segment for loans assigned a risk rating and those evaluated based on the performance status:
September 30, 2024
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost Basis
(In thousands)20242023202220212020PriorTotal
Internally Risk Rated:
Commercial real estate
Pass$97,426 $134,288 $164,910 $123,922 $56,029 $318,720 $18,020 $913,315 
Special Mention488 2,848 4,830 5,878 2,795 15,505 1,797 34,141 
Substandard— — 1,781 — 1,496 7,171 — 10,448 
Total Commercial real estate$97,914 $137,136 $171,521 $129,800 $60,320 $341,396 $19,817 $957,904 
Residential mortgage
Pass$18,113 $37,415 $23,683 $38,909 $13,743 $33,124 $419 $165,406 
Special Mention— 881 270 575 246 3,199 94 5,265 
Substandard— — — — — 68 — 68 
Total Residential Mortgage$18,113 $38,296 $23,953 $39,484 $13,989 $36,391 $513 $170,739 
Commercial and industrial
Pass$8,979 $11,038 $20,545 $30,192 $13,511 $25,644 $33,010 $142,919 
Special Mention172 153 248 223 82 449 2,703 4,030 
Substandard— 536 468 354 16 780 3,045 5,199 
Total Commercial and industrial$9,151 $11,727 $21,261 $30,769 $13,609 $26,873 $38,758 $152,148 
Home equity lines of credit
Pass$— $296 $94 $— $— $281 $5,227 $5,898 
Special Mention— — — — — — 696 696 
Substandard— — — — — 174 — 174 
Total Home equity lines of credit$— $296 $94 $— $— $455 $5,923 $6,768 
Real estate construction
Pass$9,985 $29,172 $16,397 $1,220 $306 $1,091 $8,739 $66,910 
Special Mention— 118 281 — — 679 46 1,124 
Substandard— — — — — 64 — 64 
Total Real estate construction$9,985 $29,290 $16,678 $1,220 $306 $1,834 $8,785 $68,098 
Performance Rated:
Residential mortgage
Performing$12,390 $40,244 $41,284 $13,732 $14,879 $104,279 $72 $226,880 
Nonperforming— — — — — 375 — 375 
Total Residential Mortgage$12,390 $40,244 $41,284 $13,732 $14,879 $104,654 $72 $227,255 
Home equity lines of credit
Performing$— $19 $35 $— $12 $2,809 $74,673 $77,548 
Total Home equity lines of credit$— $19 $35 $— $12 $2,809 $74,673 $77,548 
Real estate construction
Performing$4,240 $1,773 $565 $165 $193 $907 $— $7,843 
Nonperforming— — — — — 12 — 12 
Total Real estate construction$4,240 $1,773 $565 $165 $193 $919 $— $7,855 
Consumer
Performing$1,823 $1,710 $1,917 $552 $333 $904 $2,534 $9,773 
Total Consumer$1,823 $1,710 $1,917 $552 $333 $904 $2,534 $9,773 
Year-to-date gross charge-offs$— $— $9 $— $— $7 $147 $163 
Total Portfolio loans:
Pass$134,503 $212,209 $225,629 $194,243 $83,589 $378,860 $65,415 $1,294,448 
Special Mention660 4,000 5,629 6,676 3,123 19,832 5,336 45,256 
Substandard— 536 2,249 354 1,512 8,257 3,045 15,953 
Performing18,453 43,746 43,801 14,449 15,417 108,899 77,279 322,044 
Nonperforming— — — — — 387 — 387 
Total Portfolio loans$153,616 $260,491 $277,308 $215,722 $103,641 $516,235 $151,075 $1,678,088 
Year-to-date gross charge-offs$— $— $9 $— $— $7 $147 $163 
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December 31, 2023
Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost Basis
(In thousands)20232022202120202019PriorTotal
Internally Risk Rated:
Commercial real estate
Pass$136,158 $152,767 $130,994 $60,918 $65,856 $287,026 $13,636 $847,355 
Special Mention1,927 6,385 5,920 1,904 8,222 16,244 1,994 42,596 
Substandard— — — 1,530 704 6,524 — 8,758 
Total Commercial real estate$138,085 $159,152 $136,914 $64,352 $74,782 $309,794 $15,630 $898,709 
Residential mortgage
Pass$39,146 $27,612 $41,031 $14,758 $10,492 $27,274 $402 $160,715 
Special Mention588 82 593 397 826 2,457 62 5,005 
Substandard— — — — — 218 — 218 
Total Residential mortgage$39,734 $27,694 $41,624 $15,155 $11,318 $29,949 $464 $165,938 
Commercial and industrial
Pass$12,319 $24,259 $34,830 $15,614 $13,922 $17,780 $25,147 $143,871 
Special Mention128 303 290 529 140 459 2,014 3,863 
Substandard7 135 499 91 9 1,597 2,272 4,610 
Total Commercial and industrial$12,454 $24,697 $35,619 $16,234 $14,071 $19,836 $29,433 $152,344 
Year-to-date gross charge-offs$— $— $— $— $— $110 $— $110 
Home equity lines of credit
Pass$300 $99 $— $— $— $131 $5,235 $5,765 
Special Mention— — — — — — 727 727 
Substandard— — — — — 362 — 362 
Total Home equity lines of credit$300 $99 $— $— $— $493 $5,962 $6,854 
Real estate construction
Pass$19,766 $39,758 $3,953 $1,160 $— $2,604 $8,003 $75,244 
Special Mention— 465 — 92 — 725 — 1,282 
Substandard— — — — — 69 — 69 
Total Real estate construction$19,766 $40,223 $3,953 $1,252 $— $3,398 $8,003 $76,595 
Performance Rated:
Residential mortgage
Performing$33,884 $45,221 $14,878 $16,184 $9,059 $108,021 $156 $227,403 
Nonperforming— — — — — 848 — 848 
Total Residential mortgage$33,884 $45,221 $14,878 $16,184 $9,059 $108,869 $156 $228,251 
Home equity lines of credit
Performing$23 $38 $— $13 $94 $4,742 $77,745 $82,655 
Nonperforming— — — — — 92 562 654 
Total Home equity lines of credit$23 $38 $— $13 $94 $4,834 $78,307 $83,309 
Real estate construction
Performing$5,571 $753 $175 $210 $170 $867 $— $7,746 
Total Real estate construction$5,571 $753 $175 $210 $170 $867 $— $7,746 
Consumer
Performing$2,351 $2,685 $778 $522 $271 $1,085 $2,259 $9,951 
Nonperforming— — — — — — 3 3 
Total Consumer$2,351 $2,685 $778 $522 $271 $1,085 $2,262 $9,954 
Year-to-date gross charge-offs$48 $83 $42 $55 $23 $78 $67 $396 
Total Portfolio loans
Pass$207,689 $244,495 $210,808 $92,450 $90,270 $334,815 $52,423 $1,232,950 
Special Mention2,643 7,235 6,803 2,922 9,188 19,885 4,797 53,473 
Substandard7 135 499 1,621 713 8,770 2,272 14,017 
Performing41,829 48,697 15,831 16,929 9,594 114,715 80,160 327,755 
Nonperforming— — — — — 940 565 1,505 
Total Portfolio loans$252,168 $300,562 $233,941 $113,922 $109,765 $479,125 $140,217 $1,629,700 
Year-to-date gross charge-offs$48 $83 $42 $55 $23 $188 $67 $506 
During the three months ended June 30, 2024, the Corporation revised estimates driven by a realignment of the peer group used for the CECL allowance process, an update to loss driver factors from third-party data, and an update to the application of prepayment and curtailment rate studies since implementation of CECL on January 1, 2023. These estimates, which were based on more current information available as of June 30, 2024, drive input assumptions which are used in the determination of the Corporation’s allowance for credit losses and the reserve for unfunded commitments. These updated estimates were the primary
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drivers for a $2.7 million and $370 thousand reversal of the provisions for credit losses and for unfunded commitments, respectively, for the nine months ended September 30, 2024.
The following table presents the activity in the ACL by loan portfolio segment:
(In thousands)Commercial
Real Estate		Residential
Mortgage		Commercial
and
Industrial		Home Equity
Lines of
Credit		Real Estate
Construction		ConsumerUnallocatedTotal
Three Months Ended September 30, 2024     
Beginning balance - July 1, 2024$10,196 $2,839 $1,465 $312 $2,247 $103 $— $17,162 
Charge-offs— — — — — (51)— (51)
Recoveries— — 6 — — 16 — 22 
Provisions (credits)196 31 301 (16)(467)36 — 81 
Ending balance - September 30, 2024$10,392 $2,870 $1,772 $296 $1,780 $104 $— $17,214 
Nine Months Ended September 30, 2024
Beginning balance - January 1, 2024$12,010 $3,303 $2,048 $397 $2,070 $141 $— $19,969 
Charge-offs— — — — — (163)— (163)
Recoveries— — 24 — — 70 — 94 
Provisions (credits)(1,618)(433)(300)(101)(290)56 — (2,686)
Ending balance - September 30, 2024$10,392 $2,870 $1,772 $296 $1,780 $104 $— $17,214 
Three Months Ended September 30, 2023     
Beginning balance - July 1, 2023$11,728 $3,075 $1,941 $388 $1,885 $131 $— $19,148 
Charge-offs— — (81)— — (109)— (190)
Recoveries— — 32 — — 24 — 56 
Provisions170 78 (381)5 279 99 — 250 
Ending balance - September 30, 2023$11,898 $3,153 $1,511 $393 $2,164 $145 $— $19,264 
Nine Months Ended September 30, 2023
Beginning balance - January 1, 2023$10,016 $3,029 $2,848 $347 $1,000 $376 $245 $17,861 
Impact of CECL adoption1,106 297 (762)17 1,347 (142)(245)1,618 
Charge-offs— — (110)— — (279)— (389)
Recoveries— — 42 — — 58 — 100 
Provisions776 (173)(507)29 (183)132 — 74 
Ending balance - September 30, 2023$11,898 $3,153 $1,511 $393 $2,164 $145 $— $19,264 

Note 5 - Deposits

Deposits were comprised of the following for the periods presented:
(In thousands)September 30, 2024December 31, 2023
Noninterest-bearing demand deposits$463,501 $500,332 
Interest-bearing demand deposits509,930 524,289 
Money market249,197 264,907 
Savings311,958 340,134 
Total demand and savings1,534,586 1,629,662 
Time256,731 232,151 
Total deposits$1,791,317 $1,861,813 
Time deposits include brokered deposits totaling $1.5 million at September 30, 2024, and none at December 31, 2023.
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Scheduled maturities of time deposits at September 30, 2024 are as follows:
Time Deposits
(In thousands)Less than $250,000$250,000 or more
Less than 1 year$183,010 $44,229 
1 - 2 years16,136 783 
2 - 3 years7,589 — 
3 - 4 years2,764 — 
4 - 5 years2,130 — 
Thereafter90 — 
Total time deposits$211,719 $45,012 

Note 6 - Borrowings
Short-term borrowings were comprised of the following for the periods presented:
(In thousands)September 30, 2024December 31, 2023
Securities sold under repurchase agreements$37,769 $26,882 
FHLB advance— 30,000 
$37,769 $56,882 

Borrowings with original maturities of one year or less are classified as short-term. Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are sweep accounts with next-day maturities utilized by larger commercial customers to earn interest on their funds. Securities are pledged to these customers in an amount at least equal to the outstanding balance. Under an agreement with the FHLB, the Bank has short-term borrowing capacity included within its maximum borrowing capacity. All FHLB advances are collateralized by a security agreement covering qualifying loans. In addition, all FHLB advances are secured by the FHLB capital stock owned by the Bank having a par value of $10.6 million at September 30, 2024. The Bank also has unsecured lines of credit that total $192.0 million with correspondent banks for overnight federal funds borrowings. There were no advances on these lines at September 30, 2024 and December 31, 2023.

Long-term borrowings were comprised of the following for the periods presented:
(In thousands)September 30, 2024December 31, 2023
FHLB fixed-rate advances maturing:
2026$80,000 $80,000 
202790,000 60,000 
202835,000 35,000 
202930,000 — 
Trust preferred subordinated debt 1
5,322 5,292 
Subordinated debt15,000 15,000 
$255,322 $195,292 
___________________________
1 Net of purchase accounting fair value mark

The long-term FHLB advances have a weighted average rate of 4.52%, and are collateralized by the assets defined in the security agreement and FHLB capital stock described previously. Based on this collateral and ACNB’s holding of FHLB stock, ACNB is eligible to borrow up to $920.1 million, of which $684.0 million was available at September 30, 2024.

The trust preferred subordinated debt is comprised of debt securities issued by FCBI in December 2006 and assumed by ACNB Corporation through the acquisition of FCBI. FCBI completed the private placement of an aggregate of $6.0 million of trust preferred securities. The interest rate on the subordinated debentures is adjusted quarterly to 163 bps over the three-month CME Term SOFR plus applicable tenor spread adjustment. On September 15, 2024, the most recent interest rate reset date, the interest rate was adjusted to 6.84% for the period ending December 15, 2024. The trust preferred securities mature on
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December 15, 2036, and may be redeemed at par, at the Corporation’s option, on any interest payment date. The trust preferred subordinated debt is considered Tier 1 capital for the consolidated capital ratios.

On March 30, 2021, the Company entered into Purchase Agreements with the Purchasers pursuant to which the Company sold and issued $15.0 million in aggregate principal amount of its 4.00% fixed-to-floating rate subordinated notes due March 31, 2031. The Subordinated Notes bear interest at a fixed rate of 4.00% per year, from and including March 30, 2021 to, but excluding, March 31, 2026 or earlier redemption date. From and including March 31, 2026 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current 90-day average SOFR plus 329 bps. As provided in the Subordinated Notes, the interest rate on the Subordinated Notes during the applicable floating rate period may be determined based on a rate other than the 90-day average SOFR. The Subordinated Notes were issued by the Corporation to the Purchasers at a price equal to 100% of their face amount. The Subordinated Notes have a stated maturity of March 31, 2031, are redeemable by the Company at its option, in whole or in part, on or after March 30, 2026, and at any time upon the occurrences of certain events. The Subordinated Notes are considered Tier 2 capital for the consolidated capital ratios.

Note 7 -    Fair Value Measurements

Fair value is the exchange price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

Fair value measurement establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. 
Level 2 - Quoted prices for similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. 
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity). 
An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

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The following tables present assets measured at fair value and the basis of measurement used at the periods presented:
September 30, 2024
(In thousands)BasisLevel 1Level 2Level 3Total
Equity securities with readily determinable fair valuesRecurring$947 $— $— $947 
AFS Investment Securities:
U.S. Government and agencies — 152,209 — 152,209 
Collateralized mortgage obligations— 38,067 — 38,067 
Residential mortgage-backed securities— 149,068 — 149,068 
Commercial mortgage-backed securities — 62,897 — 62,897 
Corporate bonds — 15,838 — 15,838 
Total AFS Investment SecuritiesRecurring$— $418,079 $— $418,079 
Loans held for saleRecurring— 1,080 — 1,080 
Individually evaluated loansNon-recurring— — 262 262 
Foreclosed assets held for resaleNon-recurring— — 406 406 
December 31, 2023
(In thousands)BasisLevel 1Level 2Level 3Total
Equity securities with readily determinable fair valuesRecurring$928 $— $— $928 
AFS Investment Securities:
U.S. Government and agencies — 156,795 — 156,795 
Collateralized mortgage obligations— 41,084 — 41,084 
Residential mortgage-backed securities— 158,830 — 158,830 
Commercial mortgage-backed securities — 65,290 — 65,290 
Corporate bonds — 29,694 — 29,694 
Total AFS Investment SecuritiesRecurring$— $451,693 $— $451,693 
Loans held for saleRecurring— 280 — 280
Individually evaluated loansNon-recurring— — 242 242 
Foreclosed assets held for resaleNon-recurring— — 467 467 
The valuation techniques used to measure fair value for the items in the preceding tables are as follows:
Equity securities - The fair value of equity securities with readily determinable fair values is recorded on the Consolidated Statements of Condition, with realized and unrealized gains and losses reported in noninterest income on the Consolidated Statements of Income.

Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing. Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.
•     U.S. Government and agencies – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
•     Collateralized mortgage obligations and Mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
•     Corporate bonds – This category consists of subordinated and senior debt issued by financial institutions and are classified as Level 2 investments. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.
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Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value utilizing Level 2 measurements. Fair values as of September 30, 2024 and December 31, 2023, were measured as the price that secondary market investors were offering for loans with similar characteristics. Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding commitments from investors or current investor yield requirements. Net unrealized losses are recognized through a valuation allowance by charges to income.

Individually evaluated loans – This category consists of loans that were individually evaluated for impairment and have a specific reserve. They are classified as Level 3 assets.

Foreclosed assets held for resale – This category consists of foreclosed assets that are held for resale and classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:
(Dollars in thousands)Fair Value Estimate
Valuation Technique 1
Unobservable Input 2
RangeWeighted Average
September 30, 2024
Individually evaluated loans$262 Appraisal of collateral Appraisal adjustments
(17) – (100)%
(81)%
Foreclosed assets held for resale406 Appraisal of collateralAppraisal adjustments(53)(53)
December 31, 2023
Individually evaluated loans$242 Appraisal of collateralAppraisal adjustments
(33) – (100)%
(94)%
Foreclosed assets held for resale467 Appraisal of collateralAppraisal adjustments(56)(56)
_______________________________
1 Fair value is generally determined through management’s estimate or independent third-party appraisals of the underlying collateral, which generally includes various Level 3 inputs which are not observable.
2 Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, and/or age of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful. 

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The following tables present the carrying amount and the estimated fair value of the Corporation’s financial instruments:
September 30, 2024
Carrying AmountEstimated Fair Value
(In thousands)TotalLevel 1Level 2Level 3
Financial assets:
Cash and due from banks$24,636 $24,636 $24,636 $— $— 
Interest-bearing deposits with banks33,456 33,456 33,456 — — 
Equity securities with readily determinable fair values947 947 947 — — 
Investment securities AFS418,079 418,079 — 418,079 — 
Investment securities HTM64,578 59,038 — 59,038 — 
Loans held for sale1,080 1,080 — 1,080 — 
Loans, net1,659,898 1,641,479 — — 1,641,479 
Accrued interest receivable7,987 7,987 — 7,987 — 
Restricted investment in bank stocks10,853 10,853— 10,853— 
Financial liabilities:
Demand deposits, savings, and money markets$1,534,586 $1,333,125 $— $1,333,125 $— 
Time deposits256,731 250,936 — 250,936 — 
Securities sold under repurchase agreements37,769 40,649 — 40,649 — 
FHLB Advances235,000 240,277 — 240,277 — 
Trust preferred and subordinated debt20,322 18,372 — 18,372 — 
Accrued interest payable1,531 1,531 — 1,531 — 

December 31, 2023
Carrying AmountEstimated Fair Value
(In thousands)TotalLevel 1Level 2Level 3
Financial assets:
Cash and due from banks$21,442 $21,442 $7,063 $14,379 $— 
Interest-bearing deposits with banks44,516 44,516 44,516 — — 
Equity securities with readily determinable fair values928 928 928 — — 
Investment securities AFS451,693 451,693 — 451,693 — 
Investment securities HTM64,600 59,057 — 59,057 — 
Loans held for sale280 280 — 280 — 
Loans, net1,608,019 1,562,703 — — 1,562,703 
Accrued interest receivable8,080 8,080 — 8,080 — 
Restricted investment in bank stocks9,677 9,677 — 9,677 — 
Financial liabilities:
Demand deposits, savings, and money markets$1,629,662 $1,391,709 $— $1,391,709 $— 
Time deposits232,151 221,770 — 221,770 — 
Securities sold under repurchase agreements26,882 23,666 — 23,666 — 
FHLB Advances205,000 206,950 — 206,950 — 
Trust preferred and subordinated debt20,292 16,992 — 16,992 — 
Accrued interest payable794 794 — 794 — 



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Note 8 -    Retirement Benefits
 
The components of net periodic benefit income related to the non-contributory, defined benefit pension plan were as follows:
 Three Months Ended September 30, Nine Months Ended September 30,
(In thousands)2024202320242023
Service cost$107 $124 $321 $372 
Interest cost373 373 1,121 1,119 
Expected return on plan assets(712)(663)(2,136)(1,989)
Amortization of net loss20 98 58 294 
Net Periodic Benefit Income$(212)$(68)$(636)$(204)
 
The Corporation has determined that it will not be contributing to the defined benefit plan in 2024 based on current levels and expected returns on plan assets. Effective April 1, 2012, no inactive or former participant in the plan is eligible to again participate in the plan, and no employee hired after March 31, 2012, is eligible to participate in the plan.

Note 9 -    Commitments and Contingencies
 
Commitments

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit (typically mortgages and commercial loans) and, to a lesser extent, standby letters of credit. To varying degrees, these instruments involve elements of credit and interest rate risk in excess of the amount recognized on the Consolidated Statements of Condition.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments. The Corporation does not anticipate any material losses from these commitments.

Commitments to extend credit, including commitments to grant loans and unfunded commitments under lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extensions of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property and equipment and income-producing commercial properties. On loans secured by real estate, the Corporation generally requires loan to value ratios of no greater than 80%.

Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements and similar transactions. The terms of the letters of credit vary and may have renewal features. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Corporation generally holds collateral and/or personal guarantees supporting those commitments for which collateral is deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral and the enforcement of guarantees would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

The Corporation maintains a $5.0 million unsecured line of credit with a correspondent bank. The Corporation guarantees a note related to a $1.5 million commercial line of credit with a correspondent bank, with normal terms and conditions for such a line, for ACNB Insurance Services, the borrower. The commercial line of credit is for general working capital needs as they arise by the ACNB Insurance Services. The liability is recorded for the net drawn amount of this line, no further liability is recorded for the remaining line as to the guarantor’s obligation as the guarantor would have full recourse from all assets of its wholly-owned subsidiary. There were no advances on these lines at September 30, 2024 and at December 31, 2023.

The Corporation has not been required to perform on any financial guarantees, and has not incurred any losses on its commitments during the past three years.
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A summary of the Corporation’s commitments were as follows:
(In thousands)September 30, 2024December 31, 2023
Commitments to extend credit$363,631 $403,300 
Standby letters of credit14,362 21,029 

Contingencies

The Corporation is subject to claims and lawsuits which arise primarily in the ordinary course of business. Based on information presently available and advice received from legal counsel representing the Corporation in connection with any such claims and lawsuits, it is the opinion of management that the disposition or ultimate determination of any such claims and lawsuits will not have a material adverse effect on the consolidated financial position, consolidated results of operations or liquidity of the Corporation.

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Note 10 - Accumulated Other Comprehensive Loss
 
The components of accumulated other comprehensive loss, net of taxes, are as follows:
(In thousands)Unrealized (Losses) Gains on SecuritiesPension
Liability		Accumulated Other
Comprehensive Loss
Three Months Ended September 30, 2024
Balance at July 1, 2024$(42,472)$(3,927)$(46,399)
Unrealized gain on AFS securities, net of tax12,334 — 12,334 
Amortization of unrealized losses on securities transferred to HTM, net of tax215 — 215 
Amortization of pension net loss, transition liability and prior service cost, net of tax— 15 15 
Net current period other comprehensive income12,549 15 12,564 
Balance at September 30, 2024$(29,923)$(3,912)$(33,835)
Nine Months Ended September 30, 2024
Balance at December 31, 2023$(40,952)$(3,957)$(44,909)
Unrealized gain on AFS securities, net of tax10,331 — 10,331 
Realized gains on securities, net of tax53 — 53 
Amortization of unrealized losses on securities transferred to HTM, net of tax645 — 645 
Amortization of pension net loss, transition liability and prior service cost, net of tax— 45 45 
Net current period other comprehensive income11,029 45 11,074 
Balance at September 30, 2024$(29,923)$(3,912)$(33,835)
Three Months Ended September 30, 2023
Balance at July 1, 2023$(52,946)$(5,106)$(58,052)
Unrealized loss on AFS securities, net of tax(7,033)— (7,033)
Amortization of unrealized losses on securities transferred to HTM, net of tax244 — 244 
Amortization of pension net loss, transition liability and prior service cost, net of tax— 74 74 
Net current period other comprehensive (loss) income(6,789)74 (6,715)
Balance at September 30, 2023$(59,735)$(5,032)$(64,767)
Nine Months Ended September 30, 2023
Balance at December 31, 2022$(52,734)$(5,278)$(58,012)
Unrealized loss on AFS securities, net of tax(8,288)— (8,288)
Realized gains on securities, net of tax556 — 556 
Amortization of unrealized losses on securities transferred to HTM, net of tax731 — 731 
Amortization of pension net loss, transition liability and prior service cost, net of tax— 246 246 
Net current period other comprehensive (loss) income(7,001)246 (6,755)
Balance at September 30, 2023$(59,735)$(5,032)$(64,767)

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Note 11 - Segment Reporting
 
The Corporation has two reporting segments, the Bank and ACNB Insurance Services. ACNB Insurance Services is managed separately from the banking segment, which includes the Bank and related financial services that the Corporation offers through its banking subsidiary. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance to both commercial and individual clients.

Segment information as of and for the three month periods ended September 30, 2024 and 2023 is as follows:

(In thousands)BankingInsuranceTotal
2024   
Interest income and other income from external customers$31,286 $2,788 $34,074 
Interest expense6,299 — 6,299 
Depreciation and amortization expense548 196 744 
Income before income taxes8,801 609 9,410 
Total assets2,396,726 24,188 2,420,914 
Goodwill35,800 8,385 44,185 
Capital expenditures222 — 222 
2023   
Interest income and other income from external customers$28,080 $2,451 $30,531 
Interest expense2,489 — 2,489 
Depreciation and amortization expense613 212 825 
Income before income taxes11,107 520 11,627 
Total assets2,369,705 18,817 2,388,522 
Goodwill35,800 8,385 44,185 
Capital expenditures68 — 68 
Segment information as of and for the nine month periods ended September 30, 2024 and 2023, is as follows:
(In thousands)BankingInsuranceTotal
2024   
Interest income and other income from external customers$91,359 $7,652 99,011 
Interest expense17,585 — 17,585 
Depreciation and amortization expense1,677 591 2,268 
Income before income taxes30,810 1,375 32,185 
Total assets2,396,726 24,188 2,420,914 
Goodwill35,800 8,385 44,185 
Capital expenditures556 31 587 
2023
Interest income and other income from external customers$81,638 $7,193 $88,831 
Interest expense4,529 — 4,529 
Depreciation and amortization1,925 634 2,559 
Income before income taxes33,508 1,595 35,103 
Total assets2,369,705 18,817 2,388,522 
Goodwill35,800 8,385 44,185 
Capital expenditures168 6 174 
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ACNB CORPORATION
ITEM 2 – 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 continuing 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; and, 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. 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.

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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 27 community banking 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 and Jarrettsville, 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.
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)2024202320242023
Net income$7,204 $9,044 $25,251 $27,591 
Diluted earnings per share$0.84 $1.06 $2.96 $3.23 
Cash dividends declared$0.32 $0.28 $0.94 $0.84 
Return on average assets (annualized)1.17 %1.52 %1.38 %1.55 %
Return on average equity (annualized)9.63 %13.84 %11.79 %14.38 %
Net interest margin 1
3.77 %4.01 %3.79 %4.11 %
Non-performing assets to total assets0.29 %0.17 %0.29 %0.17 %
Net charge-offs to average loans outstanding (annualized)0.01 %0.03 %0.01 %0.02 %
Allowance for credit losses to total loans, net of unearned income1.03 %1.19 %1.03 %1.19 %
___________________________________________________
1 Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.
Summary Financial Results
•Net Income - Net income for the three months ended September 30, 2024 was $7.2 million compared to net income of $9.0 million for the same period of the prior year, a decrease of $1.8 million, or 20.3%. Diluted earnings per share for the three months ended September 30, 2024 and 2023 were $0.84 and $1.06, respectively, resulting in a 20.8% decrease. The decrease in net income for the three months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by higher noninterest income. Net income for the nine months ended September 30, 2024 was $25.3 million compared to $27.6 million for the same period of the prior year, a decrease of $2.3 million or 8.5%. Diluted earnings per share for the nine months ended September 30, 2024 and 2023 were $2.96 and $3.23, respectively, resulting in an 8.4% decrease. The decrease in net income for the nine months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by a reversal of the provision for credit losses and unfunded commitments and an increase in noninterest income.
•Net Interest Income - Net interest income was $20.9 million for the three months ended September 30, 2024 compared to $21.7 million for the same period of 2023, a decrease of $803 thousand, or 3.7%. For the nine months ended September 30, 2024, net interest income was $62.5 million compared to $66.8 million for the same period of the prior year, a decrease of $4.3 million, or 6.5%. The decline in net interest income was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs.
◦Net Interest Margin - The Corporation’s FTE net interest margin decreased to 3.77% for the three months ended September 30, 2024 compared to 4.01% in the same period of 2023, a decrease of 24 bps. For the nine months ended September 30, 2024, the net interest margin decreased to 3.79% compared to 4.11% for the same period of the prior year, a decrease of 32 bps.
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◦Yield on Average Earning Assets - For the three months ended September 30, 2024, the yield on average earning assets was 4.90%, an increase of 44 bps compared to the same period of the prior year, and was 4.84% for the nine months ended September 30, 2024, an increase of 45 bps compared to the same period of the prior year.
◦Loan Growth - Average loans grew $87.2 million, or 5.5%, for the three months ended September 30, 2024 compared to the same period of the prior year. For the nine months ended September 30, 2024, average loans grew $110.3 million, or 7.1%, compared to the same period of the prior year. As described in more detail below, the growth was driven by an increase in the commercial real estate portfolio.
◦Deposit Decline - Average interest-bearing deposits decreased $54.4 million, or 3.9%, for the three months ended September 30, 2024 compared to the same period of the prior year; however, average time deposit balances increased $45.9 million, or 21.6%, due to ongoing promotions. During the same period of 2024, average noninterest-bearing deposits decreased $64.6 million, or 11.9%, compared to the same period of the prior year. For the nine months ended September 30, 2024, average interest-bearing deposits decreased $132.5 million, or 9.0%, and average noninterest-bearing deposits decreased $67.1 million, or 12.2%, compared to the same period of the prior year. Average time deposits, included in average interest-bearing deposits, increased $20.3 million, or 8.6%, for the nine months ended September 30, 2024 compared to the same period in the prior year as a result of ongoing promotions.
•Asset Quality - Asset quality metrics continue to be stable despite increases in non-performing loans during the three months ended September 30, 2024. The provisions for credit losses and unfunded commitments were $81 thousand and $40 thousand, respectively, for the three months ended September 30, 2024 compared to a provision for credit losses of $250 thousand and a $171 thousand reversal of the provision for unfunded commitments for the same period of the prior year. For the nine months ended September 30, 2024, the provisions for credit losses and unfunded commitments were a reversal of $2.7 million and $370 thousand, respectively, compared to a $74 thousand and $226 thousand provisions for credit losses and unfunded commitments, respectively, for the same period of the prior year.
◦Non-performing loans were $6.6 million, or 0.39%, of total loans at September 30, 2024 compared to $3.6 million, or 0.22%, of total loans at September 30, 2023. The increase in non-performing loans was primarily the result of one long-standing commercial relationship in the healthcare industry, comprised of both owner-occupied commercial real estate and commercial and industrial loans.
◦Annualized net charge-offs for the three months ended September 30, 2024 were 0.01% of total average loans compared to 0.03% for the same period of 2023. For the nine months ended September 30, 2024 and 2023 the annualized net charge-offs were 0.01% and 0.02%, respectively, of total average loans.
•Noninterest income - Noninterest income was $6.8 million for the three months ended September 30, 2024 an increase of $536 thousand, or 8.5% from $6.3 million for the same period of 2023. The increase was driven primarily by higher wealth management income, insurance commissions and gain from mortgage loans held for sale compared to the same period of the prior year. For the nine months ended September 30, 2024 noninterest income was $18.9 million and $17.5 million for the same period of the prior year. The increase was driven primarily by higher wealth management income, higher insurance commissions, gain from mortgage loans held for sale and a net gain on sales of securities in the current period compared to a net loss in the same period of 2023.
•Noninterest expenses - Noninterest expenses increased to $18.2 million, or 11.7%, for the three months ended September 30, 2024 compared to $16.3 million in the same period of the prior year. The increase was driven primarily by merger-related expenses, higher salary and employee benefits expense, partially offset by decreases in professional services and marketing and corporate relations. For the nine months ended September 30, 2024, noninterest expenses increased to $52.3 million, or by 6.9%, from $48.9 million in the same period of 2023. The increase was driven primarily by higher salary and employee benefits expense, merger-related expenses, FDIC and regulatory, and other tax, partially offset by decreases in marketing and corporate relations and other.
A more thorough discussion of the Corporation’s results of operations and financial condition is included in the following pages.
 
CRITICAL ACCOUNTING POLICIES
 
The accounting policies that the Corporation’s management deems to be most important to the portrayal of its financial condition and results of operations, and that require management’s most difficult, subjective or complex judgment, often result
33

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 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.

RESULTS OF OPERATIONS
 
Three months ended September 30, 2024 compared to three months ended September 30, 2023

Net income for the three months ended September 30, 2024 was $7.2 million compared to net income of $9.0 million for the same period of the prior year, a decrease of $1.8 million, or 20.3%. Diluted earnings per share for the three months ended September 30, 2024 and 2023 were $0.84 and $1.06, respectively, resulting in a 20.8% decrease. The decrease in net income for the three months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including merger-related expenses, partially offset by higher noninterest income.

Net Interest Income 

Net interest income totaled $20.9 million for the three months ended September 30, 2024 compared to $21.7 million for the same period of the prior year, a decrease of $803 thousand or 3.7%. The FTE net interest margin for the three months ended September 30, 2024 was 3.77%, a 24 bps decrease from 4.01% for the same period of the prior year. The decrease in FTE net interest margin was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. 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 balance sheet and net interest income analysis for the periods presented. The discussion following this table is based on these taxable-equivalent amounts.

34

Three Months Ended September 30,
20242023
(Dollars in thousands)Average Balance
Interest 1
Yield/ RateAverage
Balance
Interest 1
Yield/
Rate
ASSETS
Loans:
Taxable$1,618,879 $23,108 5.68 %$1,520,134 $20,285 5.29 %
Tax-exempt62,401 394 2.51 73,995 457 2.45 
Total Loans 2
1,681,280 23,502 5.56 1,594,129 20,742 5.16 
Investment Securities:
Taxable441,135 2,868 2.59 466,402 2,581 2.20 
Tax-exempt54,549 359 2.62 55,027 359 2.59 
Total Investments 3
495,684 3,227 2.59 521,429 2,940 2.24 
Interest-bearing deposits with banks48,794 670 5.46 53,324 723 5.38 
Total Earning Assets2,225,758 27,399 4.90 2,168,882 24,405 4.46 
Cash and due from banks21,684 23,783 
Premises and equipment25,716 25,980 
Other assets184,105 165,821 
Allowance for credit losses(17,147)(19,101)
Total Assets$2,440,116 $2,365,365 
LIABILITIES
Interest-bearing demand deposits$518,368 $552 0.42 %$571,314 $185 0.13 %
Money markets246,653 692 1.12 245,899 312 0.50 
Savings deposits318,291 26 0.03 366,398 30 0.03 
Time deposits258,053 1,842 2.84 212,159 401 0.75 
Total Interest-Bearing Deposits1,341,365 3,112 0.92 1,395,770 928 0.26 
Short-term borrowings38,666 204 2.10 66,942 439 2.60 
Long-term borrowings255,316 2,983 4.65 94,554 1,122 4.71 
Total Borrowings293,982 3,187 4.31 161,496 1,561 3.83 
Total Interest-Bearing Liabilities1,635,347 6,299 1.53 1,557,266 2,489 0.63 
Noninterest-bearing demand deposits477,350 541,995 
Other liabilities29,946 6,820 
Stockholders’ Equity297,473 259,284 
Total Liabilities and Stockholders’ Equity$2,440,116 $2,365,365 
Taxable Equivalent Net Interest Income21,100 21,916 
Taxable Equivalent Adjustment(158)(171)
Net Interest Income$20,942 $21,745 
Cost of Funds1.19 %0.47 %
FTE Net Interest Margin3.77 %4.01 %
______________________________
1 Income on interest-earning assets has been computed on a fully taxable equivalent 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.

35

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, 2024 compared to the same period in 2023:

2024 versus 2023
(Dollars in thousands)Volume
Yield/Rate 1
Net
INTEREST EARNING ASSETS
Loans
Taxable$1,313 $1,510 $2,823 
Tax-exempt(71)8 (63)
Total Loans 2
1,242 1,518 2,760 
Securities
Taxable securities(140)427 287 
Tax-exempt securities(3)3 — 
Total Securities(143)430 287 
Interest-bearing deposits with banks(61)8 (53)
Total$1,038 $1,956 $2,994 
INTEREST BEARING LIABILITIES
Interest bearing demand deposits$(17)$384 $367 
Money markets1 379 380 
Savings deposits(4)— (4)
Time deposits87 1,354 1,441 
Total Interest-Bearing Deposits67 2,117 2,184 
Short-term borrowings(185)(50)(235)
Long-term borrowings1,903 (42)1,861 
Total Borrowings1,718 (92)1,626 
Total1,785 2,025 3,810 
Change in Net Interest Income$(747)$(69)$(816)
______________________________
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.


Total FTE interest income increased $3.0 million, or 12.3%, during the three months ended September 30, 2024 compared to the same period of the prior year. ACNB experienced a $2.0 million increase in FTE interest income due to an increase in the yield on interest earning assets and $1.0 million attributable to an increase in the average balance of interest earning assets. FTE interest income on total loans increased $2.8 million, or 13.3%, compared to the same period of 2023. The yield on total loans increased 40 bps, contributing $1.5 million to the increase. Average loans increased $87.2 million, or 5.5%, contributing $1.2 million to the increase in FTE interest income. FTE interest income on investment securities increased $287 thousand, or 9.8%, driven by a higher yield on investment securities partially offset by a lower volume of investment securities. FTE interest income on interest-bearing deposits with banks declined $53 thousand, or 7.3%, attributable to lower average balances of interest-bearing cash used to fund loan growth and deposit outflows offset slightly by a higher interest rate environment.

Total interest expense increased $3.8 million, or 153.1%, during the three months ended September 30, 2024 compared to the same period of the prior year. Total average interest-bearing deposits decreased $54.4 million, or 3.9%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023; however, average time deposit balances increased $45.9 million, or 21.6%, due to ongoing promotions. Interest expense increased $2.1 million due to higher rates on interest-bearing deposits. The cost of interest-bearing deposits was 0.92% for the three months ended September 30, 2024, an increase of 66 bps from the three months ended September 30, 2023. The largest increases in rates were in time deposits and money markets which increased 209 and 62 bps, respectively. Total average borrowings increased $132.5 million, or 82.0%, for the three months ended September 30, 2024 compared to the same period of the prior year, contributing $1.7 million to the increase in interest expense.
36

Provision for Credit Losses and Unfunded Commitments

The provisions for credit losses and unfunded commitments were $81 thousand and $40 thousand, respectively, for the three months ended September 30, 2024, compared to a provision for credit losses of $250 thousand and a reversal of unfunded commitments of $171 thousand for the same period of the prior year. The determination of the provisions was a result of the analysis of the adequacy of the ACL and unfunded commitments calculations. Each quarter, the Corporation assesses risks and reserves required compared with the balances in the allowance for credit losses and unfunded commitments.

Noninterest Income

The following table presents the components of noninterest income:
Three Months Ended September 30,Increase (Decrease)
(In thousands)20242023$%
NONINTEREST INCOME
Insurance commissions$2,787 $2,629 $158 6.0 %
Service charges on deposits1,048 1,000 48 4.8 
Wealth management1,188 953 235 24.7 
ATM debit card charges828 845 (17)(2.0)
Earnings on investment in bank-owned life insurance503 473 30 6.3 
Gain from mortgage loans held for sale112 — 112 100.0 
Net gains (losses) on equity securities28 (27)55 203.7 
Gain on assets held for sale— 14 (14)(100.0)
Other339 410 (71)(17.3)
Total Noninterest Income$6,833 $6,297 $536 8.5 %

Total noninterest income was $6.8 million for the three months ended September 30, 2024 compared to $6.3 million for the same period of the prior year, a $536 thousand, or 8.5%, increase. The more significant fluctuations by category are explained below:
•Insurance commissions increased $158 thousand, or 6.0%, compared to the same period of the prior year driven primarily by growth in commissions on policy renewals and new business.
•Wealth management income for the three months ended September 30, 2024 increased $235 thousand, or 24.7%, compared to the same period of the prior year driven primarily by portfolio market appreciation, estate income and new business generation.
•Gain from mortgage loans held for sale totaled $112 thousand compared to none in the same period of the prior year.

•Net gains on equity securities totaled $28 thousand compared to losses of $27 thousand in the same period of the prior year.
37

Noninterest Expenses

The following table presents the components of noninterest expense:
Three Months Ended September 30,Increase (Decrease)
(In thousands)20242023$%
NONINTEREST EXPENSES
Salaries and employee benefits$11,017 $10,069 $948 9.4 %
Equipment1,698 1,554 144 9.3 
Net occupancy945 942 3 0.3 
Professional services409 617 (208)(33.7)
FDIC and regulatory365 388 (23)(5.9)
Other tax360 323 37 11.5 
Intangible assets amortization304 352 (48)(13.6)
Supplies and postage236 229 7 3.1 
Marketing and corporate relations99 159 (60)(37.7)
Merger-related1,137 — 1,137 100.0 
Other1,674 1,703 (29)(1.7)
Total Noninterest Expenses$18,244 $16,336 $1,908 11.7 %
Noninterest expenses totaled $18.2 million during the three months ended September 30, 2024, an 11.7% increase compared to the same period of the prior year. The more significant fluctuations by category are explained below:
•Salaries and employee benefits, the largest component of noninterest expenses, increased 9.4% during the three months ended September 30, 2024 to $11.0 million compared to $10.1 million in the same period of the prior year. The increase was driven primarily by higher employee health insurance expense and higher base wages.
•Equipment expenses increased $144 thousand, or 9.3%, driven primarily by higher core system processing expenses and incremental purchases of office equipment.
•Professional services decreased $208 thousand, or 33.7%, driven primarily by lower recruiting expenses for talent acquisition and consulting expenses.
•Marketing and corporate relations decreased $60 thousand, or 37.7%, driven primarily by rebranding expenses incurred for the Bank’s Maryland banking locations during the same period of the prior year.
•Merger-related expenses included legal, external accounting, loan review and advisory fees incurred for the Traditions acquisition. The acquisition was reported on Form 8-K filed with the SEC on July 24, 2024.
Provision for Income Taxes
 
The Corporation recognized income taxes of $2.2 million during the three months ended September 30, 2024 compared to $2.6 million during the same period of the prior year. The provision for income taxes for the three months ended September 30, 2024 reflects a combined Federal and State ETR of 23.4% compared to an ETR of 22.2% for the same period of the prior year. Any variances from the federal statutory rate of 21% are generally due to tax-free income, which includes interest income on tax-free loans and investment securities and income from bank-owned life insurance policies, federal income tax credits, and the impact of non-tax deductible expense. Additionally, ACNB has incurred non-deductible costs related to the pending acquisition of Traditions Bank which are recorded within merger-related costs on the Consolidated Statements of Income.

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

Net income for the nine months ended September 30, 2024 was $25.3 million compared to $27.6 million for the same period of the prior year, a decrease of $2.3 million or 8.5%. Diluted earnings per share for the nine months ended September 30, 2024 and 2023 were $2.96 and $3.23, respectively, resulting in an 8.4% decrease. The decrease in net income for the nine months ended September 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses, including
38

merger-related expenses, partially offset by a reversal of the provision for credit losses and unfunded commitments and an increase in noninterest income.

Net Interest Income 

Net interest income totaled $62.5 million for the nine months ended September 30, 2024 compared to $66.8 million for the same period of the prior year, a decrease of $4.3 million, or 6.5%. The FTE net interest margin for the nine months ended September 30, 2024 was 3.79%, a 32 bps decrease from 4.11% for the same period of the prior year. The decrease in FTE net interest margin was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs. 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 balance sheet and net interest income analysis for the periods presented. The discussion following this table is based on these taxable-equivalent amounts.


39

Nine Months Ended September 30,
20242023
(Dollars in thousands)Average Balance
Interest 1
Yield/ RateAverage
Balance
Interest 1
Yield/
Rate
ASSETS
Loans:
Taxable$1,601,520 $67,253 5.61 %$1,479,690 $58,130 5.25 %
Tax-exempt64,161 1,194 2.49 75,657 1,353 2.39 
Total Loans 2
1,665,681 68,447 5.49 1,555,347 59,483 5.11 
Investment Securities:
Taxable450,297 8,932 2.65 507,061 8,647 2.28 
Tax-exempt54,644 1,078 2.64 55,307 1,118 2.70 
Total Investments 3
504,941 10,010 2.65 562,368 9,765 2.32 
Interest-bearing deposits with banks51,258 2,104 5.48 71,645 2,627 4.90 
Total Earning Assets2,221,880 80,561 4.84 2,189,360 71,875 4.39 
Cash and due from banks21,091 30,891 
Premises and equipment25,939 26,415 
Other assets186,330 159,544 
Allowance for credit losses(19,071)(18,807)
Total Assets$2,436,169 $2,387,403 
LIABILITIES
Interest-bearing demand deposits$514,757 $1,092 0.28 %$580,180 $690 0.16 %
Money markets247,710 1,841 0.99 276,154 277 0.13 
Savings deposits326,895 84 0.03 385,753 94 0.03 
Time deposits255,203 4,898 2.56 234,951 826 0.47 
Total Interest-Bearing Deposits1,344,565 7,915 0.79 1,477,038 1,887 0.17 
Short-term borrowings40,993 847 2.76 47,852 564 1.58 
Long-term borrowings253,116 8,823 4.66 58,333 2,078 4.76 
Total Borrowings294,109 9,670 4.39 106,185 2,642 3.33 
Total Interest-Bearing Liabilities1,638,674 17,585 1.43 1,583,223 4,529 0.38 
Noninterest-bearing demand deposits483,095 550,206 
Other liabilities28,406 (2,552)
Stockholders’ Equity285,994 256,526 
Total Liabilities and Stockholders’ Equity$2,436,169 $2,387,403 
Taxable Equivalent Net Interest Income62,976 67,346 
Taxable Equivalent Adjustment(477)(519)
Net Interest Income$62,499 $66,827 
Cost of Funds1.11 %0.28 %
FTE Net Interest Margin3.79 %4.11 %
_____________________________
1 Income on interest-earning assets has been computed on a fully taxable equivalent 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.


40

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, 2024 compared to the same period in 2023:

2024 versus 2023
(Dollars in thousands)Volume
Yield/Rate 1
Net
INTEREST EARNING ASSETS
Loans
Taxable$4,788 $4,335 $9,123 
Tax-exempt(206)47 (159)
Total Loans 2
4,582 4,382 8,964 
Securities
Taxable securities(969)1,254 285 
Tax-exempt securities(13)(27)(40)
Total Securities(982)1,227 245 
Interest-bearing deposits with banks(748)225 (523)
Total$2,852 $5,834 $8,686 
INTEREST BEARING LIABILITIES
Interest bearing demand deposits$(78)$480 $402 
Money markets(28)1,592 1,564 
Savings deposits(13)3 (10)
Time deposits71 4,001 4,072 
Total Interest-Bearing Deposits(48)6,076 6,028 
Short-term borrowings(81)364 283 
Long-term borrowings6,941 (196)6,745 
Total Borrowings6,860 168 7,028 
Total6,812 6,244 13,056 
Change in Net Interest Income$(3,960)$(410)$(4,370)
______________________________
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.

Total FTE interest income increased $8.7 million, or 12.1%, during the nine months ended September 30, 2024 compared to the same period of the prior year. ACNB experienced a $5.8 million increase in FTE interest income due to an increase in the yield on interest earning assets and a $2.9 million increase attributable to higher volume. Average loans increased $110.3 million, or 7.1%, contributing $4.6 million to the increase in FTE interest income. The average yield on loans increased 38 bps, contributing $4.4 million to the increase in FTE interest income. FTE interest income on investment securities increased $245 thousand driven primarily by a higher yield on investment securities partially offset by a lower volume of investment securities. FTE interest income on interest-bearing deposits with banks declined $523 thousand, or 19.9%, attributable to lower average balances of interest-bearing cash used to fund loan growth and deposit outflows offset slightly by a higher interest rate environment.

Total interest expense increased $13.1 million, or 288.3%, during the nine months ended September 30, 2024 compared to the same period of the prior year. The increase was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs. Total average borrowings increased $187.9 million, or 177.0%, for the nine months ended September 30, 2024 compared to the same period of the prior year, contributing $6.9 million to the increase in interest expense. Total average interest-bearing deposits decreased $132.5 million, or 9.0%, for the nine months ended September 30, 2024 compared to the same period of the prior year; however, average time deposit balances increased $20.3 million, or 8.6%, due to ongoing promotions. The average cost of interest-bearing deposits increased 62 bps for the nine months ended September 30, 2024 compared to the same period of the prior year, contributing $6.1 million to interest expense. The largest increases in rates were in time deposits and money markets which increased 209 and 86 bps, respectively.

41

Provision for Credit Losses and Unfunded Commitments

During the nine months ended September 30, 2024, there were reversals of $2.7 million and $370 thousand for the provisions for credit losses and for unfunded commitments, respectively, compared to provisions for credit losses and unfunded commitments of $74 thousand and $226 thousand, respectively, for the same period of the prior year. During the nine months ended September 30, 2024, the Corporation revised estimates driven by a realignment of the peer group used for the CECL allowance process, an update to loss driver factors from third-party data, and an update to the application of prepayment and curtailment rate studies since implementation of CECL on January 1, 2023. These estimates, which were based on more current information available as of June 30, 2024, drove input assumptions which were used in the determination of the Corporation’s allowance for credit losses and the reserve for unfunded commitments. These updated estimates were the primary drivers in the decrease in the provision for credit losses and unfunded commitments for the nine months ended September 30, 2024 compared to the same period of the prior year. Each quarter, the Corporation assesses risks and reserves required compared with the balances in the allowance for credit losses and unfunded commitments.

Noninterest Income

The following table presents the components of noninterest income:

Nine Months Ended September 30,Increase (Decrease)
(In thousands)20242023$%
NONINTEREST INCOME
Insurance commissions$7,649 $7,371 $278 3.8 %
Service charges on deposits3,060 2,951 109 3.7 
Wealth management3,219 2,772 447 16.1 
ATM debit card charges2,488 2,502 (14)(0.6)
Earnings on investment in bank-owned life insurance1,473 1,399 74 5.3 
Gain from mortgage loans held for sale194 31 163 525.8 
Net gains (losses) on sales or calls of securities69 (739)808 109.3 
Net gains (losses) on equity securities19 (22)41 186.4 
Gain on assets held for sale— 337 (337)(100.0)
Other756 873 (117)(13.4)
Total Noninterest Income$18,927 $17,475 $1,452 8.3 %

Total noninterest income was $18.9 million for nine months ended September 30, 2024 compared to $17.5 million for the same period of 2023, a $1.5 million, or 8.3%, increase. The more significant fluctuations by category are explained below:
•Insurance commissions increased $278 thousand, or 3.8%, compared to the same period of the prior year driven primarily by growth in commissions on policy renewals and new business, partially offset by lower contingent income.
•Wealth management income for the nine months ended September 30, 2024 increased $447 thousand, or 16.1%, compared to the same period of the prior year driven primarily by portfolio market appreciation, estate income and new business generation.
•Net gains (losses) on sales or calls of securities increased $808 thousand as a result of a gain of $69 thousand for the nine months ended September 30, 2024 compared to a loss of $739 thousand in the same period of the prior year.
•There were no gains on assets held for sale for nine months ended September 30, 2024 compared to $337 thousand for the same period of the prior year as a result of the sale of three community banking offices in the prior year.

42

Noninterest Expenses

The following table presents the components of noninterest expense:

Nine Months Ended September 30,Increase (Decrease)
(In thousands)20242023$%
NONINTEREST EXPENSES
Salaries and employee benefits$32,611 $30,335 $2,276 7.5 %
Equipment4,997 4,784 213 4.5 
Net occupancy3,066 2,981 85 2.9 
Professional services1,554 1,600 (46)(2.9)
FDIC and regulatory1,088 932 156 16.7 
Other tax1,086 965 121 12.5 
Intangible assets amortization940 1,072 (132)(12.3)
Supplies and postage610 633 (23)(3.6)
Marketing and corporate relations275 472 (197)(41.7)
Merger-related1,160 — 1,160 100.0 
Other4,910 5,125 (215)(4.2)
Total Noninterest Expenses$52,297 $48,899 $3,398 6.9 %

Noninterest expenses totaled $52.3 million during the nine months ended September 30, 2024, a 6.9% increase compared to the same period of 2023. The more significant fluctuations by category are explained below:
•Salaries and employee benefits, the largest component of noninterest expenses, increased $2.3 million, or 7.5%, to $32.6 million for the nine months ended September 30, 2024. The increase was driven primarily by higher base wages, employee health insurance expense and incentive payment accruals.
•Professional services decreased $46 thousand, or 2.9%, driven primarily by lower legal fees, timing of internal audit expenses and lower recruiting expenses for talent acquisition.
•FDIC and regulatory increased $156 thousand, or 16.7%, as a result of a higher FDIC assessment rate for 2024.
•Marketing and corporate relations decreased $197 thousand, or 41.7%, driven primarily by the rebranding expenses incurred for the Bank’s Maryland banking locations during the same period of the prior year.
•Other noninterest expense decreased $215 thousand, or 4.2%, driven primarily by decreases in third-party vendors costs and a loss related to the write-off of a limited partnership investment in the prior year.
•Merger-related expenses included legal, external auditing, loan review and advisory fees incurred for the Traditions acquisition.

Provision for Income Taxes
 
The Corporation recognized income taxes of $6.9 million for the nine months ended September 30, 2024 compared to $7.5 million during the same period of the prior year. The provision for income taxes for the nine months ended September 30, 2024 reflects a combined Federal and State ETR of 21.5% compared to an ETR of 21.4% for the same period of the prior year. Any variances from the federal statutory rate of 21% are generally due to tax-free income, which includes interest income on tax-free loans and investment securities and income from life insurance policies, federal income tax credits, and the impact of non-tax deductible expense. Additionally, ACNB has incurred non-deductible costs related to the pending acquisition of Traditions Bank which are recorded within merger-related costs on the Consolidated Statements of Income.

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FINANCIAL CONDITION
 
Assets totaled $2.42 billion at both September 30, 2024 and December 31, 2023.

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 portfolio is comprised of U.S. Government and agencies, mortgage-backed, state and municipal, and corporate securities. These securities provide the appropriate characteristics with respect to credit quality, yield and maturity relative to the management of the overall balance sheet.
 
Total investment securities were $483.6 million at September 30, 2024 compared to $517.2 million at December 31, 2023, a decrease of 6.5%. The Corporation sold securities and allowed the portfolio to naturally cash flow to support loan growth and offset deposit outflows during the first nine months of 2024 as a result of general balance sheet management. At September 30, 2024, the securities balance included a net unrealized loss on AFS securities of $36.8 million on amortized cost of $454.9 million compared to a net unrealized loss of $50.2 million on amortized cost of $501.9 million at December 31, 2023. At September 30, 2024, the securities balance included HTM securities with an amortized cost of $64.6 million and a fair value of $59.0 million as compared to an amortized cost of $64.6 million and a fair value of $59.1 million at December 31, 2023.

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 as follows:
Increase (Decrease)
(In thousands)September 30, 2024December 31, 2023$%
Commercial real estate$957,904 $898,709 $59,195 6.6 %
Residential mortgage397,994 394,189 3,805 1.0 
Commercial and industrial152,148 152,344 (196)(0.1)
Home equity lines of credit84,316 90,163 (5,847)(6.5)
Real estate construction75,953 84,341 (8,388)(9.9)
Consumer9,773 9,954 (181)(1.8)
Gross loans1,678,088 1,629,700 48,388 3.0 
Unearned income(976)(1,712)736 43.0 
Total Loans, Net of Unearned Income$1,677,112 $1,627,988 $49,124 3.0 %

Total loans, net of unearned income, outstanding increased $49.1 million, or 3.0%, from December 31, 2023 to September 30, 2024. The increase was driven by growth in the commercial real estate portfolio. The growth in the commercial real estate portfolio was spread throughout ACNB’s geographic footprint and across various property types. The collateral for these loans is primarily spread across our Pennsylvania and Maryland market areas. Despite the intense competition in the Corporation’s Market Areas, management continues to focus on asset quality and disciplined underwriting standards in the loan origination process. ACNB does not have a significant concentration of credit risk with any single borrower, industry or geographic location. Most of the Corporation’s lending activities are with customers located within the Bank’s Market Area.

The commercial real estate portfolio grew $59.2 million, or 6.6%, in 2024. The collateral for these loans is primarily spread across Pennsylvania and Maryland, 55.6% and 42.8%, respectively, at September 30, 2024, compared to 53.1% and 44.5%, respectively, at September 30, 2023. Less than 3% of the portfolio is for real estate in Urban areas such as Baltimore, Maryland and Philadelphia, Pennsylvania. The largest sectors of the commercial real estate portfolio are retail and mixed-use commercial rental units, office complexes and hotels, motels and bed and breakfast entities. Non-owner occupied commercial real estate represented 61.7% 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.
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The following chart details the percentage of the various categories included in the portfolio:
35463547
___________________________________________
1 Constitutes over 40 loan categories that do not fit into the categories presented above
The concentration of non-owner occupied commercial real estate, construction, and multi-family was 206.4% of total capital of the Bank as of September 30, 2024.
Allowance for Credit Losses and Asset Quality
 
The ACL at September 30, 2024 was $17.2 million, or 1.03% of total loans, net of unearned income as compared to $20.0 million, or 1.23% of loans, at December 31, 2023 and $19.3 million, or 1.19% of loans, at September 30, 2023.
Changes in the ACL were as follows for the periods presented:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2024202320242023
Beginning balance$17,162 $19,148 $19,969 $17,861 
Impact of CECL adoption— — — 1,618 
Provision for (reversal of) credit losses81 250 (2,686)74 
Loans charged-off(51)(190)(163)(389)
Recoveries on charged-off loans22 56 94 100 
Ending balance$17,214 $19,264 $17,214 $19,264 
Net charge-offs to average loans (annualized)0.01 %0.03 %0.01 %0.02 %

Loans greater than or equal to 90 days past due and accruing were $438 thousand as of September 30, 2024 and $1.2 million as of December 31, 2023. Nonaccrual loans totaled $6.1 million and $3.0 million as of September 30, 2024 and December 31, 2023, respectively. Nonaccrual loans increased $3.7 million during the three months ended September 30, 2024 primarily the result of one long-standing commercial relationship in the healthcare industry, comprised of both owner-occupied commercial real estate and commercial and industrial loans. The ratio of non-performing assets to total assets was 0.29% at September 30, 2024 compared to 0.19% at December 31, 2023 and 0.17% at September 30, 2023.
45


Information on nonaccrual loans, by collateral type rather than loan segment, at September 30, 2024, as compared to December 31, 2023, is as follows:
(Dollars in thousands)Number of
Credit
Relationships		BalanceCurrent Specific Loss
Allocations		Current Year
Charge-Offs		LocationOriginated
September 30, 2024      
Owner occupied commercial real estate6 $3,606 $138 $— In market2006-2022
Commercial and industrial4 2,359 905 — In market2009-2023
Home equity lines of credit1 168 — — In market2009
Total11 $6,133 $1,043 $—   
December 31, 2023      
Owner occupied commercial real estate7 $1,822 $175 $— In market2006-2019
Commercial and industrial4 1,004 901 — In market2014-2021
Home equity lines of credit1 185 — — In market2009
Total12 $3,011 $1,076 $—   
All nonaccrual loans are to borrowers located within ACNB’s Market Area and were originated by ACNB’s banking subsidiary.
Deposits
Deposits were comprised of the following for the periods presented:
Increase (Decrease)
(In thousands)September 30, 2024December 31, 2023$%
Noninterest-bearing demand deposits$463,501 $500,332 $(36,831)(7.4)%
Interest-bearing demand deposits509,930 524,289 (14,359)(2.7)
Money market249,197 264,907 (15,710)(5.9)
Savings311,958 340,134 (28,176)(8.3)
Total demand and savings1,534,586 1,629,662 (95,076)(5.8)
Time256,731 232,151 24,580 10.6 
Total deposits$1,791,317 $1,861,813 $(70,496)(3.8)%
ACNB relies on deposits as a primary source of funds for lending activities with total deposits of $1.79 billion as of September 30, 2024. Deposits decreased by $70.5 million, or 3.8%, from December 31, 2023 to September 30, 2024 driven primarily by an outflow of 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, 2024 were municipal deposits totaling $137.4 million, or 7.7%, compared to $176.6 million, or 9.5%, at December 31, 2023. Time deposits increased $24.6 million, or 10.6%, as a result of ongoing deposit promotions that occurred during the first nine months of 2024. Time deposits include brokered deposits totaling $1.5 million at September 30, 2024 and none at December 31, 2023. The loan-to-deposit ratio was 93.62% at September 30, 2024 compared to 87.44% at December 31, 2023.

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 relevant local competition, including local government investment trusts, credit unions and larger regional banks. Interest-bearing deposit costs for the nine months ended September 30, 2024 were 0.79% compared to 0.17% for the same period of the prior year. The increase in the interest-bearing costs was driven by ongoing deposit promotions that occurred during the first nine months of 2024. Based on total Bank deposits outstanding, consumer and commercial constituted approximately 58% and 42%, respectively, of total Bank deposits as of September 30, 2024. The ratio of uninsured and non-collateralized Bank deposits to total Bank deposits was approximately 19% at
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September 30, 2024. As of September 30, 2024, cash on hand, the fair value of unencumbered investment securities and collateralized borrowing capacities at the FHLB and the Federal Reserve discount window at the Bank were 310.5% of uninsured and non-collateralized Bank deposits. At September 30, 2024, deposits from the 20 largest unrelated depositors, excluding internal accounts, of the Bank totaled $166.3 million, or 9.2%, of total Bank deposits compared to $192.7 million, or 10.3%, of total Bank deposits at December 31, 2023.

Borrowings
 
Short-term borrowings are comprised primarily of securities sold under agreements to repurchase and short-term borrowings from the FHLB. As of September 30, 2024, short-term borrowings were $37.8 million, a decrease of $19.1 million, or 33.6%, compared to $56.9 million at December 31, 2023. 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. Compared to December 31, 2023, securities sold under repurchase agreements balances increased by $10.9 million, or 40.5%, due to normal changes in the cash flow position of ACNB’s commercial and local government customer base. There were no short-term FHLB borrowings at September 30, 2024 compared to $30.0 million at December 31, 2023. Short-term FHLB borrowings are used to supplement Bank funding from seasonal and daily fluctuations in the deposit base. A $25.0 million short-term FHLB borrowing was paid off during the quarter.

Long-term borrowings consist of longer-term advances from the FHLB, trust preferred subordinated debt and subordinated debt. Long-term borrowings totaled $255.3 million at September 30, 2024 compared to $195.3 million at December 31, 2023. During the first nine months of 2024, the bank borrowed $60.0 million from the FHLB at a weighted average fixed rate of 4.30% for a weighted average term of 4.00 years to fund deposit outflows and loan growth. Further borrowings will be used when necessary for a variety of risk management and funding purposes. Please refer to the Liquidity discussion below for more information on the Corporation’s ability to borrow.

Capital
 
ACNB’s capital management strategies have been developed to provide an appropriate 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 $306.8 million at September 30, 2024 compared to $277.5 million at December 31, 2023. The primary source of additional capital to ACNB is earnings retention, which represents net income less dividends declared and common stock repurchases. During the first nine months of 2024, ACNB retained $17.3 million, or 68.4%, of its net income compared to $20.4 million, or 74.1%, for the same period of 2023. Cash dividends paid to ACNB Corporation stockholders during the first nine months of 2024 totaled $8.0 million, or $0.94 per common share. The dividend payout ratio was 31.64% for the first nine months of 2024. Comparatively, during the first nine months of 2023, ACNB paid cash dividends of $7.2 million, or $0.84 per common share and the dividend payout ratio was 25.94%.

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, 2024, 16,590 shares were issued under this plan with proceeds in the amount of $597 thousand and during the nine months September 30, 2023, 16,580 shares were issued under this plan with proceeds in the amount of $543 thousand.

On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a new plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares of the Corporation’s common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. As of September 30, 2024, 67,908 shares of common stock have been repurchased under this new plan.

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 off-
47

balance sheet 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, 2024
Tier 1 Leverage Capital (to average assets)
ACNB Corporation12.46 %4.00 %N/A
ACNB Bank11.82 %4.00 %5.00 %
Common Equity Tier 1 Capital (to risk-weighted assets)
ACNB Corporation16.07 %4.50 %N/A
ACNB Bank15.71 %4.50 %6.50 %
Tier 1 Capital (to risk-weighted assets)
ACNB Corporation16.36 %6.00 %N/A
ACNB Bank15.71 %6.00 %8.00 %
Total Capital (to risk-weighted assets)
ACNB Corporation18.15 %8.00 %N/A
ACNB Bank16.69 %8.00 %10.00 %
December 31, 2023
Tier 1 Leverage Capital (to average assets)
ACNB Corporation11.57 %4.00 %N/A
ACNB Bank11.12 %4.00 %5.00 %
Common Equity Tier 1 Capital (to risk-weighted assets)
ACNB Corporation15.16 %4.50 %N/A
ACNB Bank14.86 %4.50 %6.50 %
Tier 1 Capital (to risk-weighted assets)
ACNB Corporation15.46 %6.00 %N/A
ACNB Bank14.86 %6.00 %8.00 %
Total Capital (to risk-weighted assets)
ACNB Corporation17.41 %8.00 %N/A
ACNB Bank15.99 %8.00 %10.00 %
___________________________
1 Ratios do not include capital conservation buffer.
2 N/A - Not applicable as “well capitalized” applies only to banks.

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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, Federal Reserve Discount Window and unsecured Federal Funds line providers.

At September 30, 2024, ACNB’s banking subsidiary had borrowing capacity of approximately $920.1 million from the FHLB, of which $684.0 million was available. At September 30, 2024, ACNB’s banking subsidiary could borrow approximately $65.1 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 Fed Funds lines with correspondent banks. As of September 30, 2024, Fed Funds line capacity at the banking subsidiary was $192.0 million, of which the full amount was available. ACNB Corporation maintains a $5.0 million unsecured line of credit with a correspondent bank, all of which was available for borrowing as of September 30, 2024. 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 and did not have any outstanding balance as of September 30, 2024.

Another source of liquidity is securities sold under repurchase agreements to customers of ACNB’s banking subsidiary totaling approximately $37.8 million and $26.9 million at September 30, 2024, and December 31, 2023, 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 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 off-balance sheet 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, 2024, the Corporation had unfunded outstanding commitments to extend credit of $363.6 million and outstanding standby letters of credit of $14.4 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.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of ACNB’s ALCO, with direct oversight from the board of directors, is to maximize net interest income within established policy parameters. This objective is accomplished through the management of balance sheet composition and duration, market risk exposures arising from changing economic conditions, and liquidity risk.

Market risk comprises exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks. Specific to the banking industry, one of the greatest risk exposures is to that of changing market interest rates. The primary objective of monitoring ACNB’s interest rate sensitivity risk is to provide management the flexibility necessary to manage the balance sheet to minimize adverse changes in net interest income as a result of changes in the direction and level of interest rates. FOMC monetary policy, economic uncertainty, and fiscal policy changes have been significant factors affecting the task of managing interest rate sensitivity positions in recent years.

ACNB’s ALCO is a management committee responsible for monitoring and managing interest rate risk within approved policy limits utilizing earnings sensitivity simulation and economic value-at-risk models. These models are highly dependent on
49

various assumptions, which change regularly as the balance sheet composition and market interest rates change. The key assumptions and strategies employed are analyzed, reviewed and documented at least annually by the ALCO as well as provided to the Board.
Interest Rate Risk
Interest rate risk is the exposure to fluctuations in the Bank’s future earnings (earnings at risk) and value (value at risk) resulting from changes in interest rates. This exposure results from differences between the amounts of interest-earning assets and interest-bearing liabilities that reprice within a specified time period as a result of scheduled maturities, scheduled and unscheduled repayments, the propensity of borrowers and depositors to react to changes in their economic interests, and contractual loan interest rate changes.

Management attempts to manage the level of repricing and maturity mismatch through its asset/liability management processes so that fluctuations in net interest income are maintained within policy limits across a range of market conditions while satisfying liquidity and capital requirements. Management recognizes that a certain amount of interest rate risk is inherent, appropriate, and necessary to ensure the Bank’s profitability. Thus, the goal of the Bank’s interest rate risk management is to minimize the fluctuations of net interest income across all interest rate scenarios.

Management endeavors to control the exposure to changes in interest rates by understanding, reviewing, and making decisions based on its risk position. The Bank primarily uses its securities portfolio, FHLB advances and brokered deposits to manage its interest rate risk position. Additionally, pricing, promotion, and product development activities are directed in an effort to emphasize the loan and deposit repricing characteristics that best meet current interest rate risk objectives.

ACNB uses simulation analysis to assess earnings at risk and net present value analysis to assess value at risk. These methods allow management to regularly monitor both the direction and magnitude of its interest rate risk exposure. These analyses require numerous assumptions including, but are not limited to, changes in balance sheet mix, prepayment rates on loans and securities, cash flows and repricing of all financial instruments, changes in volumes and pricing, future shapes of the yield curve, relationship of market interest rates to each other (basis risk), credit spread, and deposit sensitivity. Assumptions are based on management’s best estimates, but may not accurately reflect actual results under certain changes in interest rates due to the timing, magnitude, and frequency of rate changes and changes in market conditions and management strategies, among other factors. However, the analyses are useful in quantifying risk and providing a relative gauge of the Corporation’s interest rate risk position over time.

ACNB’s ALCO operates under management policies, approved by the board of directors, which define guidelines and limits on the level of risk. The ALCO committee meets regularly and reviews its interest rate risk position and monitors various liquidity ratios to ensure a satisfactory liquidity position. By utilizing the analyses, management can determine changes that may need to be made to the asset and liability mixes to mitigate the change in net interest income under various interest rate scenarios. Management continually evaluates the condition of the economy, the pattern of market interest rates, and other economic data to inform the committee. Regulatory authorities also monitor the Corporation’s interest rate risk position along with other liquidity ratios.

Net Interest Income Sensitivity

Simulation analysis evaluates the effect of upward and downward changes in market interest rates on future net interest income. The analysis involves changing the interest rates used in determining net interest income over the next twelve months. The resulting percentage change in net interest income in various rate scenarios is an indication of Corporation’s short-term interest rate risk. The analysis assumes recent pricing trends in new loan and deposit volumes will continue while balances remain constant. Additional assumptions are applied to modify pricing under the various rate scenarios.

The simulation analysis results are presented in the table below. At September 30, 2024, results in the falling interest rate scenario project a decrease in net interest income. The Bank is currently modestly asset-sensitive according to the model as interest-earning assets are expected to reprice faster than interest-bearing liabilities.

Economic Value

Net present value analysis provides information on the risk inherent in the balance sheet that might not be considered in the simulation analysis due to the short time horizon used. The net present value of the balance sheet incorporates the discounted present value of expected asset cash flows minus the discounted present value of expected liability cash flows. The analysis involves changing the interest rates used in determining the expected cash flows and in discounting the cash flows. The
50

resulting percentage change in net present value in various rate scenarios is an indication of the longer-term repricing risk and options embedded in the balance sheet.

The results at September 30, 2024 and December 31, 2023 are reflected below. Funding cost and repricing speed will continue to be a factor in the results of the model. The behavior of the business and retail clients also varies across the rate scenarios, which is reflected in the results. To improve comparability across periods, the Bank strives to follow best practices related to the assumption setting and maintains the size and mix of the period end balance sheet; thus, the results do not reflect actions management may take through the normal course of business that would impact results.
12-Month Earnings at Risk Ramps
% Change in Net Interest Income
Change in Market Interest Rates (bps)September 30, 2024December 31, 2023Policy Limits
(200)(1.6)%(2.9)%(10.0)%
(100)(1.5)%(1.6)%(5.0)%
100 1.1 %0.3 %(5.0)%
200 1.3 %0.4 %(10.0)%
Value at Risk Ramps
% Change in Market Value
Change in Market Interest Rates (bps)September 30, 2024December 31, 2023Policy Limits
(200)(19.0)%(17.8)%(35.0)%
(100)(7.6)%(6.4)%(20.0)%
100 2.2 %1.9 %(20.0)%
200 1.2 %1.1 %(35.0)%
 
ITEM 4 – CONTROLS AND PROCEDURES
 
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
 
As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in periodic SEC filings.

Disclosure controls and procedures are Corporation controls and other procedures that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
 
There were no changes in the Corporation’s internal control over financial reporting during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.
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PART II – OTHER INFORMATION
 
ACNB CORPORATION
ITEM 1 – LEGAL PROCEEDINGS
 
As of September 30, 2024, there were no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which ACNB or its subsidiaries are a party or by which any of their assets are the subject, which could have a material adverse effect on ACNB or its subsidiaries or their results of operations. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation or its subsidiaries by governmental authorities.
 
ITEM 1A – RISK FACTORS
 
In addition to the risk factors previously disclosed in Part I, Item 1A. Risk Factors of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, management has identified the following additional risk factors:

RISKS RELATING TO THE MERGER OF TRADITIONS BANCORP, INC. INTO ACNB CORPORATION
ACNB INCURRED AND WILL CONTINUE TO INCUR SIGNIFICANT TRANSACTION AND MERGER-RELATED COSTS IN CONNECTION WITH THE MERGER.
ACNB incurred and expects to continue to incur costs associated with combining the operations of the two companies. ACNB is formulating and executing on detailed integration plans to deliver planned synergies. Additional unanticipated costs may be incurred in the integration of the businesses of ACNB and Traditions. Whether or not the merger is consummated, ACNB will incur substantial expenses, such as financial advisory, legal, accounting, printing, and contract termination fees, in pursuing the merger. Although ACNB expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.
SOME OF THE CONDITIONS TO CLOSING OF THE MERGER MAY RESULT IN DELAY OR PREVENT COMPLETION OF THE MERGER, WHICH MAY ADVERSELY AFFECT THE VALUE OF ACNB’S SECURITIES.
Completion of the merger is conditioned upon the receipt of approvals by ACNB and Traditions shareholders, certain governmental consents and approvals, including consents and approvals required by the Federal Reserve Board, FDIC, and Pennsylvania Department of Banking and Securities. Failure to obtain these approvals and consents would prevent consummation of the merger. Even if the approvals are obtained, the effort involved may delay consummation of the merger. Governmental authorities may also impose conditions in connection with the merger that may adversely affect the combined company’s operations after the merger. However, ACNB is not required to take any action or agree to any condition or restriction in connection with obtaining any approvals that would reasonably be expected to have a material adverse effect on ACNB or the combined company.
THE MERGER MAY DISTRACT ACNB’S MANAGEMENT TEAM FROM THEIR OTHER RESPONSIBILITIES.
The merger could cause the management of ACNB to focus their time and energies on matters related to the merger that otherwise would be directed to the Corporation’s business and operations. Any such distraction on the part of management, if significant, could affect management’s ability to service existing business, develop new business, and adversely affect the combined company’s business and earnings following the merger.
IF THE MERGER IS NOT COMPLETED, ACNB WILL HAVE INCURRED SUBSTANTIAL EXPENSES WITHOUT REALIZING THE EXPECTED BENEFITS.
ACNB will incur substantial expenses in connection with the merger. The completion of the merger depends on the satisfaction of specified conditions and the receipt of regulatory approvals. ACNB cannot guarantee that these conditions will be met. If the merger is not completed, these expenses could have a material adverse impact on the financial condition of ACNB because it would not have realized the expected benefits from the merger.
In addition, if the merger is not completed, ACNB may experience negative reactions from the financial markets and from their respective customers and employees. ACNB also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against ACNB to perform its obligations under the reorganization agreement. If the merger is not completed, ACNB cannot assure its shareholders that the risks described above will not materialize and will not materially affect the business, financial results, and stock price of ACNB.
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LITIGATION AGAINST ACNB OR TRADITIONS, OR THE MEMBERS OF ACNB OR TRADITIONS BOARD OF DIRECTORS, COULD PREVENT OR DELAY THE COMPLETION OF THE MERGER.
While ACNB and Traditions believe that any claims that may be asserted by purported shareholder plaintiffs related to the merger would be without merit, the results of any such potential legal proceedings are difficult to predict and such legal proceedings could delay or prevent the merger from being completed in a timely manner. If litigation were to be commenced related to the merger, such litigation could affect the likelihood of obtaining the required approvals from ACNB shareholders and Traditions shareholders. Moreover, any litigation could be time consuming and expensive, and could divert the attention of the management of ACNB and Traditions away from their regular business. Any lawsuit adversely resolved against the ACNB, Traditions, or members of ACNB or Traditions board of directors could have a material adverse effect on each party’s business, financial condition, results of operations and future prospects.
POST-MERGER INTEGRATION AND CHANGE OF ACNB’S HISTORICAL BUSINESS MODEL MAY FAIL TO ACHIEVE EXPECTED RESULTS.
The success of the transaction depends heavily on a smooth integration and post-merger operations of the combined company. Benefits of the transaction to shareholders may not be realized if the post-merger integration is not well executed or well received by each company’s historical customers.

ACNB MAY FAIL TO REALIZE THE COST SAVINGS IT EXPECTS TO ACHIEVE FROM THE MERGER.
The success of the merger will depend, in part, on ACNB’s ability to realize the estimated cost savings from combining the businesses of ACNB and Traditions. While ACNB believes that the cost savings estimates are achievable, it is possible that the potential cost savings could be more difficult to achieve than ACNB anticipates. ACNB’s cost savings estimates also depend on its ability to combine the businesses of ACNB and Traditions in a manner that permits those cost savings to be realized. If ACNB’s estimates are incorrect or it is unable to combine the two companies successfully, the anticipated cost savings may not be realized fully or at all, or may take longer to realize than expected.
COMBINING ACNB AND TRADITIONS MAY BE MORE DIFFICULT, COSTLY, OR TIME-CONSUMING THAN EXPECTED.
ACNB and Traditions have operated and, until the completion of the merger, will continue to operate independently. The integration process could result in the loss of key employees, disruption of each company’s ongoing business, and inconsistencies in standards, controls, procedures and policies that adversely affect either company’s ability to maintain relationships with customers and employees or achieve the anticipated benefits of the merger. As with any merger of financial institutions, there also may be disruptions that cause ACNB and Traditions to lose customers or cause customers to withdraw their deposits from ACNB or Traditions, or have other unintended consequences, that could have a material adverse effect on ACNB’s financial condition and results of operations.
 
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
On May 5, 2009, shareholders approved and adopted the amendment to the Articles of Incorporation of ACNB Corporation to authorize up to 20,000,000 shares of preferred stock, par value $2.50 per share. As of September 30, 2024, there were no issued or outstanding shares of preferred stock.

On May 1, 2018, shareholders approved and ratified the ACNB Corporation 2018 Omnibus Stock Incentive Plan, effective as of March 20, 2018, in which awards shall not exceed, in the aggregate, 400,000 shares of common stock, plus any shares that were authorized, but not issued, under the ACNB Corporation 2009 Restricted Stock Plan. As of September 30, 2024, there were 138,019 shares issued under this plan. The maximum number of shares that may yet be granted under this plan is 436,036. The Corporation’s Registration Statement under the Securities Act of 1933 on Form S-8 for the ACNB Corporation 2018 Omnibus Stock Incentive Plan was filed with the Securities and Exchange Commission on March 8, 2019. In addition, on March 8, 2019, the Corporation filed Post-Effective Amendment No. 1 to the Registration Statement on Form S-8 for the ACNB Corporation 2009 Restricted Stock Plan to add the ACNB Corporation 2018 Omnibus Stock Incentive Plan to the registration statement to reflect that the remaining unissued shares under the 2009 Restricted Stock Plan may instead be issued under the 2018 Omnibus Stock Incentive Plan.

On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a new plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares of the Corporation’s common stock. This new common stock repurchase program replaces and supersedes any and all earlier announced repurchase plans. There were 2,642 shares repurchased during the three months ended September 30, 2024. As of September 30, 2024, 67,908 shares of common stock had been repurchased under this plan.
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Following is a summary of the Corporation’s purchases of common stock during the third quarter of 2024:

Total number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced planMaximum number of shares that may yet be purchased under the plan
July 1 - July 31, 2024— $— — 65,266 190,309 
August 1 - August 31, 20242,583 $38.59 (39)67,849 187,726 
September 1 - September 31, 202459 $38.99 (39)67,908 187,667 
 

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES – NOTHING TO REPORT.
 
ITEM 4 – MINE SAFETY DISCLOSURES – NOT APPLICABLE.
 

ITEM 5 – OTHER INFORMATION

During the three months ended September 30, 2024, no director or officer of the Corporation adopted or terminated a “Rule 10b5-1 trading agreement” or a “non-Rule 10b5-1 trading agreement” as each term is defined in Item 408(a) of Regulation S-K.
 
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ITEM 6 – EXHIBITS
 
The following exhibits are included in this report:
Exhibit 2.1
Exhibit 2.2
Exhibit 2.3
Exhibit 2.4
Exhibit 3(i) 
   
Exhibit 3(ii) 
Exhibit 4.1
   
Exhibit 10.1 
Exhibit 10.2 
   
Exhibit 10.3 
   
Exhibit 10.4 
   
Exhibit 10.5 
   
Exhibit 10.6 
   
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Exhibit 10.7
Exhibit 10.8
Exhibit 10.9
Exhibit 10.10
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 10.15
Exhibit 10.16
Exhibit 10.17
Exhibit 10.18
Exhibit 10.19
Exhibit 10.20
Exhibit 10.21
Exhibit 10.22
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Exhibit 10.23
Exhibit 10.24
Exhibit 10.25
Exhibit 10.26
Exhibit 10.27
Exhibit 10.28
Exhibit 10.29
Exhibit 10.30
Exhibit 10.31
Exhibit 31.1 
Exhibit 31.2 
   
Exhibit 32.1 
   
Exhibit 32.2 
Exhibit 101.LAB XBRL Taxonomy Extension Label Linkbase.
   
Exhibit 101.PRE XBRL Taxonomy Extension Presentation Linkbase.
   
Exhibit 101.INSXBRL Instance Document – The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH XBRL Taxonomy Extension Schema.
   
Exhibit 101.CAL XBRL Taxonomy Extension Calculation Linkbase.
   
Exhibit 101.DEF XBRL Taxonomy Extension Definition Linkbase.
Exhibit 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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SIGNATURES
 
 
Pursuant to the requirements of Section 13 or 15(d) 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 (Registrant)
   
Date:November 7, 2024 /s/ James P. Helt
  James P. Helt
  President & Chief Executive Officer
   
  /s/ Jason H. Weber
  Jason H. Weber
  Executive Vice President/Treasurer &
  Chief Financial Officer (Principal Financial Officer)
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