UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- ---------------------- Commission file number 0-11783 --------------------------------------------------------- ACNB CORPORATION - -------------------------------------------------------------------------------- (Exact name of corporation as specified in its charter) PENNSYLVANIA 23-2233457 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 16 LINCOLN SQUARE, GETTYSBURG, PA 17325 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (717) 334-3161 - -------------------------------------------------------------------------------- (corporation's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the corporation (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the corporation was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the corporation has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class - Common Stock ($2.50 par value) Outstanding at July 31, 2002 - 5,436,101
<TABLE> <CAPTION> PART I ITEM I FINANCIAL INFORMATION ACNB CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CONDITION 6/30 6/30 12/31 2002 2001 2001 ASSETS (000 omitted) <S> <C> <C> <C> Cash and Due from Banks $ 22,157 $ 46,734 $ 21,925 Investment Securities Securities Held to Maturity 36,232 47,515 48,480 Securities Available for Sale 196,977 92,541 175,017 -------- -------- -------- Total Investment Securities 233,209 140,056 223,497 Federal Funds Sold 0 0 0 Loans 370,821 359,916 362,579 Less: Reserve for Loan Losses (3,778) (3,757) (3,723) -------- -------- -------- Net Loans 367,043 356,159 358,856 Premises and Equipment 6,612 5,409 5,704 Other Real Estate 807 1,262 1,646 Other Assets 19,054 17,354 18,606 -------- -------- -------- TOTAL ASSETS $648,882 $566,974 $630,234 ======== ======== ======== LIABILITIES Deposits Noninterest Bearing 75,857 67,317 70,907 Interest Bearing 467,601 407,628 438,328 -------- -------- -------- Total Deposits 543,458 474,945 509,235 Securities Sold Under Agreement To Repurchase 25,999 24,274 33,239 Borrowing Federal Home Loan Bank 7,700 0 17,850 Demand Notes U.S. Treasury 450 450 412 Other Liabilities 5,120 5,070 6,805 -------- -------- -------- TOTAL LIABILITIES 582,727 504,739 567,541 SHAREHOLDERS' EQUITY Common Stock ($2.50 par value) 20,000,000 shares authorized: 5,436,101 shares issued and outstanding at 6/30/02 13,590 13,590 13,590 Retained Earnings 50,998 48,031 48,661 Accumulated Other Comprehensive Income 1,567 614 442 -------- -------- -------- TOTAL SHAREHOLDERS' EQUITY 66,155 62,235 62,693 TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $648,882 $566,974 $630,234 ======== ======== ======== </TABLE> See accompanying notes to financial statements. PAGE 2
<TABLE> <CAPTION> ACNB CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended 6/30 6/30 2002 2001 2002 2001 (000 omitted) (000 omitted) <S> <C> <C> <C> <C> INTEREST INCOME Loan Interest and Fees $6,241 $7,088 $12,508 $14,320 Interest and Dividends on Investment Securities 3,097 2,517 6,228 5,309 Interest on Federal Funds Sold 0 127 0 198 Interest on Balances with Depository Institutions 12 99 23 137 ------ ------ ------- ------- TOTAL INTEREST INCOME 9,350 9,831 18,759 19,964 INTEREST EXPENSE Deposits 3,008 3,851 6,062 7,691 Other Borrowed Funds 199 256 458 930 ------ ------ ------- ------- TOTAL INTEREST EXPENSE 3,207 4,107 6,520 8,621 NET INTEREST INCOME 6,143 5,724 12,239 11,343 Provision for Loan Losses 60 60 120 120 NET INTEREST INCOME AFTER PROVISION ------ ------ ------- ------- FOR LOAN LOSSES 6,083 5,664 12,119 11,223 OTHER INCOME Trust Department 225 120 377 278 Service Charges on Deposit Accounts 418 340 817 578 Other Operating Income 518 352 1,159 806 Securities Gains 0 0 0 0 ------ ------ ------- ------- TOTAL OTHER INCOME 1,161 812 2,353 1,662 OTHER EXPENSES Salaries and Employee Benefits 2,338 1,999 4,489 3,845 Premises and Equipment 490 467 1,017 1,030 Other Expenses 1,227 1,140 2,499 2,130 ------ ------ ------- ------- TOTAL OTHER EXPENSE 4,055 3,606 8,005 7,005 INCOME BEFORE INCOME TAX 3,189 2,870 6,467 5,880 Applicable Income Tax 969 885 1,973 1,867 ------ ------ ------- ------- NET INCOME $2,220 $1,985 $ 4,494 $ 4,013 ====== ====== ======= ======= EARNINGS PER SHARE* $0.41 $0.37 $0.83 $0.74 DIVIDENDS PAID PER SHARE 0.20 0.20 0.60 0.40 </TABLE> *Based on a weighted average of 5,436,101 shares outstanding in 2002 and 5,436,133 in 2001 See accompanying notes to financial statements. Page 3
<TABLE> <CAPTION> ACNB CORPORATION AND SUBSIDIARY STATEMENT OF CASH FLOWS Six months ended 6/30 2002 2001 (000 omitted) <S> <C> <C> INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash Flows from Operating Activities: Interest and Dividends Received $ 17,536 $ 19,125 Fees and Commissions Received 2,408 1,824 Interest Paid (7,123) (8,282) Cash Paid to Suppliers and Employees (7,955) (14,788) Income Taxes Paid (2,087) (1,973) Net Cash (Used in) Provided by Operating Activities 2,779 (4,094) Cash Flows from Investing Activities: Proceeds from Maturities of Investment Securities and Interest Bearing Balances with Other Banks 27,294 31,998 Purchase of Investment Securities and Interest Bearing Balances with Other Banks (34,084) 0 Principal Collected on Loans 46,044 40,751 Loans Made to Customers (54,209) (40,016) Capital Expenditures (1,199) (936) Net Cash (Used in) Provided by Investing Activities (16,154) 31,797 Cash Flow from Financing Activities: Net Increase (Decrease) in Demand Deposits, NOW Accounts, and Savings Accounts 35,242 5,459 Proceeds from Sale of Certificates of Deposit 21,432 18,875 Payments for Maturing Certificates of Deposit (29,693) (10,471) Dividends Paid (3,262) (2,174) Increase (Decrease) in Borrowings (10,112) (16,300) Retirement of Common Stock 0 (74) Net Cash Used in Financing Activities 13,607 (4,685) Net Increase (Decrease) in Cash and Cash Equivalents 232 23,018 Cash and Cash Equivalents: Beginning of Period 21,925 23,716 End of Period $ 22,157 $ 46,734 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income $ 4,494 $ 4,013 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 291 215 Provision for Loan Losses 120 120 Provision for Deferred Taxes (390) (85) Amortization (Accretion) of Investment Securities Premiums (4) 12 Increase (Decrease) in Taxes Payable 276 (21) (Increase) Decrease in Interest Receivable 198 (75) Increase (Decrease) in Interest Payable (603) 339 Increase (Decrease) in Accrued Expenses 247 468 (Increase) Decrease in Other Assets (646) (8,466) Increase (Decrease) in Other Liabilities (1,204) (614) Net Cash (Used in) Provided by Operating Activities $ 2,779 $ (4,094) </TABLE> DISCLOSURE OF ACCOUNTING POLICY For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. Page 4
ACNB CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly ACNB Corporation's financial position as of June 30, 2002 and 2001 and December 31, 2001 and the results of its operations for the six months ended June 30, 2002 and 2001 and changes in financial position for the six months then ended. All such adjustments are of a normal recurring nature. The accounting policies followed by the corporation are set forth in Note A to the corporation's financial statements in the 2001 ACNB Corporation Annual Report and Form 10-K filed with the Securities and Exchange Commission under file no. 0-11783. 2. The book and approximate market value of securities owned at June 30, 2002 and December 31, 2001 were as follows: 6/30/02 12/31/01 Amortized Fair Amortized Fair Cost Value Cost Value (000 omitted) U.S. Treasury and U.S. Government Agencies (held to maturity) 30,542 32,340 40,744 42,388 State and Municipal (held to maturity) 1,709 1,763 2,123 2,126 Corporate (held to maturity) 218 223 1,957 1,974 Corporate (available for sale) 23,997 24,073 U.S. Government Agencies (available for sale) 170,058 172,904 173,845 175,017 Restricted Equity Securities 3,763 3,763 3,656 3,656 -------- -------- -------- -------- TOTAL $230,287 $235,066 $222,325 $225,161 Income earned on investment securities was as follows: Six Months Ended June 30 2002 2001 (000 omitted) U.S. Treasury 26 343 U.S. Government Agencies 5,935 4,604 State and Municipal 40 59 Other Investments 227 303 ----- ----- 6,228 5,309 Page 5
3. Gross loans are summarized as follows: June 30 December 31 2002 2001 (000 omitted) Real Estate 324,609 316,928 Real Estate Construction 13,075 15,497 Commercial and Industrial 21,592 18,027 Consumer 11,545 12,127 -------- -------- Total Loans $370,821 $362,579 4. Earnings per share are based on the weighted average number of shares of stock outstanding during each period. Weighted average shares outstanding for the three month periods ended June 30, 2002 and 2001 were 5,436,101 and 5,436,133 respectively. 5. Dividends paid per share were $.60 and $.40 for the six month periods ended June 30, 2002 and 2001, respectively. This represented a 72% payout of net income in 2002 and a 54% payout in 2001. 6. The results of operations for the six month periods ended June 30, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. Page 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Registrant's discussion and analysis of the significant changes in the results of operations, capital resources and liquidity presented in the accompanying consolidated financial statements for the Registrant, and its wholly-owned subsidiary, Adams County National Bank, follow. The Registrant's consolidated financial condition and results of operations consist almost entirely of the bank's financial condition and results of operations. This discussion should be read in conjunction with the corporation's 2001 Annual Report to Shareholders. Current performance does not guarantee, assure, and is not necessarily indicative of similar performance in the future. In addition to historical information, this Form 10-Q contains forward-looking statements. From time to time, the corporation may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors could cause the corporation's actual results and experience to differ materially from the anticipated results or other expectations expressed in the corporation's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the corporation's business include the following: general economic conditions, including their impact on capital expenditures; business conditions in the banking industry; the regulatory environment; rapidly changing technology and evolving banking industry standards; competitive factors, including increased competition with community, regional and national financial institutions; new service and product offerings by competitors and price pressures; and similar items. Three months ended June 30, 2002 compared to three months ended June 30, 2001 - ----------------------------------------------------------------------------- Net Income for the three month period ending June 30, 2002 was $2,220,000, up $235,000 from the second quarter of 2001. Net interest income was up, total other income was up and total other expense was up. The second quarter increase is due to improved net interest income. Net income per share, for the second quarter, was $.41, compared to the $.37 earned in the same period in 2001. For the three month period (annualized) in 2002, the return on average assets and return on average equity were 1.41% and 13.96%, respectively, compared to 1.42% and 12.92%, respectively for 2001. An explanation of the factors and trends that caused changes between the two periods, by major earnings category, follows. Total interest income for the second three month period of 2002 was $9,350,000, down $481,000 or 4.9% below the $9,831,000 earned in the same period of 2001. The $481,000 decrease in interest income was due to a sustained fall in interest rates during 2001. In an effort to manage interest rate risk, the Registrant lowered interest rates on transaction accounts to historic lows. Income from loans and securities during the current period decreased approximately $267,000 due to lower interest rates even though loan and security volumes continued to grow. Page 7
Total interest expense for the second three month period of 2002 was $3,207,000, down $900,000 or 21.9% from the $4,107,000 incurred for the same period in 2001. The $900,000 decrease in interest expense was due to lower interest rates, especially in the transaction account area. Because the decrease in interest expense exceeded the decrease in interest income, net interest income increased $419,000. Total other income for the second three month period of 2002 at $1,161,000, was $349,000 greater than the same quarter in 2001. This was due to increased service charges on deposit accounts, trust income and a gain on sale of a parcel of other real estate owned. The bank introduced a new service called overdraft privilege in mid-year 2001. The increase should continue until the third quarter of this year when it should mirror last year's performance. In the trust area, there were improvements in both estate fees and brokerage fees. In addition, the bank sold a small repossessed subdivision which generated a one-time gain of $113,000. Total other expense for the second three month period of 2002 was $4,055,000, up $449,000 from the $3,606,000 incurred for the second quarter of 2001. The increase was in salary and employee benefits, and write off of deposit purchase premium and professional services associated with the overdraft plan, mentioned above. The provision for income taxes in the second quarter increased $84,000 due to a higher level of pretax earnings. Six months ended June 30,2002 compared to six months ended June 30, 2001 - ------------------------------------------------------------------------ Net income for the first six months of 2002 was $4,494,000, up $481,000 or 12% above the $4,013,000 earned for the same period of 2001. The increase in net income was due primarily to stronger net interest income but partially offset by growing total other expense as explained below. For the six month period (annualized) of 2002, the return on average assets (ROA) and return on average equity (ROE) were 1.44% and 14.25%, respectively, compared to 1.43% and 13.12%, respectively, for 2001. At June 30, 2002, total assets were approximately $649 million, reflecting an $82 million or 14% increase above June 30, 2001. This increase in assets stems from migration of funds from the equities market and the purchase of approximately $24,000,000 in deposits in November 2001. As explained more fully under Capital Management section, book value per share was $12.17 on June 30, 2002, compared to $11.45 on June 30, 2001. The corporation's capital remained sound as evidenced by Total Shareholders Capital Ratio of 10.19% and a Total Risk-Based Capital Ratio of 18.27% on June 30, 2002. Total interest income for the current six month period was $18,759,000 down $1,205,000 or 6% from the $19,964,000 earned in the same period of 2001. The $1,205,000 decrease in total interest income was due to falling interest rates in the general market economy in 2002 translating to lower rates on new loans and securities. In 2001, market rates fell rapidly and the effect is still strongly affecting yields on components of the corporation's balance sheet. Total interest expense for the current six month period was $6,520,000, down $2,101,000 or 24% below the $8,621,000 incurred for the same period in 2001. The $2,101,000 decrease in total interest expense was due to falling interest rates through the year 2001 and their effect continuing into 2002. Page 8
Net interest income was $12,239,000 for the current period, $896,000 above the first six months in 2001. Margins are slipping, but assets are increasing and helping net interest income. The bank has shifted to a funds purchased position from a funds sold position since June of 2001, and has been able to improve dollar denominated net yield, but not margins. Total non-interest income for the current six month period was $2,353,000 ,an increase of $691,000 or 42% above the same period in 2001. The increase was caused by a $239,000 improvement in service charges on deposit accounts, as a result of the new product mentioned above, $99,000 in trust services (mainly in estates and brokerage fees), $32,000 in loan application fees, $123,000 on Bank Owned Life Insurance, a $60,000 litigation settlement, and $116,000 in gains on sale of other real estate. Total non-interest expense for the current six month period was $8,005,000, $1,000,000 or 14% above the $7,005,000 incurred for the same period in 2001. The increase was located in a $644,000 increase in salaries and benefits, a $159,000 increase in write-off of deposit purchase premium, a $28,000 increase in audit fees, a $37,000 increase in professional fees, and $52,000 increase in charged-off cash items. The provision for income taxes was $1,973,000 for the current period, $106,000 above the same period in 2001 due to higher pretax income. OVERVIEW OF THE BALANCE SHEET The changes in the balance sheet have been driven by strong growth in deposits. The following are some of the results: o Total investment securities were $233,209,000 at June 30, 2002, an increase of $93,153,000 or 66% since June 30, 2001. Securities have increased from 25% of total assets to 36% of total assets. o Total deposits have grown from $474,945,000 at June 30, 2001 to $543,458,000 at June 30, 2002, an increase of $68,513,000 or 14%. Approximately $24,000,000 of those deposits were obtained through a branch purchase transaction with Farmers and Mechanics Bank of Frederick, Maryland. Certificates of deposit were down $1,919,000 or 1% from the June 30, 2001 total. More than 100% of the $68,513,000 increase was from transaction accounts. This has increased our liability sensitivity, as measured by the bank's internal gap (see below). o Accumulated other comprehensive income has increased from $442,000 at December 31, 2001 to $1,567,000 at June 30, 2002. This indicates the after tax effect in the change in market value of the available for sale securities portfolio. This shift helped in repositioning of the portfolio for income purposes as interest rates fell in the second quarter. Certain low rate securities were sold in July to shorten maturities. Shorter term securities will make it possible to sell and repurchase securities with better yields in a rising rate environment. INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS Six Months Ended 6/30/02 6/30/01 Rate Rate Earning Assets 6.36% 7.51% Interest Bearing Liabilities 2.67% 3.97% Interest Rate Spread 3.69% 3.54% Net Yield on Earning Assets 4.15% 4.27% Page 9
Net Yield on Earning Assets is the difference, stated in percentages, between the interest earned on loans and other investments and the interest paid on deposits and other sources of funds. The Net Yield on Earning Assets is one of the best analytical tools available to demonstrate the effect of interest rate changes on the corporation's earning capacity. The Net Yield on Earning Assets, for the first six months of 2002, was down 12 basis points compared to the same period in 2001. Yields on loans and securities have changed more rapidly than deposit rates as interest rates in the general economy have continued to fall over the last twelve months. PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES Reserve for Possible Loan Losses (In Thousands) Six Months Ended 6/30/02 6/30/01 Balance at Beginning of Period 3,723 3,695 Provision Charged to Expense 120 120 Loans Charged Off 115 81 Recoveries 50 23 Balance at End of Period 3,778 3,757 Ratios: Net Charge-offs to: Net Income 1.45% 1.45% Total Loans .02% .02% Reserve for Possible Loan Losses 1.72% 1.54% Reserve for Possible Loan Losses to: Total Loans 1.02% 1.04% The Reserve for Possible Loan Losses at June 30, 2002 was $3,778,000 (1.02% of Total Loans), an increase of $21,000 from $3,757,000 (1.04% of Total Loans) at the end of the first six months of 2001. Loans past due 90 days and still accruing were $1,856,000 and non-accrual loans were $775,000, as of June 30, 2002. The ratio of non-performing assets plus other real estate owned to total assets was .53%, at June 30, 2002. All properties are carried at the lower of market or book value and are not considered to represent significant threat of loss to the bank. In addition, a parcel of other real estate owned with a book value of $782,000 was sold during the second quarter for $890,000, reducing other real estate owned(OREO) by over 50%. Loans past due 90 days and still accruing were $1,003,000, at year end 2001, while non-accruals were at $837,000. The bulk of the corporation's real estate loans are in owner occupied dwellings. Management believes that internal loan review procedures will be effective in recognizing and correcting any real estate lending problems that may occur due to current economic conditions. Interest not accrued, due to an average of $799,000 in non-accrual loans, was approximately $28,000 for the first six months of 2002. The bank considers a loan impaired when, based on current information and events, it is probable that a lender will be unable to collect all amounts due. We measure impaired loans based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or as a practical Page 10
expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than its recorded investment a lender must recognize an impairment by creating, or adjusting, a valuation allowance with a corresponding charge to loan loss expense. The corporation uses the cash basis method to recognize interest income on loans that are impaired. All of the corporation's impaired loans were on a non-accrual status for all reported periods. CAPITAL MANAGEMENT Total Shareholders' Equity was $66,155,000 at June 30, 2002, compared to $62,235,000 at June 30, 2001, an increase of $3,920,000 or 6.3% over that period. The ratio of Total Shareholders' Equity to Total Assets was 9.95% at December 31, 2001, 10.98% at June 30, 2001, and 10.20% at June 30, 2002. The total risk-based capital ratio was 18.27% at June 30, 2002. The leverage ratio was 9.69% at June 30, 2002, and 10.79% during the same period in 2001. Capital at the corporation remains strong. The payment of a special 20 cents per share dividend in January 2002 has not slowed capital growth from the previous period. LIQUIDITY AND INTEREST RATE SENSITIVITY Management believes that the corporation's liquidity is adequate. Liquid assets (cash and due from banks, federal funds sold, money market instruments, available for sale securities and held to maturity investment securities maturing within one year) were 35% of total assets at June 30, 2002. This mix of assets would be readily available for funding any cash requirements. In addition, the Bank has an approved line of credit of $326,004,000 at the Federal Home Loan Bank of Pittsburgh with $7,700,000 outstanding at June 30, 2002. As of June 30, 2002, the cumulative asset sensitive gap was 7.9% of total assets at one month, 3.3% at six months, and 5.1% at one year. Adjustable rate mortgages, which have an annual interest rate cap of 2%, are considered rate sensitive. Passbook and statement savings and NOW accounts are carried in the one to five year category. Half of money market deposit accounts are spread over the four to twelve month category. The other half are shown to mature in the one to three year category. There are no known trends or demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way. Aside from those matters described above, management does not currently believe that there are any known trends or uncertainties that would have a material impact on future operating results, liquidity or capital resources nor is it aware of any current recommendations by the regulatory authorities, which, if they were to be implemented, would have such an effect, although the general cost of compliance with numerous and multiple federal and state laws and regulation does have and in the future may have a negative impact on the corporation's results of operations. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Management monitors and evaluates changes in market conditions on a regular basis. Based upon the most recent review management has determined that there have been no material changes in market risks since year end. For further discussion of year end information, refer to the annual report. PART II. OTHER INFORMATION Item 1. Legal Proceedings - Nothing to report. Page 11
Item 2. Changes in Securities and Use of Proceeds - Nothing to report. Item 3. Defaults Upon Senior Securities - Nothing to report. Item 4. Submission of Matters to a Vote of Security Holders. (a) An annual meeting of shareholders was held at 1:00 p.m. on May 7, 2002 at the main office of Adams County National Bank, 675 Old Harrisburg Road, Gettysburg, PA 17325. (b) Five matters were voted upon, as follows: Proposal to fix the number of Directors of ACNB Corporation at eleven (11): Votes Cast Votes Cast Votes "FOR" "AGAINST" ABSTAINED ---------- ---------- --------- 3,992,472 74,970 13,929 Proposal to fix the number of Class 1 Directors at four (4): Votes Cast Votes Cast Votes "FOR" "AGAINST" ABSTAINED ---------- ---------- --------- 4,028,693 28,438 24,240 Proposal to fix the number of Class 2 Directors at three (3): Votes Cast Votes Cast Votes "FOR" "AGAINST" ABSTAINED ---------- ---------- --------- 4,038,990 23,309 19,072 Proposal to fix the number of Class 3 Directors at four (4): Votes Cast Votes Cast Votes "FOR" "AGAINST" ABSTAINED ---------- ---------- --------- 4,034,746 27,847 18,778 Election of four (4) Class 3 Directors to serve for a three-year term: Votes Cast Votes Director Term Expires "FOR" "WITHHELD" - -------- ------------ ---------- ---------- Philip P. Asper 2005 4,021,614 59,757 Guy F. Donaldson 2005 3,978,050 103,321 Frank Elsner, III 2005 4,036,967 44,404 Thomas A. Ritter 2005 3,924,655 156,716 Item 5. Other Information - Nothing to report. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following Exhibits are included in this Report: Exhibit 3(i) Articles of Incorporation of Registrant (Incorporated by Reference to Exhibit 3 (i) in Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). Page 12
Exhibit 3(ii) Bylaws of Registrant (Incorporated by Reference to Exhibit 3(ii) in Registrant's Report of Form 8-K, filed with the Commission on March 25, 1998). Exhibit 10.1 Executive Employment Agreement Dated as of January 1, 1998 between Adams County National Bank, ACNB Corporation and Ronald L. Hankey (Incorporated By Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, Filed with the Commission on March 25, 1998). Exhibit 10.2 Executive Employment Agreement Dated as of January 1, 2000 between Adams County National Bank, ACNB Corporation and Thomas A. Ritter (Incorporated by Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, filed with the Commission on March 26, 2001). Exhibit 11 Statement Regarding Computation of Earnings Per Share. Exhibit 99.1 Certification of Chief Executive Officer Exhibit 99.2 Certification of Chief Financial Officer (b) Report on Form 8-K. The Registrant filed no Current Reports on Form 8-K during the quarter ended June 30, 2002. Pursuant to the requirements of the Securities Exchange Act of 1934, the corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACNB CORPORATION Ronald L. Hankey, Chariman of the Board and CEO August 7, 2002 John W. Krichten, Secretary/Treasurer Page 13
EXHIBIT INDEX Exhibit Number - -------------- Exhibit 3(i) Articles of Incorporation of Registrant (Incorporated by Reference to Exhibit 3 ( i ) of Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). Exhibit 3(ii) Bylaws of Registrant (Incorporated by Reference to Exhibit 3(ii) of Registrant's Report on Form 8-K, filed with the Commission on March 25, 1998). Exhibit 10.1 Executive Employment Agreement Dated as of January 1, 1998 between Adams County National Bank, ACNB Corporation and Ronald L. Hankey (Incorporated By Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, Filed with the Commission on March 25, 1998). Exhibit 10.2 Executive Employment Agreement Dated as of January 1, 2000 between Adams County National Bank, ACNB Corporation and Thomas A. Ritter (Incorporated by Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, filed with the Commission on March 26, 2001). Exhibit 11 Statement Regarding Computation of Earnings Per Share. Exhibit 99.1 Certification of Chief Executive Officer Exhibit 99.2 Certification of Chief Financial Officer Page 14