Mortgages play big part in new Pennsylvania bank merger

Mortgages will be a key companion piece to other business lines in ACNB's newly-announced agreement to buy Traditions Bancorp through an in-market acquisition.

Traditions is based in York, approximately 30 miles away from the acquiring company. Post-merger closures will include two Traditions branches and one ACNB loan production office.

"Traditions' mortgage banking unit complements ACNB's existing insurance and wealth management sources of non-interest income, providing future revenue and loan growth," an investor presentation included in a Securities and Exchange Commission filing said.

Traditions shareholders will receive 0.73 shares of ACNB common stock for each share they own. The deal is valued at $73.5 million based on the volume weighted average price of ACNB on July 19.

The deal will build on ACNB's presence in York County and help it expand into nearby Lancaster County, James Helt, president and CEO, said in a press release.

On the same day the deal was announced, both banks announced earnings that shed light on the role housing finance could play in the combined company.

"Mortgage banking income has rebounded for the quarter, with gains on the sale of mortgages bolstering earnings as rising funding costs continue to inhibit net interest income," Eugene Draganosky, Traditions chairman and CEO, said in the earnings release. "We remain optimistic and look forward to the normalization of the interest rate yield curve in the future."

Second quarter GOS was $1.5 million, versus $1 million in the fourth quarter and $1.2 million one year prior.

Its mortgage pipeline increased to $25.8 million from $17.4 million compared with the end of the first quarter and from $15.6 million on June 30, 2023.

However, mortgages drove an increase in its nonaccrual loan portfolio to $4.4 million in the second quarter from $3.8 million for the first quarter. The mortgage portion increased by $0.9 million.

Traditions reported net income of $1.8 million for the quarter, compared with $1.4 million for the prior period and $1.3 million in the same quarter of 2023.

ACNB's net income for the second quarter was $11.3 million, compared with $6.8 million three months earlier and $9.5 million for the period ended June 30, 2023.

"We continued to experience strong loan demand through the first half of the year combined with stellar asset quality metrics," Helt said in the ACNB earnings release. "Our ongoing efforts to diversify our revenue streams with ACNB Insurance Services and our wealth management teams continue to show positive momentum."