-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NuDnZq3n1oyldYMly2ZWt+/osTsw2seIBQpIBhqpmzGdsygZ0pIMGlZP9PQ7SlQS bwkzf6Tzw9JMNcgQVFde7w== 0000950115-00-000602.txt : 20000427 0000950115-00-000602.hdr.sgml : 20000427 ACCESSION NUMBER: 0000950115-00-000602 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACNB CORP CENTRAL INDEX KEY: 0000715579 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 232233457 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-11783 FILM NUMBER: 608807 BUSINESS ADDRESS: STREET 1: 675 OLD HARRISBURG RD STREET 2: P O BOX 3129 CITY: GETTYSBURG STATE: PA ZIP: 17325 BUSINESS PHONE: 7173343161 MAIL ADDRESS: STREET 1: P O BOX 3129 STREET 2: 675 OLD HARRISBURG RD CITY: GETTYSBURG STATE: PA ZIP: 17325 10-K405/A 1 AMENDED ANNUAL REPORT FORM 10-K Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (X) Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999. Commission file no. 0-11783. ACNB CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2233457 - --------------------------------------- ------------------------------------ (State of Incorporation) (IRS Employer Identification Number) 675 Old Harrisburg Road Gettysburg, PA 17325 - --------------------------------------- ------------------------------------ (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717)334-3161 ------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON CAPITAL STOCK PAR VALUE $2.50 A SHARE - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past ninety (90) days. YES X NO --- --- As of February 29, 2000, ACNB Corporation had outstanding 5,705,530 shares of Common Stock. The aggregate market value of such Common Stock held by nonaffiliates as of February 29, 2000, was approximately $98,449,544. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded because they may be deemed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 2, 2000, are incorporated by reference into Part III. FORM 10-K PART I ITEM 1. BUSINESS The Registrant owns all of the outstanding shares of Adams County National Bank and Farmers National Bank of Newville (hereinafter the "Banks"). The Registrant, organized in 1983 and headquartered in Gettysburg, Pennsylvania, presently has no significant operations other than serving as a bank holding company. On March 31, 1999, ACNB Corporation acquired Farmers National Bancorp, Inc., a single-bank holding company located in Newville, Cumberland County, Pennsylvania, with assets of $44 million. The sole and wholly-owned subsidiary of Farmers National Bancorp, Inc. was Farmers National Bank of Newville. The rate of exchange was 2.266 shares of ACNBCorporation for every share of Farmers National Bancorp, Inc. The town of Newville had a 1996 population of 1,354, but the surrounding townships of North Newton, with a population of 1,939, and West Pennsboro, with a population of 5,343, have shown marked growth over the last several decades. Cumberland County had a 1996 population of 207,042. The Newville area is mainly agricultural. The Banks engage in a full-service commercial and consumer banking and trust business. Adams County National Bank provides financial services to its customers through its community banking network of thirteen full-service offices located throughout Adams County, Pennsylvania, and in Hanover, York County, Pennsylvania. Farmers National Bank of Newville serves its marketplace via three banking offices in the Newville, Cumberland County, Pennsylvania area. The Banks' services include accepting demand, savings and time deposits including NOW, SuperNOW, money market, passbook savings, a diversified array of certificates of deposit, IRAs, and club accounts. The services also include making secured and unsecured commercial and consumer loans; financing commercial transactions; making construction and mortgage loans; making residential mortgage loans and home equity lines of credit; making small business loans; making student loans; and, the renting of safe deposit box facilities. Further, the Banks' business loans include seasonal credit, collateral loans and term loans. Trust services provided by Adams County National Bank include services as executor and trustee under wills and deeds, estate planning services, and custodian and agent for various investment companies. Trust services also include transfer agent and registrar of bond issues and escrow agent. The Banks have a relatively stable deposit base, and no material amount of deposits is obtained from a single depositor or group of depositors (including federal, state and local governments). See Management's Discussion and Analysis in the 1999 Annual Report. The Banks have not experienced any significant seasonal fluctuations in the amount of its deposits. As of December 31, 1999, the Registrant had a total of 174 full-time and 73 part-time employees. SUPERVISION AND REGULATION The Registrant and the Banks are considered "affiliates" for purposes of Section 23A of the Federal Reserve Act and, as such, are subject to certain limitations specified therein on the making of loans on, extensions of credit to, or investments in each other. The Federal Bank Holding Company Act of 1956 restricts the Registrant's activities, whether conducted directly or through subsidiary corporations, to specified activities functionally related to banking. Permissible activities under the Act include lending, certain leasing activities, fiduciary and investment advisory services, acting as insurance agent or broker in connection with loans by subsidiary or affiliated companies, and certain bookkeeping or data processing services. COMPETITION All phases of the Banks' business are highly competitive. The Banks' market area is the primary trading area of Adams County, Pennsylvania; a western portion of York County, Pennsylvania; central Cumberland County, Pennsylvania, and, the northernmost portions of those counties in Maryland which are immediately adjacent to the southern border of Adams County. The market concentration is in the area of Gettysburg, Pennsylvania. The Banks compete with local commercial banks, other commercial banks with branches in the Banks' market area, savings associations, and other financial service providers. The Banks consider their major competition to be PNC Bank, Allfirst, Bank of Hanover and Trust Co, Peoples State Bank of East Berlin, Keystone Financial, F & M Trust, and Orrstown Bank. GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS The earnings and growth of the Banks are affected by the policies of the regulatory authorities including the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation. An important function of the Federal Reserve System is to regulate the money supply and interest rates. Among the instruments used to implement these objectives are open market operations in U.S. Government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits. Their use may also affect interest rates charged on loans or paid for deposits. The policies and regulations of the Federal Reserve Board have had, and will probably continue to have, a significant effect on the Banks' deposits, loans and investment growth, as well as the rate of interest earned and paid. The impact of such policies and regulations upon the future business and earnings of the Banks cannot be accurately predicted. ITEM 2. PROPERTIES ACNB Corporation owns two offices in Gettysburg, PA. The office at 675 Old Harrisburg Road is the main office and administrative headquarters. The Corporation also owns nine offices and leases one, which are spread throughout and serve Adams County. In addition, the Corporation owns one office in western York County and three in central Cumberland County. All three counties are located in south central Pennsylvania. 2 FORM 10-K ITEM 3. LEGAL PROCEEDINGS In the opinion of the management of the Corporation, there are no proceedings pending to which the Corporation and the Banks are a party or to which its property is subject, which, if determined adversely to the Corporation and the Banks, would be material in relation to the Corporation's and Banks' financial condition. There are no proceedings pending other than ordinary routine litigation incident to the business of the Corporation and the Banks. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation and the Banks by government authorities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required by this Item, regarding market value, dividend payment, and number of shareholders, is set forth on page 53 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is set forth on pages 15 and 46 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth on pages 16 through 25 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is set forth on pages 20 and 21 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages 26 through 45 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item, relating to directors, executive officers, and control persons, is set forth in sections "Principal Beneficial Owners of the Corporation's Stock", "Information as to Nominees, Directors and Executive Officers" and "Principal Officers of the Corporation" of the Registrant's definitive Proxy Statement to be used in connection with the 2000 Annual Meeting of Shareholders, which pages are incorporated herein by reference. Section 16(a) Beneficial Ownership Compliance. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Registrant's officers and directors, and persons who own more than 10 percent of a registered class of the Registrant's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC. Officers, directors and greater than 10 percent shareholders are required by SEC regulation to furnish the Registrant with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it or written representations from certain reporting persons that no Forms 5 were required for those persons, the Registrant believes that during the period of January 1, 1999, through December 31, 1999, its officers and directors were in compliance with all filing requirements applicable to them. 3 PART IV ITEM 14b. EXHIBITS EXHIBIT 3(i) Articles of Incorporation of ACNB Corporation, as amended. EXHIBIT 3(ii) Bylaws of Registrant A copy of the Bylaws, as amended, of ACNB Corporation is incorporated by reference to Exhibit 3(ii) of the Registrant's Current 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 A copy of the Executive Employment Agreement dated as of January 1, 1998, between Adams County National Bank, ACNB Corporation and Ronald L. Hankey is 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 11 Statement Regarding the Computation of Earnings Per Share
For the Fiscal Year ended December 31 ------------------------------------- 1999 1998 1997 - --------------------------------------------------------------------------------------------- Weighted average shares outstanding ................. 5,782,930 5,815,246 5,817,273 Common stock Common Stock equivalents Stock options ..................................... -- -- -- Stock awards ...................................... -- -- -- ESOP shares ....................................... -- -- -- ---------- ---------- ---------- Total common stock equivalents ...................... -- -- -- ---------- ---------- ---------- Total Weighted Average Shares Outstanding ........... 5,782,930 5,815,246 5,817,273 ========== ========== ========== Net Income .......................................... $7,823,000 $7,725,000 $7,770,000 Net Income Per Share ................................ $1.35 $1.33 $1.34
EXHIBIT 12 Statements Regarding the Computation of Ratios The information required by this Exhibit is set forth on page 46 of the Registrant's 1999 Annual Report and incorporated herein by reference. EXHIBIT 21 Subsidiaries of the Registrant The Registrant has two banking subsidiaries, Adams County National Bank and Farmers National Bank of Newville, both national banks, which are wholly-owned by the Registrant. EXHIBIT 27 Financial Data Schedule 4 FORM 10-K ITEM 15. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACNB CORPORATION (Registrant) March 21, 2000 ---------------------- Date BY: /s/ Ronald L. Hankey BY: /s/ John W. Krichten - ---------------------------------- ---------------------------- Ronald L. Hankey John W. Krichten Chairman, Secretary & Treasurer President & CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 21, 2000, by the following persons in the capacities indicated. /s/ Philip P. Asper /s/ William B. Lower - ---------------------------------- ---------------------------- Philip P. Asper William B. Lower Director Director /s/ Guy F. Donaldson /s/ Paul G. Pitzer - ---------------------------------- ---------------------------- Guy F. Donaldson Paul G. Pitzer Director Director /s/ Richard L. Galusha /s/ Ralph S. Sandoe - ---------------------------------- ---------------------------- Richard L. Galusha Ralph S. Sandoe Director Director /s/ D. Richard Guise /s/ Marian B. Schultz - ---------------------------------- ---------------------------- D. Richard Guise Marian B. Schultz Director & Vice Chairman of the Director Board /s/ Ronald L. Hankey /s/ L. Robert Snyder - ---------------------------------- ---------------------------- Ronald L. Hankey L. Robert Snyder Director, Chairman, President & CEO Director /s/ Edgar S. Heberlig /s/ Jennifer L. Weaver - ---------------------------------- ---------------------------- Edgar S. Heberlig Jennifer L. Weaver Director Director /s/ Philip M. Jones /s/ Harry L. Wheeler - ---------------------------------- ---------------------------- Philip M. Jones Harry L. Wheeler Director Director /s/ Wayne E. Lau - ---------------------------------- Director 5 EX-3.(I) 2 ARTICLES OF INCORPORATION AMENDED AND RESTATED ARTICLES OF INCORPORATION ACNB CORPORATION FIRST: The name of the Corporation is ACNB Corporation. SECOND: The address of the Corporation's registered office in this Commonwealth is 675 Old Harrisburg Road, Gettysburg, Adams County, Pennsylvania 17325. THIRD: The purposes for which the Corporation is incorporated are to have unlimited power to engage in and do any lawful act concerning any or all lawful business for which corporations may be incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania. The Corporation is incorporated under the provisions of the Business Corporation Law of the Commonwealth of Pennsylvania (Act of May 5, 1993, P. L. 364 as amended). FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is: Twenty Million (20,000,000) shares of Common Stock of the par value of $2.50 per share (the "Common Stock"). FIFTH: The term of existence of the Corporation is perpetual. SIXTH: Intentionally Omitted. SEVENTH: Cumulative voting rights shall not exist with respect to the election of Directors. EIGHTH: A. The Board of Directors may, if it deems it advisable, oppose a tender, or other offer for the Corporation's securities, whether the offer is in cash or in securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but it is not legally obligated to, consider any pertinent issues; by way of illustration, but not of limitation, the Board of Directors may, but shall not be legally obligated to, consider any and all of the following: 1. Whether the offer price is acceptable based on the historical and present operating results or financial condition of the corporation. 2. Whether a more favorable price could be obtained for the corporation's securities in the future. 3. The impact which an acquisition of the Corporation would have on its employees, depositors and customers of the Corporation and its subsidiaries in the community which they serve. 4. The reputation and business practices of the offeror and its management and affiliates as they would affect the employees, depositors and customers of the corporation and its subsidiaries and the future value of the corporation's stock. 5. The value of the securities, if any, which the offeror is offering in exchange for the corporation's securities, based on an analysis of the worth of the corporation as compared to the corporation or other entity whose securities are being offered. 6. Any antitrust or other legal and regulatory issues that are raised by the offer. B. If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose including, but not limited to, any and all of the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring the corporation's securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an anti-trust or other regulatory problem for the offeror; and obtaining a more favorable offer from another individual or entity. NINTH: No merger, consolidation, liquidation or dissolution of the Corporation, or any action that would result in the sale or other disposition of all or substantially all of the assets of the Corporation shall be valid unless first approved by the affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of Common Stock. This Article 9 may not be amended unless first approved by the affirmative vote of the holders of at least seventy-five percent (75%) of the outstanding shares of Common Stock. TENTH: Classification of Directors. The Directors shall be divided into three (3) classes, as nearly equal in number as possible, known as Class 1, consisting of not more than eight (8) Directors; Class 2, consisting of not more than eight (8) Directors; and Class 3, consisting of not more than nine (9) Directors. The initial Directors of Class shall serve until the third (3rd) annual meeting of shareholders. At the third (3rd) annual meeting of the shareholders, the Directors of Class 1 shall be elected for a term of three (3) years and, after expiration of such term, shall thereafter be elected every three (3) years for three (3) year terms. The initial Directors of Class 2 shall serve until the second (2nd) annual meeting of the shareholders. At the second (2nd) annual meeting of the shareholders, the Directors of Class 2 shall be elected for a term of three (3) years and, after the expiration of such term, shall thereafter be elected every three (3) years for three (3) year terms. The initial Directors of Class 3 shall serve until the first (1st) annual meeting of shareholders. At the first (1st) annual meeting of the shareholders the Directors of Class 3 shall be elected for a term of three (3) years and, after the expiration of such term, shall thereafter be elected every three (3) years for three (3) years terms. Each Director shall serve until his/her successor shall have been elected and shall qualify, even though his/her term of office as herein provided has otherwise expired, except in the event of his/her earlier resignation, removal or disqualification. 2 ELEVENTH: The Board of Directors shall consist of not less than five (5) nor more than twenty-five (25) shareholders, the exact number to be fixed and determined from time to time by resolution of a majority of the shareholders at any annual or special meeting thereof. TWELFTH: No holder of shares of any class or of any series of any class shall have any preemptive right to subscribe for, purchase or receive any shares of the corporation, whether now or hereafter authorized, or any obligations or other securities convertible into or carrying options to purchase any such shares of the corporation, or any options or rights to purchase any such shares or securities, issued or sold by the corporation for cash or any other form of consideration, and any such shares, securities or rights may be issued or disposed of by the Board of Directors to such persons and on such terms as the Board in its discretion shall deem advisable. EX-13 3 ANNUAL REPORT ACNB CORPORATION 1999 ANNUAL REPORT Generating Momentum Generating momentum in the labyrinth of business challenges. This is the goal of ACNB Corporation and its bank subsidiaries from 1999 through 2000. The 1999 Annual Report focuses on the forward-looking course set for ACNB Corporation, as a community banking organization, in the financial services marketplace. 1 Financial Highlights 1 Business Profile 2 Report to Stockholders 5 Generating Momentum 14 Index to Financial Information 15 Five-Year Financial Overview 16 Management's Discussion and Analysis 25 Independent Auditors' Report 26 Consolidated Financial Statements 30 Notes to Consolidated Financial Statements 46 Quarterly Results of Operations 46 Five-Year Financial Summary 47 Form 10-K Cross-Reference Index 48 Form 10-K 53 Common Stock Information 54 Board of Directors 55 Officers 56 Office Locations ACNB CORPORATION & SUBSIDIARIES 1999 ANNUAL REPORT FINANCIAL HIGHLIGHTS FOR THE YEAR 1999 1998 1997 - ----------------------------------------------------------------------------------------------- Net interest income $ 22,228,000 $ 22,076,000 $ 21,814,000 - ----------------------------------------------------------------------------------------------- Net income 7,823,000 7,725,000 7,770,000 - ----------------------------------------------------------------------------------------------- Cash dividends 4,908,000 4,519,000 4,274,000 - ----------------------------------------------------------------------------------------------- PER SHARE STATISTICS - ----------------------------------------------------------------------------------------------- Basic earnings $ 1.35 $ 1.33 $ 1.34 - ----------------------------------------------------------------------------------------------- Cash dividends .85 .78 .73 - ----------------------------------------------------------------------------------------------- Book value (year-end) 10.41 10.51 9.26 - ----------------------------------------------------------------------------------------------- AT YEAR-END - ----------------------------------------------------------------------------------------------- Total assets $545,952,000 $544,263,000 $508,211,000 - ----------------------------------------------------------------------------------------------- Total loans 347,787,000 352,355,000 358,294,000 - ----------------------------------------------------------------------------------------------- Total deposits 452,633,000 455,699,000 431,054,000 - ----------------------------------------------------------------------------------------------- Total stockholders' equity 59,863,000 61,118,000 57,454,000 - ----------------------------------------------------------------------------------------------- KEY RATIOS - ----------------------------------------------------------------------------------------------- Return on average stockholders' equity 12.88% 12.75% 13.78% - ----------------------------------------------------------------------------------------------- Return on average assets 1.42% 1.46% 1.53% - ----------------------------------------------------------------------------------------------- Dividend payout 63% 58% 55% - ----------------------------------------------------------------------------------------------- Stockholders' equity to assets 10.96% 11.23% 11.31% - -----------------------------------------------------------------------------------------------
BUSINESS PROFILE ACNB Corporation is a multi-bank holding company headquartered in Gettysburg, PA. Its two bank subsidiaries include Adams County National Bank, Gettysburg, PA, and Farmers National Bank of Newville, Cumberland County, PA. Both Adams County National Bank and Farmers Natonal Bank of Newville are commercial banks with a history of service and commitment to their respective communities. Through its bank subsidiaries, ACNB Corporation provides a wide array of consumer, commercial and fiduciary services to fulfill the financial needs of individuals, businesses, public entities, and community organizations in its trading area. Adams County National Bank serves its marketplace via a network of thirteen banking offices located throughout Adams County, PA, and in Hanover, York County, PA. Farmers National Bank of Newville operates three banking offices in the Newville, Cumberland County, PA, area. At December 31, 1999, ACNB Corporation had total assets of $546 million. On this same date, the bank subsidiaries employed 247 persons throughout all community banking offices and functional support areas. REPORT TO STOCKHOLDERS In the financial services industry today, it is critical to generate momentum for future growth and profitability. ACNB Corporation, like other community banking organizations, needs to move forward both in outlook and its business practices. It is not enough to offer just checking, savings and loans via traditional brick-and-mortar banking offices. Customers expect alternative investment products, additional service delivery channels, as well as enhanced access to their accounts twenty-four hours a day. These initiatives require an investment of both time and dollars. ACNB Corporation made these investments in 1999, and will continue to do so in 2000. Specifically, the Corporation--through its bank subsidiary of Adams County National Bank--entered into an agreement with Raymond James Financial Services, Inc. in October 1999. Customers, in an effort to attain their financial goals, can now choose from a full array of alternative investment products, as well as financial planning services, retirement account planning, and some insurance products. In December 1999, a contract was signed with an Internet banking service provider. This new product will be available for both retail and commercial customers in the Second Quarter of 2000 and will be accessible via the Web at www.acnb.com. Throughout 1999, a significant amount of staff time and resources was dedicated to the Year 2000 Project. And, although ACNB Corporation experienced no adverse impact during the century date change event, hours upon hours of effort were put forth across the organization. I would like to take this opportunity to express my sincere gratitude, as well as that of the ACNB Corporation Board of Directors, to the members of the Year 2000 Task Force, which was formed in 1996 and composed primarily of senior managers representing various functional areas. I would also like to personally thank all staff members for their individual roles in ensuring the viability of our business in this project. March 1, 1999, marked the consummation of the affiliation of Farmers National Bancorp, Inc. and its wholly-owned subsidiary, Farmers National Bank of Newville, with ACNB Corporation. As a multi-bank holding company, the Corporation posted 1999 earnings of $7,823,000--up from $7,725,000 for 1998. Strong profits resulted in a return on average assets and return on average stockholders' equity of 1.42% and 12.88%, respectively. ACNB Corporation's Board of Directors approved quarterly cash dividends totaling $.85 per share in 1999, which is an increase from the restated $.78 per share paid in 1998. In 1999 and 1998, the total cash dividends per share included an extra dividend of $.05 per share paid in the fourth ACNB Corporation & Subsidiaries 2 quarter of each year. With aggregate cash dividends in the amount of $4,908,000 for 1999, ACNB Corporation realized a dividend payout ratio of 63%. The Board of Directors also announced on October 20, 1999, the approval of a plan to repurchase, in open market and privately-negotiated transactions, up to 282,440 shares of ACNB Corporation common stock. The intent of the common stock repurchase program is to use available excess capital to fund the purchases for the benefit of the organization and its stockholders. Effective December 31, 1999, Thomas A. Ritter was appointed as Executive Vice President of both ACNB Corporation and Adams County National Bank. He had previously been associated with ACNB Corporation and Adams County National Bank as a member of the Boards of Directors since December 31, 1997. In his position as Executive Vice President, Mr. Ritter will assume responsibility for the overall management of the Corporation in the years ahead. At the Board level, Edgar S. Heberlig and Harry L. Wheeler joined ACNB Corporation's Board of Directors in conjunction with the affiliation of Farmers National Bancorp, Inc. as of March 1, 1999. Both of these gentlemen also continue to serve on the Board of Directors of Farmers National Bank of Newville. Mr. Heberlig and Mr. Wheeler began their directorships with Farmers National Bank of Newville in 1970 and 1987, respectively--thus bringing years of business and banking experience to ACNB Corporation. Further, due to ACNB Corporation's retirement policy for the Board of Directors, there will be four directors retiring from active service on the Boards of Directors of ACNB Corporation and Adams County National Bank as of the Corporation's Annual Meeting of Shareholders on May 2, 2000. These four persons, as well as their respective years of service to ACNB Corporation and predecessor institutions, include Richard L. Galusha, 38 years; Philip M. Jones, 21 years; Paul G. Pitzer, 33 years; and, L. Robert Snyder, 21 years. The longevity of service displayed by these individuals is reflective of their commitment to community banking in the local marketplace. Each of them will continue his association with the organization as Director Emeritus. As I mentioned last year in my message to you, the stockholders, I was elected to the Board of Directors of the American Bankers Association and was appointed to the Federal Advisory Council as a representative of the Third Federal Reserve District. I am now serving in my second year of a three-year term for each of these organizations. The American Bankers Association is the largest banking 3 ACNB Corporation & Subsidiaries trade association in the country, whose members include community, regional and money center banks and holding companies, as well as savings associations, trust companies, and savings banks. The Federal Advisory Council was created by the Federal Reserve Act of 1913 to be the principal conduit of information and views between the Federal Reserve Board of Governors and the banking system. In both roles, I represent the interests of the independent community bank in the financial services marketplace today while, simultaneously, being sensitive to the needs and issues for the entire industry. The learning and networking experiences garnered from my involvement with these two organizations has directly impacted, in a positive manner, my primary role as Chairman, President and Chief Executive Officer of ACNB Corporation and Adams County National Bank. Once again, for these opportunities, I am extremely honored to serve the industry at the national level and grateful for the continued encouragement of ACNB Corporation's Board of Directors to pursue these interests. In closing, we, at ACNB Corporation, have been in the process of generating momentum for the future success of our organization and its subsidiary banks--Adams County National Bank and Farmers National Bank of Newville. Each of these banks serves the customers in their respective and unique communities. Each of you, as stockholders, contributes to the advancement of these two community banks due to your ongoing investment in ACNB Corporation. In exchange, we constantly strive to maximize the return on your investment in our organization. Sincerely, /s/ Ronald L. Hankey ------------------------------- Ronald L. Hankey President ACNB Corporation & Subsidiaries 4 [GRAPHIC OMITTED] Generating Momentum generating momentum in the labyrinth of business challenges. This is the goal of ACNB Corporation and its bank subsidiaries from 1999 through 2000. Historically, prior to the initial moves during the 1980s towards deregulation of the product offerings and geographical boundaries for banks, the labyrinth board was steady, the marble's path was clear, and the maze walls were insurmountable. Banks were banks. Banks competed against other local banks. All banks offered the customer essentially the same products and services. Interest rates were controlled. Banking was not really much of a challenge. Nor was the maze much more than a single channel with bends and turns determined by the local economic environment. Today, the labyrinth in which banks do business encompasses the entirety of the financial services industry. The financial products offered by the industry are diverse. The competition is keen. The expectations of consumers are high. The workforce is tight. The demands of stockholders are real. In short, the labyrinth--called business--is fraught with challenges, both positive and negative, for all financial service providers in the marketplace. Banking is a business at ACNB Corporation. But, in recognizing the unsteadiness of the labyrinth board and the possibilities for wrong turns in negotiating the maze, ACNB Corporation enters 2000 positioned to move forward...beyond the conceptual box delineating traditional community bank products and delivery systems. Moving the marble forward in the channels of the business maze does not, however, mean that the Corporation's strong foundation as a community banking organization is lost at a turn. Quite the opposite, this commitment to remain a community banking organization is paramount in efforts to generate momentum for the future. [GRAPHIC OMITTED] Adams County celebrated its bicentennial on January 22, 2000. Two hundred years after its founding, Adams County is still growing. So is ACNB Corporation, which shares much of this history--tracing its origins to April 11, 1857. ACNB Corporation & Subsidiaries 6 GROWTH & EXPANSION Growth and expansion was attained by ACNB Corporation in its becoming a multi-bank holding company with the affiliation of Farmers National Bancorp, and its wholly-owned subsidiary, Farmers National Bank of Newville, as of March 1, 1999. This affiliation extends the Corporation's geographic presence beyond Adams County, PA, to the northwest into Cumberland County, PA. [GRAPHIC OMITTED] 7 ACNB Corporation & Subsidiaries The course in 1999 was set on four primary foci--growth and expansion, investments and brokerage, technology and commerce, as well as people and service. Growth and expansion was attained by ACNB Corporation in its becoming a multi-bank holding company with the affiliation of Farmers National Bancorp, Inc. and its wholly-owned subsidiary, Farmers National Bank of Newville, as of March 1, 1999. At year-end 1998, prior to the affiliation, ACNB Corporation was a single-bank holding company with $499 million in assets and Adams County National Bank as its sole and wholly-owned subsidiary. On December 31, 1999, ACNB Corporation had two bank subsidiaries--Adams County National Bank and Farmers National Bank of Newville--with assets of $546 million. Not only did this affiliation result in asset growth, as well as increased deposit and loan volumes, for ACNB Corporation, but there was also an expansion of the Corporation's trading area. Farmers National Bank of Newville operates three community banking offices in the Newville area, which extends the Corporation's geographic presence beyond Adams County, PA, to the northwest into Cumberland County, PA. Due to consumer wants and needs for higher yielding investments, the Corporation's subsidiary, Adams County National Bank, entered into an agreement with Raymond James Financial Services, Inc. in October 1999 to effectively fulfill these wants and needs. The firm of Raymond James Financial Services, Inc. is a leading full-service provider of financial services through community financial institutions. Engaged principally in the securities brokerage business, Raymond James Financial Services, Inc.--located at Adams County National Bank--offers financial planning services, retirement account planning, some insurance products, as well as a comprehensive line of investment products including bonds, fixed and variable annuities, mutual funds, and stocks. An on-site financial advisor, who is an employee of the Bank, provides investors with one-on-one guidance and assistance with respect to financial planning and [GRAPHIC OMITTED] Times change...and so have the worlds of business and banking. The constant, however, is the desire to invest for the future. ACNB Corporation strives to respond to the financial needs of both the commercial and retail customer today, just as in decades past. ACNB Corporation & Subsidiaries 8 INVESTMENTS & BROKERAGE ACNB Corporation's subsidiary, Adams County National Bank, entered into an agreement with Raymond James Financial Services, Inc. in October 1999. Through this firm and the guidance of an on-site financial advisor, investors can now secure financial planning services, retirement account planning, some insurance products, well as a comprehensive line of investment products. [GRAPHIC OMITTED] 9 ACNB Corporation & Subsidiaries investments. This personal attention ensures that each investor's preferences, with regard to portfolio risk, growth and income, are assessed prior to any purchase or sale transactions. New technology initiatives were not the highest priority in 1999 due to ACNB Corporation's Year 2000 Project, which was an enterprise-wide endeavor demanding the concerted effort of organizational resources. Nonetheless, the Corporation's subsidiary, Adams County National Bank, accomplished two significant technology-related objectives in the Fourth Quarter of 1999. First, the initial Web site design plan changed directions to become more than an on-line source of Bank information. This Web site, www.acnb.com, is now an Internet portal site with links to other sites of interest to consumers. The on-screen portal buttons include local news, national news, weather, stock reports, community events, as well as links to Web sites for community organizations, Civil War history, governmental agencies, financial information sources, and kids' education and entertainment. All are connected to the Bank's Web site with a simple click, or two, of the Internet user's mouse. Second, the Bank signed a contract with nFront, an Internet banking service provider. Upon the completion of this project in Second Quarter 2000, Adams County National Bank retail and business customers will be able to access their account information, conduct banking transactions, and pay bills on-line via the Internet. In the meantime, customers can be assured that security and privacy are key factors in the development and introduction of this new product delivery system, the purpose of which is to connect the customer to convenience. People are the generators of momentum. Service is the catalyst for momentum. ACNB Corporation is still an organization of people. And, the customers served are people. Providing financial services is essentially a people-to-people business...built upon trust and confidence. In the Corporation's view, there are both internal and external customers. There are the internal customers, the [GRAPHIC OMITTED] In 1900, RFD Carriers delivered information throughout Adams County by horse power. Today, information can be delivered worldwide almost instantaneously. ACNB Corporation utilizes technological advancements to enhance customer satisfaction and convenience in the delivery of financial services. ACNB Corporation & Subsidiaries 10 TECHNOLOGY & COMMERCE In 1999, ACNB Corporation's highest technology-related priority was the Year 2000 Project. Nonetheless, the Corporation's subsidiary, Adams County National Bank, introduced www.acnb.com - an Internet portal site with links to other Web sites of interest to consumers - and signed a contract with an Internet banking service provider for a targeted launch date of Second Quarter 2000. [GRAPHIC OMITTED] 11 ACNB Corporation & Subsidiaries employees, who support one another to serve the external customers, the users of banking products and delivery systems. A major initiative during 2000 will be the development of a program to renew and reinforce the organization's commitment to people and service. The path of the marble throughout the business labyrinth today is never straight and narrow. Rather, the course must adjust to shifts in the industry, the local marketplace, and the paradigms of doing business. It must curve to avoid competitive threats and other obstacles--or to benefit from its strengths and opportunities. And, sometimes, the course may be blocked, thus creating a new challenge. At ACNB Corporation, the course for 2000 is to grow and expand, not necessarily in terms of asset size or bricks and mortar. But, to grow and expand via alternative investment options, new technology-based delivery systems, and a strong resolve to further its commitment to serving both internal and external customers. This emphasis on growth, apart from the traditional, is predicated on the fundamental business strategies of enhancing customer relationships through retention and attraction, improving organizational productivity, embracing technology that adds value in the delivery of financial services, furthering the image of the bank subsidiaries in their respective communities, increasing profitability, and ensuring a return on the investment of stockholders in ACNB Corporation. Generating momentum in the labyrinth of business challenges is not easy. It takes hard work, dedication, and the synergy of many in the organization. It is easy to sit still in the maze...awaiting some movement that rolls the marble forward or backward at random. Unequivocally, ACNB Corporation is poised to compete as a community banking organization in the labyrinth of business during 2000. [GRAPHIC OMITTED] In the small retail shops of yesteryear, people were integral to serving each and every customer. Likewise, ACNB Corporation is still an organization of people. And, the customers served are people. Providing financial services is essentially a people-to-people business...built upon trust and confidence. ACNB Corporation & Subsidiaries 12 PEOPLE & SERVICE People are the generators of momentum. Service is the catalyst for momentum. In ACNB corporation's view, there are both internal and external customers. There are the internal customers, the employees, who support one another to serve the external customers, the users of banking products and delivery systems. [GRAPHIC OMITTED] 13 ACNB Corporation & Subsidiaries INDEX TO FINANCIAL INFORMATION Five-Year Financial Overview ............................................ 15 Management's Discussion and Analysis of Financial Condition and Results of Operations ................................................... 16-25 Independent Auditors' Report ............................................ 25 Consolidated Financial Statements Consolidated Statements of Condition at December 31, 1999 and 1998 ...................................................... 26 Consolidated Statements of Income for the years ended December 31, 1999, 1998 and 1997 ............................. 27 Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1999, 1998 and 1997 ............... 28 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 ............................. 29 Notes to Consolidated Financial Statements .............................. 30-45 Quarterly Results of Operations ......................................... 46 Five-Year Summary of Selected Financial Data ............................ 46 Form 10-K Cross-Reference Index ......................................... 47 Form 10-K ............................................................... 48-52 Common Stock Market Prices and Dividends ................................ 53 ACNB Corporation & Subsidiaries 14 [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points. FIVE-YEAR FINANCIAL OVERVIEW TOTAL DEPOSITS BASIC EARNNGS PER SHARE In millions of dollars In dollars 1999 ............. 452.6 1999 ................ 1.35 1998 ............. 455.7 1998 ................ 1.33 1997 ............. 431.1 1997 ................ 1.34 1996 ............. 438.5 1996 ................ 1.29 1995 ............. 425.1 1995 ................ 1.17 TOTAL LOANS DIVIDENDS PER SHARE In millions of dollars In dollars 1999 ............. 347.8 1999 ........... .85 1998 ............. 352.4 1998 ........... .78 1997 ............. 358.3 1997 ........... .75 1996 ............. 340.5 1996 ........... 1.56 1995 ............. 338.1 1995 ........... .61 RETURN ON AVERAGE ASSETS BOOK VALUE PER SHARE Percent In dollars 1999 ............. 1.42 1999 .............. 10.41 1998 ............. 1.46 1998 .............. 10.51 1997 ............. 1.53 1997 .............. 9.26 1996 ............. 1.50 1996 .............. 9.38 1995 ............. 1.38 1995 .............. 9.62 15 ACNB Corporation & Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION AND FORWARD-LOOKING STATEMENTS - -------------------------------------------------------------------------------- INTRODUCTION The following is management's discussion and analysis of the significant changes in the results of operations, capital resources and liquidity presented in its accompanying consolidated financial statements for ACNB Corporation, a bank holding company. Please read this discussion in conjunction with the 1999 Annual Report to ACNB Corporation stockholders. Current performance does not guarantee, assure, or indicate similar performance in the future. FORWARD-LOOKING STATEMENTS In addition to historical information, this 1999 Annual Report contains forward-looking statements. Forward-looking statements are subject to certain risks and uncertainties. Actual results may differ materially from those projected in the forward-looking statements. Important factors that might cause such a difference include, but are not limited to, those discussed in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations". We caution readers not to place undue reliance on these forward-looking statements. They only reflect management's analysis as of this date. The corporation does not revise or update these forward-looking statements to reflect events or changed circumstances. Please carefully review the risk factors described in other documents the corporation files from time to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q, to be filed by the corporation in 2000, and any Current Reports on Form 8-K filed by the corporation.
Comparative Average Balance Sheet and Net Interest Analysis - ------------------------------------------------------------------------------------------------------- December 31 ---------------------------------------- 1999 ---------------------------------------- ASSETS In thousands Balance Interest Rate - ------------------------------------------------------------------------------------------------------- Loans .................................................. $ 344,323 $ 27,137 7.88% Taxable investment securities .......................... 149,453 9,609 6.43% Non-taxable investment securities ...................... 8,485 350 4.12% Federal funds sold ..................................... 3,005 148 4.93% Interest bearing deposits with banks ................... 18,990 950 5.00% ------- --------- Total interest earning assets .......................... 524,256 $ 38,194 7.29% Cash and due from banks ................................ 18,366 Premises and equipment ................................. 4,779 Other assets ........................................... 6,653 Allowance for loan losses .............................. (3,594) --------- TOTAL ASSETS ........................................... $ 550,460 ========= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------------------------------------------------------------------------- Interest bearing demand deposits ....................... $ 67,191 $ 1,621 2.41% Savings deposits ....................................... 117,991 2,833 2.40% Time deposits (excluding time certificates of deposit of $100,000 or more) ...................................... 195,315 9,446 4.84% Time certificates of deposit of $100,000 or more ....... 21,469 1,093 5.09% Short-term borrowings .................................. 22,711 973 4.28% ------- --------- Total interest bearing liabilities ..................... 424,677 $ 15,966 3.76% - ------------------------------------------------------------------------------------------------------- INTEREST RATE SPREAD ................................... 3.53% - ------------------------------------------------------------------------------------------------------- Demand deposits ........................................ 60,363 Other liabilities ...................................... 4,678 Stockholders' equity ................................... 60,742 --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................... $ 550,460 ========= - ------------------------------------------------------------------------------------------------------- INTEREST INCOME/EARNING ASSETS ......................... $ 524,256 $ 38,194 7.29% INTEREST EXPENSE/EARNING ASSETS ........................ $ 524,256 $ 15,966 3.05% NET YIELD ON EARNING ASSETS ............................ $ 22,228 4.24% - -------------------------------------------------------------------------------------------------------
Loan fees of $451,000, $495,000 and $556,000 for 1999, 1998 and 1997, respectively, are included for rate calculation purposes. Average nonaccrual loans for 1999, 1998 and 1997 were $1,532,000, $1,641,000 and $1,207,000, respectively. ACNB Corporation & Subsidiaries 16 FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- EARNINGS PERFORMANCE Net income for the year ended December 31, 1999, was $7.8 million, and for the year ended 1998 was $7.7 million. Basic earnings per share were $1.35 in 1999 and $1.33 in 1998. We attribute the net income increase of $98,000 in 1999 to an increase of $152,000, or 6.9%, in the corporation's net interest income and a reduction in the provision for possible loan losses of $107,000, or 29.7%. These items were accompanied by an increase of $477,000 in total non-interest income. The corporation recorded net income of $7.7 million for the year ended December 31, 1998, compared to net income of $7.8 million in 1997. Basic earnings per share of $1.33 in 1998 compared to $1.34 per share in 1997. The $45,000 decrease in net income in 1998 was due to a $539,000, or 4.5%, rise in total non-interest expense. This was partially offset by an increase of $350,000, or 17.0%, in non-interest income. We intend, in the balance of this discussion and analysis, to provide details of the operating results, on a comparative basis, for each of the periods ended December 31, 1999, 1998 and 1997. NET INTEREST INCOME Net interest income is the difference between the interest and dividends earned on loans and investment securities (interest earning assets) and the interest paid on deposits and borrowings (interest bearing liabilities). Net interest income is affected principally by the spread between the yield on interest earning assets and the cost of interest bearing liabilities, as well as by the relative dollar amounts of such assets and liabilities. Net interest income was $22.2 million in 1999. This is an increase over net interest income of $22.1 million in 1998 and $21.8 million in 1997. The increase was the result of growth in average earning assets, which were up by $19.5 million, or 3.9%. The rise in 1998 reflected slower growth than 1999. Average earning assets increased by $18.3 million, or 3.8%, in 1998. The lessening of yields on earning assets, which happened at a greater rate than that on interest bearing liabilities, caused a lowering of the net interest margin from 4.49% in 1997 to 4.37% in 1998 to 4.24% in 1999. Interest from loans accounted for 71% of the corporation's interest income in 1999, as compared to 76% in 1998 and 77% in 1997. Interest and dividends on investments were $10.0 million in 1999, as compared to $8.6 million in 1998 and $8.1 million in 1997. The average yield on the taxable investment portfolio decreased to 6.43% for 1999, from 6.45% for the prior year. The yield decrease resulted largely from a downward shift in interest rates during 1998, which carried over into early 1999.
- ---------------------------------------------------------------------------------------- December 31 December 31 - --------------------------------------- ---------------------------------------- 1998 1997 - --------------------------------------- ---------------------------------------- Balance Interest Rate Balance Interest Rate - ---------------------------------------------------------------------------------------- $356,154 $ 29,176 8.19% $353,553 $29,123 8.24% 130,553 8,417 6.45% 117,433 7,949 6.77% 4,719 218 4.62% 4,151 194 4.67% 3,765 201 5.34% 2,979 162 5.44% 9,519 520 5.46% 8,256 459 5.56% -------- -------- ------- ------- 504,710 $ 38,532 7.63% 486,372 $37,887 7.79% 14,868 13,487 5,430 5,571 5,952 6,317 (3,450) (3,379) -------- -------- $527,510 $508,368 ======== ======== $ 60,985 $ 1,542 2.53% $ 55,534 $ 1,401 2.52% 114,348 3,007 2.63% 116,206 3,197 2.75% 192,327 9,936 5.17% 190,952 9,778 5.12% 20,891 1,113 5.33% 17,369 960 5.53% 19,380 858 4.43% 16,805 737 4.39% -------- -------- ------- ------- 407,931 $ 16,456 4.03% 396,866 $16,073 4.05% - ---------------------------------------------------------------------------------------- 3.60% 3.74% - ---------------------------------------------------------------------------------------- 55,076 51,366 3,935 3,736 60,568 56,400 - --------- -------- $527,510 $508,368 ======== ======== - ---------------------------------------------------------------------------------------- $504,710 $ 38,532 7.63% $486,372 $37,887 7.79% $504,710 $ 16,456 3.26% $486,372 $16,073 3.30% $ 22,076 4.37% $21,814 4.49% - ----------------------------------------------------------------------------------------
17 ACNB Corporation & Subsidiaries The Comparative Average Balance Sheet and Net Interest Analysis, a table found on pages 16 and 17, presents for the periods indicated the total dollar amount of interest income from average interest earning assets and resultant yields, as well as the interest expense on average interest bearing liabilities and the resultant costs, expressed both in dollars and rates. The average interest earning assets balance includes nonaccrual loans. Interest income includes interest from nonaccrual loans only to the extent that payments were received and to the extent that the corporation believes it will recover the remaining principal balance of the loan. Average balances are principally computed using a daily average balance during the period. The net yield on earning assets, which reflects the corporation's relative level of interest earning assets to interest bearing liabilities, is the difference between interest income on interest earning assets and interest expense on interest bearing liabilities, divided by average interest earning assets for the period. This table also shows the net interest income and the interest rate spread. Changes in the corporation's net interest income are a function of both changes in rates and changes in volumes of interest earning assets and interest bearing liabilities. The Analysis of Changes in Interest Income and Expense Due to Volume and Rate Changes, a table found on page 18, shows changes in interest income and expense for ACNB Corporation for the years indicated. For each category of interest earning assets and interest bearing liabilities, we provide data on the changes attributed to changes in rate (changes in rate multiplied by old volume) and changes in volume (changes in volume multiplied by old rate), with changes in rate volume (change in rate multiplied by change in volume) factored in proportionally. We compute the interest earning asset and interest bearing liability balances principally using daily average balances. NON-INTEREST INCOME Growth in non-interest income is one of the corporation's long-term strategies. Non-interest income for 1999 increased by $477,000, or 19.8%, compared to 1998, and increased by $350,000, or 17.0%, when 1998 is compared to 1997. In 1998, ACNB Corporation adjusted service fees on deposit accounts to reflect the marketplace more closely. This adjustment occurred in the second half of 1998 causing an increase to both 1998 and 1999 results. The largest part of the increase in non-interest income was the proceeds of a life insurance policy paid on the death of a key employee. The proceeds were $287,000, and amounted to 60% of the total increase in this category. Trust service income rose by $20,000, or 3.8%, in 1999 and by $10,000, or 1.9%, in 1998. The trust department engaged a financial advisor and registered principal who will work through Raymond James Financial Services, Inc. He was engaged in the fourth quarter of 1999, and should contribute to trust earnings in the first quarter of 2000. Year-to-date service fees on deposit accounts increased over the last two years due to improved average deposit growth and a reassessment of service fees. This took effect in September 1998, and was the main reason for the 11.3% improvement in service fees on deposit accounts in 1998 and the 9.5% improvement experienced in 1999. Average interest bearing liabilities were up 2.8% in 1998 and 4.1% in 1999. Average non-interest bearing demand deposits were up 7.2% in 1998 and 9.6% in 1999. NON-INTEREST EXPENSE Non-interest expense was $13.3 million in 1999, an increase of 4.9% compared to 1998. In 1998, non-interest expense was $12.7 million, reflecting an increase of 4.5% compared to 1997. The primary cause of the increase in non-interest expense is an increase in the other expenses. Personnel expense increased by $70,000, or 0.9%, in 1999, compared to 1998, and by $341,000, or 4.8%, in 1998, compared to 1997. The small increase in 1999 was due to normal merit raises and the retirement of several highly paid employees. Management studied the impact of the eventual retirement of certain loan officers. In anticipation of these retirements, the corporation decided not to add additional loan officers, but to evaluate the effect of the loss of these personnel and determine if the corporation could offset the loss through internal promotion. This was successful in controlling personnel costs for 1999. In addition to salary and employee benefit increases, there was a significant rise in other expenses. Costs were up by $498,000, or 18.9%, in 1999, compared to 1998, and by $81,000, or 3.2%, in 1998, compared to 1997. The increase in 1999 is attributable to increased pension insurance premiums of $31,000 caused by a change in plan year, litigation costs of $156,000, Farmers National Bancorp, Inc. acquisition costs and other holding company costs of $125,000, Y2K professional costs of $79,000, waived loan
Analysis of Changes in Interest Income and Expense Due to Volume and Rate Changes - ------------------------------------------------------------------------------------------------------------------------------- Year ended December 31 ---------------------------------------------------------------------------------------- 1999 versus 1998 1998 versus 1997 1997 versus 1996 Changes Due To Changes Due To Changes Due To ---------------------------------------------------------------------------------------- In thousands Volume Rate Net Volume Rate Net Volume Rate Net ---------------------------------------------------------------------------------------- Interest earned on: Loans ................................ $ (953) $(1,086) $(2,039) $ 216 $(163) $ 53 $1,384 $(196) $1,188 Taxable investment securities ........ 1,219 (27) 1,192 967 (499) 468 (404) 597 193 Non-taxable investment securities .... 158 (26) 132 18 6 24 40 4 44 Federal funds sold ................... (37) (16) (53) 39 -- 39 (37) 11 (26) Time deposits with banks ............. 478 (48) 430 71 (10) 61 (101) 31 (70) ---------------------------------------------------------------------------------------- Total Interest Earning Assets ........ $ 865 $(1,203) $ (338) $1,311 $(666) $ 645 $ 882 $ 447 $1,329 ---------------------------------------------------------------------------------------- Interest paid on: Interest bearing demand deposits ..... $ 154 $ (75) $ 79 $ 136 $ 5 $ 141 $ 86 $ 41 $ 127 Savings deposits ..................... 94 (268) (174) (45) (145) (190) (132) (19) (151) Time deposits ........................ 181 (691) (510) 280 31 311 (28) (54) (82) Short-term borrowings ................ 145 (30) 115 114 7 121 (65) (21) (86) ---------------------------------------------------------------------------------------- Total Interest Bearing Liabilities ... $ 574 $(1,064) $ (490) $ 485 $(102) $ 383 $ (139) $ (53) $ (192) ---------------------------------------------------------------------------------------- NET INTEREST EARNINGS ................ $ 291 $ (139) $ 152 $ 826 $(564) $ 262 $1,021 $ 500 $1,521 ----------------------------------------------------------------------------------------
ACNB Corporation & Subsidiaries 18 costs in consumer loan promotions, and several other unusual items that will probably not be repeated. FDIC insurance cost remained consistent with 1998. The cost for deposit insurance was $49,000 in 1999 and $48,000 in 1998. This cost may rise in 2000, as there were several notorious and expensive bank failures in 1999. OVERVIEW OF THE BALANCE SHEET During 1999, ACNB Corporation's total assets increased by $1.7 million. In 1998, total assets grew by $36.2 million, or 7.1%. Deposits were down $3.1 million in 1999. Loans were down $4.6 million with most of the runoff in residential mortgages. The corporation continues to compete with traditional rivals, including several local and nonlocal commercial banks, as well as nontraditional rivals, such as mortgage brokers and brokerage houses for deposits and for loans. The mix of assets and liabilities continues to change. Investment securities declined $7.7 million, or 4.8%, and loans fell $4.6 million, or 1.3%, in 1999 after decreasing by $5.8 million, or 1.6%, in 1998. Premises and equipment decreased by $353,000 in 1999 and by $473,000 in 1998, as fixed assets were depreciated faster than the value of new equipment placed in service. In addition, other real estate decreased by $79,000, or 31.6%, in 1999. On the liability side, non-interest bearing deposits were up by $1.0 million, or 1.6%, in 1999, and up by $6.7 million, or 12.5%, in 1998. Core deposits decreased in 1999 by a total of $4.0 million. Fiscal year 1998 showed an increase of $17.9 million, or 4.7%. Capital continued to be strong, though it decreased by $1.3 million, or 2.1%, in 1999. It increased by $3.7 million, or 6.4%, in 1998 due to internal earnings retention. The decrease in 1999 was caused by a loss in fair market value in securities available for sale and the beginning effects of a stock repurchase program. ASSET/LIABILITY ANDMARKET RISK MANAGEMENT - -------------------------------------------------------------------------------- INTEREST RATE RISK Managing interest rate risk is fundamental to banking. Banking institutions manage the inherently different maturity and repricing characteristics of the lending and deposit-taking lines of business to achieve a desired interest rate sensitivity position and to limit their exposure to interest rate risk. ACNB Corporation manages its balance sheet to achieve maximum stockholder value within the constraints of interest rate risk discipline, the maintenance of high credit quality, and sound leverage and liquidity positions. The primary objective of interest rate sensitivity management is to manage net interest income growth, while reducing exposure to the risks inherent in interest rate movements. MARKET RISK The Quantitative Disclosures of Market Risk, a table found on pages 20 and 21, provides information about the corporation's financial instruments used for purposes other than trading that are sensitive to changes in interest rates. For loans, securities and liabilities with contractual maturities, this table presents principal cash flows and related weighted-average interest rates by contractual maturities, as well as the corporation's historical experience relative to the impact of interest rate fluctuations on the prepayment of residential and home equity loans and mortgage-backed securities. For core deposits -- such as demand deposit, interest checking, savings and money market deposit accounts -- that have no contractual maturity, the table presents principal cash flows and, as applicable, related weighted-average interest rates based on the corporation's historical experience, management's judgment, and statistical analysis, as applicable, concerning their most likely withdrawal behaviors. Different assumptions would result in a change in cash flows and a change in results. Also, ACNB Corporation uses a simulation model as another method of measuring interest rate risk. The simulation model, because of its dynamic nature, forecasts the effects of future balance sheet trends, changing slopes of the yield curve, different patterns of rate movements, and changing relationships between rates. The results of the simulation analysis are used by management to evaluate possible corrective actions to reduce any negative impact on the net interest margin. Traditionally, the investment portfolio is used to alter the interest rate sensitivity of the corporation. This is accomplished by holding fixed-rate debt instruments in the securities portfolio. During 1999 and 1998, ACNB Corporation lengthened the maturity of prime rate loans, added fixed-rate mortgages with a maturity of 15 years or less to the loan portfolio, and continued to purchase mortgage-backed securities; thus, restructuring the asset sensitive position resulting from a short maturity investment portfolio. LIQUIDITY MANAGEMENT Liquidity management involves planning to meet anticipated funding needs at a reasonable cost, as well as contingency plans to meet unanticipated funding needs or a loss of funding sources. Liquidity management is governed by policies formulated and monitored by senior management, which take into account the marketability of assets, the sources and stability of funding, and the level of unfunded commitments. Long-term liquidity needs are provided by a large core deposit base. This is the most stable source of liquidity for a bank because of the long-term relationship with depositors and the deposit insurance provided by the FDIC. In 1999, 83% of total assets were funded by core deposits and 5% were funded with short-term purchased funds, compared to 84% and 4%, respectively, in 1998. ACNB Corporation belongs to the Federal Home Loan Bank of Pittsburgh. This membership serves the dual purposes of emergency and long-term liquidity. The corporation's borrowing capacity with the Federal Home Loan Bank stood at $197 million at year-end 1999. Parent company liquidity is maintained by the cash flow from dividends received from the subsidiary banks. Dividends from the subsidiary banks are the corporation's primary source of funds to pay dividends to the corporation's shareholders. The amount of dividends paid by the subsidiary banks is subject to certain regulatory restrictions, detailed in Note L of the Notes to Consolidated Financial Statements, "Restrictions on Subsidiary Dividends, Loans and Advances". The parent company financial statements are presented in Note Q of the Notes to Consolidated Financial Statements, "ACNB Corporation (Parent Company Only) Financial Information". OFF-BALANCE SHEET FINANCIAL INSTRUMENTS In the normal course of business, ACNB Corporation does not use off-balance sheet financial instruments to hedge potential fluctuations in income or market values. The corporation's off-balance sheet items consist solely of loan commitments and letters of credit. 19 ACNB Corporation & Subsidiaries LOAN REVIEW AND ALLOWANCE FOR LOAN LOSS ANALYSIS - -------------------------------------------------------------------------------- GENERAL ACNB Corporation's lending activities are carried on through the subsidiary banks. As of December 31, 1999, the corporation's total loan portfolio, carried at historical cost, of $348 million included: o $218.7 million in mortgage loans, secured by liens on one-to-four family residential properties; o $89.6 million in mortgage loans secured by commercial properties, such as apartment buildings, office buildings, warehouses, and medical office buildings; o $13.2 million in construction loans; o $13.8 million in consumer loans; and, o $12.7 million in commercial and agricultural credits. In originating loans, the corporation must compete with savings banks, savings and loan associations, other commercial banks, mortgage companies, and credit unions. The corporation's lending activities are heavily influenced by economic trends affecting the availability of funds and by general interest rate levels. More specifically, the condition of the construction industry and the demand for housing have a direct impact on residential lending volumes. RESIDENTIAL REAL ESTATE LOANS The corporation makes a full range of residential loans, including conventional fixed-rate loans and adjustable-rate mortgage loans, available to borrowers in its primary consumer market area. Adjustable-rate mortgages are advantageous to the corporation because adjustable-rate loans are a closer match to the repricing of the corporation's core deposits. However, the corporation's ability to originate ARMs, in lieu of fixed-rate loans, varies in response to changes in market interest rates. ARMs are often refinanced to fixed-rate loans when market interest rates fall, which leads to runoff in the corporation's loan portfolio. With the rise in interest rates in 1994 and 1995, ARMs comprised a larger share of total originations and the corporation's portfolio resumed its long-term growth. In 1997, 1998 and 1999, ACNB Corporation suffered runoff in its residential adjustable-rate mortgage portfolio. Currently, ARMs are indexed to the Federal Housing Finance Board's Contract Rate for Major Lenders and One-Year U.S. Treasury Bills with constant maturity, and have limits on annual increases of 2% over the prior year's rate. All of the corporation's residential mortgage lending is subject to nondiscriminatory underwriting standards, and most is subject to loan origination and documentation procedures acceptable to the secondary market. Residential mortgage loans are originated using standard Federal National Mortgage Association and Federal Home Loan Mortgage Corporation applications and appraisal forms. All loans are subject to underwriting review and approval by various levels of bank personnel, depending upon the size of the loan. Residential loan applications come in through various channels, primarily via a network of 16 community banking offices. However, all residential loans are currently originated by the subsidiary banks, and mortgage insurance is required on all residential loans originated at a loan-to-value ratio over 85%. In addition to interest earned on loans, the corporation receives fees for originating loans and for providing loan commitments. The corporation also assesses fees for loan modifications, late payments, changes of property ownership, and other miscellaneous services, as well as receives fees for the servicing of loans for others. RESIDENTIAL CONSTRUCTION LOANS The corporation provides financing for two different categories of residential construction loans. A custom construction loan is made to the intended occupant of a house to finance its construction. Speculative construction loans are made to borrowers who are in the business of building homes for resale. Speculative construction loans are made on a house-by-house basis, and not as lines of credit to builders. This type of construction loan involves somewhat more risk than custom construction loans, and the corporation uses different underwriting considerations. All construction loans require approval by various levels of bank personnel, depending upon the size of the loan. Construction loans for nonconforming residential properties, which are properties other than single-family detached houses, are subject to more stringent approval requirements.
Quantitative Disclosures of Market Risk - ------------------------------------------------------------------------------------------ Principal Amount Maturing In -------------------------------------------- RATE SENSITIVE ASSETS In thousands 2000 2001 2002 - ------------------------------------------------------------------------------------------ Fixed interest rate loans $ 10,188 $10,178 $10,738 Average interest rate 9.01% 8.46% 7.84% Variable interest rate loans $ 49,450 $43,503 $44,749 Average interest rate 7.50% 7.99% 7.42% Fixed interest rate securities $ 4,579 $20,412 $13,508 Average interest rate 5.88% 6.07% 6.07% Variable interest rate securities $ 60 $ 66 $ 75 Average interest rate 5.45% 5.45% 5.45% Other interest bearing assets $ 5,550 $ -- $ -- Average interest rate 5.50% 0.00% 0.00% RATE SENSITIVE LIABILITIES - ------------------------------------------------------------------------------------------ Non-interest bearing checking $ 15,428 $13,885 $13,885 Average interest rate 0.00% 0.00% 0.00% Savings and interest bearing checking $ 9,285 $53,635 $53,635 Average interest rate 2.48% 2.29% 2.29% Time deposits $154,248 $30,149 $16,051 Average interest rate 4.61% 5.34% 5.56% Variable interest rate borrowings $ 14,913 $ 4,474 $ 4,474 Average interest rate 4.63% 4.63% 4.63%
[Right-Hand side of TABLE cont. on p. 21] ACNB Corporation & Subsidiaries 20 COMMERCIAL REAL ESTATE LOANS In all commercial real estate lending, the corporation considers the location, marketability and overall attractiveness of the project. ACNB Corporation underwriting guidelines on commercial real estate loans currently require an economic analysis of each property, with regard to the annual revenue and expenses, debt service coverage and fair market value, to determine the maximum loan amount. Commercial real estate loans require approval by various levels of bank personnel, depending upon the size of the loan. Commercial real estate lending generally entails greater risks than residential mortgage lending. This form of lending typically involves large loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties usually depends on the successful operation of the related real estate project and, thus, may be subject, to a greater extent, to adverse conditions in the real estate market or in the general economy. In order to monitor its commercial real estate loan portfolio, the corporation periodically inspects real estate collateral based upon the loan risk classification, the loan size, and the location of the collateral; analyzes the economic condition of markets in which the corporation has a geographic concentration; and, reviews operating statements and rent rolls, updated financial and tax statements of borrowers, evidence of insurance coverage, and evidence that real estate taxes have been paid. These procedures are designed to analyze the economic viability of the property, as well as to determine whether or not the debt service coverage and loan-to-value ratios remain consistent with the corporation's underwriting policies. It is the practice of management to perform a continual review of the commercial real estate loan portfolio in light of the condition of the real estate market. Based upon the above procedures, the corporation classifies loans that fall below underwriting standards into various risk or watch categories. MANUFACTURED HOUSING, SECOND MORTGAGE AND OTHER CONSUMER LOANS The corporation offers consumer loan programs that include the following: o manufactured housing loans; o second mortgage loans for a variety of purposes, including purchase, renovation, or remodeling of property, and for uses unrelated to the security; o loans for the purchase of automobiles, pleasure boats, and recreational vehicles; o student loans; and, o loans for general household purposes, including home equity lines of credit. Consumer loans, in addition to being an important part of the corporation's orientation toward consumer financial services, promote greater net interest income stability because of the somewhat shorter maturities and faster prepayment characteristics. Lending in this area may involve special risks, including decreases in the value of collateral and transaction costs associated with foreclosure and repossession. Consumer loans are generally secured loans and are made based upon an evaluation of the collateral and the borrower's creditworthiness, including such factors as income, other indebtedness, and credit history. Secured consumer loan amounts typically do not exceed 85% of the value of the collateral, less the outstanding balance of any first mortgage loan. Lines of credit are subject to periodic review, revision and, when deemed appropriate by the corporation, cancellation as a result of changes in the borrower's financial circumstances. ASSET QUALITY Banks are required to review their assets on a regular basis, and to classify them if certain weaknesses are noted. Adequate allowances must be maintained for assets classified as substandard or doubtful. Any assets classified as a loss must be written off immediately. The corporation has a comprehensive process for classifying assets, and asset reviews are performed on a quarterly basis. The objective of the review process is to identify any trends and to determine the levels of loss exposure to evaluate the need for an adjustment to the allowance account. Classified assets consist of: o nonaccrual loans; o loans under foreclosure; o other real estate owned, or OREO; and, o performing loans and securities that exhibit credit quality weaknesses. The principal measures of asset problems are: o the levels of nonaccruing loans; o loans under foreclosure; o other real estate owned; o the size of the provision for loan losses; o loan charge-offs; and, o the size of the write-downs in the value of other real estate owned. Management ceases to accrue interest income on any [RESTUBBED TABLE CONT. FROM p. 20]
Quantitative Disclosures of Market Risk - -------------------------------------------------------------------------------------------------------------------------------- Principal Amount Maturing In Fair Value ---------------------------------------------------------------- December 31, RATE SENSITIVE ASSETS In thousands 2003 2004 Thereafter TOTAL 1999 - -------------------------------------------------------------------------------------------------------------------------------- Fixed interest rate loans $ 8,910 $ 5,910 $ 26,404 $ 72,328 $ 71,837 Average interest rate 7.61% 7.66% 8.15% 8.16% Variable interest rate loans $ 24,960 $15,483 $ 97,314 $275,459 $270,272 Average interest rate 6.76% 6.79% 7.36% 7.41% Fixed interest rate securities $ 8,205 $ 3,100 $105,952 $155,756 $151,502 Average interest rate 5.91% 6.37% 6.49% 6.35% Variable interest rate securities $ 84 $ 93 $ 354 $ 732 $ 732 Average interest rate 5.45% 5.45% 5.45% 5.45% Other interest bearing assets $ -- $ -- $ -- $ 5,550 $ 5,550 Average interest rate 0.00% 0.00% 0.00% 5.50% RATE SENSITIVE LIABILITIES - -------------------------------------------------------------------------------------------------------------------------------- Non-interest bearing checking $ 6,171 $ 6,171 $ 6,171 $ 61,711 $ 61,711 Average interest rate 0.00% 0.00% 0.00% 0.00% Savings and interest bearing checking $ 16,326 $16,326 $ 32,880 $182,087 $182,087 Average interest rate 2.27% 2.27% 2.27% 2.29% Time deposits $ 7,387 $ -- $ 1,000 $208,835 $208,881 Average interest rate 5.16% 0.00% 5.50% 4.81% Variable interest rate borrowings $ 2,983 $ 2,983 $ -- $ 29,827 $ 29,827 Average interest rate 4.63% 4.63% 0.00% 4.63%
21 ACNB Corporation & Subsidiaries loan that becomes 90 days or more delinquent and is not in the process of collection. Thereafter, interest income is accrued only if and when, in management's opinion, projected cash proceeds are deemed sufficient to repay both principal and interest. All loans on which interest is not being accrued are referred to as loans on nonaccrual status. Nonperforming loans include loans on which payment is 90 days or more delinquent, whether or not interest is still being accrued. The Nonperforming Assets Analysis, a table found on page 22, presents figures relative to nonperforming assets and net charge-offs for 1999 and 1998. Real estate that served as security for a defaulted loan and that then became other real estate owned is recorded on the corporation's books at the lower of the outstanding loan balance or fair market value, the determination of which takes into account the effect of sales and financing concessions that may be required to market the property. If management's estimate of fair market value at the time a property becomes OREO is less than the loan balance, the loan is written down at that time by a charge to the allowance for loan losses. OREO currently consists of three properties valued at $171,000 as of December 31, 1999, down from $250,000 at December 31, 1998. One of these properties has been sold, but must be reported as OREO until the terms, under which it was disposed of, meet current regulatory standards. The remaining properties are general real estate with an appraised value in excess of book value and less than $100,000 per property. PROVISION FOR LOAN LOSSES AND ALLOWANCE FOR LOAN LOSSES The provision for loan losses is based upon management's continuing analysis of certain factors underlying the quality of the loan portfolio. These factors include: o changes in the size and composition of the portfolio; o historical loan loss trends; o the industry's loss experience; and, o current and anticipated economic conditions. To determine adequacy of the allowance for loan losses, the corporation reviews its loan portfolio for specific weaknesses. A portion of the allowance is then allocated to reflect the potential loss exposure of those specific weaknesses. When the corporation confirms that specific loans or portions of loans are uncollectible, these amounts are charged against the allowance for loan losses. The existence of some or all of the following criteria generally confirms that a loss has been incurred: o the loan is significantly delinquent and the borrower has not evidenced the ability or intent to bring the loan current; o the corporation has no recourse to the borrower or, if it does, the borrower has insufficient assets to pay the debt; or, o the fair market value of the loan collateral is significantly below the current loan balance, and there is little or no near-term prospect for improvement. Residential real estate and consumer loans are not individually analyzed for loss exposure because of the significant number of loans, their relatively small balances, and historically low level of losses. The Allocation of the Allowance for Loan Losses is presented in Note E of the Notes to Consolidated Financial Statements, "Allowance for Loan Losses". This table shows a breakdown of the allowance as it applies to different types of loans in the portfolio. CAPITAL MANAGEMENT - -------------------------------------------------------------------------------- During 1999, ACNB Corporation's capital decreased by $1.3 million, or 2.1%. During 1998, the capital base increased by $3.7 million, or 6.4%. At year-end 1999, the risk-based capital ratios of Tier 1 capital and Total capital were 19.54% and 20.68%, which exceed the minimum ratios required by the Federal Reserve Board. Capital ratios are highlighted in a table, Capital Ratios at Year-End, on page 23. Capital management is an ongoing process, which consists of providing equity and long-term debt for current and future financial positioning. ACNB Corporation manages its capital as set forth in its strategic business plan and to support its growth and investments. ACNB Corporation and its banks are subject to the capital adequacy guidelines of various federal banking agencies, such as the Federal Reserve Board and the Office of the Comptroller of the Currency. At December 31, 1999, the corporation and banks were in compliance with the capital requirements of these regulatory agencies. Management expects them to remain in compliance with these capital requirements in the future. Federal banking regulators have set the minimum capital ratios for a well-capitalized banking institution at 6% Tier 1 capital, 10% Total capital, and 5% Tier 1 leverage. At December 31, 1999, the capital ratios of the corporation exceeded these levels. Management expects the corporation's ratios to remain in excess of the minimum ratios required of a well-capitalized institution. The corporation's quarterly common stock cash dividend remained at $.20 per share during 1999, with a special dividend of $.05 per share during the fourth quarter for a total of $.85 per share. Annual dividends per share during 1998 were $.78, which also included a $.05 special dividend. The corporation's total stockholders' equity at December 31, 1999, was $59.9 million, or 10.96% of total assets, compared with $61.1 million, or 11.23% of total assets, at December 31, 1998. The decrease in capital is the result of unrealized losses on securities of $2,233,000; repurchase of dissenters' shares concerning the Farmers National Bancorp, Inc. acquisition of $624,000; excess purchase price of Farmers National Bancorp, Inc. over book value of $1,026,000; and, repurchase of ACNB Corporation shares of $605,000.
Nonperforming Assets Analysis - --------------------------------------------------------------------------------------------------------------------- Year ended December 31 ----------------------------------------------------------------------- 1999 1998 ------------------------------- ------------------------------- Nonperforming Net Nonperforming Net In thousands Assets Charge-offs Assets Charge-offs ------------------------------- ------------- ----------- Real estate loans (1-to-4 family dwellings) $2,506 $ 43 $1,802 $ (12) Real estate loans (other) 988 50 1,776 4 Commercial and industrial -- 53 83 20 Consumer 41 158 139 104 ------ ------ ------ ----- TOTAL $3,535 $ 304 $3,800 $ 116 ====== ====== ====== =====
ACNB Corporation & Subsidiaries 22 YEAR 2000 ISSUE - -------------------------------------------------------------------------------- CORPORATION'S STATE OF READINESS The Year 2000 (Y2K) Problem was the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems would have been unable to interpret dates beyond the year 1999, which would have caused a system failure or other computer errors, leading to disruptions in operations. If not corrected, many computer applications could have failed or created erroneous results by or at the Year 2000. This could have caused entire system failures, miscalculations, and disruptions of normal business operations including, among other things, a temporary inability to process transactions, send statements, or engage in similar day-to-day business activities. The corporation developed a five-phase program for Y2K information and non-information systems compliance, which included the following: 1. Awareness Phase o Establish Year 2000 Task Force. o Define Year 2000 Problem. o Develop Year 2000 Plan and Strategy. This phase was completed as of December 31, 1997. 2. Assessment Phase o Identify and inventory information systems, technology items, computer programs, business partners, environmental systems, and data communication links. o Prioritize mission critical systems. o Obtain vendor certifications for software, hardware, and outsourced service providers. o Assess impact of Year 2000. This phase was completed December 31, 1998. 3. Renovation Phase o Implement hardware and software upgrades. o Replace systems and technology items. o Monitor vendor and service provider progress. This phase was substantially completed as of December 31, 1998. 4. Validation Phase o Develop testing plan and strategy. o Establish test environment(s). o Test internal information systems, technology items, computer programs, environmental systems, and data communication links. o Test with and/or monitor testing of vendors and service providers. This phase began in May 1998 and was substantially completed as of June 30, 1999. 5. Implementation Phase o Implement Y2K compliant systems and technology items. This phase began in December 1997 and continued through October 29, 1999. Based upon an ongoing assessment, the corporation determined that it was required to modify or replace portions of its hardware and software so that its computer systems would properly use dates beyond December 31, 1999. The corporation believes that as a result of modifications to existing software and hardware and conversions to new software, the Year 2000 Problem was mitigated. COSTS OF YEAR 2000 The total cost to implement the five-phase program was approximately $394,000. Internal costs approximated $188,000, while outside consultants for legal work, contingency planning, and verification of testing approximated $206,000. Costs in 1998 were $169,000, with $119,000 being internal costs with very little cash outlay that were absorbed by current operations. $50,000 was spent on consultant and legal work in 1998. Fiscal year 1999 expenses were budgeted at $108,000 for internal costs and $140,000 for consultant and legal work. There was a shift in personnel, which required more work to be outsourced at higher costs in 1999. With actual costs of $169,000 in 1998 and $225,000 for 1999, the financial impact to the corporation of Year 2000 compliance has not been and is not anticipated to be material to the corporation's financial position or results of operations in any given year. Risks of Year 2000 Management believes it has remedied the corporation's systems, programs and applications. The Year 2000 computer problem created risk for the corporation from unforeseen problems in its own computer systems and from third-party vendors who provide the majority of mainframe and PC-based computer applications. Failure of third-party systems relative to the Y2K issue could have had a material impact on the corporation's ability to conduct business. Other Year 2000 Endeavors ACNB Corporation also undertook other endeavors to address the challenges of the Year 2000 Problem. These included: 1. Stakeholder Communications o Customer awareness program. o Bank employee communications and training. o Corporation shareholder communications. 2. Commercial Customer Credit Risk Control Process o Due diligence process for current and future material customers. o Assessment of customer Year 2000 readiness. 3. Fiduciary Client Risk Control Process o Due diligence process for fiduciary account and asset administration servicers including investment providers, third parties, counterparties and transfer agents. o Assessment of servicer Year 2000 readiness. During the fourth quarter of 1999, ACNB Corporation increased cash reserves for anticipated customer withdrawals by approximately $12 million. These funds were found to be unnecessary and returned to the Federal Reserve Bank of Philadelphia within the first week following the Y2K rollover event and promptly reinvested. As of February 29, 2000, ACNB Corporation has suffered no disruptions due to the Year 2000 issue. In addition, a verification process was initiated in January 2000 to determine the effect of the Year 2000 event on commercial loan customers. As of February 29, 2000, there have been no reported incidences of significance from loan officers or customers that a negative Y2K event has occurred. Capital Ratios at Year-End - ------------------------------------------------------------------------- 1999 1998 ---- ---- Common stockholders' equity to assets 10.96% 11.23% Tier 1 leverage ratio 10.88% 11.71% Tier 1 risk-based capital ratio 19.54% 19.55% Total risk-based capital ratio 20.68% 20.74% 23 ACNB Corporation & Subsidiaries REGULATORY ACTIVITY Recently, Pennsylvania enacted a law that permits state-chartered banking institutions to sell insurance. This follows the U.S. Supreme Court decision in favor of nationwide insurance sales by banks, which also bars states from blocking insurance sales by national banks in towns with populations of no more than 5,000. The Office of the Comptroller of the Currency has issued guidelines for national banks to sell insurance. The corporation is evaluating its options regarding the sale of insurance. Congress repealed the Glass-Steagall Act, which prohibits commercial banks from engaging in the securities industry. Consequently, equity underwriting activities of banks may increase in the near future. The corporation does not currently anticipate entering into these activities. FINANCIAL SERVICES MODERNIZATION LEGISLATION On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act of 1999, also called the Financial Services Modernization Act. The Financial Services Modernization Act repeals the two affiliation provisions of the Glass-Steagall Act: o Section 20, which restricted the affiliation of Federal Reserve Member Banks with firms "engaged principally" in specified securities activities; and, o Section 32, which restricted officer, director or employee interlocks between a member bank and any company or person "primarily engaged" in specified securities activities. In addition, the Financial Services Modernization Act contains provisions that expressly preempt any state insurance law. The general effect of the law is to establish a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the Bank Holding Company Act framework to permit a holding company system to engage in a full range of financial activities through a new entity known as a Financial Holding Company. "Financial activities" is broadly defined to include not only banking, insurance and securities activities, but also merchant banking and additional activities that the Federal Reserve, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally. In brief, the Financial Services Modernization Act: o Repeals historical restrictions on, and eliminates many federal and state law barriers to, affiliations among banks, securities firms, insurance companies, and other financial service providers; o Provides a uniform framework for the functional regulation of the activities of banks, savings institutions, and their holding companies; o Broadens the activities that may be conducted by national banks, banking subsidiaries of bank holding companies, and their financial subsidiaries; o Provides an enhanced framework for protecting the privacy of consumer information; o Adopts a number of provisions related to the capitalization, membership, corporate governance, and the other measures designed to modernize the Federal Home Loan Bank system; o Modifies the laws governing the implementation of the Community Reinvestment Act (CRA); and, o Addresses a variety of other legal and regulatory issues affecting both day-to-day operations and long-term activities of financial institutions. In order for the corporation to take advantage of the ability to affiliate with other financial services providers, the corporation must become a Financial Holding Company, as permitted under an amendment to the Bank Holding Company Act. To become a Financial Holding Company, the corporation would file a declaration with the Federal Reserve, electing to engage in activities permissible for Financial Holding Companies and certifying that it is eligible to do so because all of its insured depository institution subsidiaries are well-capitalized and well-managed. In addition, the Federal Reserve must determine that each insured depository institution subsidiary of the corporation has at least a "satisfactory" CRA rating. The corporation currently meets the requirements to make an election to become a Financial Holding Company. The corporation's management has not determined at this time whether it will seek an election to become a Financial Holding Company. The corporation is examining its strategic business plan to determine whether, based on market conditions, the relative financial conditions of the corporation and its subsidiaries, regulatory capital requirements, general economic conditions, and other factors, the corporation desires to utilize any of its expanded powers provided in the Financial Services Modernization Act. The Financial Services Modernization Act also permits national banks to engage in expanded activities through the formation of financial subsidiaries. A national bank may have a subsidiary engaged in any activity authorized for national banks directly or any financial activity, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which may only be conducted through a subsidiary of a Financial Holding Company. Financial activities include all activities permitted under new sections of the Bank Holding Company Act or permitted by regulation. A national bank seeking to have a financial subsidiary, and each of its depository institution affiliates, must be "well-capitalized" and "well-managed". The total assets of all financial subsidiaries may not exceed the lesser of 45% of a bank's total assets or $50 billion. A national bank must exclude from its assets and equity all equity investments, including retained earnings, in a financial subsidiary. The assets of the subsidiary may not be consolidated with the bank's assets. The bank must also have policies and procedures to assess financial subsidiary risk and to protect the bank from such risks and potential liabilities. The corporation and the subsidiary banks do not believe that the Financial Services Modernization Act will have a material adverse effect on our operations in the near term. However, to the extent that it permits banks, securities firms, and insurance companies to affiliate, the financial services industry may experience further consolidation. The Financial Services Modernization Act is intended to grant to community banks certain powers as a matter of right that larger institutions have accumulated on an ad hoc basis. Nevertheless, this act may have the result of increasing the amount of competition that the ACNB Corporation & Subsidiaries 24 corporation and the subsidiary banks face from larger institutions and other types of companies offering financial products, many of which may have substantially more financial resources than the corporation. From time to time, various types of federal and state legislation have been proposed that could result in additional regulation of, and restrictions on, the business of the corporation and the banks. Management cannot predict whether such legislation will be enacted or, if enacted, how the legislation would affect the business of the corporation and the banks. As a consequence of the extensive regulation of commercial banking activities in the United States, the corporation's and the banks' business is particularly susceptible to being affected by federal legislation and regulations that may increase the cost of doing business. Except as specifically described above, management believes that the impact of the provisions of the aforementioned legislation on the liquidity, capital resources, and results of operations of the corporation will be immaterial. Management is not aware of any other current specific recommendations by regulatory authorities or proposed legislation, which, if they were implemented, would have a material adverse effect upon the corporation's liquidity, capital resources, or results of operations, although the general cost of compliance with numerous and multiple federal and state laws and regulations does have, and in the future may have, a negative impact on the corporation's results of operations. The business of the corporation is also affected by the state of the financial services industry in general. As a result of legal and industry changes, management predicts that the industry will continue to experience an increase in consolidations and mergers as the financial services industry strives for greater cost efficiencies and market share. Management also expects increased diversification of financial products and services offered by the corporation and its competitors. Management believes that such consolidations and mergers, as well as the expanded diversification of products and services, may enhance its competitive position as a community banking organization. INDEPENDENT AUDITORS' REPORT To The Stockholders and Board of Directors Stambaugh o Ness ACNB Corporation ----------------------------- Gettysburg, Pennsylvania CERTIFIED PUBLIC ACCOUNTANTS We have audited the accompanying consolidated statements of condition of ACNB Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ACNB Corporation and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. Stambaugh o Ness, P.C. York, Pennsylvania January 14, 2000 25 ACNB Corporation & Subsidiaries CONSOLIDATED STATEMENTS OF CONDITIONS
December 31 --------------------------- ASSETS In thousands 1999 1998 - ------------------------------------------------------------------------------------------------------------ Cash and due from banks...................................................... $ 29,840 $ 16,728 Interest bearing deposits with banks......................................... 3,839 4,075 Investment securities (fair value $152,234 and $162,414, respectively)........................... 153,105 160,762 Federal funds sold........................................................... 1,711 2,718 Mortgage loans held for sale................................................. 433 504 Loans (net of unearned discount of $0 and $22, respectively)..................... 347,354 351,851 Allowance for possible loan losses........................................... (3,543) (3,594) -------- --------- Net loans.................................................................... 343,811 348,257 Premises and equipment....................................................... 4,524 4,877 Other real estate............................................................ 171 250 Other assets................................................................. 8,518 6,092 -------- -------- TOTAL ASSETS................................................................. $545,952 $544,263 ======== ======== LIABILITIES - ----------------------------------------------------------------------------------------------------------- Non-interest bearing deposits................................................ $ 61,711 $ 60,744 Interest bearing deposits.................................................... 890,922 394,955 -------- -------- TOTAL DEPOSITS............................................................... 452,633 455,699 Securities sold under agreement to repurchase................................ 29,377 22,658 Demand notes, U.S. Treasury.................................................. 450 100 Other liabilities............................................................ 3,629 4,688 -------- -------- TOTAL LIABILITIES............................................................ 486,089 483,145 STOCKHOLDERS' EQUITY - ----------------------------------------------------------------------------------------------------------- Common stock (par value $2.50; 20,000,000 shares authorized; 5,748,732 and 5,783,567 issued and outstanding shares on 12/31/99 and 12/31/98, respectively).................................... 14,372 14,458 Additional paid-in capital................................................... 1,963 2,480 Retained earnings............................................................ 45,761 42,846 Accumulated other comprehensive income....................................... (2,233) 1,334 -------- -------- TOTAL STOCKHOLDERS' EQUITY................................................... 59,863 61,118 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................... $545,952 $544,263 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. ACNB Corporation & Subsidiaries 26 CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31 ---------------------------------- INTEREST INCOME In thousands, except per share data 1999 1998 1997 - -------------------------------------------------------------------------------------------------- Loans (including fees).................................... $27,137 $29,176 $29,123 Time deposits with banks.................................. 950 520 459 Federal funds sold........................................ 148 201 162 Taxable securities........................................ 9,609 8,417 7,949 Non-taxable securities.................................... 350 218 194 ------- ------- ------- TOTAL INTEREST INCOME..................................... 38,194 38,532 37,887 INTEREST EXPENSE - -------------------------------------------------------------------------------------------------- Interest bearing deposits................................. 14,993 15,598 15,336 Other borrowed funds...................................... 973 858 737 ------- ------- ------- TOTAL INTEREST EXPENSE.................................... 15,966 16,456 16,073 NET INTEREST INCOME....................................... 22,228 22,076 21,814 Provision for possible loan losses........................ 253 360 210 ------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES........................ 21,975 21,716 21,604 NON-INTEREST INCOME - -------------------------------------------------------------------------------------------------- Trust income.............................................. 550 530 520 Service fees on deposit accounts.......................... 964 880 791 Other income.............................................. 1,374 1,001 750 ------- ------- ------- TOTAL NON-INTEREST INCOME................................. 2,888 2,411 2,061 NON-INTEREST EXPENSE - -------------------------------------------------------------------------------------------------- Salaries and employee benefits............................ 7,555 7,485 7,144 Net occupancy expense..................................... 871 809 843 Equipment expense......................................... 1,174 1,185 1,090 Other taxes............................................... 536 536 480 Other expense............................................. 3,134 2,635 2,554 ------- ------- ------- TOTAL NON-INTEREST EXPENSE................................ 13,270 12,650 12,111 INCOME BEFORE INCOME TAXES................................ 11,593 11,477 11,554 Applicable income taxes................................... 3,770 3,752 3,784 ------- ------- ------- NET INCOME................................................ $ 7,823 $ 7,725 $ 7,770 ======= ======= ======= PER COMMON SHARE DATA* - -------------------------------------------------------------------------------------------------- Basic earnings............................................ $1.35 $1.33 $1.34 Cash dividends............................................ $ .85 $ .78 $ .73
*Based on a weighted average of 5,782,930 shares in 1999, 5,815,246 shares in 1998, and 5,817,273 shares in 1997. The accompanying notes are an integral part of the consolidated financial statements. 27 ACNB Corporation & Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated Additional Other Common Paid-in Retained Comprehensive Stock Capital Earnings Income Total - -------------------------------------------------------------------------------------------------------------------------- In thousands BALANCE AT JANUARY 1, 1997 As previously reported........................................... $13,196 $ 3,994 $31,889 $ 357 $49,436 Adjustment for pooling of interest............................... 1,325 (1,167) 4,255 (2) 4,411 ------- ------- ------- ------- ------- As restated.................................................... 14,521 2,827 36,144 355 53,847 Comprehensive income: Net income....................................................... -- -- 7,770 -- 7,770 Net change in unrealized gains on securities available-for-sale.. -- -- -- 521 521 ------- Total comprehensive income..................................... 8,291 ------- Cash dividends..................................................... -- -- (4,274) -- (4,274) Retirement of 25,194 shares........................................ (63) (347) -- -- (410) ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1997....................................... 14,458 2,480 39,640 876 57,454 Comprehensive income: Net income....................................................... -- -- 7,725 -- 7,725 Net change in unrealized gains on securities available-for-sale.. -- -- -- 458 458 ------- Total comprehensive income..................................... 8,183 ------- Cash dividends..................................................... -- -- (4,519) -- (4,519) ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1998....................................... 14,458 2,480 42,846 1,334 61,118 Comprehensive income: Net income....................................................... -- -- 7,823 -- 7,823 Net change in unrealized losses on securities available-for-sale. -- -- -- (3,567) (3,567) ------- Total comprehensive income..................................... 4,256 ------- Cash dividends..................................................... -- -- (4,908) -- (4,908) Retirement of 34,721 shares........................................ (86) (517) -- -- (603) ------- ------- ------- ------- ------- BALANCE AT DECEMBER 31, 1999....................................... $14,372 $ 1,963 $45,761 $(2,233) $59,863 ======= ======= ======= ======= =======
The accompanying notes are an integral part of the consolidated financial statements. ACNB Corporation & Subsidiaries 28 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31 INCREASE (DECREASE) IN CASH ---------------------------------- AND CASH EQUIVALENTS In thousands 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Interest and dividends received............................................... $ 37,141 $ 38,197 $ 37,839 Fees and commissions received................................................. 3,038 2,870 2,592 Interest paid................................................................. (16,190) (16,215) (15,930) Cash paid to suppliers and employees.......................................... (14,420) (12,155) (11,304) Income taxes paid............................................................. (4,061) (4,013) (3,813) Loans originated for sale..................................................... (11,888) (21,294) (6,368) Proceeds of mortgage loans sold............................................... 11,959 21,360 5,798 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,579 8,750 8,814 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturities of investment securities held-to-maturity............ 11,168 12,925 73,857 Proceeds from maturities of investment securities available-for-sale.......... 18,732 16,822 6,785 Purchase of investment securities held-to-maturity............................ (21,299) (10,403) (26,200) Purchase of investment securities available-for-sale.......................... (4,700) (70,757) (27,598) Net decrease (increase) in loans.............................................. 4,279 5,758 (17,422) Capital expenditures.......................................................... (288) (197) (280) Proceeds from sale of other real estate owned................................. 64 249 614 Proceeds from officer life insurance policies................................. 383 -- -- -------- -------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES........................... 8,339 (45,603) 9,756 CASH FLOWS FROM FINANCING ACTIVITIES Net increase in demand deposits, NOW accounts and savings accounts........................................................ 6,604 14,014 2,562 Net increase (decrease) in certificates of deposit............................ (9,583) 10,630 (9,994) Net increase (decrease) in securities sold under agreement to repurchase.......................................... 6,719 7,637 (1,715) Dividends paid................................................................ (4,908) (4,519) (4,274) Net increase (decrease) in borrowed funds..................................... 350 (350) -- Retirement of common stock.................................................... (1,231) -- (460) -------- -------- -------- NET CASH PROVIDED BY (USEDIN) FINANCING ACTIVITIES............................ (2,049) 27,412 (13,881) -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......................................................... 11,869 (9,441) 4,689 CASH AND CASH EQUIVALENTS AT BEGINNINGOFYEAR............................................................ 23,521 32,962 28,273 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR...................................... $ 35,390 $ 23,521 $ 32,962 ======== ======== ======== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES - ------------------------------------------------------------------------------------------------------------------ Net income.................................................................... $ 7,823 $ 7,725 $ 7,770 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation and amortization................................................. 641 670 703 Provision for possible loan losses............................................ 253 360 210 Provision (Benefit) for deferred taxes........................................ (200) (312) 70 Amortization (Accretion) of investment securities premiums (discounts)........ (45) (122) 2 Increase (Decrease) in taxes payable.......................................... (105) 87 (134) Decrease (Increase) in interest receivable.................................... (127) (129) 470 Increase (Decrease) in interest payable....................................... (225) 257 144 Increase (Decrease) in accrued expenses....................................... 801 (39) 209 Decrease (Increase) in mortgage loans held for sale........................... 71 66 (570) Increase in other assets...................................................... (2,612) (252) (232) Increase (Decrease) in other liabilities...................................... (696) 439 172 -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES..................................... $ 5,579 $ 8,750 $ 8,814 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 29 ACNB Corporation & Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------------------------------------- BUSINESS ACNB Corporation provides banking and financial services to businesses and consumers through its wholly-owned banking subsidiaries of Adams County National Bank and Farmers National Bank of Newville. The corporation engages in full-service commercial and consumer banking and trust services through its sixteen locations in Adams, Cumberland and York counties. The corporation's primary source of revenue is interest income on loans and investment securities and fee income on its products and services. Expenses consist of interest expense on deposits and borrowed funds, provisions for loan losses, and other operating expenses. BASIS OF FINANCIAL STATEMENTS The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of the corporation and its wholl y-owned subsidiaries. All significant intercompany transactions have been eliminated. Financial statements prepared in accordance with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts and disclosure of contingencies. Actual results could differ from these estimates. Income and expenses are recorded on the accrual basis of accounting, except for trust department income and certain other fees which are recorded primarily on the cash basis. Recognition of such income on an accrual basis is impractical and would not materially affect net income. For comparative purposes, prior years' consolidated financial statements have been reclassified to conform with report classifications of the current year. CASH EQUIVALENTS For the purpose of presentation in the consolidated statements of 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. INVESTMENT SECURITIES Under Statement of Financial Accounting Standards No. 115, securities are required to be classified into one of three categories: held-to-maturity, available-for-sale, or trading. Investments in securities which the corporation has the positive intent and ability to hold to maturity are classified as held-to-maturity. These securities are accounted for at amortized cost. Other securities are classified as available-for-sale. The difference between amortized cost and fair value is an unrealized holding gain or loss included, net of taxes, as accumulated other comprehensive income, in stockholders' equity. Management will reassess the appropriateness of the classifications each quarter. Amortization of premium and accretion of discount for investment securities is computed by the straight-line method to the maturity date or call date. There is not a material difference between the straight-line method and the interest method. Gains and losses are determined using the specific identification method. Income is accrued the month it is earned MORTGAGE LOANS HELD FOR SALE The mortgages held for sale are carried at the lower of aggregate cost or estimated market value. LOANS Loans are stated net of unearned interest on consumer installment loans. Beginning in 1995, interest on new installment loans is recognized on the simple interest method. Interest on installment loans opened prior to 1995 is recognized using the sum-of-the-month-digits method, which is not materially different from the interest method. Interest on commercial and real estate loans is recognized based upon the principal amount outstanding. ALLOWANCE FOR POSSIBLE LOAN LOSSES The provision for possible loan losses charged to income is based upon management's evaluation of outstanding loans, the historical loan loss experience of the subsidiaries, and the adequacy of the allowance for possible loan losses. A significant change in this estimate could result in a material change to net income. Loans are deemed impaired when it is probable that the corporation will be unable to collect all amounts due in accordance with the loan agreement. The corporation evaluates collectively for impairment large groups of smaller balance homogeneous loans. At December 31, 1999 and 1998, all of the corporation's impaired loans were on nonaccrual status for all reported periods. PREMISES AND EQUIPMENT Land is carried at cost. Bank premises and furniture and equipment are carried at cost, less accumulated depreciation computed principally by the straight-line method. NONPERFORMING ASSETS Nonperforming assets are comprised of loans for which the accrual of interest has been discontinued due to a serious weakening of the borrower's financial condition. Loans are generally placed on a nonaccrual basis when principal or interest is past due 90 days or more and when, in the opinion of management, full collection of principal or interest is unlikely. At the time a loan is placed on nonaccrual status, the accrual of interest is discontinued. Income on such loans is then recognized only to the extent of cash received. The basis in foreclosed real estate is carried at the lower of fair market value, less costs to sell, or the carrying value of the related loan at the time of acquisition. ACNB Corporation & Subsidiaries 30 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) - ------------------------------------------------------------------------------- INCOME TAXES Deferred tax assets and liabilities are reflected at currently-enacted income tax rates applicable to the period in which deferred tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. NET INCOME PER SHARE Basic earnings per share of common stock is computed on the basis of the weighted average number of shares of common stock outstanding. The corporation does not have diluted earnings per share. ADVERTISING COSTS Costs of advertising are expensed when incurred. COMPREHENSIVE INCOME The corporation adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income", as of January 1, 1998. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the statement of condition, such items, along with net income, are components of comprehensive income. The adoption of Statement of Financial Accounting Standards No. 130 had no effect on the corporation's net income or stockholders' equity other than expanded disclosure. NOTE B RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS - ------------------------------------------------------------------------------- The banks are required to maintain average reserve balances with the Federal Reserve Bank. The average amount of these reserve balances for the years ended December 31, 1999 and 1998, were approximately $7,622,000 and $5,686,000, respectively. 31 ACNB Corporation & Subsidiaries NOTE C INVESTMENT SECURITIES - -------------------------------------------------------------------------------- The amortized cost and estimated fair value of investment securities at December 31, 1999 and 1998, were as follows:
Gross Gross Amortized Unrealized Unrealized Fair 1999 In Thousands Cost Gains Losses Value - ------------------------------------------------------------------------------------------------------------------ Held-to-Maturity Securities U.S. Treasury securities and obligations of U.S. Government corporations and agencies............. $ 42,249 $ 93 $ 865 $ 41,477 Obligations of states and political subdivisions........ 4,321 4 59 4,266 Corporate debt.......................................... 7,904 2 46 7,860 -------- ------- ------- -------- Total debt securities................................... 54,474 99 970 53,603 Restricted equity securities............................ 3,456 -- -- 3,456 -------- ------- ------- -------- Total Held-to-Maturity Securities....................... $ 57,930 $ 99 $ 970 $ 57,059 ======== ======= ======= ======== Available-for-Sale Securities U.S. Treasury securities and obligations of U.S. Government corporations and agencies............. $ 98,558 $ 74 $ 3,457 $ 95,175 ======== ======= ======= ======== 1998 In thousands - ------------------------------------------------------------------------------------------------------------------ Held-to-Maturity Securities U.S. Treasury securities and obligations of U.S. Government corporations and agencies............. $ 36,309 $ 1,418 $ -- $ 37,727 Obligations of states and political subdivisions........ 5,090 53 5 5,138 Corporate debt.......................................... 3,131 5 1 3,135 -------- ------- ------- -------- Total debt securities................................... 44,530 1,476 6 46,000 Restricted equity securities............................ 3,012 -- -- 3,012 -------- ------- ------- -------- Total Held-to-Maturity Securities....................... $ 47,542 $ 1,476 $ 6 $ 49,012 ======== ======= ======= ======== Available-for-Sale Securities U.S. Treasury securities and obligations of U.S. Government corporations and agencies............. $111,184 $ 2,046 $ 10 $113,220 ======== ======= ======= ========
The amortized cost and estimated fair value of debt securities at December 31, 1999, by contractual maturity are shown below. Expected maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations with or without call or prepayment penalties.
Held-to-Maturity Available-for-Sale ------------------------ ----------------------- Amortized Fair Amortized Fair Cost Value Cost Value In thousands --------- ------- --------- -------- Within one year......................................... $ 4,289 $ 4,279 $ 350 $ 349 After one year through five years....................... 27,614 27,453 17,929 17,552 After five years through ten years...................... 21,633 20,931 774 738 After ten years......................................... 938 940 79,505 76,536 -------- ------- ------- -------- Total Debt Securities................................... $ 54,474 $53,603 $98,558 $ 95,175 ======== ======= ======= ========
ACNB Corporation & Subsidiaries 32
NOTE C INVESTMENT SECURITIES (continued) - ------------------------------------------------------------------------------------------------------------------- U.S. Government Taxable and Federal State and Other Equivalent December 31, 1999 In thousands Agency Municipal Securities Total Yield - ------------------------------------------------------------------------------------------------------------------- Amortized Cost Within one year................................. $ 1,249 $1,616 $ 1,774 $ 4,639 5.91% After one year through five years............... 38,185 1,228 6,130 45,543 6.12% After five years through ten years.............. 21,325 1,082 -- 22,407 6.78% After ten years................................. 80,048 395 -- 80,443 6.45% No set maturity................................. -- -- 3,456 3,456 6.57% -------- ------ ------- -------- Total........................................... $140,807 $4,321 $11,360 $156,488 ======== ====== ======= ======== Fair Value...................................... $136,652 $4,266 $11,316 $152,234 ======== ====== ======= ======== Taxable Equivalent Yield........................ 6.38% 6.84% 6.32% December 31, 1998 In thousands - ------------------------------------------------------------------------------------------------------------------- Amortized Cost.................................. $147,493 $5,090 $ 6,143 $158,726 ======== ====== ======= ======== December 31, 1997 In thousands - ------------------------------------------------------------------------------------------------------------------- Amortized Cost.................................. $ 99,242 $4,912 $ 3,282 $107,436 ======== ====== ======= ========
The weighted average yield of tax-exempt obligations has been calculated on a taxable equivalent basis. The taxable equivalent adjustments are based on an effective tax rate of 35%. The yield information does not give effect to changes in fair value that are reflected as a component of stockholders' equity. At December 31, 1999 and 1998, assets with a carrying value of $82,964,000 and $57,982,000, respectively, were pledged as required or permitted by law to secure certain public and trust deposits, repurchase agreements, or for other purposes. The corporation did not sell any securities over the past three years.
NOTE D LOANS - ------------------------------------------------------------------------------------------------------------------- Loans at December 31 are summarized as follows: In thousands 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Commercial, financial and agricultural.................. $ 12,697 $ 13,163 $ 11,160 $ 11,029 $ 10,436 Real estate - construction.............................. 13,188 14,661 13,923 11,453 13,130 Real estate - mortgage.................................. 308,241 309,030 316,078 301,010 296,870 Consumer................................................ 13,661 15,523 17,299 17,775 19,867 -------- -------- -------- -------- -------- 347,787 352,377 358,460 341,267 340,303 Less: Unearned discount on loans........................ -- 22 166 728 2,184 -------- -------- -------- -------- -------- Total Loans............................................. $347,787 $352,355 $358,294 $340,539 $338,119 ======== ======== ======== ======== ========
The following table outlines the repricing opportunities for all loans outstanding as of December 31, 1999. Loans with immediately adjustable rates, such as loans tied to prime rate, are included in the within one year column. Loans with rates that are adjustable at some time over the life of the loan are included under the time heading when they become adjustable. All fixed-rate loans are included under the heading in which they mature.
Repricing Period ------------------------------------ Within After One Year One Through In thousands Year Five Years Total --------- ---------- ------- Commercial, financial and agricultural................................. $ 6,354 $ 6,343 $12,697 Real estate - construction............................................. 5,175 8,013 13,188 ------- ------- ------- Total.................................................................. $11,529 $14,356 $25,885 ======= ======= ======= Loans with predetermined interest rates................................ $ 2,523 $ 3,881 $ 6,404 Loans with variable interest rates..................................... 11,530 7,951 19,481 ------- ------- ------- Total.................................................................. $14,053 $11,832 $25,885 ======= ======= =======
33 ACNB Corporation & Subsidiaries NOTE D LOANS (continued) - -------------------------------------------------------------------------------- The aggregate balance of loans (in excess of $60,000) made to directors and executive officers in the normal course of business as of December 31, 1999 and 1998, was $3,502,082 and $3,279,064, respectively. The terms for these loans were substantially the same as those for unrelated parties.
Balance at Balance at Numbers January 1, Amounts December 31, of 1999 Additions Collected 1999 Debtors - --------------------------------------------------------------------------------------------- $3,279,064 $933,058 $710,040 $3,502,082 5
NOTE E ALLOWANCE FOR LOAN LOSSES - -------------------------------------------------------------------------------- Transactions in the valuation portion of the allowance for loan losses for the past five years at December 31 are shown below:
In thousands 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- Balance of allowance for loan losses at beginning of period.... $ 3,594 $ 3,350 $ 3,376 $ 3,475 $ 3,573 Loans charged-off: Commercial, financial and agricultural......................... 58 20 49 34 -- Real estate - construction..................................... -- -- -- -- -- Real estate - mortgage......................................... 128 4 34 31 44 Consumer....................................................... 204 195 181 142 98 -------- -------- -------- -------- -------- Total loans charged-off........................................ 390 219 264 207 142 Recovery of charged-off loans: Commercial, financial and agricultural......................... 5 -- 1 6 12 Real estate - construction..................................... -- -- -- -- -- Real estate - mortgage......................................... 35 12 -- 41 1 Consumer....................................................... 46 91 27 31 31 -------- -------- -------- -------- -------- Total recoveries............................................... 86 103 28 78 44 Net loans charged-off.......................................... 304 116 236 129 98 Provision for possible loan losses............................ 253 360 210 30 -- -------- -------- -------- -------- -------- Balance at end of period....................................... $ 3,543 $ 3,594 $ 3,350 $ 3,376 $ 3,475 ======== ======== ======== ======== ======== TOTAL LOAN BALANCE In thousands - -------------------------------------------------------------------------------------------------------------------- Average total loans............................................ $344,323 $356,154 $353,553 $337,259 $334,190 Total loans at year-end........................................ 347,787 352,355 358,294 340,539 338,119 RATIOS - -------------------------------------------------------------------------------------------------------------------- Net charge-offs to: Average total loans............................................ 0.09% 0.03% 0.07% 0.04% 0.03% Total loans at year-end........................................ 0.09% 0.03% 0.07% 0.04% 0.03% Allowance for loan losses...................................... 8.58% 3.23% 7.04% 3.82% 2.82% Allowance for loan losses to: Average total loans............................................ 1.03% 1.01% 0.95% 1.00% 1.04% Total loans at year-end........................................ 1.02% 1.02% 0.93% 0.99% 1.03%
The amounts of additional provision to the allowance were based on management's judgement after considering an analysis of larger loans, all loans known to management to have unusual risk characteristics, nonperforming or problem loans, historical patterns of charge-offs and recoveries, and actual net charge-offs. Further consideration was given to current economic and employment conditions both nationally and in the corporation's local service area. Loans secured by real estate comprised 92% of the corporation's total loan portfolio at December 31, 1999. The majority of loans in both the commercial, financial and agricultural category and the consumer category are also secured by personal property, negotiable assets, or business assets. This conservative policy explains the low ratio of losses to loans experienced by the corporation over the last five years. This policy did not change during the year ending 1999. Management anticipates that charge-off amounts will approximate $250,000 in 2000. ACNB Corporation & Subsidiaries 34 NOTE E ALLOWANCE FOR LOAN LOSSES (continued) - -------------------------------------------------------------------------------- ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES - --------------------------------------------------------------------------------
1999 1998 1997 1996 1995 ------------- -------------- -------------- -------------- -------------- % of % of % of % of % of Gross Gross Gross Gross Gross In thousands Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- Commercial, financial and agricultural..$1,042 0.30% $ 838 0.24% $ 735 0.20% $ 98 0.03% $ 101 0.03% Real estate - construction.............. 246 0.07% 107 0.03% 72 0.02% 50 0.01% 51 0.01% Real estate - mortgage.................. 1,474 0.43% 1,152 0.33% 1,602 0.45% 1,773 0.52% 1,824 0.54% Consumer................................ 251 0.07% 238 0.07% 211 0.06% 165 0.05% 170 0.05% Unallocated............................. 530 0.15% 1,259 0.35% 730 0.20% 1,290 0.38% 1,329 0.39% ------ ----- ------ ----- ------ ----- ------ ----- ------ ----- Total...................................$3,543 1.02% $3,594 1.02% $3,350 0.93% $3,376 0.99% $3,475 1.02% ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
NOTE F PREMISES AND EQUIPMENT - -------------------------------------------------------------------------------- The composition of corporation premises and equipment at December 31 was as follows:
In thousands 1999 1998 ------- ------- Land............................................................. $ 904 $ 904 Bank premises.................................................... 6,389 6,389 Furniture and equipment.......................................... 5,410 5,139 Less: Accumulated depreciation and amortization.................. (8,179) (7,555) -------- ------- Total............................................................ $ 4,524 $ 4,877 ======== =======
A summary of depreciation and amortization expenses is as follows: In thousands 1999 1998 1997 ---- ---- ---- Bank premises.................................................... $224 $198 $201 Furniture and equipment.......................................... 417 473 502 ---- ---- ---- Total............................................................ $641 $670 $703 ==== ==== ====
NOTE G INVESTMENT IN REAL ESTATE PARTNERSHIPS - -------------------------------------------------------------------------------- ACNB Corporation is the sole limited partner in a partnership named Gettysburg Scattered Site Associates, whose purpose is to develop, manage and operate a residential low-income development comprised of sixteen dwelling units in Gettysburg, PA. ACNB Corporation owns a 99% limited partner's interest in the partnership. The corporation also owns a 62% share, as a limited partner, of a residential low-income project called Poplar Creek Apartments in York, PA. These investments are accounted for under the equity method of accounting. At December 31, 1999 and 1998, the carrying value of these investments was approximately $918,988 and $276,019, respectively. 35 ACNB Corporation & Subsidiaries NOTE H NONPERFORMING ASSETS - -------------------------------------------------------------------------------- The following table presents information concerning the aggregate amount of nonperforming assets at December 31:
In thousands 1999 1998 1997 1996 1995 ------- ------- ------ ------- ------ Nonaccrual loans___________________________ $ 1,615 $ 1,450 $1,908 $ 1,092 $1,092 90 days past due still accruing____________ 1,920 2,350 1,360 2,515 2,947 Restructured loans_________________________ -- -- -- -- -- Other real estate owned____________________ 171 250 401 1,015 689 ------- ------- ------- ------- ------- Total Nonperforming Assets_________________ $ 3,706 $ 4,050 $ 3,669 $ 4,622 $ 4,728 ======= ======= ======= ======= =======
The gross interest income that would have been recorded on nonaccrual loans at December 31, 1999, under original terms was approximately $130,000. The amount of interest income on these loans that was included in net income for the year ended December 31, 1999, was $0. The corporation does not accrue interest on any loan when principal or interest are in default for 90 days or more, unless the loan is well secured and in the process of collection. Consumer loans and residential real estate loans secured by 1-to-4 family dwellings shall ordinarily not be subject to these guidelines. When a loan is placed in a nonaccrual status, all previously accrued, but uncollected, interest is charged against the interest income account. Previously accrued interest is not charged-off if principal and interest are protected by sound collateral values. NOTE I TIME DEPOSITS - -------------------------------------------------------------------------------- Time deposits in denominations of $100,000 or more at December 31, 1999 and 1998, are summarized in the following table:
In thousands 1999 1998 -------- ------- Time certificates of deposit___________________ $ 20,149 $23,030 Other time deposits____________________________ 1,000 1,000
Maturities of time deposits of $100,000 or more outstanding at December 31, 1999, are summarized as follows:
In thousands Three months or less______________________ $ 5,387 Over three through six months_____________ 4,762 Over six through twelve months____________ 5,388 Over twelve months________________________ 5,612 ------ Total_____________________________________ $21,149 =======
The interest expense related to time certificates of deposit in denominations of $100,000 or more totaled $1,044,000 in 1999, $1,113,000 in 1998, and $960,000 in 1997. NOTE J LEASE COMMITMENTS - -------------------------------------------------------------------------------- Certain branch offices and equipment are leased under agreements which expire at varying dates through 2010. Most leases contain renewal provisions at the corporation's option. The total rental expense for all operating leases was $119,140, $109,308 and $91,887 for the years ended December 31, 1999, 1998 and 1997, respectively. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31: 2000_____________________ $ 62,880 2001_____________________ 41,310 2002_____________________ 20,553 2003_____________________ 6,900 2004_____________________ 7,500 Later years______________ 3,900 ------ Total Minimum Payments___ $ 143,043 ========= ACNB Corporation & Subsidiaries 36 NOTE K SHORT-TERM BORROWINGS - -------------------------------------------------------------------------------- Federal funds purchased, securities sold under agreements to repurchase, and other short-term borrowings generally mature within one to 90 days from the date originated. The following is a summary of aggregate short-term borrowings for the years ended December 31, 1999, 1998 and 1997, respectively:
In thousands 1999 1998 1997 -------- -------- ------- Amount outstanding at year-end___________________________ $ 29,827 $ 22,758 $15,471 Average interest rate at year-end________________________ 4.70% 4.33% 4.42% Maximum amount outstanding at any month-end______________ $ 29,827 $ 25,812 $ 22,740 Average amount outstanding_______________________________ $ 22,711 $ 19,001 $ 16,805 Weighted average interest rate___________________________ 4.29% 4.41% 4.39%
NOTE L RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS AND ADVANCES - -------------------------------------------------------------------------------- Certain restrictions exist regarding the ability of the banks to transfer funds to the corporation in the form of cash dividends, loans or advances. The approval of the Office of the Comptroller of the Currency is required to pay dividends in excess of earnings retained in the current year plus retained net profits for the preceding two years. As of December 31, 1999, $8,687,000 of undistributed earnings of the banks, included in consolidated retained earnings, was available for distribution to the corporation as dividends without prior regulatory approval. Under national banking laws, the banks are also limited as to the amount it may loan to its affiliates, including the corporation, unless such loans are collateralized by specific obligations. At December 31, 1999, the maximum amount available for transfer from the banks to the corporation in the form of loans was approximately $6,341,000. NOTE M INCOME TAXES - -------------------------------------------------------------------------------- The composition of applicable taxes (benefits) for the years ended December 31 was alloacated as follows
In thousands 1999 1998 1997 ------- ------- ------- Income from continuing operations_________________________ $ 3,770 $ 3,752 $ 3,784 Stockholders' equity for other comprehensive income_______ (1,842) 240 268 Total_____________________________________________________ $ 1,928 $ 3,992 $ 4,052 ======= ====== =======
Income tax expense attributable to other comprehensive income consists of the following at December 31:
In thousands 1999 1998 1997 ------- ------- ------- Unrealized gains (losses) on securities arising during the period___________ $(1,842) $ 240 $ 268 Reclassification adjustment for gains (losses) included in net income_______ -- -- -- ------- -------- -------- Income Tax (Benefits) Expense Related to Other Comprehensive Income_________ $(1,842) $ 240 $ 268 ======== ======== ========
Income tax expense attributable to income from continuing operations consists of the following at December 31: 37
In thousands 1999 1998 1997 ------- ------- ------- Currently payable________________________________________________ $ 3,945 $ 3,771 $ 3,884 Deferred tax benefits____________________________________________ (175) (19) (100) ------- ------- -------- Applicable Income Taxes__________________________________________ $ 3,770 $ 3,752 $ 3,784 ======= ======= ========
37 NOTE M INCOME TAXES (continued) - -------------------------------------------------------------------------------- For the years ended December 31, the applicable income tax expense attributable to income from continuing operations differs from the tax expense computed by applying the federal statutory rate to pretax earnings. The components of the differences are as follows:
In thousands 1999 1998 1997 ------- ------- -------- Income taxes at statutory rate $ 4,054 $ 4,009 $ 4,037 Increase (Decrease) resulting from: Tax-exempt income (103) (91) (82) Rehabilitation and low-income housing credits (73) (73) (73) Other (108) (93) (98) -------- -------- --------- Applicable Income Taxes $ 3,770 $ 3,752 $ 3,784 ======== ======== =========
The significant components of deferred tax assets and deferred tax liabilities at December 31, 1999 and 1998, are as follows:
In thousands 1999 1998 -------- -------- Deferred tax assets: Allowance for possible loan losses_______________________________ $ 683 $ 642 Deferred compensation____________________________________________ 234 163 Net unrealized losses on available-for-sale securities___________ 1,150 -- Other____________________________________________________________ 62 46 ------- --------- Total gross deferred tax assets__________________________________ 2,129 851 ------- --------- Deferred tax liabilities: Depreciation_____________________________________________________ 45 87 Net unrealized gains on available-for-sale securities____________ -- 692 Pension__________________________________________________________ 45 50 ------ ------ Total gross deferred tax liabilities_____________________________ 90 829 ------- ------- Net Deferred Tax Assets__________________________________________ $2,039 $ 22 ======= ==========
Since the corporation has historically had strong earnings, management believes the deferred tax assets are realizable. Income taxes paid during 1999, 1998 and 1997 were $3,969,000, $3,992,000 and $3,644,000, respectively. ACNB Corporation & Subsidiaries 38 NOTE N RETIREMENT PLANS - -------------------------------------------------------------------------------- The corporation's subsidiaries have non-contributory pension plans. The plan covering the employees of the subsidiary acquired in March 1999 was frozen under the terms of the plan as of March 1993. Retirement benefits under both plans are a function of both years of service and compensation. The funding policy of each subsidiary is to contribute annually the amount that is sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act. The total pension expense for the years ended December 31, 1999, 1998 and 1997 was $408,000, $427,000 and $429,000, respectively. The following tables provide a reconciliation of the changes in the plan benefit obligations and fair value of plan assets for the two plan years ending December 31, 1999 and 1998, and a statement of the funded status as of December 31, 1999 and 1998:
In thousands 1999 1998 -------- -------- Reconciliation of benefit obligations: Benefit obligations - beginning of year_________________________________ $ 9,845 $ 8,144 Service costs___________________________________________________________ 367 328 Interest costs__________________________________________________________ 536 517 Actuarial (gains) losses________________________________________________ (1,275) 923 Benefit payments________________________________________________________ (188) (67) ------- ------ Benefit Obligations - End of Year_______________________________________ 9,285 9,845 ======= ====== Reconciliation of fair value of plan assets:____________________________ Fair value of plan assets - beginning of year___________________________ 7,630 6,562 Actual return on plan assets____________________________________________ 255 524 Employer contributions__________________________________________________ 260 611 Benefits paid___________________________________________________________ (188) (67) ------ ------ Fair Value of Plan Assets - End of Year_________________________________ 7,957 7,630 -------- ------ Reconciliation of funded assets: Funded status at December 31(under funded) over funded___________________ (1,328) (2,215) Unrecognized net actuarial loss_________________________________________ 1,054 2,053 Unrecognized transition asset___________________________________________ 116 114 Adjustment for minimum pension liability________________________________ -- (181) Unrecognized prior service costs________________________________________ 156 193 ------- ------- Net Accrued Pension_____________________________________________________ $ (2) $ (36) ======== =======
39 ACNB Corporation & Subsidiary NOTE N RETIREMENT PLANS (continued) - -------------------------------------------------------------------------------- The following table provides the components of net periodic benefit costs for the years ending December 31, 1999, 1998 and 1997:
In thousands Components of net periodic benefit costs: 1999 1998 1997 ------- ------- ------- Service costs______________________________________ $ 367 $ 328 $ 287 Interest costs_____________________________________ 535 517 470 Expected return on assets__________________________ (613) (492) (401) Recognized net actuarial loss______________________ 83 34 42 Amortization of transition asset___________________ (14) 2 (13) Amortization of prior service costs________________ 50 38 44 ---------- -------- ------- Net Periodic Benefit Costs_________________________ $ 408 $ 427 $ 429 ========= ========= ========
The assumptions used in the measurement of the benefit obligations are shown in the following table:
Weighted average assumptions as of December 31: 1999 1998 1997 -------- ------- ------- Discount rate______________________________________________ 6.00 - 6.50% 5.00 - 5.50% 6.00 - 6.50% Expected return on plan assets_____________________________ 6.00 - 8.25% 6.00 - 8.25% 6.00 - 7.50% Rate of compensation increase (Frozen plan assumes no increase in compensation)_______ 4.69% 4.62% 5.62%
Plan assets consist of a deposit administration contract, various pooled separate accounts, annuities, and an investment of 37,560 shares of common stock with ACNB Corporation at December 31, 1999 and 1998. The corporation's subsidiaries have a 401(k) Salary Deferral Plan, which covers all eligible employees. The annual expense included in salaries and benefits amounted to $221,000, $222,000 and $197,000 for 1999, 1998 and 1997, respectively. The corporation has non-qualified salary agreements with certain senior management. The future commitments under these arrangements have been funded through corporate-owned variable life insurance policies. At December 31, 1999 and 1998, the present value of the future obligations was $688,000 and $301,000, respectively. The insurance policies included in other assets had a total cash value of $1,701,000 and $2,028,000, respectively, at December 31, 1999 and 1998. ACNB Corporation & Subsidiaries 40 NOTE O COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT - -------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK The corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and financial guarantees which involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statements of condition. The corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. A summary of significant commitments and contingent liabilities at December 31, 1999 and 1998, is presented below:
In thousands 1999 1998 ------- -------- Commitments to extend credit__________________________________________ $ 31,226 $ 29,636 Standby letters of credit_____________________________________________ 3,457 2,191
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The corporation evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the corporation upon extension of credit, is based on management's credit evaluation of the creditor. The type of collateral may vary; however, a significant portion of these financial instruments is secured through real estate. Standby letters of credit and financial guarantees written are conditional commitments issued by the corporation to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. CONCENTRATIONS OF CREDIT RISK The corporation has a diversified loan portfolio and grants agribusiness, commercial and residential loans to customers, substantially all of whom are local residents in the corporation's primary marketplace. CONTINGENT LIABILITIES The corporation is party to litigation and claims arising in the normal course of business. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such litigation and claims will not be material to the consolidated financial position. NOTE P DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------------------------------------------- Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires all entities to disclose the estimated fair value of its financial instrument assets and liabilities. For 1999 and 1998, approximately 98% of the corporation's assets and 88% of its liabilities are considered financial instruments as defined in Statement of Financial Accounting Standards No. 107. Many of the corporation's financial instruments, however, lack an available trading market as characterized by a willing buyer and a willing seller engaging in an exchange transaction. Therefore, significant estimations and present value calculations were used by the corporation for the purposes of this disclosure. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate the value. Financial instruments actively traded in a secondary market have been valued using quoted available market prices.
December 31, 1999 December 31, 1998 ---------------------------------- ----------------------------------- Estimated Fair Carrying Estimated Fair Carrying Value Amount Value Amount ------------- -------- ----------------- ---------------- In thousands Cash and due from banks____________________ $ 29,840 $ 29,840 $ 16,728 $ 16,728 Interest bearing deposits with banks_______ 3,839 3,839 4,075 4,075 Federal funds sold_________________________ 1,711 1,711 2,718 2,718 Investment securities______________________ 152,234 153,105 162,235 160,762 Interest receivable________________________ 3,225 3,225 2,714 2,714
41 ACNB Corporation & Subsidiaries NOTE P DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (continued) - -------------------------------------------------------------------------------- Fair values for net loans are estimated for portfolios with similar financial characteristics. Loans are segregated into commercial, residential real estate, and consumer. The loan categories are further segmented into fixed and adjustable types. Fair value for adjustable-rate commercial loans is considered to be the same as the carrying value because these loans were made at the corporation's prime lending rate, which is the same rate these loans would be written as of the date of this financial statement. Fixed-rate commercial loans have been revalued at a rate the corporation would use if the loans were written as of December 31, 1999 and 1998. Mortgages and consumer loans have been revalued using discounted cash flows. The mortgages were estimated using market rates at December 31, 1999 and 1998, and consumer loans were revalued using rates being charged by the corporation at year-end 1999 and 1998. Fair value for nonperforming loans is based on current valuations of underlying collateral.
December 31, 1999 December 31, 1998 --------------------------------- ---------------------------------- Estimated Fair Carrying Estimated Fair Carrying Value Amount Value Amount -------------- -------------- ---------------- ---------------- In thousands Net loans_____________________________ $344,189 $343,811 $349,762 $348,257 Mortgage loans held for sale__________ 433 433 504 504
Under Statement of Financial Accounting Standards No. 107, the fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW accounts, and money market checking accounts, is equal to the amount payable on demand as of December 31, 1999 and 1998. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities, compared to the cost of borrowing funds in the market.
December 31, 1999 December 31, 1998 ----------------------------------- -------------------------------------- Estimated Fair Carrying Estimated Fair Carrying Value Amount Value Amount ----------------- ------------- ---------------- ----------- In thousands Deposits with no stated maturities___________ $243,817 $243,817 $237,689 $237,689 Deposits with stated maturities______________ 208,862 208,816 221,261 218,010 Repurchase agreements________________________ 29,377 29,377 22,658 22,658 Federal funds purchased and demand notes_____ 450 450 100 100 Interest payable_____________________________ 2,637 2,637 2,862 2,862
The fair value of commitments to extend credit is estimated taking into account the remaining terms of the agreements and the creditworthiness of the counterparties. For loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements, or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties. The contract amount and the estimated fair value for commitments to extend credit and standby credits are charted.
December 31, 1999 December 31, 1998 --------------------------------- ------------------------------------- Estimated Fair Carrying Estimated Fair Carrying Value Amount Value Amount ------------------ ------------ ------------------ ------------- In thousands Commitments to extend credit____________ $31,226 $31,226 $29,636 $29,636 Standby letters of credit_______________ 3,457 3,457 2,191 2,191
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include deferred tax assets and liabilities, and property and equipment. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on the fair value estimates. ACNB Corporation & Subsidiaries 42 NOTE Q ACNB CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION - --------------------------------------------------------------------------------
December 31 ---------------------------- STATEMENTS OF CONDITION In thousands 1999 1998 - ------------------------------------------------------------------------------------------------------------------- ASSETS Cash____________________________________________________________ $ 291 $ 202 Securities and other assets_____________________________________ 919 276 Investment in common stock of subsidiaries______________________ 60,845 58,926 Receivable from subsidiaries____________________________________ 41 1,007 --------- -------- TOTAL ASSETS____________________________________________________ $ 62,096 $ 60,411 ========= ========= LIABILITIES Accrued Expenses________________________________________________ $ -- $ 627 --------- ---------- STOCKHOLDERS' EQUITY Common stock (par value $2.50; 20,000,000 shares authorized; 5,748,732 and 5,783,567 issued and outstanding shares on 12/31/99 and 12/31/98, respectively)___________________________________ 14,372 14,458 Additional paid-in capital___________________________________________________ 1,963 2,480 Retained earnings____________________________________________________________ 45,761 42,846 ------ ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY___________________________________ $ 62,096 $ 60,411 ======= =======
Year ended December 31 ---------------------------------- STATEMENTS OF INCOME In thousands 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------ INCOME Dividend from subsidiaries____________________________________________ $5,928 $4,519 $4,274 EXPENSE_______________________________________________________________ 107 167 45 ----- ------ ------ INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED NET INCOME OF SUBSIDIARIES______________________________ 5,821 4,352 4,229 Applicable tax benefit________________________________________________ (84) (130) (88) INCOME BEFORE EQUITY IN ------- ----- ------ UNDISTRIBUTED NET INCOME OF SUBSIDIARIES______________________________ 5,905 4,482 4,317 Equity in undistributed net income of subsidiaries____________________ 1,918 3,243 3,453 ------- ------- ------- NET INCOME____________________________________________________________ $7,823 $7,725 $7,770 ====== ======= ========
Year ended December 31 -------------------------------------- STATEMENTS OF CASH FLOWS In thousands 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Dividends received_________________________________________________ $5,928 $4,519 $ 4,684 ------- ------ ------- Net Cash Provided by Operating Activities__________________________ 5,928 4,519 4,684 CASH FLOWS FROM INVESTING ACTIVITIES Investment in equity investments___________________________________ (188) -- -- ------- ------- -------- Net Cash Used in Investing Activities______________________________ (188) -- -- CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid_____________________________________________________ (4,908) (4,519) (4,274) Retirement of common stock_________________________________________ (603) -- (460) Purchase of dissenters' shares_____________________________________ (140) -- -- -------- ------- -------- Net Cash Used in Financing Activities______________________________ (5,651) (4,519) (4,734) -------- ------- -------- NET INCREASE (DECREASE) IN CASAH AND CASH EQUIVALENTS______________ 89 -- (50) ------- ------- -------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR_____________________ 202 202 252 ------- ------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR___________________________ $ 291 $ 202 $ 202 ======= ======= =========
43 ACNB Corporation & Subsidiaries NOTE Q ACNB CORPORATION (PARENT COMPANY ONLY) FINANCIAL INFORMATION (continued) - --------------------------------------------------------------------------------
Year ended December 31 ------------------------------------------ STATEMENTS OF CASH FLOWS (continued) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net income________________________________________________________ $ 7,823 $7,725 $7,770 Increase in investment in common stock of subsidiaries____________ (1,918) (3,243) (3,453) Decrease (Increase) in receivable from subsidiaries_______________ 966 (7) 322 Loss on equity investment_________________________________________ 39 44 45 Increase in equity investment_____________________________________ (496) -- -- Decrease in accrued expenses (486) -- -- -------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES_________________________ $ 5,928 $4,519 $4,684 ======== ======= =======
NOTE R FINANCIAL INFORMATION RELATING TO OPERATING SEGMENTS - -------------------------------------------------------------------------------- In June 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards and disclosure requirements for the manner entities report information about operating segments. Operating segments are defined based upon the way management organizes segments for making operating decisions and evaluating performance. Management of the corporation monitors and evaluates four segments of its operations, which include commercial, consumer and mortgage lending and investment securities. The corporation's marketplace is southcentral Pennsylvania which encompasses Adams County and areas in contiguous counties of York, Franklin and Cumberland, as well as sections of northern Maryland. Commercial lending includes commercial mortgages, real estate development, accounts receivable financing, and agricultural loans. Consumer lending programs include home equity loans, automobile and recreational vehicle loans, and manufactured housing loans. Mortgage lending programs include personal residential mortgages, residential construction loans, and speculative construction loans. Management measures the net interest income of each segment based upon the earnings and fees for each segment recognized less the charge for the funds used. The charge for funds used is based on the average cost of funds used by the respective segment. Other non-interest expense, which includes salaries and employee benefits, occupancy and equipment expense, and other expenses, is allocated to each segment and is netted against net interest income after provision for possible loan losses to arrive at income before income taxes for each respective segment. The following is for year ending December 31, 1999, by the four operating segments:
In thousands Commercial Consumer Mortgage Investment Lending Lending Lending Securities Other Total --------- --------- --------- ------------ --------- ---------- Total interest income_________________ $ 10,874 $ 3,531 $ 12,696 $ 11,057 $ 36 $ 38,194 Charge for funds used_________________ (6,674) (1,905) (8,458) (8,069) 9,140 (15,966) ------- ------- ------- ------ ----- -------- Net Interest Income___________________ 4,200 1,626 4,238 2,988 9,176 22,228 Provision for possible loan losses_______________________ (95) (70) (88) -- -- (253) Net Interest Income After Provision ------- ------- ------- ------ ----- --------- for Possible Loan Losses__________ 4,105 1,556 4,150 2,988 9,176 21,975 Non-interest income___________________ 100 118 232 90 2,348 2,888 Non-interest expense__________________ (1,075) (442) (1,236) (68) (10,449) (13,270) ------- ------ ------- ------ ------ -------- Income Before Income Taxes____________ $ 3,130 $ 1,232 $ 3,146 $ 3,010 $ 1,075 $ 11,593 ======== ====== ========== ======== ========= ========= Average Funds Used____________________ $135,074 $ 38,465 $170,780 $162,096 $ 44,045 $ 550,460 ======== ======= ========== ======== ========= =========
ACNB Corporation & Subsidiaries 44 NOTE S EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - -------------------------------------------------------------------------------- In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging purposes. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statement of condition and measure those instruments at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. If conditions are met, a derivative may be specifically designated as a hedge of the exposure to changes in fair value of a recognized asset or liability or unrecognized commitment, a hedge of the exposure to variable cash flows of a forecasted transaction, or a hedge of certain foreign currency exposures. SFAS No. 133 includes a provision for the potential reclassification of investments from held-to-maturity to available-for-sale. This statement became effective for the fiscal year beginning after June 15, 1999. In June 1999, SFAS No. 137 was issued deferring the effective date of SFAS No. 133 to all years beginning after June 15, 2000. Management anticipates that the adoption of this statement will not have a material effect on operating results or financial condition. NOTE T BUSINESS COMBINATION - -------------------------------------------------------------------------------- On March 1, 1999, the corporation issued approximately 530,000 shares of ACNBCorporation common stock in exchange for approximately 234,000 shares of Farmers National Bancorp, Inc. The transaction was accounted for as a pooling of interests and, accordingly, the consolidated financial statements for the periods presented have been restated to include the accounts of ACNBCorporation and Farmers National Bancorp, Inc. Net interest income and net earnings of the separate entities for the periods preceding the acquisition were as follows: EARNING DATAa - --------------------------------------------------------------------------------
Net Interest Net In thousands (unaudited) Income Earnings ------------ ---------- Two months ended February 28, 1999: ACNB Corporation_____________________________________ $ 3,359 $ 1,223 Farmers National Bancorp, Inc.______________________ 271 97 -------- -------- Combined____________________________________________ $ 3,630 $ 1,320 ======== ======== Year ended December 31, 1998: ACNB Corporation, as previously reported_____________ $20,390 $ 7,221 Farmers National Bancorp, Inc.______________________ 1,686 504 -------- -------- Combined____________________________________________ $22,076 $ 7,725 ======== ======== Year ended December 31, 1997: ACNB Corporation, as previously reported_____________ $20,151 $ 7,229 Farmers National Bancorp, Inc.______________________ 1,663 541 -------- -------- Combined____________________________________________ $21,814 $ 7,770 ======== ========
45 ACNB Corporation & Subsidiaries QUARTERLY RESULTS OF OPERATIONS Selected quarterly information for the years ended December 31, 1999 and 1998, is as follows:
First Second Third Fourth 1999 In thousands, except per share data Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------------------------------------------- Interest income $9,451 $9,486 $9,597 $9,660 - -------------------------------------------------------------------------------------------------------------------- Interest expense 4,022 4,010 3,970 3,964 - -------------------------------------------------------------------------------------------------------------------- Net interest income 5,429 5,476 5,627 5,696 - -------------------------------------------------------------------------------------------------------------------- Provision for possible loan losses 90 90 50 23 - -------------------------------------------------------------------------------------------------------------------- Net income 1,904 1,909 1,945 2,065 - -------------------------------------------------------------------------------------------------------------------- Basic earnings per share .33 .33 .34 .35 - -------------------------------------------------------------------------------------------------------------------- Return on average assets 1.41% 1.38% 1.46% 1.49% - -------------------------------------------------------------------------------------------------------------------- 1998 - -------------------------------------------------------------------------------------------------------------------- Interest income $9,413 $9,625 $9,766 $9,728 - -------------------------------------------------------------------------------------------------------------------- Interest expense 3,976 4,097 4,156 4,227 - -------------------------------------------------------------------------------------------------------------------- Net interest income 5,437 5,528 5,610 5,501 - -------------------------------------------------------------------------------------------------------------------- Provision for possible loan losses 90 90 90 90 - -------------------------------------------------------------------------------------------------------------------- Net income 1,907 2,064 2,001 1,753 - -------------------------------------------------------------------------------------------------------------------- Basic earnings per share .33 .35 .34 .31 - -------------------------------------------------------------------------------------------------------------------- Return on average assets 1.50% 1.58% 1.50% 1.29% - --------------------------------------------------------------------------------------------------------------------
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
The following table sets forth financial data for the last five years: In thousands, except per share data .. 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------- Total interest income ................ $ 38,194 $ 38,532 $ 37,887 $ 36,573 $ 34,747 Total interest expense ............... 15,966 16,456 16,073 16,265 15,490 Net interest income .................. 22,228 22,076 21,814 20,308 19,257 Provision for possible loan losses ... 253 360 210 30 -- Net income ........................... 7,823 7,725 7,770 7,589 6,874 PER SHARE DATA - ------------------------------------------------------------------------------------------------- Basic earnings ....................... $ 1.35 $ 1.33 $ 1.34 $ 1.29 $ 1.17 Cash dividends ....................... .85 .78 .73 1.56 .61 BALANCE SHEET TOTALS - ------------------------------------------------------------------------------------------------- Average stockholders' equity ......... $ 60,742 $ 60,568 $ 56,600 $ 53,022 $ 54,851 Average assets ....................... 550,460 527,510 508,568 505,340 496,409 RATIOS - ------------------------------------------------------------------------------------------------- Return on average assets ............. 1.42% 1.46% 1.53% 1.50% 1.38% Return on average stockholders' equity ............................. 12.88% 12.75% 13.78% 14.31% 12.53% Dividend payout ...................... 63% 58% 55% 120% 53% Stockholders' equity to assets ....... 10.96% 11.23% 11.31% 10.62% 11.30%
ACNB CORPORATION & SUBSIDIARIES 46 FORM 10-K CROSS-REFERENCE INDEX Portions of this Annual Report are not required by Form 10-K, and are not filed with the Securities and Exchange Commission as part of the corporation's Report on Form 10-K for the year ended December 31, 1999. Only the sections referenced in the index below are incorporated into this Form 10-K.
PART I PAGE(S) ------- Item 1 - Business ...................................................................... 49 Item 2 - Properties ................................................................... 49 Item 3 - Legal Proceedings ............................................................. 50 Item 4 - Submission of Matters to a Vote of Stockholders ............................... 50 PART II Item 5 - Market for the Registrant's Common Stock and Related Stockholder Matters .............................................. 53 Item 6 - Selected Financial Data ................................................. 15 & 46 Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations ........................... 16 - 25 a. Quantitative and Qualitative Disclosures About Market Risk ....................................... 20 & 21 Item 8 - Financial Statements and Supplementary Data ............................. 26 - 45 Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....................................... 50 PART III Item 10 - Directors and Executive Officers of the Registrant .......................... 50 Item 11 - Executive Compensation(1) Item 12 - Security Ownership of Certain Beneficial Owners and Management(1) Item 13 - Certain Relationships and Related Transactions(1) PART IV Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K a. Financial Statements and Financial Statement Schedules(2) b. Exhibits ................................................................. 51 c. Reports on Form 8-K(3) Item 15 - Signatures .................................................................. 52
(1) The information required by Item 11, Item 12 and Item 13 is incorporated herein by reference to the corporation's definitive Proxy Statement to be filed with the Commission not later than 120 days after the close of the year ended December 31, 1999, under the headings "Executive Compensation" and "Compensation of Directors". (2) Financial statement schedules have been omitted because either they are not applicable or the required information is included in the financial statements or the notes thereto. (3) No reports on Form 8-K were filed during the quarter ended December 31, 1999. 47 ACNB CORPORATION & SUBSIDIARIES FORM 10-K Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (X) Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 1999. Commission file no. 0-11783. ACNB CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 23-2233457 - --------------------------------------- ------------------------------------ (State of Incorporation) (IRS Employer Identification Number) 675 Old Harrisburg Road Gettysburg, PA 17325 - --------------------------------------- ------------------------------------ (Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717)334-3161 ------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON CAPITAL STOCK PAR VALUE $2.50 A SHARE - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past ninety (90) days. YES X NO --- --- As of February 29, 2000, ACNB Corporation had outstanding 5,705,530 shares of Common Stock. The aggregate market value of such Common Stock held by nonaffiliates as of February 29, 2000, was approximately $98,449,544. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded because they may be deemed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 2, 2000, are incorporated by reference into Part III. ACNB CORPORATION & SUBSIDIARIES 48 FORM 10-K PART I ITEM 1. BUSINESS The Registrant owns all of the outstanding shares of Adams County National Bank and Farmers National Bank of Newville (hereinafter the "Banks"). The Registrant, organized in 1983 and headquartered in Gettysburg, Pennsylvania, presently has no significant operations other than serving as a bank holding company. On March 31, 1999, ACNB Corporation acquired Farmers National Bancorp, Inc., a single-bank holding company located in Newville, Cumberland County, Pennsylvania, with assets of $44 million. The sole and wholly-owned subsidiary of Farmers National Bancorp, Inc. was Farmers National Bank of Newville. The rate of exchange was 2.266 shares of ACNBCorporation for every share of Farmers National Bancorp, Inc. The town of Newville had a 1996 population of 1,354, but the surrounding townships of North Newton, with a population of 1,939, and West Pennsboro, with a population of 5,343, have shown marked growth over the last several decades. Cumberland County had a 1996 population of 207,042. The Newville area is mainly agricultural. The Banks engage in a full-service commercial and consumer banking and trust business. Adams County National Bank provides financial services to its customers through its community banking network of thirteen full-service offices located throughout Adams County, Pennsylvania, and in Hanover, York County, Pennsylvania. Farmers National Bank of Newville serves its marketplace via three banking offices in the Newville, Cumberland County, Pennsylvania area. The Banks' services include accepting demand, savings and time deposits including NOW, SuperNOW, money market, passbook savings, a diversified array of certificates of deposit, IRAs, and club accounts. The services also include making secured and unsecured commercial and consumer loans; financing commercial transactions; making construction and mortgage loans; making residential mortgage loans and home equity lines of credit; making small business loans; making student loans; and, the renting of safe deposit box facilities. Further, the Banks' business loans include seasonal credit, collateral loans and term loans. Trust services provided by Adams County National Bank include services as executor and trustee under wills and deeds, estate planning services, and custodian and agent for various investment companies. Trust services also include transfer agent and registrar of bond issues and escrow agent. The Banks have a relatively stable deposit base, and no material amount of deposits is obtained from a single depositor or group of depositors (including federal, state and local governments). See Management's Discussion and Analysis in the 1999 Annual Report. The Banks have not experienced any significant seasonal fluctuations in the amount of its deposits. As of December 31, 1999, the Registrant had a total of 174 full-time and 73 part-time employees. SUPERVISION AND REGULATION The Registrant and the Banks are considered "affiliates" for purposes of Section 23A of the Federal Reserve Act and, as such, are subject to certain limitations specified therein on the making of loans on, extensions of credit to, or investments in each other. The Federal Bank Holding Company Act of 1956 restricts the Registrant's activities, whether conducted directly or through subsidiary corporations, to specified activities functionally related to banking. Permissible activities under the Act include lending, certain leasing activities, fiduciary and investment advisory services, acting as insurance agent or broker in connection with loans by subsidiary or affiliated companies, and certain bookkeeping or data processing services. COMPETITION All phases of the Banks' business are highly competitive. The Banks' market area is the primary trading area of Adams County, Pennsylvania; a western portion of York County, Pennsylvania; central Cumberland County, Pennsylvania, and, the northernmost portions of those counties in Maryland which are immediately adjacent to the southern border of Adams County. The market concentration is in the area of Gettysburg, Pennsylvania. The Banks compete with local commercial banks, other commercial banks with branches in the Banks' market area, savings associations, and other financial service providers. The Banks consider their major competition to be PNC Bank, Allfirst, Bank of Hanover and Trust Co, Peoples State Bank of East Berlin, Keystone Financial, F & M Trust, and Orrstown Bank. GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS The earnings and growth of the Banks are affected by the policies of the regulatory authorities including the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation. An important function of the Federal Reserve System is to regulate the money supply and interest rates. Among the instruments used to implement these objectives are open market operations in U.S. Government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits. Their use may also affect interest rates charged on loans or paid for deposits. The policies and regulations of the Federal Reserve Board have had, and will probably continue to have, a significant effect on the Banks' deposits, loans and investment growth, as well as the rate of interest earned and paid. The impact of such policies and regulations upon the future business and earnings of the Banks cannot be accurately predicted. ITEM 2. PROPERTIES ACNB Corporation owns two offices in Gettysburg, PA. The office at 675 Old Harrisburg Road is the main office and administrative headquarters. The Corporation also owns nine offices and leases one, which are spread throughout and serve Adams County. In addition, the Corporation owns one office in western York County and three in central Cumberland County. All three counties are located in south central Pennsylvania. 49 ACNB CORPORATION & SUBSIDIARIES FORM 10-K ITEM 3. LEGAL PROCEEDINGS In the opinion of the management of the Corporation, there are no proceedings pending to which the Corporation and the Banks are a party or to which its property is subject, which, if determined adversely to the Corporation and the Banks, would be material in relation to the Corporation's and Banks' financial condition. There are no proceedings pending other than ordinary routine litigation incident to the business of the Corporation and the Banks. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Corporation and the Banks by government authorities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The information required by this Item, regarding market value, dividend payment, and number of shareholders, is set forth on page 53 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is set forth on pages 15 and 46 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth on pages 16 through 25 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is set forth on pages 20 and 21 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages 26 through 45 of the Registrant's 1999 Annual Report and incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item, relating to directors, executive officers, and control persons, is set forth in sections "Principal Beneficial Owners of the Corporation's Stock", "Information as to Nominees, Directors and Executive Officers" and "Principal Officers of the Corporation" of the Registrant's definitive Proxy Statement to be used in connection with the 2000 Annual Meeting of Shareholders, which pages are incorporated herein by reference. Section 16(a) Beneficial Ownership Compliance. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Registrant's officers and directors, and persons who own more than 10 percent of a registered class of the Registrant's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC. Officers, directors and greater than 10 percent shareholders are required by SEC regulation to furnish the Registrant with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it or written representations from certain reporting persons that no Forms 5 were required for those persons, the Registrant believes that during the period of January 1, 1999, through December 31, 1999, its officers and directors were in compliance with all filing requirements applicable to them. ACNB CORPORATION & SUBSIDIARIES 50 PART IV ITEM 14b. EXHIBITS EXHIBIT 3(i) Articles of Incorporation of ACNB Corporation, as amended. EXHIBIT 3(ii) Bylaws of Registrant A copy of the Bylaws, as amended, of ACNB Corporation is incorporated by reference to Exhibit 3(ii) of the Registrant's Current 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 A copy of the Executive Employment Agreement dated as of January 1, 1998, between Adams County National Bank, ACNB Corporation and Ronald L. Hankey is 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 11 Statement Regarding the Computation of Earnings Per Share
For the Fiscal Year ended December 31 ------------------------------------- 1999 1998 1997 - --------------------------------------------------------------------------------------------- Weighted average shares outstanding ................. 5,782,930 5,815,246 5,817,273 Common stock Common Stock equivalents Stock options ..................................... -- -- -- Stock awards ...................................... -- -- -- ESOP shares ....................................... -- -- -- ---------- ---------- ---------- Total common stock equivalents ...................... -- -- -- ---------- ---------- ---------- Total Weighted Average Shares Outstanding ........... 5,782,930 5,815,246 5,817,273 ========== ========== ========== Net Income .......................................... $7,823,000 $7,725,000 $7,770,000 Net Income Per Share ................................ $1.35 $1.33 $1.34
EXHIBIT 12 Statements Regarding the Computation of Ratios The information required by this Exhibit is set forth on page 46 of the Registrant's 1999 Annual Report and incorporated herein by reference. EXHIBIT 21 Subsidiaries of the Registrant The Registrant has two banking subsidiaries, Adams County National Bank and Farmers National Bank of Newville, both national banks, which are wholly-owned by the Registrant. EXHIBIT 27 Financial Data Schedule 51 ACNB CORPORATION & SUBSIDIARIES FORM 10-K ITEM 15. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ACNB CORPORATION (Registrant) March 21, 2000 ---------------------- Date BY: /s/ Ronald L. Hankey BY: /s/ John W. Krichten - ---------------------------------- ---------------------------- Ronald L. Hankey John W. Krichten Chairman, Secretary & Treasurer President & CEO Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 21, 2000, by the following persons in the capacities indicated. /s/ Philip P. Asper /s/ William B. Lower - ---------------------------------- ---------------------------- Philip P. Asper William B. Lower Director Director /s/ Guy F. Donaldson /s/ Paul G. Pitzer - ---------------------------------- ---------------------------- Guy F. Donaldson Paul G. Pitzer Director Director /s/ Richard L. Galusha /s/ Ralph S. Sandoe - ---------------------------------- ---------------------------- Richard L. Galusha Ralph S. Sandoe Director Director /s/ D. Richard Guise /s/ Marian B. Schultz - ---------------------------------- ---------------------------- D. Richard Guise Marian B. Schultz Director & Vice Chairman of the Director Board /s/ Ronald L. Hankey /s/ L. Robert Snyder - ---------------------------------- ---------------------------- Ronald L. Hankey L. Robert Snyder Director, Chairman, President & CEO Director /s/ Edgar S. Heberlig /s/ Jennifer L. Weaver - ---------------------------------- ---------------------------- Edgar S. Heberlig Jennifer L. Weaver Director Director /s/ Philip M. Jones /s/ Harry L. Wheeler - ---------------------------------- ---------------------------- Philip M. Jones Harry L. Wheeler Director Director /s/ Wayne E. Lau - ---------------------------------- Director ACNB CORPORATION SUBSIDIARIES 52 COMMON STOCK MARKET PRICES AND DIVIDENDS The common stock of ACNB Corporation is traded in the over-the-counter market. As of December 31, 1999, the approximate number of shareholders of the corporation's common stock was 3,120. As quoted on the OTC Bulletin Board, high and low bid prices of common shares and dividends for the last two years were:
1999 1998 ------------------------------------- --------------------------------- Bid Price Cash Bid Price Cash Quarter --------------------- Dividend ------------------- Dividend Ended High Low Paid High Low Paid - ----------------------------------------------------------------------------------------------------------------- March 31 $23.50 $21.00 $.20 $25.63 $23.38 $.19 June 30 21.00 18.25 .20 27.50 25.63 .19 September 30 18.75 16.25 .20 27.75 24.50 .20 December 31 18.00 16.63 .25 24.50 22.00 .25
The bid prices for ACNB Corporation common stock for the periods indicated represent inter-dealer prices without adjustment for retail mark-up, mark-down or commission, and do not necessarily represent actual transactions. Trades have generally occurred in relatively small lots, and the prices quoted herein are not necessarily indicative of the market value of a substantial block. While the corporation expects to continue its policy of regular quarterly dividend payment, no assurance of future dividend payment can be given. Future dividend payments will depend upon maintenance of a continued strong financial condition, future earnings, and capital requirements. The corporation has no restrictions affecting the payment of dividends, except as indicated in Note L of the Notes to Consolidated Financial Statements. The following firms make a market in ACNB Corporation common stock: Ferris, Baker Watts, Incorporated F.J. Morrissey & Co., Inc. Frederick, MD Philadelphia, PA (301)662-6488/(800)950-6488 (215)563-8500/(800)842-8928 Hopper Soliday & Co., Inc. Salomon Smith Barney Inc. Lancaster, PA Gettysburg, PA (717)519-6060/(800)456-9234 (717)334-9101/(800)344-3828 Janney Montgomery Scott, Inc. York, PA (717)845-5611/(800)999-0503 53 ACNB CORPORATION & SUBSIDIARIES BOARD OF DIRECTORS ACNB CORPORATION - ---------------------------------------------------------------------------------------------------------- PHILIP P. ASPER EDGAR S. HEBERLIG RALPH S. SANDOE Building Contractor Retired Fruit Broker PHILIP M. JONES MARIAN B. SCHULTZ GUY F. DONALDSON CEO Interim Dean Fruit Grower Times & News Special Academic Programs Publishing Company Shippensburg University RICHARD L. GALUSHA WAYNE E. LAU L. ROBERT SNYDER Retired Sales Representative Chairman of the Board Destinations: A Travel Company Littlestown Hardware & D. RICHARD GUISE Foundry Co., Inc. President WILLIAM B. LOWER Adams County Motors Corp. President JENNIFER L. WEAVER Vice Chairman Boyer Nurseries & Orchards, Inc. Director ACNB Corporation & Gettysburg Campus Adams County National Bank PAUL G. PITZER Harrisburg Area Community College Fruit Grower RONALD L. HANKEY HARRY L. WHEELER Chairman, President & CEO Proprietor ACNB Corporation & Wheeler Drywall Adams County National Bank ADAMS COUNTY NATIONAL BANK - ---------------------------------------------------------------------------------------------------------- PHILIP P. ASPER PHILIP M. JONES RALPH S. SANDOE GUY F. DONALDSON WAYNE E. LAU MARIAN B. SCHULTZ RICHARD L. GALUSHA WILLIAM B. LOWER L. ROBERT SNYDER D. RICHARD GUISE PAUL G. PITZER JENNIFER L. WEAVER RONALD L. HANKEY FARMERS NATIONAL BANK OF NEWVILLE - ---------------------------------------------------------------------------------------------------------- DANA P. BRANDT EDGAR S. HEBERLIG W. IRVIN NELSON J. THOMAS DERICK CAROLYN H. KOUGH FRANK A. REEDER FRANK C. EGGER MERVIN J. MORRISON HARRY L. WHEELER RONALD L. HANKEY
ADAMS COUNTY NATIONAL BANK HONORARY DIRECTOR DIRECTORS EMERITI - ---------------------------------------------------------------------------------------------------------- C. F. DITZLER FRANK ELSNER, JR. CHARLES E. RITTER ADAMS COUNTY NATIONAL BANK HONORARY DIRECTOR - ---------------------------------------------------------------------------------------------------------- DALE G. CRUM ACNB CORPORATION & SUBSIDIARIES 54
OFFICERS ACNB CORPORATION - ---------------------------------------------------------------------------------------------------------- RONALD L. HANKEY JOHN W. KRICHTEN Chairman, Secretary & Treasurer President & Ceo LYNDA L. GLASS Assistant Secretary THOMAS A. RITTER Executive Vice President ADAMS COUNTY NATIONAL BANK - ---------------------------------------------------------------------------------------------------------- RONALD L. HANKEY GARY R. BENNETT JOHN W. KRICHTEN Chairman, Senior Vice President & Senior Vice President, Cashier & President & CEO Senior Trust Officer Chief Financial Officer THOMAS A. RITTER LYNDA L. GLASS NANCY L. REICHART Executive Vice President Senior Vice President & Senior Vice President & Chief Operating Officer Trust Officer ELIZABETH H. BEALL Senior Vice President JOHN M. KIEHL CARL L. RICKER Human Resources Senior Vice President Senior Vice President & Operations & Security Chief Lending Officer ASSISTANT VICE PRESIDENTS VICE PRESIDENTS ASSISTANT CASHIERS - ------------------------------ ---------------------------------- ------------------------------------- ROBERT L. BREWER DEBRA B. BRENNAN BEVERLY S. KRESS KIRK B. COWDEN SANDRA A. DEANER DIANA K. KUNTZ WAYNE G. CRUM STEVEN E. EBERSOLE LINDA L. LEER DAVID W. DEANER GEORGE R. GUISE ROBERT A. HAHN NANCY E. HELWIG L. JOHN HICKS DOROTHY K. PUHL RONALD L. HOFFMAN M. PATRICIA SHARP CHARLES D. MARTIER, JR. SHELBY L. STONE WAYNEA. STEINOUR WILLIAM H. YOHE, JR. FARMERS NATIONAL BANK OF NEWVILLE - ---------------------------------------------------------------------------------------------------------- MERVIN J. MORRISON JAMES E. SHOWVAKER President Cashier CAROLYN H. KOUGH DOUGLAS R. LINDSAY Executive Vice President Assistant Cashier
55 ACNB CORPORATION & SUBSIDIARIES OFFICE LOCATIONS ADAMS COUNTY NATIONAL BANK - ---------------------------------------------------------------------------------------------------------- ARENDTSVILLE EAST BERLIN McSHERRYSTOWN 101 Main Street 1677 Abbottstown Pike 369 Main Street Arendtsville, PA 17303 East Berlin, PA 17316 McSherrystown, PA 17344 BENDERSVILLE FRANKLIN TOWNSHIP NORTH GETTYSBURG 101 North Main Street 10 High Street 675 Old Harrisburg Road Bendersville, PA 17306 Cashtown, PA 17310 Gettysburg, PA 17325 BIGLERVILLE HANOVER WEST LITTLESTOWN 3459 Biglerville Road 1127 Eichelberger Street 444 West King Street Biglerville, PA 17307 Hanover, PA 17331 Littlestown, PA 17340 CARROLL VALLEY LINCOLN SQUARE YORK SPRINGS 104 Sanders Road 2 Chambersburg Street 202 Main Street Carroll Valley, PA 17320 Gettysburg, PA 17325 York Springs, PA 17372 LITTLESTOWN 17 South Queen Street Littlestown, PA 17340
ADAMS COUNTY NATIONAL BANK ADAMS COUNTY NATIONAL BANK INTERNET BANKING TELEPHONE BANKING www.acnb.com Banking Convenience is Just a Phone Call Away! Toll-Free: 1-888-338-ACNB (2262) Local: 338-ACNB (2262)
FARMERS NATIONAL BANK OF NEWVILLE - -------------------------------------------------------------------------------- MAIN OFFICE DRIVE-UP BIG SPRING 1 West Big Spring Avenue 2 East Big Spring Avenue 36 Carlisle Road Newville, PA 17241 Newville, PA 17241 Newville, PA 17241
ACNB CORPORATION & SUBSIDIARIES 56 ANNUAL MEETING The Annual Meeting of Shareholders for ACNB Corporation will be held on Tuesday, May 2, 2000, at 1:00 p.m. at the Main Office of Adams County National Bank, 675 Old Harrisburg Road, Gettysburg, PA. FORM 10-K A copy of ACNB Corporation's Form 10-K, as filed with the Securities and Exchange Commission, may be obtained, without charge, by writing to: Ronald L. Hankey President ACNB Corporation P. O. Box 3129 Gettysburg, PA 17325 The Annual Report and other Corporation reports are also filed electronically through the Electronic Data Gathering, Analysis, and Retrieval System ("EDGAR"), which performs automated collection, validation, indexing, acceptance, and forwarding of submissions to the Securities and Exchange Commission, or SEC, and is accessible by the public using the Internet at http://www.sec.gov./edgarhp.htm. TRANSFER AGENT, REGISTRAR AND DIVIDEND DISBURSING AGENT Registrar and Transfer Company 10 Commerce Drive Cranford, NJ 07016 For stockholder inquiries, call toll-free (800)368-5948. 57 ACNB CRPORATION & SUBSIDIARIES EX-27 4 FDS --
9 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 29,840 3,839 1,711 0 95,175 57,930 57,059 347,787 3,543 545,952 452,633 29,827 3,629 0 0 0 14,372 45,491 545,952 27,137 9,959 1,098 38,194 14,993 15,966 22,228 253 0 13,270 11,593 11,593 0 0 7,823 1.35 1.35 4.24 1,615 1,920 0 3,535 3,594 390 86 3,543 3,543 0 0
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