ACNB CORP

Previous wording

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 26 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.

Current wording

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.

Previous wording

•Net Interest Income - Net interest income was $21.0 million for the three months ended June 30, 2024 compared to $22.0 million for the same period of 2023, a decrease of $1.0 million, or 4.7%. For the six months ended June 30, 2024, net interest income was $41.6 million compared to $45.1 million for the same period of the prior year, a decrease of $3.5 million, or 7.8%. The decline in net interest income was driven primarily by an increase in long-term borrowings and promotional time deposit balances and costs.

Current wording

•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.

Previous wording

◦Net Interest Margin - The Corporation’s FTE net interest margin decreased to 3.82% for the three months ended June 30, 2024 compared to 4.11% in the same period of 2023, a decrease of 29 bps. For the six months ended June 30, 2024, the net interest margin decreased to 3.79% compared to 4.16% for the same period of the prior year, a decrease of 37 bps.

Current wording

◦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.

Previous wording

◦Yield on Average Earning Assets -For the three months ended June 30, 2024, the yield on average earning assets was 4.89%, an increase of 56 bps compared to the same period of 2023, and was 4.82% for the six months ended June 30, 2024, an increase of 47 bps compared to the same period of 2023.

Current wording

◦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.

Previous wording

◦Loan Growth - Average loans grew $137.0 million, or 8.9%, for the three months ended June 30, 2024 compared to the same period of the prior year. For the six months ended June 30, 2024, average loans grew $121.8 million, or 7.9%, compared to the same period for 2023. As described in more detail below, the growth was driven by an increase in the commercial real estate portfolio, which increased $76.3 million over the same period of the prior year.

Current wording

◦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.

Previous wording

◦Deposit Decline - Average interest-bearing deposits decreased $99.8 million, or 6.9%, for the three months ended June 30, 2024 compared to the same period of 2023; however, average time deposit balances increased $38.4 million, or 17.1%, due to the ongoing promotions. During the same period of 2024, average noninterest-bearing deposits decreased $65.2 million, or 11.8% compared to the same period of the prior year. For the six months ended June 30, 2024, average interest-bearing deposits decreased $166.6 million, or 11.0%, and noninterest-bearing deposits decreased $68.3 million, or 12.3% compared to the same period of the prior year. Average time deposits, included in average interest-bearing deposits increased $7.2 million, or 2.9%, for the six months ended June 30, 2024 compared to the same period in the prior year as a result of ongoing promotions.

Current wording

◦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.

Previous wording

•Asset Quality- Asset quality metrics continue to be stable. The provision for credit losses was a reversal of $3.0 million and the provision for unfunded commitments was a reversal of $259 thousand for the three months ended June 30, 2024 compared toa reversal of the provision for credit losses of $273 thousand and a $121 thousand provision for unfunded commitments for the same period of the prior year. For the six months ended June 30, 2024, the provision for credit losses was a reversal of $2.8 million and the provision for unfunded commitments was a reversal of $410 thousand, compared to a $176 thousand reversal of the provision for credit losses and a $397 thousand provision for unfunded commitments for the same period of 2023.

Current wording

•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 toa 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.

Previous wording

◦Non-performing loans were $3.1 million, or 0.19%, of total loans at June 30, 2024 compared to $3.7 million, or 0.23%, of total loans at June 30, 2023.

Current wording

◦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.

Previous wording

◦Annualized net charge-offs for the three months ended June 30, 2024 were 0.00% of total average loans compared to 0.02% for the same period of 2023. For the six months ended June 30, 2024 and 2023 the annualized net charge-offs were 0.00% and 0.02%, respectively, of total average loans.

Current wording

◦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.

Previous wording

•Noninterest income - Noninterest income was $6.4 million for the three months ended June 30, 2024 and $6.2 million for the same period of 2023. The increase was driven primarily by no gain or loss on sales of securities in the current period compared to a net loss in the same period of 2023 and higher wealth management income. The increase was partially offset by no gain on assets held for sale in the current period compared to a $323 thousand gain that occurred in the same period of the prior year. For the six months ended June 30, 2024 noninterest income was $12.1 million and $11.2 million for the same period of the prior year. The increase was driven primarily by a net gain on sales of securities in the current period compared to a net loss in the same period of 2023, higher insurance commissions and higher wealth management income.

Current wording

•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.

Previous wording

•Noninterest expenses -Noninterest expenses increased to $16.4 million, or 0.7%, in the three months ended June 30, 2024 compared to $16.3 million in the same period of the prior year. The increase was driven primarily by higher salary and employee benefits expense partially offset by decreases in professional services, marketing and corporate relations and other. For the six months ended June 30, 2024, noninterest expenses increased to $34.1 million, or by 4.6%, from $32.6 million in the same period of 2023. The increase was driven primarily by higher salary and employee benefits expense, professional services, FDIC and regulatory, and other tax.

Current wording

•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.

Previous wording

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

Current wording

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.

Previous wording

Net income for the three months ended June 30, 2024 was $11.3 million compared to net income of $9.5 million for the same period of the prior year, an increase of $1.8 million or 18.4%. Basic and diluted earnings per share for the three months ended June 30, 2024 and 2023 were $1.32 and $1.12, respectively, resulting in a 17.9% increase. The increase in net income for the three months ended June 30, 2024 was driven primarily by a $3.2 million reversal of the provision for credit losses and unfunded commitments and higher noninterest income, partially offset by a decrease in net interest income and higher noninterest expenses.

Current wording

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.

Previous wording

Net interest income totaled $41.6 million for the six months ended June 30, 2024 compared to $45.1 million for the same period of the prior year, a decrease of $3.5 million, or 7.8%. The FTE net interest margin for the six months ended June 30, 2024 was 3.79%, a 37 bps decrease from 4.16% for the same period of the prior year. 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.

Current wording

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.

Previous wording

Total FTE interest income increased $3.6 million, or 15.6%, during the three months ended June 30, 2024 compared to the same period of the prior year. ACNB experienced a $2.4 million increase in FTE interest income due to an increase in the yield on interest earning assets and an $1.3 million increase attributable to higher volume. FTE interest income on total loans increased $3.7 million, or 19.0%, compared to the same period of 2023. The yield on total loans increased 48 bps, contributing $1.8 million to the increase. Average loans increased $137.0 million, or 8.9%, contributing $1.8 million to the increase in FTE interest income. FTE interest income on investment securities increased $172 thousand, or 5.5%, primarily 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 $206 thousand, or 23.1%, 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.

Current wording

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.

Previous wording

Total interest expense increased $4.7 million, or 382.8%, during the three months ended June 30, 2024 compared to the same period of the prior year. Total average borrowings increased $198.6 million, or 211.3%, for the three months ended June 30, 2024 compared to the same period of the prior year, contributing $2.1 million to the increase in interest expense. The average cost of total borrowings was 4.48% for the three months ended June 30, 2024, an increase of 133 basis points from the three months ended June 30, 2023, contributing $470 thousand to the increase in interest expense. Total average interest-bearing deposits decreased $99.8 million, or 6.9%, for the three months ended June 30, 2024 compared to the three months ended

Current wording

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.

Previous wording

Total noninterest income was $6.4 million for the three months ended June 30, 2024 compared to $6.2 million for the same period of the prior year, a $233 thousand, or 3.8% increase. The more significant fluctuations by category are explained below:

Current wording

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:

Previous wording

•Wealth management income for the three months ended June 30, 2024 increased $90 thousand, or 9.2%, compared to the same period of the prior year driven primarily by portfolio market appreciation and new business generation.

Current wording

•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.

Previous wording

Noninterest expenses totaled $16.4 million during the three months ended June 30, 2024, a 0.7% increase compared to the same period of the prior year. The more significant fluctuations by category are explained below:

Current wording

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:

Previous wording

•Salaries and employee benefits, the largest component of noninterest expenses, increased 6.1% during the three months ended June 30, 2024 to $10.4 million compared to $9.8 million in the same period of the prior year. The increase was driven primarily by higher incentive payment accruals and higher base wages.

Current wording

•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.

Previous wording

•Professional services decreased $72 thousand, or 12.0%, driven primarily by lower recruiting expenses for talent acquisition compared to the same period of the prior year.

Current wording

•Professional services decreased $208 thousand, or 33.7%, driven primarily by lower recruiting expenses for talent acquisition and consulting expenses.

Previous wording

•Marketing and corporate relations decreased $71 thousand, or 44.7%, driven primarily by rebranding expenses incurred for the Bank’s Maryland banking locations during the same period of the prior year.

Current wording

•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.

Previous wording

The Corporation recognized income taxes of $3.0 million during the three months ended June 30, 2024 compared to $2.5 million during the same period of the prior year. The provision for income taxes for the three months ended June 30, 2024 reflects a combined Federal and State ETR of 20.8% compared to an ETR of 21.0% 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.

Current wording

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.

Previous wording

Net income for the six months ended June 30, 2024 was $18.0 million compared to $18.5 million for the same period of the prior year, a decrease of $500 thousand or 2.7%. Basic earnings per share for the six months ended June 30, 2024 and 2023 were $2.12 and $2.18, respectively, resulting in a 2.8% decrease. Diluted earnings per share for the six months ended June 30, 2024 and 2023 were $2.12 and $2.17, respectively. The decrease in net income for the six months ended June 30, 2024 was driven primarily by a decrease in net interest income and higher noninterest expenses partially offset by a reversal of the provision for credit losses and unfunded commitments and an increase in noninterest income.

Current wording

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.

Previous wording

Net interest income totaled $21.0 million for the three months ended June 30, 2024 compared to $22.0 million for the same period of the prior year, a decrease of $1.0 million or 4.7%. The FTE net interest margin for the three months ended June 30, 2024 was 3.82%, a 29 bps decrease from 4.11% for the same period of the prior year. 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.

Current wording

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.

Previous wording

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 thesix months ended June 30, 2024 compared to the same period in 2023:

Current wording

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 thenine months ended September 30, 2024 compared to the same period in 2023:

Previous wording

Total FTE interest income increased $5.7 million, or 12.0%, during the six months ended June 30, 2024 compared to the same period of the prior year. ACNB experienced a $3.9 million increase in FTE interest income due to an increase in the yield on interest earning assets and a $1.8 million increase attributable to higher volume. Average loans increased $121.8 million, or 7.9%, contributing $3.3 million to the increase in FTE interest income. The average yield on loans increased 36 bps, contributing $2.9 million to the increase in FTE interest income. FTE interest income on investment securities decreased $41 thousand, or 0.6%, primarily driven by a lower volume of investment securities partially offset by a higher yield on investment securities. FTE interest income on interest-bearing deposits with banks declined $470 thousand, or 24.7%, 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.

Current wording

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.

Previous wording

Total interest expense increased $9.2 million, or 453.2%, during the six months ended June 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 $215.7 million, or 275.1%, for the six months ended June 30, 2024 compared to the same period of the prior year, contributing $4.6 million to the increase in interest expense. The average cost of total borrowings increased 165 bps during the six months ended June 30, 2024 compared to the same period of the prior year, contributing $795 thousand to the increase in interest expense. Total average interest-bearing deposits decreased $166.6 million, or 11.0%, for the six months ended June 30, 2024 compared to the same period of the prior year; however, average time deposit balances increased $7.2 million, or 2.9%, due to ongoing promotions. The average cost of interest-bearing deposits increased 59 bps for the six months ended June 30, 2024 compared to the same period of the prior year, contributing $3.9 million to interest expense. The largest increases in rates were in time deposits and money markets which increased 207 and 83 bps, respectively.

Current wording

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.

Previous wording

For the three months ended June 30, 2024, there was a $3.0 million and $259 thousand reversal of the provisions for credit losses and unfunded commitments, respectively compared to a reversal of $273 thousand of the provision for credit losses and a provision for unfunded commitments of $121 thousand for the same period of the prior year. 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 drivers in the decrease in the provision for credit losses and unfunded commitments for the three months ended June 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.

Current wording

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.

Previous wording

•Insurance commissions increased $120 thousand, or 2.5%, compared to the same period of the prior year driven primarily by organic growth and timing of commissions partially offset by lower contingent income.

Current wording

•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.

Previous wording

•Wealth management income for the six months ended June 30, 2024 increased $212 thousand, or 11.7%, in comparison to the same period in 2023 driven primarily by portfolio market appreciation and new business generation.

Current wording

•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.

Previous wording

•Net gains (losses) on sales or calls of securities increased $808 thousand as a result of a gain of $69 thousand for the six months ended June 30, 2024 compared to a loss of $739 thousand in the same period of 2023.

Current wording

•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.

Previous wording

•There were no gains on assets held for sale for six months ended June 30, 2024 compared to $323 thousand for the same period of the prior year as a result of the sale of three community banking offices in the prior year.

Current wording

•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.

Previous wording

Noninterest expenses totaled $34.1 million during the six months ended June 30, 2024, a 4.6% increase compared to the same period of 2023. The more significant fluctuations by category are explained below:

Current wording

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:

Previous wording

•Salaries and employee benefits, the largest component of noninterest expenses, increased $1.3 million, or 6.6%, to $21.6 million for the six months ended June 30, 2024. The increase was driven primarily by higher base wages, incentive payment accruals and health insurance expenses.

Current wording

•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.

Previous wording

•FDIC and regulatory increased $179 thousand, or 32.9%, as a result of a higher FDIC assessment rate for 2024.

Current wording

•FDIC and regulatory increased $156 thousand, or 16.7%, as a result of a higher FDIC assessment rate for 2024.

Previous wording

•Marketing and corporate relations decreased $137 thousand, or 43.8%, driven primarily by the rebranding expenses incurred for the Bank’s Maryland banking locations during the same period of the prior year.

Current wording

•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.

Previous wording

•Other noninterest expense decreased $163 thousand, or 4.8%, 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.

Current wording

•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.

Previous wording

The Corporation recognized income taxes of $4.7 million for the six months ended June 30, 2024 compared to $4.9 million during the same period of the prior year. The provision for income taxes for the six months ended June 30, 2024 reflects a combined Federal and State ETR of 20.8% compared to an ETR of 21.0% 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.

Current wording

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.

Previous wording

Total investment securities were $483.9 million at June 30, 2024 compared to $517.2 million at December 31, 2023, a decrease of 6.4%. The Corporation sold securities and did not reinvest the portfolio cash flows during the first six months of 2024 as a result of general balance sheet management.

Current wording

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.