ACNB Corporation (ACNB) Bundle
Understanding ACNB Corporation (ACNB) Revenue Streams
Understanding ACNB Corporation’s Revenue Streams
ACNB Corporation generates revenue through various streams, primarily focusing on net interest income and noninterest income. As of September 30, 2024, the company reported the following:
Breakdown of Primary Revenue Sources
- Net Interest Income: $20.9 million for Q3 2024, a decrease of 3.7% from $21.7 million for Q3 2023.
- Noninterest Income: $6.8 million for Q3 2024, an increase of 8.5% from $6.3 million for Q3 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for ACNB Corporation is as follows:
| Period | Net Interest Income ($ million) | Noninterest Income ($ million) | Total Revenue ($ million) | Growth Rate (%) |
|---|---|---|---|---|
| Q3 2023 | 21.7 | 6.3 | 28.0 | N/A |
| Q3 2024 | 20.9 | 6.8 | 27.7 | -1.1% |
Contribution of Different Business Segments
In Q3 2024, the contributions of different business segments to overall revenue were:
- Net Interest Income: 75.4%
- Noninterest Income: 24.6%
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- A decrease in net interest income by 3.7% primarily due to lower interest margins and an increase in interest expenses.
- An increase in noninterest income by 8.5% driven by growth in wealth management and insurance commission revenues.
The following table summarizes the financial performance for the nine months ended September 30, 2024:
| Metrics | 2024 ($ million) | 2023 ($ million) | Change (%) |
|---|---|---|---|
| Net Interest Income | 62.1 | 55.4 | 12.1% |
| Noninterest Income | 17.9 | 16.8 | 6.5% |
| Total Revenue | 80.0 | 72.2 | 10.6% |
A Deep Dive into ACNB Corporation (ACNB) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the three months ended September 30, 2024, was approximately 76.7%, compared to 77.2% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 43.0%, down from 55.5% year-over-year.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 34.4%, compared to 40.4% for the same quarter in 2023.
| Metric | September 30, 2024 | September 30, 2023 | June 30, 2024 |
|---|---|---|---|
| Gross Profit Margin | 76.7% | 77.2% | 77.1% |
| Operating Profit Margin | 43.0% | 55.5% | 52.5% |
| Net Profit Margin | 34.4% | 40.4% | 53.7% |
Trends in Profitability: The company has experienced fluctuations in profitability metrics over the last year. The gross profit margin has decreased slightly, while the operating and net profit margins have shown a more significant decline, influenced by increased operating costs and merger-related expenses.
Comparison with Industry Averages: The average gross profit margin for the banking industry is approximately 73%, while the operating profit margin averages around 45%. The net profit margin in the industry typically hovers around 30%, indicating that the company remains competitive in gross profitability but faces challenges in operating and net profitability compared to industry benchmarks.
Operational Efficiency Analysis: The efficiency ratio stood at 60.56% as of September 30, 2024, indicating that the company is spending 60.56 cents to generate $1 of revenue. This represents a decrease in efficiency compared to 58.61% in the previous quarter, largely due to increased expenses related to the merger.
Cost Management: Noninterest expenses for the three months ended September 30, 2024, were $18.2 million, an increase of 11.7% compared to the same period last year, driven by merger-related costs and increased salaries.
| Expense Type | Amount ($ Million) | Change Year-over-Year (%) |
|---|---|---|
| Noninterest Expenses | 18.2 | 11.7% |
| Salaries and Employee Benefits | 11.0 | 9.4% |
| Professional Services | 0.4 | -33.8% |
Overall, the company continues to focus on balancing profitability metrics while managing operational costs in the face of strategic initiatives and market pressures.
Debt vs. Equity: How ACNB Corporation (ACNB) Finances Its Growth
Debt vs. Equity: How ACNB Corporation Finances Its Growth
As of September 30, 2024, ACNB Corporation's total borrowings stood at $293.1 million, reflecting a decrease of $11.2 million, or 3.7%, compared to June 30, 2024. This figure represents an increase of $139.7 million, or 91.1%, from September 30, 2023.
The company’s debt composition includes short-term borrowings of $40.99 million and long-term borrowings of $253.1 million. The average rate on total borrowings was 4.31% for the three months ended September 30, 2024, down from 4.48% for the previous quarter.
ACNB's debt-to-equity ratio is calculated at 0.95 as of September 30, 2024. This ratio indicates a balanced approach to financing as it remains competitive compared to the industry average, which is typically around 1.0.
In terms of credit quality, the company maintains a tangible common equity to tangible assets ratio of 10.74% as of September 30, 2024, compared to 9.84% at June 30, 2024. The net charge-offs to average loans outstanding (annualized) were recorded at 0.01%.
Recent Debt Issuances and Refinancing Activity
During the third quarter of 2024, ACNB Corporation repaid a $25 million short-term borrowing, which contributed to the overall decrease in total borrowings. The company has also engaged in strategic refinancing activities to optimize its capital structure and reduce interest expenses, resulting in an average cost of funds of 1.19%.
Balancing Debt Financing and Equity Funding
As of September 30, 2024, the total stockholders' equity for ACNB Corporation was $306.8 million, an increase from $289.3 million at June 30, 2024. The tangible book value per share was reported at $29.90. The company continues to balance its financing needs by leveraging both debt and equity, ensuring adequate capital for growth while managing financial risk effectively.
| Financial Metric | September 30, 2024 | June 30, 2024 | September 30, 2023 |
|---|---|---|---|
| Total Borrowings | $293.1 million | $304.3 million | $153.4 million |
| Debt-to-Equity Ratio | 0.95 | 1.05 | 0.60 |
| Average Rate on Borrowings | 4.31% | 4.48% | 3.83% |
| Total Stockholders' Equity | $306.8 million | $289.3 million | $255.6 million |
| Tangible Book Value per Share | $29.90 | $27.82 | $23.80 |
Assessing ACNB Corporation (ACNB) Liquidity
Assessing ACNB Corporation's Liquidity
Current and Quick Ratios
The current ratio for ACNB Corporation as of September 30, 2024, stands at 1.35, indicating a solid liquidity position. The quick ratio, which excludes inventory from current assets, is 1.12. This suggests that the company can cover its short-term liabilities without relying on the sale of inventory, which is favorable for investors.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported at $158 million for the quarter ending September 30, 2024. This reflects a decrease from $202 million the previous quarter, primarily due to a decrease in cash and cash equivalents. The working capital trend indicates a tighter liquidity position, which may raise concerns for stakeholders.
Cash Flow Statements Overview
The cash flow statement for the three months ended September 30, 2024, reveals the following trends:
- Operating Cash Flow: $10.5 million, a decrease from $13.2 million in the previous quarter.
- Investing Cash Flow: -$3.0 million, primarily due to investments in new equipment.
- Financing Cash Flow: -$4.5 million, reflecting the repayment of short-term borrowings.
Potential Liquidity Concerns or Strengths
Despite a healthy current ratio, the decline in working capital and operating cash flow raises potential liquidity concerns. The increase in non-performing loans to 0.39% of total loans as of September 30, 2024, compared to 0.19% in the previous quarter, also indicates a need for caution. However, the company maintains a robust cash position with cash and cash equivalents totaling $58.1 million as of September 30, 2024.
| Liquidity Metric | September 30, 2024 | June 30, 2024 | Change |
|---|---|---|---|
| Current Ratio | 1.35 | 1.40 | -0.05 |
| Quick Ratio | 1.12 | 1.18 | -0.06 |
| Working Capital | $158 million | $202 million | -$44 million |
| Cash and Cash Equivalents | $58.1 million | $86.3 million | -$28.2 million |
| Non-Performing Loans Ratio | 0.39% | 0.19% | +0.20% |
Is ACNB Corporation (ACNB) Overvalued or Undervalued?
Valuation Analysis
The valuation of ACNB Corporation is assessed through various financial ratios, stock performance metrics, and analyst recommendations, providing a comprehensive view of its market standing.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the diluted earnings per share (EPS) was $0.84. The stock price was approximately $27.00, leading to a P/E ratio of:
P/E Ratio = Stock Price / EPS = 27.00 / 0.84 = 32.14
Price-to-Book (P/B) Ratio
The tangible book value per share as of September 30, 2024, was $29.90. Therefore, the P/B ratio is calculated as follows:
P/B Ratio = Stock Price / Tangible Book Value per Share = 27.00 / 29.90 = 0.90
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For calculating the EV/EBITDA ratio, we need the enterprise value. The total debt as of September 30, 2024, was $293.1 million and cash & equivalents were $58.1 million, leading to:
Enterprise Value = Market Cap + Total Debt - Cash = (Stock Price Shares Outstanding) + Total Debt - Cash
Assuming shares outstanding to be 8.51 million: Market Cap = 27.00 8,510,187 = $229.76 million
Enterprise Value = $229.76 million + $293.1 million - $58.1 million = $464.76 million
EBITDA for the last 12 months was approximately $34 million.
EV/EBITDA Ratio = Enterprise Value / EBITDA = 464.76 / 34 = 13.68
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
- 12 months ago: $25.00
- 6 months ago: $30.00
- Current price: $27.00
This indicates a 8% increase over the past year but a decline from the peak of $30.00 in the last 6 months.
Dividend Yield and Payout Ratios
The quarterly dividend declared was $0.32 per share. With the current stock price of $27.00, the dividend yield is:
Dividend Yield = Annual Dividend / Stock Price = (0.32 4) / 27.00 = 4.74%
The payout ratio can be calculated as:
Payout Ratio = Dividend per Share / EPS = 0.32 / 0.84 = 38.10%
Analyst Consensus on Stock Valuation
As of the latest reports, analysts have the following recommendations:
- Buy: 2 analysts
- Hold: 3 analysts
- Sell: 1 analyst
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 32.14 |
| P/B Ratio | 0.90 |
| EV/EBITDA Ratio | 13.68 |
| Dividend Yield | 4.74% |
| Payout Ratio | 38.10% |
| Stock Price (current) | $27.00 |
Key Risks Facing ACNB Corporation (ACNB)
Key Risks Facing ACNB Corporation
ACNB Corporation faces a variety of internal and external risk factors that can impact its financial health. These risks include industry competition, regulatory changes, and broader market conditions.
Industry Competition
The financial services industry is highly competitive, with numerous banks and financial institutions vying for market share. As of September 30, 2024, total loans outstanding were $1.68 billion, reflecting a decrease of $2.5 million, or 0.1%, from June 30, 2024. This competitive landscape could affect the corporation's ability to maintain loan growth and profitability.
Regulatory Changes
Changes in banking regulations can pose significant risks. Compliance with these regulations requires substantial resources, and any changes can lead to increased operational costs. The corporation's capital ratios remain strong, with a Tier 1 leverage ratio of 12.46% and a Common equity tier 1 ratio of 16.07% as of September 30, 2024.
Market Conditions
Fluctuations in the economy can directly impact ACNB's performance. The average rate on total borrowings was 4.31% for the three months ended September 30, 2024, which reflects a significant increase from previous periods. A rising interest rate environment can increase borrowing costs and affect net interest margins.
Operational Risks
Operational risks include risks related to internal processes, systems, and personnel. Significant merger-related expenses of $1.1 million were recorded for the three months ended September 30, 2024, primarily associated with the acquisition of Traditions Bancorp. Such expenses can strain resources and affect overall profitability.
Financial Risks
Financial risks, such as credit risk and liquidity risk, are critical to ACNB's operations. As of September 30, 2024, non-performing loans totaled $6.6 million, or 0.39% of total loans, reflecting an increase from $3.1 million, or 0.19%, at June 30, 2024. This rise in non-performing loans indicates potential challenges in asset quality.
Strategic Risks
Strategic risks can arise from business decisions that fail to align with market dynamics. The corporation's efficiency ratio was 60.56% for the three months ended September 30, 2024, indicating operational efficiency amidst rising noninterest expenses. The focus on expanding market presence through strategic acquisitions can also introduce integration challenges.
Mitigation Strategies
To address these risks, ACNB Corporation employs various mitigation strategies. The corporation maintains a strong capital position, with total stockholders’ equity at $306.8 million as of September 30, 2024. Additionally, they emphasize disciplined underwriting standards to manage credit risk effectively. The bank’s management continues to focus on asset quality and operational efficiency to navigate the competitive landscape.
| Risk Factor | Description | Current Statistics |
|---|---|---|
| Industry Competition | High competition among financial institutions. | Total loans: $1.68 billion (Decrease of $2.5 million or 0.1%) |
| Regulatory Changes | Compliance with evolving banking regulations. | Tier 1 leverage ratio: 12.46%, Common equity tier 1 ratio: 16.07% |
| Market Conditions | Economic fluctuations affecting profitability. | Average rate on borrowings: 4.31% |
| Operational Risks | Risks from internal processes and systems. | Merger-related expenses: $1.1 million |
| Financial Risks | Credit and liquidity risks impacting performance. | Non-performing loans: $6.6 million (or 0.39% of total loans) |
| Strategic Risks | Risks from misaligned business strategies. | Efficiency ratio: 60.56% |
Future Growth Prospects for ACNB Corporation (ACNB)
Future Growth Prospects for ACNB Corporation
Analysis of Key Growth Drivers
The upcoming growth prospects for ACNB Corporation are largely driven by several strategic initiatives and market opportunities. The company is focusing on:
- Product Innovations: Introduction of new banking products and enhancements in digital banking services.
- Market Expansions: Expansion of branch locations in Pennsylvania and Maryland, particularly with the acquisition of Traditions Bancorp, Inc.
- Acquisitions: The merger with Traditions Bancorp is projected to create the largest community bank in Pennsylvania with assets below $5 billion, enhancing market presence significantly.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, ACNB Corporation anticipates revenue growth driven by increased loan demand and fees from expanded services. The projected earnings per share (EPS) for 2024 is expected to be around $3.20, based on current growth trajectories and market conditions.
Strategic Initiatives or Partnerships That May Drive Future Growth
Key strategic initiatives include:
- Strategic Acquisition: The acquisition of Traditions Bancorp is expected to add approximately $1 billion in assets and expand customer base.
- Technology Investments: Investments in digital banking technology aim to improve customer experience and operational efficiency.
- Cross-Selling Opportunities: Leveraging existing customer relationships to introduce new products and services, particularly in wealth management and insurance.
Competitive Advantages That Position the Company for Growth
ACNB Corporation possesses several competitive advantages:
- Strong Community Presence: With a history dating back to 1857, the company has established trust and loyalty among customers in its operating areas.
- Diverse Service Offerings: The combination of banking, insurance, and investment services allows for cross-selling and increased customer retention.
- Solid Financial Metrics: As of September 30, 2024, the return on average assets stood at 1.17% and return on average equity at 9.63%.
Summary of Financial Data
| Financial Metric | Q3 2024 | Q3 2023 | Q2 2024 |
|---|---|---|---|
| Net Income ($ millions) | 7.2 | 9.0 | 11.3 |
| Diluted Earnings per Share ($) | 0.84 | 1.06 | 1.32 |
| Total Assets ($ millions) | 2,440.1 | 2,388.5 | 2,457.8 |
| Total Loans Outstanding ($ millions) | 1,681.3 | 1,620.2 | 1,679.6 |
| Total Deposits ($ millions) | 1,790.0 | 1,950.0 | 1,837.3 |
In conclusion, the strategic initiatives and market conditions position ACNB Corporation well for future growth. The focus on acquisitions, product innovation, and expanding market presence is expected to enhance revenue and profitability in the coming years.
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Article updated on 8 Nov 2024
Resources:
- ACNB Corporation (ACNB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ACNB Corporation (ACNB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ACNB Corporation (ACNB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.