Hello, and welcome to the 2021 annual meeting of shareholders of ACNB Corporation. Please note that today's meeting is being recorded. During the meeting, there'll be a question- and- answer session. You can submit questions or comments at any time by clicking on the message icon on your screen. It is now my pleasure to turn today's meeting over to James P. Helt, President and Chief Executive Officer of ACNB Corporation. Mr. Helt, the floor is yours.
Thank you, and good afternoon. On behalf of the board of the directors, the executive management team, and all of our team members, I'd like to welcome you to the 2021 annual meeting of shareholders for ACNB Corporation. While the pandemic is once again preventing us from meeting in person this year, we believe it is important to carry forward with the business of the corporation. Therefore, working together with Computershare, we're pleased to present the 2021 shareholder meeting in a virtual format. We're disappointed that we cannot meet with you again in person. However, we are excited to share with you the progress the corporation has made over the last year and the steps that we have taken to manage the corporation through this public healthcare crisis.
Before we begin the business portion of the meeting, I would like to remind you this is a virtual meeting and will be audio only, and shareholders can submit questions electronically that we will address prior to adjournment today. If there are any matters of an individual concern to a shareholder, they can be directed to any representative of the company or by emailing the Corporate Secretary at Lynda Glass at lglass@acnb.com. Now, I'd like to acknowledge several parties that have and continue to play a vital role in the success of our company. First, our Board of Directors, led by Chairman of the Board, Alan Stock, and Vice Chairman, Todd Herring. I would like to express my sincerest appreciation to this group of dedicated professionals. Their continued leadership and guidance, especially over the last year, has been invaluable.
I would also like to recognize and say a special thank you to Director Tom Ritter. This is Mr. Ritter's final meeting as a member of the board of directors after serving the Corporation since 1997 in several different capacities, including as President and CEO of both ACNB Bank and ACNB Corporation, as Chairman of the Board of RIG, and as a board member of both the Bank and the Corporation. Mr. Ritter's leadership and dedication to ACNB over the last 24 years has been immeasurable, and we all wish him the very best in his future endeavors. I would also like to express my appreciation to this team of dedicated professional community bankers. Their leadership and community spirit over the last year has been evident during this crisis, and I am honored and privileged to work with them on a daily basis.
I'd also like to acknowledge two key business advisors to ACNB Corporation. First, the law firm of Bybel Rutledge, our SEC legal counsel. Their continued support and guidance play a vital role in the success of our company. Second, RSM, our external auditing firm. We've been working with RSM for the last three years, and we thank them for their support and all of their hard work. Today's business agenda will consist of business matters, a management presentation, shareholder questions. We will hear the voting results before we adjourn for the day.
We have also posted for your review additional reference materials, including a full version of the rules of conduct and procedures for today's meeting, minutes from the 2020 annual meeting of shareholders, a press release outlining our first quarter financial results for 2021, as well as a press release for the second quarter regular dividend and a special dividend that was just recently announced as approved by the board of directors. I also need to point out the forward-looking statement. During the course of this presentation, there may be projections or forward-looking statements regarding events or the future financial performance of ACNB Corporation. We want to caution you that these forward-looking statements involve certain risks and uncertainties, including a variety of factors that may cause actual results to differ materially from the anticipated statements.
Now, at this time, I'd like to call to order the 2021 annual meeting of shareholders of ACNB Corporation. Secretary Glass, do we have a quorum present?
Yes. At this time, at least 73% of the outstanding and voting shares of ACNB Corporation are represented in person or by proxy at this 2021 annual meeting of shareholders.
Thank you. A quorum is present in accordance with the bylaws of the Corporation and Pennsylvania law for transaction of business at this annual meeting. Is there a motion to waive the reading of the minutes from the 2020 annual meeting of shareholders and to approve such minutes as presented in the online posting for today's meeting? I move to waive the reading of the minutes of the 2020 annual meeting of shareholders. Thank you.
Second.
Thank you. All those in favor, please say aye. Aye.
Aye.
Thank you. I will now ask that Corporation Secretary, Lynda Glass, read the notice of the annual meeting.
Notice is hereby given that the annual meeting of shareholders of ACNB Corporation will be held in a virtual meeting format only via the Internet on Tuesday, May the 4th, 2021 at 1:00 P.M. prevailing time for the purpose of considering and voting upon the following matters. First, to elect four Class II directors to serve for terms of three years and until their successors are elected and qualified. Second, to conduct a non-binding vote on executive compensation. Third, to ratify the selection of RSM US LLP as ACNB Corporation's independent registered public accounting firm. Fourth, to transact such other business as may properly come before the 2021 annual meeting and any adjournment or postponement thereof.
I also affirm to the mailing of this meeting notice and the accompanying proxy materials commencing on March 30th, 2021 to the shareholders of record as of the close of business on the record date of March 15th, 2021, as evidenced by the affidavit of mailing executed by Computershare and notarized on March 31st, 2021.
Thank you. Is there a motion to approve the business matters to be voted upon as indicated in the notice of annual meeting?
So moved.
Second.
Thank you. All those in favor, please say aye.
Aye.
Aye.
Serving as the independent judge of election for the 2021 annual meeting of shareholders and in attendance via webcast is Jeanette Rocha of Computershare, the corporation's transfer agent and registrar. Directors Todd Herring and James Lott will serve as proxy holders for today's annual meeting and are present in person for this purpose. If there are any proxies to be voted, please do so now via the link on your screen for online voting. Also, at this time, the proxy holders will come forward to sign the ballot, voting all of the shares previously voted by proxy.
While the votes are tabulated by the judge of elections, we will begin the management presentation. 2020 was a year unlike any year in our past. The pandemic has impacted our economy, our customers, and our employees in ways that would have been unimaginable just 18 months ago. It has also impacted how we fundamentally operate our company and interact with our customers. While we all see light at the end of the tunnel with the ongoing vaccination process, we do believe that our industry and our company will be permanently changed in how we conduct our business as a result of the pandemic, ranging from a wider use of digital banking services by our customer base to fewer and smaller retail offices, to a more efficient use of space and employee time.
In spite of the negative economic impacts of the pandemic, ACNB remains a strong, well-capitalized, full-service financial institution that has provided stability to our customers, our communities, and our shareholders for over 164 years. Today, our company is a $2.6 billion organization that is the 16th largest bank headquartered in the state of Pennsylvania. We offer a full range of financial products and services, from traditional banking, including treasury management services, to a variety of wealth management products and a full line of commercial and personal lines of insurance through the Russell Insurance Group. Our company has been named for the third consecutive year to the Central Pennsylvania Business Journal's list of the top 50 fastest-growing companies in Central PA, and we continue to garner support from the communities we serve, as evidenced by the Gettysburg Times and the Hanover Evening Sun.
We believe a strong community bank should support the communities we serve. ACNB has a long and proud history of serving our communities. Today, ACNB serves our customers with 34 locations spanning five counties in both South Central Pennsylvania and across the state of Maryland. We provide our products and services under the flagship of ACNB Corporation while offering services in Pennsylvania under ACNB Bank and trading as NWSB Bank in Carroll and Baltimore Counties and as of January 2020, FCB Bank in Frederick County, Maryland. While we offer our products and services under these different brand names, we operate as one team with one philosophy of providing quality service to all of our customers, regardless of location or brand. 2020 started the year off strong with the largest acquisition in our corporation's history with the addition of Frederick County Bank in the first quarter.
This transaction resulted in the addition of $443 million in total assets, $329 million in loans, and $374 million in deposits. We believe this acquisition enhances and complements our existing Maryland presence and our 2017 acquisition of NWSB. Net income for the year was $18.4 million, or $2.13 per share. This does represent a year-over-year decline of 22.5% and was driven by two primary factors. First, the anticipated one-time merger-related expenses associated with the acquisition of FCB in the total amount of $6 million. Second, a higher loan loss provision expense for the year of $9.1 million as compared to $600,000 in 2019. Excluding the $6 million in one-time merger expenses with FCB, net income totaled $23 million, or $2.67 per share.
We were pleased that in spite of the pandemic's impact on the economy, we were able to continue our proud history of paying a strong dividend to our shareholders by paying out a total of $8.7 million in dividends for the year, which represented an increase of 25% over 2019. With this slide, we can see the positive trends of the corporation over the last five years in key metrics such as total assets, total loans, and total deposits. The year was positively impacted with the addition of Frederick County Bank in the first quarter. However, we also saw strong organic growth in both loans and deposits due to government stimulus programs that were introduced last year as a result of the pandemic.
This slide illustrates our ability to grow our company both organically and inorganically over the last five years, supporting our strategic initiative to become the financial provider of choice in the markets that we serve. Our compounded annual growth rate in all of these metrics has been strong and has resulted in a fundamentally sound financial organization. These key performance trends are commonly used to measure the performance of any banking institution. Here we can see over the last five years, our company has become more efficient as we have grown, as evidenced by the positive trends in our efficiency ratio. However, we can also see the impact of the pandemic on the bank, as evidenced by the decline in our net interest margin of 46 basis points.
The decline in the margin was a result of lower yielding assets due to historically low interest rates and a change in our earning asset mix. This impacted both our return on average equity and our earnings per share for the year. The challenge for our industry, specifically for ACNB in 2021, will be to successfully manage through this low interest rate environment by continuing to grow earning assets, managing our expense structure, and continuing to grow our non-interest income revenue streams. One of our main sources of non-interest income comes from our wealth management division. Our wealth management business is derived from traditional trust and fiduciary services, as well as investment advisory and brokerage services. As of year-end, we had approximately $437 million in wealth management assets under management, consisting of $277 million in trust and fiduciary assets and $159 million in retail brokerage assets.
Here we can see with the acquisition of NWSB in 2017, we began to offer brokerage services at ACNB in the state of Pennsylvania, and we were able to introduce traditional trust services to the state of Maryland. Now, we see a tremendous opportunity to continue this growth trajectory by introducing our full line of wealth management services to the Frederick market. While our efforts were severely hampered by the pandemic last year, we believe this represents a significant opportunity for future growth. Another significant avenue for non-interest income is from the sale of insurance services through the Russell Insurance Group. The agency was acquired by ACNB Corporation in 2005, and it has positively contributed earnings per share annually since that time. RIG has three offices in the state of Maryland, and in 2020, we acquired our first agency in Pennsylvania, the Bergsdale Agency in Gettysburg.
RIG offers a full service line of products ranging from property and casualty insurance to group life and health insurance on both commercial and individual client bases, with licenses in 44 states. They generated approximately $48 million in gross premium volume in 2020, resulting in $6 million in gross commissions and contributed approximately $0.8 to our corporation's earnings per share. We're excited about what RIG can do for us in the future, especially as we move into Pennsylvania and explore opportunities to work more closely with ACNB Bank clients. A critical component of our interest income is derived from our loan portfolio. Here we can see that our five-year compounded annual growth rate of the portfolio has been strong at 14%. We can also see the composition of the portfolio as of year-end.
The majority of our loan portfolio is real estate secured, and approximately 70% of the portfolio consists of commercial loans. The majority of our loan growth last year was the result of the acquisition of FCB and the bank's participation in the SBA's Paycheck Protection Program, which I'll discuss in greater detail shortly. We've also implemented a fully integrated enterprise risk management process, including independent external loan reviews, to help oversee and manage this risk to our company. In spite of the pandemic, and due to historically sound credit underwriting practices, our loan portfolio remains healthy. However, due to the pandemic's unknown impacts on our commercial customers, the bank took prudent steps in 2020 to fortify our loan loss reserves. There were two driving factors for the significant increase in the provision expense year-over-year.
We experienced a $2 million unexpected loan charge-off after the death of the borrower. Second, the quantitative factors that were developed that attempted to measure the impact of the pandemic-related closures and restrictions on many of our business customers. The estimation of these factors for this event was approximately $4.1 million. As a result, our allowance now stands at 1.23% of our total loan portfolio, or just over $20 million, compared to 1.09% in 2019 or a total of $13.8 million. We rely on deposits as the primary source of funds for our lending activities. We saw deposits grow year-over-year by 55% in 2020. This growth was primarily attributed to the acquisition of FCB and the addition of $374 million in deposits.
However, we also saw strong organic deposit growth of 28% due to PPP proceeds being deposited into customers' accounts, as well as increased balances in a broad base of deposit accounts, which is the result of a lack of economic activity in the marketplace due to the pandemic. We're fortunate that a majority of our deposits are strong core accounts or relationships, and approximately 25% of our deposits are in non-interest-bearing accounts. History is filled with examples similar to our current situation. Time and time again, the world has faced great uncertainties and great challenges. Time and time again, ordinary people and ordinary communities have risen up, come together to accomplish extraordinary things. This crisis has been no exception.
ACNB has risen to the challenge, and we have been a source of strength in our communities, led by our team of community bankers, taking action in a variety of ways, such as offering individual loan modification programs to assist our customers that are in need, providing PPP loans to help save thousands of jobs in our communities, offering various customer relief programs, as outlined here on this slide, and by reaching out directly to those individuals in need by offering meals through our ACNB Helping Hands program. With regards to our customers' lending needs, we've responded by being an active participant in the SBA's Paycheck Protection Program, helping to save jobs in our communities. As of December 31st, the bank had funded over 1,400 individual PPP loans for a total of $161 million.
We've also been a participant in the second round of PPP lending, and through the end of the first quarter, we had funded 609 new loans in the amount of $53 million. Our participation in this program and our ability to assist our customers with this complicated and ever-changing government-run program is a terrific example of community banking at its best. We've also worked hand-in-hand with our customers to tailor individual loan modification programs to assist those clients through government-mandated shutdowns and restrictions. We strongly believe in relationship banking, and that means working with our customers during difficult times as well as the good times. Here on this slide, we've provided some detail on the COVID-19 loan modifications that we have provided through the end of the year. As of December 31, we had total COVID loan modifications in the amount of $35 million, representing approximately 2% of our loan portfolio.
Modifications have trended down since reaching a peak in June of 2020 and have continued to trend in a positive direction through the first quarter of 2021. Clearly, the hospitality industry has been the most impacted by the pandemic and represents the highest number of modifications in both dollars and as a percentage of the total loan portfolio. At this time, we believe our loans to borrowers in these industries impacted by COVID remain strong and that they will rebound as the country emerges from the depths of the pandemic. One of our biggest achievements in 2020, and one that I take great joy in sharing with our shareholders, is the success of a new initiative that we called ACNB Helping Hands. This initiative was designed to support all the members in our communities.
The bank, working together with our employees and board members, contributed over $50,000 toward providing meals to those in need in all of our respective communities. We partnered with local restaurants who are bank customers to provide these meals. With this one program, we were able to support our business customers while providing meals to our neighbors and friends. We believe that a strong community bank is a reflection of the communities we serve, and in difficult times, it's our responsibility to help support those communities. ACNB Helping Hands is now a permanent part of our culture, and we look forward to expanding this program in the future. As we've seen in this presentation and with our operating results over the last five years, ACNB has successfully executed on our strategy of combining organic growth initiatives with inorganic growth opportunities.
The addition of both NWSB and FCB, combined with our organic growth initiatives over the last five years, such as our expansion into Lancaster County, PA, and Hunt Valley, Maryland, via new loan production offices, the continued growth and expansion of our wealth management platform, and the growth and expansion of RIG, have all combined to double the size of our company, improve our efficiencies, and allowed us to offer better products and improved technology to our customers and improve our return to you, our shareholder, over that same time period. We believe that our economy and our country will rebound from the effects of this pandemic, and we strongly believe that ACNB is well-positioned for future growth. Our company is well-capitalized. Our loan portfolio remains strong, and we have proven to the marketplace that we can successfully and profitably grow this organization.
As we look to the future, we believe as a community banking organization, we must consistently strive to maximize shareholder value. We have outlined a comprehensive plan of action designed to achieve our major strategic objectives for the corporation, including, one, the importance of protecting our company from the yet unknown impacts of the pandemic. We are focused on managing not only the short-term impacts, such as capital preservation and asset quality, but how the pandemic will impact our long-term operating strategies. Two, the continued use of a multipronged approach to grow our company and expand our customer base through both account diversification and geographical expansion. Three, a concentrated effort in expanding both our wealth management and insurance revenue streams.
Our recent acquisition of FCB and the Burgdale Agency provides a tremendous platform for us to continue that expansion across the entire company. Four, during periods of historically low interest rates and continued margin pressures, it is paramount that we focus on expense management through the use of technology and challenging our core operating models. The pandemic has clearly impacted how customers will interact with the bank, and we are focused on how these changes will impact our future business model. Five, we've embarked on a multi-year strategy utilizing a variety of tools, including third parties, fintech companies, and cloud-based solutions to enhance our capabilities, improve the customer experience, and protect sensitive customer data. This strategy has resulted in ACNB introducing new services in the last year, including online deposit account opening, instant issue debit cards, the use of Zelle for our customers, improved online banking services, and increased security features.
In 2021, the bank will complete a system-wide conversion to a new core operating system that will significantly improve our ability to serve the customer and improve our efficiency. Once again, on behalf of the board of directors and the executive management team, I want to thank you, our shareholders, for your continued support of our corporation. Working together, ACNB Corporation has embraced our philosophy that change is an opportunity and a chance to make a difference. Without the strength of our shareholders, we would not have the ability to pursue our vision and live our values in serving customers with diligence and determination. We can all be proud of our accomplishments, and we are excited and confident in our future. Thank you. Before we respond to any general shareholder questions, please be advised that the online voting is now closed.
At this time, we will check to see if there are any shareholder questions.
There are no questions submitted by shareholders for response at this time.
Thank you. I'm pleased to report that at this annual meeting of shareholders of ACNB Corporation, based upon the preliminary review of the votes cast by shareholders of ACNB Corporation common stock, the requisite number of votes resulted in the election of the four nominees as ACNB Corporation directors under proposal one, as well as the required affirmative for vote of a majority of all votes cast for the approval of proposal number two related to executive compensation and proposal number three for the ratification of the independent registered public accounting firm. On behalf of the board of directors, I would like to express our appreciation for the continued support of all of our shareholders. We believe that by working together, ACNB Corporation remains focused on maximizing shareholder value by executing on our strategic initiatives and by serving all of our communities.
We thank you for attending today's virtual meeting, and we look forward to seeing everyone in person at the 2022 annual meeting of shareholders. Thank you.
This concludes today's meeting. You may now disconnect.