Analyst Summary
- Net income increased slightly, while net interest income decreased due to higher funding costs.
- Noninterest income increased, driven by gains on sales of securities and higher wealth management income.
- Total assets decreased slightly, with loan growth offset by reductions in cash and investment securities.
- Deposit levels decreased, leading to increased reliance on borrowings.
- Asset quality remains stable, although non-performing loans increased slightly.
- The allowance for credit losses decreased due to updated estimates in the CECL model.
- Management attributes the decrease in net interest income to higher deposit costs and increased long-term borrowings.
- The MD&A highlights the impact of the Traditions acquisition and related merger expenses.
- Net Profit Margin decreased by 12.46% to 24.10%, slightly below the industry average.
- Return on Assets (ROA) decreased by 0.76% to 1.31%, slightly above the industry average.
- Return on Equity (ROE) decreased by 10.55% to 10.94%, around the industry average.
- Basic EPS increased by 0.81% to $3.75, Diluted EPS increased by 0.54% to $3.73.
- Current Ratio decreased by 11.11% to 0.24, below the typical range, suggesting lower liquidity.
- Debt-to-Equity Ratio decreased by 10.75% to 6.89, within the typical range.
- Interest Coverage Ratio decreased by 53.37% to 2.70.
- Revenue Growth is 14.35%.
- Net Income Growth is 0.50%.
- EPS Growth is 0.54%.
Opportunities and Risks
- Interest Rate Risk: ACNB is susceptible to fluctuations in interest rates, which could negatively impact net interest income.
- Credit Risk: A significant portion of the loan portfolio consists of commercial and industrial, construction, and commercial real estate loans, which carry higher default risk.
- Cybersecurity Risk: Increasing reliance on electronic transactions exposes ACNB to cyber-attacks, potentially leading to financial losses and reputational damage.
- Economic Conditions: ACNB’s performance is tied to the economic conditions in its market area (southcentral Pennsylvania and northern Maryland).
- Integration Risk: The integration of Traditions Bancorp, Inc. poses challenges and could disrupt ACNB’s business.
- Commercial Real Estate Volatility: The commercial real estate market, particularly the office sector, faces uncertainty, potentially affecting loan performance.
- Traditions Acquisition: The acquisition of Traditions Bancorp, Inc. expands ACNB’s market presence and offers potential synergies.
- Wealth Management Growth: Increased wealth management income indicates a growing opportunity in this segment.
- Community Involvement: Strong community ties and employee volunteerism can enhance ACNB’s reputation and customer loyalty.
- Technological Advancements: Embracing new technologies can improve efficiency and customer service.
Potential Implications
Company Performance
- Successful integration of Traditions Bancorp is crucial for future growth and synergy realization.
- Maintaining asset quality and managing credit risk are essential for stable performance.
- Controlling operating expenses will be important in a challenging interest rate environment.
- Focus on growing wealth management income to offset potential declines in net interest income.
Stock Price
- The market’s reaction to the Traditions acquisition will likely influence the stock price.
- Continued pressure on net interest margin could negatively impact investor sentiment.
- Stable asset quality and strong capital ratios could provide support for the stock price.
- Overall economic conditions in ACNB’s market area will play a role in stock performance.
Executive Summary
This report analyzes ACNB CORP’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include a slight increase in net income, a decrease in net interest margin, and stable asset quality. The acquisition of Traditions Bancorp, Inc. is a significant event. Overall, ACNB appears to be a stable community bank navigating a challenging interest rate environment. A hold rating is suggested, pending further observation of the Traditions acquisition integration and its impact on future performance.
Company Overview
ACNB CORP is a financial holding company headquartered in Gettysburg, Pennsylvania. Its primary subsidiaries are ACNB Bank and ACNB Insurance Services. ACNB Bank provides banking and wealth management services in southcentral Pennsylvania and northern Maryland. ACNB Insurance Services offers insurance products in multiple states. The company recently acquired Traditions Bancorp, Inc., expanding its footprint in Pennsylvania.
Financial Statement Analysis
Income Statement
Net income increased slightly, but net interest income decreased due to a higher cost of funds. Noninterest income increased, driven by gains on sales of securities and higher wealth management income.
Balance Sheet
Total assets decreased slightly. Loan growth was offset by a reduction in cash and investment securities. Deposit levels decreased, requiring increased reliance on borrowings.
Key Ratios
| Ratio |
2024 |
2023 |
2022 |
| Return on Average Assets |
1.31% |
1.32% |
1.31% |
| Return on Average Equity |
10.94% |
12.23% |
14.35% |
| Net Interest Margin |
3.79% |
4.07% |
3.36% |
Asset Quality
Asset quality remains stable, although non-performing loans increased slightly. The allowance for credit losses decreased due to updated estimates in the CECL model.
| Metric |
2024 |
2023 |
2022 |
| Non-Performing Assets to Total Assets |
0.30% |
0.19% |
0.17% |
| Net Charge-offs to Average Loans |
0.02% |
0.02% |
0.08% |
| Allowance for Credit Losses to Total Loans |
1.03% |
1.23% |
1.16% |
Management’s Discussion and Analysis (MD&A) Insights
Management attributes the decrease in net interest income to higher deposit costs and increased long-term borrowings. They emphasize maintaining asset quality and disciplined underwriting standards. The MD&A also highlights the impact of the Traditions acquisition and related merger expenses.
Risk Assessment
- Interest Rate Risk: ACNB is susceptible to fluctuations in interest rates, which could negatively impact net interest income.
- Credit Risk: A significant portion of the loan portfolio consists of commercial and industrial, construction, and commercial real estate loans, which carry higher default risk.
- Cybersecurity Risk: Increasing reliance on electronic transactions exposes ACNB to cyber-attacks, potentially leading to financial losses and reputational damage.
- Economic Conditions: ACNB’s performance is tied to the economic conditions in its market area (southcentral Pennsylvania and northern Maryland).
- Integration Risk: The integration of Traditions Bancorp, Inc. poses challenges and could disrupt ACNB’s business.
- Commercial Real Estate Volatility: The commercial real estate market, particularly the office sector, faces uncertainty, potentially affecting loan performance.
Opportunity Assessment
- Traditions Acquisition: The acquisition of Traditions Bancorp, Inc. expands ACNB’s market presence and offers potential synergies.
- Wealth Management Growth: Increased wealth management income indicates a growing opportunity in this segment.
- Community Involvement: Strong community ties and employee volunteerism can enhance ACNB’s reputation and customer loyalty.
- Technological Advancements: Embracing new technologies can improve efficiency and customer service.
Conclusion & Actionable Insights
ACNB is a well-managed community bank facing industry-wide challenges such as interest rate volatility and cybersecurity threats. The acquisition of Traditions presents both opportunities and risks. The decrease in net interest margin warrants close monitoring. A hold rating is suggested, pending further observation of the Traditions acquisition integration and its impact on future performance. Focus should be placed on managing credit risk, controlling operating expenses, and successfully integrating Traditions.
1. Commentary
ACNB Corporation’s financial performance in 2024 shows a mixed picture. Net income experienced a slight increase, while key profitability ratios like ROA and ROE saw minor declines. The company maintained strong capital ratios, exceeding regulatory requirements. The upcoming acquisition of Traditions Bancorp, Inc. is a significant event that could impact future financial performance.
2. Financial Ratio and Metric Analysis
Profitability
Gross Profit Margin
Not applicable for a financial institution.
Operating Profit Margin
Not directly calculable from the provided statements. Need operating income data.
Net Profit Margin
Metric: Net Income / Total Revenue = $31,846 / ($107,465 + $24,730) = 24.10%
Trend: 2023 Net Profit Margin = $31,688 / ($96,640 + $18,445) = 27.53%. Percentage Change = (24.10 – 27.53) / 27.53 = -12.46%
Industry: Industry average net profit margin for regional banks is approximately 25%. ACNB’s margin is slightly below the industry average.
Return on Assets (ROA)
Metric: Net Income / Average Total Assets = $31,846 / (($2,435,358 + $2,392,278)/2) = 1.31%
Trend: 2023 ROA = 1.32%. Percentage Change = (1.31 – 1.32) / 1.32 = -0.76%
Industry: The industry average ROA for banks is around 1%. ACNB’s ROA is slightly above the industry average.
Return on Equity (ROE)
Metric: Net Income / Average Stockholders’ Equity = $31,846 / (($303,273 + $277,461)/2) = 10.94%
Trend: 2023 ROE = 12.23%. Percentage Change = (10.94 – 12.23) / 12.23 = -10.55%
Industry: The industry average ROE is approximately 10%. ACNB’s ROE is around the industry average.
Earnings Per Share (EPS) – Basic and Diluted
Metric: Basic EPS = $3.75, Diluted EPS = $3.73
Trend: 2023 Basic EPS = $3.72, Diluted EPS = $3.71. Basic EPS Percentage Change = (3.75 – 3.72) / 3.72 = 0.81%. Diluted EPS Percentage Change = (3.73 – 3.71) / 3.71 = 0.54%
Industry: EPS varies significantly based on the size and performance of individual banks. ACNB’s EPS is within a reasonable range for a bank of its size.
Liquidity
Current Ratio
Metric: Current Assets / Current Liabilities. Need to calculate current assets and current liabilities from the balance sheet. Assuming cash and cash equivalents, equity securities, AFS investment securities, loans held for sale are current assets and deposits, short-term borrowings are current liabilities. Current Assets = $47,262 + $919 + $393,975 + $426 = $442,582. Current Liabilities = $1,792,501 + $15,826 = $1,808,327. Current Ratio = $442,582 / $1,808,327 = 0.24
Trend: 2023 Current Assets = $65,958 + $928 + $451,693 + $280 = $518,459. Current Liabilities = $1,861,813 + $56,882 = $1,918,695. Current Ratio = $518,459 / $1,918,695 = 0.27. Percentage Change = (0.24 – 0.27) / 0.27 = -11.11%
Industry: A typical current ratio for a bank is around 0.8 to 1.2. ACNB’s current ratio is below the typical range, suggesting lower liquidity.
Quick Ratio (Acid-Test Ratio)
Metric: (Current Assets – Inventory) / Current Liabilities. Banks don’t typically have inventory, so we’ll exclude loans held for sale. Quick Assets = $47,262 + $919 + $393,975 = $442,156. Quick Ratio = $442,156 / $1,808,327 = 0.24
Trend: 2023 Quick Assets = $65,958 + $928 + $451,693 = $518,579. Quick Ratio = $518,579 / $1,918,695 = 0.27. Percentage Change = (0.24 – 0.27) / 0.27 = -11.11%
Industry: A typical quick ratio for a bank is around 0.8 to 1.0. ACNB’s quick ratio is below the typical range, suggesting lower liquidity.
Cash Ratio
Metric: (Cash + Marketable Securities) / Current Liabilities = ($16,352 + $30,910 + $919) / $1,808,327 = 0.03
Trend: 2023 Cash Ratio = ($21,442 + $44,516 + $928) / $1,918,695 = 0.04. Percentage Change = (0.03 – 0.04) / 0.04 = -25%
Industry: A typical cash ratio for a bank is around 0.1 to 0.2. ACNB’s cash ratio is below the typical range, suggesting lower liquidity.
Solvency/Leverage
Debt-to-Equity Ratio
Metric: Total Liabilities / Total Stockholders’ Equity = $2,091,557 / $303,273 = 6.89
Trend: 2023 Debt-to-Equity Ratio = $2,141,386 / $277,461 = 7.72. Percentage Change = (6.89 – 7.72) / 7.72 = -10.75%
Industry: The average debt-to-equity ratio for banks is around 5 to 8. ACNB’s ratio is within the typical range.
Debt-to-Assets Ratio
Metric: Total Liabilities / Total Assets = $2,091,557 / $2,394,830 = 0.87
Trend: 2023 Debt-to-Assets Ratio = $2,141,386 / $2,418,847 = 0.89. Percentage Change = (0.87 – 0.89) / 0.89 = -2.25%
Industry: The average debt-to-assets ratio for banks is around 0.8 to 0.9. ACNB’s ratio is within the typical range.
Interest Coverage Ratio (Times Interest Earned)
Metric: EBIT / Interest Expense = (Net Income + Income Tax Expense + Interest Expense) / Interest Expense = ($31,846 + $8,573 + $23,854) / $23,854 = 2.70
Trend: 2023 Interest Coverage Ratio = ($31,688 + $8,161 + $8,320) / $8,320 = 5.79. Percentage Change = (2.70 – 5.79) / 5.79 = -53.37%
Industry: A healthy interest coverage ratio is generally above 1.5. ACNB’s ratio is above this threshold, but has decreased significantly.
Activity/Efficiency
Inventory Turnover
Not applicable for a financial institution.
Days Sales Outstanding (DSO)
Not directly applicable for a financial institution.
Days Payable Outstanding (DPO)
Not directly applicable for a financial institution.
Asset Turnover
Metric: Total Revenue / Average Total Assets = ($107,465 + $24,730) / (($2,394,830 + $2,418,847)/2) = 0.11
Trend: 2023 Asset Turnover = ($96,640 + $18,445) / (($2,418,847 + $2,720,957)/2) = 0.09. Percentage Change = (0.11 – 0.09) / 0.09 = 22.22%
Industry: The asset turnover ratio for banks is typically low, ranging from 0.05 to 0.15. ACNB’s ratio is within the typical range.
Valuation
Stock price at the time of reporting (ACNB – 2025-03-14 – $41.30)
Price-to-Earnings Ratio (P/E)
Metric: Stock Price / EPS = $41.30 / $3.73 = 11.07
Trend: 2023 P/E = $41.30 / $3.71 = 11.13. Percentage Change = (11.07 – 11.13) / 11.13 = -0.54%
Industry: The average P/E ratio for regional banks is around 10-15. ACNB’s P/E ratio is within the typical range.
Price-to-Book Ratio (P/B)
Metric: Market Cap / Book Value of Equity = (8,553,785 * $41.30) / $303,273,000 = 1.16
Trend: 2023 P/B = (8,511,453 * $41.30) / $277,461,000 = 1.27. Percentage Change = (1.16 – 1.27) / 1.27 = -8.66%
Industry: The average P/B ratio for banks is around 1. ACNB’s P/B ratio is slightly above the industry average.
Price-to-Sales Ratio (P/S)
Metric: Market Cap / Total Revenue = (8,553,785 * $41.30) / ($107,465,000 + $24,730,000) = 2.68
Trend: 2023 P/S = (8,511,453 * $41.30) / ($96,640,000 + $18,445,000) = 3.07. Percentage Change = (2.68 – 3.07) / 3.07 = -12.70%
Industry: The average P/S ratio for banks is around 2 to 4. ACNB’s P/S ratio is within the typical range.
Enterprise Value to EBITDA (EV/EBITDA)
Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents = (8,553,785 * $41.30) + $271,159,000 – $47,262,000 = $3,754,428,505. EBITDA = Net Income + Interest Expense + Taxes + Depreciation and Amortization = $31,846 + $23,854 + $8,573 + $3,033 = $67,306. EV/EBITDA = $3,754,428,505 / $67,306,000 = 55.78
Trend: Not enough information to calculate previous year’s EV/EBITDA.
Industry: The average EV/EBITDA ratio for banks is around 10-15. ACNB’s EV/EBITDA ratio is significantly higher than the industry average.
Growth Rates
Revenue Growth
Metric: ($107,465 + $24,730) / ($96,640 + $18,445) – 1 = 14.35%
Trend: Not enough information to calculate previous year’s Revenue Growth.
Industry: The average Revenue Growth ratio for banks is around 5-10%.
Net Income Growth
Metric: $31,846 / $31,688 – 1 = 0.50%
Trend: Not enough information to calculate previous year’s Net Income Growth.
Industry: The average Net Income Growth ratio for banks is around 5-10%.
EPS Growth
Metric: $3.73 / $3.71 – 1 = 0.54%
Trend: Not enough information to calculate previous year’s EPS Growth.
Industry: The average EPS Growth ratio for banks is around 5-10%.
Other Relevant Metrics
No company-specific KPIs or non-GAAP metrics were provided in the filing.
⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️