10-Q 1 acnb_10q.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________________ to Commission file number 0-11783 ACNB CORPORATION -------------------------------------------------------------------------------- (Exact name of corporation as specified in its charter) PENNSYLVANIA 23-2233457 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 16 LINCOLN SQUARE, GETTYSBURG, PA 17325 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (717) 334-3161 -------------------------------------------------------------------------------- (corporation's telephone number, including area code) 675 OLD HARRISBURG ROAD, GETTYSBURG, PA 17325 -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the corporation (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the corporation was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ Indicate by check mark whether the corporation is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes __X__ No _____ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the corporation has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class - Common Stock ($2.50 par value) Outstanding at March 31, 2003 - 5,436,101 PART I ITEM I FINANCIAL INFORMATION ACNB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CONDITION
3/31 3/31 12/31 2003 2002 2002 ASSETS (000 omitted) Cash and Due from Banks $27,598 $18,344 $19,098 Investment Securities Securities Held to Maturity 32,941 37,141 31,658 Securities Available for Sale 323,037 175,710 282,389 ______ ______ Total Investment Securities 355,978 212,851 314,047 Loans 380,728 364,264 374,850 Less: Reserve for Loan Losses (3,849) (3,688) (3,837) _______ _______ Net Loans 376,879 360,576 371,013 Premises and Equipment 7,357 5,647 7,182 Other Real Estate 515 1,509 559 Other Assets 23,665 19,639 22,745 ________ ________ ________ TOTAL ASSETS $791,992 $618,566 $734,644 ======== ======== ======== LIABILITIES Deposits Noninterest Bearing 75,266 74,090 70,728 Interest Bearing 529,527 437,669 511,887 _______ _______ _______ Total Deposits 604,793 511,759 582,615 Securities Sold Under Agreement To Repurchase 33,089 28,902 35,945 Borrowing Federal Home Loan Bank 75,000 8,050 40,050 Demand Notes U.S. Treasury 469 450 450 Other Liabilities 7,033 6,467 5,484 _______ _______ _______ TOTAL LIABILITIES 720,384 555,628 664,544 SHAREHOLDERS' EQUITY Common Stock ($2.50 par value) 20,000,000 shares authorized: 5,436,101 shares issued and outstanding at 3/31/03 13,590 13,590 13,590 Retained Earnings 54,054 49,856 52,781 Accumulated Other Comprehensive Income (Loss) 3,963 (508) 3,729 ______ ______ ______ TOTAL SHAREHOLDERS' EQUITY 71,607 62,938 70,100 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $791,991 $618,566 $734,644 ======== ======== ======== See accompanying notes to financial statements.
ACNB CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Three Months Ended 3/31 2003 2002 (000 omitted) INTEREST INCOME Loan Interest and Fees $6,053 $6,267 Interest and Dividends on Investment Securities 3,497 3,131 Interest on Federal Funds Sold 0 0 Interest on Balances with Depository Institutions 15 11 _____ _____ TOTAL INTEREST INCOME 9,565 9,409 INTEREST EXPENSE Deposits 3,109 3,054 Other Borrowed Funds 587 259 _____ _____ TOTAL INTEREST EXPENSE 3,696 3,313 NET INTEREST INCOME 5,869 6,096 Provision for Loan Losses 60 60 NET INTEREST INCOME AFTER PROVISION _____ _____ FOR LOAN LOSSES 5,809 6,036 OTHER INCOME Trust Department 162 152 Service Charges on Deposit Accounts 463 399 Other Operating Income 515 395 Gain on Other Real Estate 222 0 Bank Owned Life Insurance 127 88 Securities Gains 450 0 _____ _____ TOTAL OTHER INCOME 1,939 1,034 OTHER EXPENSES Salaries and Employee Benefits 2,452 2,151 Premises and Equipment 647 527 Other Expenses 1,203 1,114 _____ _____ TOTAL OTHER EXPENSE 4,302 3,792 INCOME BEFORE INCOME TAX 3,446 3,278 Applicable Income Tax 979 1,004 _____ _____ NET INCOME $2,467 $2,274 ===== ===== EARNINGS PER SHARE* $0.45 $0.42 DIVIDENDS PAID PER SHARE 0.21 0.40 *Based on a weighted average of 5,436,101 shares outstanding in 2003 and 5,436,101 in 2002. See accompanying notes to financial statements. ACNB CORPORATION AND SUBSIDIARIES STATEMENT OF CASH FLOWS
Three months ended 3/31 2003 2002 (000 (omitted) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash Flows from Operating Activities: Interest and Dividends Received $ 10,821 $ 9,834 Fees and Commissions Received 2,109 1,133 Interest Paid (3,593) (3,738) Cash Paid to Suppliers and Employees (5,043) (4,654) Income Taxes Paid 0 0 Loans Originated for Sale (4,476) 0 Proceeds of Mortgage Loans Sold 5,214 0 Net Cash (Used in) Provided by Operating Activities 5,032 2,575 Cash Flows from Investing Activities: Proceeds from Maturities of Investment Securities 59,364 19,251 Purchase of Investment Securities (100,444) (10,000) Net Decrease (Increase) in Loans (5,879) (1,608) Capital Expenditures (359) (48) Proceeds from Sale of Other Real Estate Owned 494 0 Net Cash (Used in) Provided by Investing Activities (46,824) 7,595 Cash Flow from Financing Activities: Net Increase (Decrease) in Demand Deposits, NOW Accounts, and Savings Accounts 19,388 4,823 Net Increase (Decrease) in Certificates of Deposit (67) (6,638) Net Increase in Securities Sold Under Agreement to Repurchase (2,856) 0 Dividends Paid (1,142) (2,174) Net Increase (Decrease) in Borrowings 34,969 (9,762) Net Cash (Used in) Provided by Financing Activities 50,292 (13,751) Net Increase (Decrease) in Cash and Cash Equivalents 8,500 (3,581) Cash and Cash Equivalents: Beginning of Period 19,098 21,925 End of Period $ 27,598 $1 8,344 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Net Income $ 2,467 $ 2,274 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 184 105 Provision for Loan Losses 60 60 Provision for Deferred Taxes (404) (390) Amortization (Accretion) of Investment Securities Premiums 656 (65) Increase (Decrease) in Taxes Payable 1,383 1,394 (Increase) Decrease in Interest Receivable 257 (125) Increase (Decrease) in Interest Payable 103 (425) Increase (Decrease) in Accrued Expenses 251 80 Decrease (Increase) in Mortgage Loans Held for Sale 738 0 (Increase) Decrease in Other Assets (1,176) (1,047) Increase (Decrease) in Other Liabilities 513 714 Net Cash (Used in) Provided by Operating Activities $ 5,032 $ 2,575 DISCLOSURE OF ACCOUNTING POLICY For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.
ACNB CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly ACNB Corporation's financial position as of March 31, 2003 and 2002 and December 31, 2002 and the results of its operations for the three months ended March 31, 2003 and 2002 and changes in financial position for the three months then ended. All such adjustments are of a normal recurring nature. The accounting policies followed by the corporation are set forth in Note A to the corporation's financial statements in the 2002 ACNB Corporation Annual Report and Form 10-K, filed with the SEC on March 21, 2003. 2. The book and approximate market value of securities owned at March 31, 2003 and December 31, 2002 were as follows:
3/31/03 12/31/02 Amortized Fair Amortized Fair Cost Value Cost Value (000 omitted) U.S. Treasury and U.S. Government Agencies (held to maturity) $ 25,539 $ 28,359 $ 25,540 $ 28,350 State and Municipal (held to maturity) 1,425 1,434 1,509 1,524 Corporate (held to maturity) 0 0 217 219 State and Municipal (available for sale) 22,928 23,173 10,337 10,513 U.S. Government Agencies (available for sale) 1,330 1,356 21,501 22,138 Mortgage Backed Securities (available for sale) 189,575 193,575 180,696 184,893 Corporate (available for sale) 102,554 104,933 63,565 64,845 Restricted Equity Securities 5,977 5,977 4,392 4,392 TOTAL $349,328 $358,807 $307,757 $316,874
Income earned on investment securities was as follows:
Three Months Ended March 31 2003 2002 (000 omitted) U.S. Treasury and U.S. Government Agencies $ 545 $1,529 Mortgage Backed Securities 1,945 1,514 State and Municipal 172 24 Other Investments 835 64 $3,497 $3,131 3. Gross loans are summarized as follows: March 31 December 31 (000 omitted) 2003 2002 Real Estate $326,991 $326,180 Real Estate Construction 19,037 16,096 Commercial and Industrial 23,240 21,128 Consumer 11,460 11,446 Total Loans $380,728 $374,850
4. Earnings per share are based on the weighted average number of shares of stock outstanding during each period. Weighted average shares outstanding for the three month periods ended March 31, 2003, and 2002 were 5,436,101 and 5,436,101, respectively. 5. Dividends paid per share were $.21 and $.40 for the three month periods ended March 31, 2003, and 2002, respectively. This represented a 46% payout of net income in 2003 and a 95% payout in 2002. 6. The results of operations for the three month periods ended March 31, 2003, and 2002, are not necessarily indicative of the results to be expected for the full year. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The corporation's discussion and analysis of the significant changes in the results of operations, capital resources and liquidity presented in the accompanying consolidated financial statements for the Registrant, and its wholly-owned subsidiaries, Adams County National Bank and Pennbanks Insurance Company, follow. The corporation's consolidated statement of financial condition and results of operations consist principally of the bank's financial condition and results of operations. This discussion should be read in conjunction with the corporation's 2002 Annual Report to Shareholders. Current performance does not guarantee, assure, and is not necessarily indicative of similar performance in the future. In addition to historical information, this Form 10-Q contains forward-looking statements. From time to time, the corporation may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the corporation notes that a variety of factors could cause the corporation's actual results and experience to differ materially from the anticipated results or other expectations expressed in the corporation's forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the corporation's business include the following: general economic conditions, including their impact on capital expenditures; business conditions in the banking industry; the regulatory environment; rapidly changing technology and evolving banking industry standards; competitive factors, including increased competition with community, regional and national financial institutions; new service and product offerings by competitors and price pressures; and similar items. Three months ended March 31, 2003 compared to three months ended March 31, 2002 Net Income for the three month period ending March 31, 2003 was $2,467,000, up $193,000 from the first quarter of 2002. Net interest income was down, total other income was up and other expense was up. The first quarter increase is due to securities gain and gain on sale of other real estate. Net income per share, for the first quarter, was $.45, compared to the $.42 earned in the same period in 2002. For the three month period (annualized) in 2003, the return on average assets and return on average equity were 1.30% and 14.14%, respectively, compared to 1.47% and 14.55%, respectively for 2002. An explanation of the factors and trends that caused changes between the two periods, by major earnings category, follows. Total interest income for the first three month period of 2003 was $9,565,000, up $156,000 or 1.6% above the $9,409,000 earned in the same period of 2002. The $156,000 increase in interest income was due to a rapid growth in earning assets in the securities portfolio during 2003. The average yield on earning assets declined 114 basis points compared to the same quarter in 2002. In an effort to manage interest rate risk, the corporation continues to lower interest rates on transaction accounts and keep securities maturities short. Income from loans was down approximately $214,000 due to lower interest rates while security income was up approximately $366,000 due to greater volume of securities. Total interest expense for the first three month period of 2003 was $3,696,000, up $383,000 or 11.6% from the $3,313,000 incurred for the same period in 2002. The $383,000 increase in interest expense was due to successful deposit promotions and increased borrowing. Because the increase in interest expense exceeded the increase in interest income, net interest income decreased $227,000. Total other income for the first three month period of 2003 at $1,939,000, was $905,000 greater than the same quarter in 2002. The following are the primary causes of the 88% increase in other income: o A $55,000 increase in overdraft charges as the overdraft privilege program continues to be successful. o Gain on sale of other real estate. The former Carroll Valley Office was sold in March of 2003, and a gain of $222,000 was recognized. o Realized gains on securities of $450,000. Short term securities with terms of approximately 12 to 18 months were sold for gains, and the proceeds reinvested at terms of 24 to 30 months at higher rates. Not all of the funds were reinvested at higher rates, but the average return ended up greater than before the sale. o Additional income from bank owned life insurance of approximately $50,000. Since interest margins continue to narrow, the main cause of increased net earnings can be traced to the other income category. Total other expense for the first three month period of 2003 was $4,302,000, up $510,000 from the $3,792,000 incurred for the first quarter of 2002. The following are the primary causes of the 13% increase in other expense: o A $301,000 or 14% increase in salaries and benefits caused by a continuation of staffing efforts connected with a new branch in Dillsburg, PA, and upgrading of loan personnel. o A $120,000 increase in premises and equipment expense. This increase was spread across the entire category and not confined to a specific area. o An $89,000 increase spread across the entire other expense category. The provision for income taxes in the first quarter decreased $25,000 due to a higher level of tax-free income and low income housing tax credits. OVERVIEW OF THE BALANCE SHEET The changes in the balance sheet have been driven by strong growth in interest bearing transaction accounts and borrowings. The following are some of the results: o Total investment securities were $355,978,000, at March 31, 2003, an increase of $143,127,000 or 67% since March 31, 2002. Securities have increased from 34% of total assets to 45% of total assets, of these securities, $20,000,000 mature within seven months with a total of $72,100,000 maturing within two years. These funds should be available for reinvestment when interest rates rise. o Total deposits have grown from $511,759,000, at March 31, 2002, to $604,793,000, at March 31, 2003, an increase of $93,034,000 or 18%. Approximately $72,600,000 of those deposits are called classic money market. At March 31,2002, the corporation had none of these accounts. They are transaction accounts, which will require a movement of interest rates, similar to general money market rates, when the economy improves. In addition, borrowings have increased from $37,400,000, at March 31, 2002, to $108,600,000, at March 31, 2003. Of these $75,000,000 are term borrowings ranging from two to ten years in maturity. o Accumulated other comprehensive income has increased from a negative $508,000, at March 31, 2002, to a positive $3,963,000, at March 31, 2003. This indicates the after tax effect in the change in market value of the available for sale securities portfolio. This shift enhances the corporation's ability to reposition the portfolio for income purposes as interest rates rise. As these securities come closer to maturity, they can be sold and terms lengthened to obtain higher yields. INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS Three Months Ended 3/31/03 3/31/02 Rate Rate Earning Assets 5.33% 6.47% Interest Bearing Liabilities 2.39% 2.73% Interest Rate Spread 2.94% 3.74% Net Yield on Earning Assets 3.28% 4.19% Net Yield on Earning Assets is the difference, stated in percentages, between the interest earned on loans and other investments and the interest paid on deposits and other sources of funds. The Net Yield on Earning Assets is one of the best analytical tools available to demonstrate the effect of interest rate changes on the corporation's earning capacity. The Net Yield on Earning Assets, for the first three months of 2003, was down 91 basis points compared to the same period in 2002. Yields on loans and securities have changed more rapidly than deposit rates as interest rates in the general economy have remained at record low levels after falling dramatically in 2001 and 2002. PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES Reserve for Possible Loan Losses (In Thousands) Three Months Ended 3/31/03 3/31/02 Balance at Beginning of Period $3,837 $3,723 Provision Charged to Expense 60 60 Loans Charged Off 60 104 Recoveries 12 9 Balance at End of Period $3,849 $3,688 Ratios: Net Charge-offs to: Net Income 1.95% 4.18% Total Loans .01% .03% Reserve for Possible Loan Losses 1.25% 2.58% Reserve for Possible Loan Losses to: Total Loans 1.01% 1.01% The Reserve for Possible Loan Losses at March 31, 2003 was $3,849,000 (1.01% of Total Loans), an increase of $161,000 from $3,688,000 (1.01% of Total Loans) at the end of the first quarter of 2002. Loans past due 90 days and still accruing were $1,265,000 and non-accrual loans were $424,000, as of March 31, 2003. The ratio of non-performing assets plus other real estate owned to total assets was .28%, at March 31, 2003. All properties are carried at the lower of market or book value and are not considered to represent significant threat of loss to the bank. Loans past due 90 days and still accruing were $1,379,000, at year end 2002, while non-accruals were $1,037,000. The bulk of the corporation's real estate loans are in residential mortgages. Management believes that internal loan review procedures will be effective in recognizing and correcting any real estate lending problems that may occur due to current economic conditions. Interest not accrued, due to an average of $730,000 in non-accrual loans, was approximately $10,000 for the first quarter of 2003. The bank considers a loan impaired when, based on current information and events, it is probable that a lender will be unable to collect all amounts due. We measure impaired loans based on the present value of expected future cash flows, discounted at the loan's effective interest rate, or as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. If the measure of the impaired loan is less than its recorded investment a lender must recognize an impairment by creating, or adjusting, a valuation allowance with a corresponding charge to loan loss expense. The corporation uses the cash basis method to recognize interest income on loans that are impaired. All of the corporation's impaired loans were on a non-accrual status for all reported periods. CAPITAL MANAGEMENT Total Shareholders' Equity was $71,607,000, at March 31, 2003, compared to $62,938,000, at March 31, 2002, an increase of $8,669,000 or 13.8% over that period. The ratio of Total Shareholders' Equity to Total Assets was 9.54%, at December 31, 2002, 10.17%, at March 31, 2002, and 9.04%, at March 31, 2003. The total risk-based capital ratio was 14.53%, at March 31, 2003. The leverage ratio was 8.65%, at March 31, 2003, and 10.16%, during the same period in 2002. Capital growth of $4,471,000 reflects a change in other comprehensive income, consisting mainly of unrealized security gains, but the remainder, $4,198,000, was generated internally through retained earnings. LIQUIDITY AND INTEREST RATE SENSITIVITY Management believes that the corporation's liquidity is adequate. Liquid assets (cash and due from banks, federal funds sold, money market instruments, available for sale securities and held to maturity investment securities maturing within one year) were 45% of total assets, at March 31, 2003. This mix of assets would be readily available for funding any cash requirements. In addition, the Bank has an approved line of credit of $343,284,000 at the Federal Home Loan Bank of Pittsburgh with $75,000,000 outstanding at March 31, 2003. As of March 31, 2003, the cumulative asset sensitive gap was 4.2% of total assets at one month, 9.0% at six months, and 17.0% at one year. Adjustable rate mortgages, which have an annual interest rate cap of 2%, are considered rate sensitive. Twenty-five (25%) percent of passbook and statement savings, NOW and money market deposit accounts are calculated to reprice overnight. The remaining 75% are carried in the over 5-year category. Other than the construction of a new operations center, costing approximately $7,000,000 over the next 18 months, there are no known trends or demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way. Aside from those matters described above, management does not currently believe that there are any known trends or uncertainties that would have a material impact on future operating results, liquidity or capital resources nor is it aware of any current recommendations by the regulatory authorities, which, if they were to be implemented, would have such an effect, although the general cost of compliance with numerous and multiple federal and state laws and regulation does have and in the future may have a negative impact on the corporation's results of operations. ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Management monitors and evaluates changes in market conditions on a regular basis. Based upon the most recent review management has determined that there have been no material changes in market risks since year end. For further discussion of year end information, refer to the annual report. ITEM 4 CONTROLS AND PROCEDURES Within the 90 days prior to the date of this report, the corporation carried out an evaluation, under the supervision and with the participation of the corporation's management, including the corporation's Chief Financial Officer, of the effectiveness of the design and operation of the corporation's disclosure controls and procedures pursuant to the Securities Exchange Act of 1934 ("Exchange Act") Rule 13a-14. Based upon that evaluation, the corporation's Chief Executive Officer along with the corporation's Chief Financial Officer concluded that the corporation's disclosure controls and procedures are effective in timely alerting them to material information relating to the corporation (including its consolidated subsidiaries) required to be included in the corporation's periodic SEC filings. There have been no significant changes in the corporation's internal controls or in other factors which could significantly affect these controls subsequent to the date the corporation carried out its evaluation. Disclosure controls and procedures are corporation controls and other procedures that are designed to ensure that information required to be disclosed by the Corporation in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. PART II. OTHER INFORMATION Item 1. Legal Proceedings - Nothing to report. Item 2. Changes in Securities and Use of Proceeds - Nothing to report. Item 3. Defaults Upon Senior Securities - Nothing to report. Item 4. Submission of Matters to a Vote of Security Holders - Nothing to report. Item 5. Other Information - Nothing to report. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following Exhibits are included in this Report: Exhibit 3(i) Articles of Incorporation of Registrant (Incorporated by Reference to Exhibit 3 ( i ) in Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). Exhibit 3(ii) Bylaws of Registrant (Incorporated by Reference to Exhibit 3(ii) in Registrant's Report of Form 8-K, filed with the Commission on March 25, 1998). Exhibit 10.1 Executive Employment Agreement Dated as of January 1, 2000 between Adams County National Bank, ACNB Corporation and Thomas A. Ritter (Incorporated by Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, filed with the Commission on March 26, 2001). Exhibit 11 Statement Regarding Computation of Earnings Per Share. Exhibit 99.1 Certification of Chairman of the Board and Chief Executive Officer Exhibit 99.2 Certification of Chief Financial Officer (b) Report on Form 8-K. The Registrant filed no Current Reports on Form 8-K during the quarter ended March 31, 2003. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACNB CORPORATION Ronald L. Hankey, Chairman of the Board/CEO May 2, 2003 John W. Krichten, Secretary/Treasurer CERTIFICATION I, Ronald L. Hankey, Chairman of the Board/Chief Executive Officer, certify, that: 1. I have reviewed this quarterly report on Form 10-Q of ACNB Corporation. 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: Ronald L. Hankey, Chairman of the Board/CEO Date: May 2, 2003 CERTIFICATION I, John W. Krichten, Secretary/Treasurer, certify, that: 1. I have reviewed this quarterly report on Form 10-Q of ACNB Corporation. 2. Based on my knowledge, the quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report. 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of the internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect the internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: John W. Krichten, Secretary/Treasurer Date: May 2, 2003 EXHIBIT INDEX Exhibit Number Exhibit 3(i) Articles of Incorporation of Registrant (Incorporated by Reference to Exhibit 3 ( i ) of Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). Exhibit 3(ii) Bylaws of Registrant (Incorporated by Reference to Exhibit 3 (ii) of Registrant's Report on Form 8-K, filed with the Commission on March 25, 1998). Exhibit 10.1 Executive Employment Agreement Dated as of January 1, 2000 between Adams County National Bank, ACNB Corporation and Thomas A. Ritter (Incorporated by Reference to Exhibit 99 of the Registrant's Current Report on Form 8-K, filed with the Commission on March 26, 2001). Exhibit 11 Statement Regarding Computation of Earnings Per Share. Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350 as Added by Section of 906 of the Sarbanes-Oxley Act of 2002 by Ronald L. Hankey Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350 as Added by Section of 906 of the Sarbanes-Oxley Act of 2002 by John W. Krichten