- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-------------------------------------------------
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
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ACNB CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
PENNSYLVANIA 23-2233457
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
675 OLD HARRISBURG ROAD, GETTYSBURG, PA 17325
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(717) 334-3161
--------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant 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 August 3, 1998 - 5,253,278
<PAGE>
PART I ITEM I FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
30-Jun 30-Jun 31-Dec
1998 1997 1997
-------- -------- --------
ASSETS (000 omitted)
<S> <C> <C> <C>
Cash and Due from Banks 15,680 14,776 28,734
Investment Securities
Securities Held to Maturity 32,920 54,766 32,988
Securities Available for Sale 85,749 48,589 55,935
-------- -------- --------
Total Investment Securities 118,669 103,355 88,923
Federal Funds Sold 0 100 100
Loans 341,904 340,183 341,808
Less: Reserve for Loan Losses (3,259) (3,170) (3,174)
-------- -------- --------
Net Loans 338,645 337,013 338,634
Premises and Equipment 4,652 5,178 4,949
Other Real Estate 496 352 401
Other Assets 5,798 5,568 5,096
-------- -------- --------
TOTAL ASSETS $483,940 $466,342 $466,837
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing 48,969 46,985 46,839
Interest Bearing 359,522 352,090 348,734
-------- -------- --------
Total Deposits 408,491 399,075 395,573
Securities Sold Under
Agreement To Repurchase 16,765 12,467 15,021
Borrowing Federal Home Loan Bank 0 650 0
Demand Notes U.S. Treasury 450 450 450
Other Liabilities 3,763 2,969 3,175
-------- -------- --------
TOTAL LIABILITIES 429,469 415,611 414,219
SHAREHOLDERS EQUITY
Common Stock ($2.50 par value)
20,000,000 shares authorized:
5,253,278 shares issued and
outstanding at 6/30/98 13,133 13,133 13,133
Surplus 3,647 3,647 3,647
Retained Earnings 36,646 33,620 34,968
Net unrealized gains on securities available
for sale 1,045 331 870
-------- -------- --------
TOTAL SHAREHOLDERS EQUITY 54,471 50,731 52,618
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $483,940 $466,342 $466,837
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
PAGE 2
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1998 1997 1998 1997
------ ------ ------ ------
(000 omitted) (000 omitted)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loan Interest and Fees 6,983 6,927 13,963 13,602
Interest and Dividends on
Investment Securities 1,689 1,840 3,319 3,717
Interest on Federal Funds Sold 0 2 1 3
Interest on Balances with
Depository Institutions 240 22 339 81
------ ------ ------ ------
TOTAL INTEREST INCOME 8,912 8,791 17,622 17,403
INTEREST EXPENSE
Deposits 3,610 3,534 7,134 7,007
Other Borrowed Funds 187 164 346 335
------ ------ ------ ------
TOTAL INTEREST EXPENSE 3,797 3,698 7,480 7,342
NET INTEREST INCOME 5,115 5,093 10,142 10,061
Provision for Loan Losses 90 60 180 90
------ ------ ------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,025 5,033 9,962 9,971
OTHER INCOME
Trust Department 214 141 284 237
Service Charges on Deposit Accounts 189 185 371 374
Other Operating Income 233 142 451 309
Securities Gains 0 0 0 0
------ ------ ------ ------
TOTAL OTHER INCOME 636 468 1,106 920
OTHER EXPENSES
Salaries and Employee Benefits 1,623 1,540 3,291 3,289
Premises and Fixed Assets 456 432 919 865
Other Expenses 728 664 1,366 1,327
------ ------ ------ ------
TOTAL OTHER EXPENSE 2,807 2,636 5,576 5,481
INCOME BEFORE INCOME TAX 2,854 2,865 5,492 5,410
Applicable Income Tax 946 948 1,818 1,787
------ ------ ------ ------
NET INCOME $1,908 $1,917 $3,674 $3,623
====== ====== ====== ======
EARNINGS PER SHARE* $0.36 $0.36 $0.70 $0.68
DIVIDENDS PER SHARE* 0.19 0.18 0.38 0.36
</TABLE>
*Based on 5,253,278 shares outstanding in 1998 and 5,255,893 in 1997
See accompanying notes to financial statements.
Page 3
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30
1998 1997
---- ----
(000 omitted)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash Flows from Operating Activities:
Interest and Dividends Received 17,938 16,942
Fees and Commissions Received 1,355 1,205
Interest Paid (7,458) (7,314)
Cash Paid to Suppliers and Employees (5,827) (4,766)
Income Taxes Paid (1,828) (1,755)
Net Cash Provided by Operating Activities 4,180 4,312
Cash Flows from Investing Activities:
Proceeds from Maturities of Investment Securities
and Interest Bearing Balances with Other Banks 9,760 26,701
Purchase of Investment Securities and Interest
Bearing Balances with Other Banks (39,457) (13,560)
Principal Collected on Loans 39,141 33,527
Loans Made to Customers (39,427) (48,223)
Capital Expenditures (17) (87)
Net Cash Used in Investing Activities (30,000) (1,642)
Cash Flow from Financing Activities:
Net Increase in Demand Deposits, NOW Accounts, and
Savings Accounts 8,290 376
Proceeds from Sale of Certificates of Deposit 23,052 21,254
Payments for Maturing Certificates of Deposit (16,680) (29,951)
Dividends Paid (1,996) (1,891)
Increase (Decrease) in Borrowings 0 650
Repurchase of Common Stock 0 (410)
Net Cash Provided by Financing Activities 12,666 (9,972)
Net Increase in Cash and Cash Equivalents (13,154) (7,302)
Cash and Cash Equivalents:
Beginning of Period 28,834 22,178
End of Period 15,680 14,876
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net Income 3,674 3,623
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 314 324
Provision for Possible Credit Losses 180 90
Provision for Deferred Taxes 0 73
Amortization of Investment Securities Premiums (49) 17
Increase (Decrease) in Taxes Payable (10) (41)
(Increase) Decrease in Interest Receivable 231 138
Increase (Decrease) in Interest Payable 22 28
Increase (Decrease) in Accrued Expenses 368 282
(Increase) Decrease in Other Assets (933) 109
Increase (Decrease) in Other Liabilities 383 (331)
Net Cash Provided by Operating Activities 4,180 4,312
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks, and federal funds sold. Generally,
federal funds are purchased and sold for one-day periods.
Page 4
<PAGE>
ACNB CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly
ACNB Corporation's financial position as of June 30, 1998 and 1997 and
December 31, 1997 and the results of its operations for the six months
ended June 30, 1998 and 1997 and changes in financial position for the six
months then ended. All such adjustments are of a normal recurring nature.
The accounting policies followed by the company are set forth in Note A to
the company's financial statements in the 1997 ACNB Corporation Annual
Report and Form 10-K filed with the Securities and Exchange Commission
under file no. 0-11783.
2. The book and approximate market values of securities owned at June 30, 1998
and December 31, 1997 were as follows:
<TABLE>
<CAPTION>
6/30/98 12/31/97
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- -------- -----
(000 omitted)
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
Agencies (held to maturity) 32,131 32,614 32,156 32,286
State and Municipal (held to
maturity) 789 789 832 832
U.S. Government Agencies
(available for sale) 81,191 82,774 51,756 53,074
Other Investments (available for
sale) 2,975 2,975 2,861 2,861
-------- -------- -------- --------
TOTAL $117,086 $119,152 $ 87,605 $ 89,053
</TABLE>
Income earned on investment securities was as follows:
Six Months Ended June 30
------------------------
1998 1997
------ ------
(000 omitted)
U.S. Treasury 457 789
U.S. Government Agencies 2,743 2,815
State and Municipal 25 28
Other Investments 94 85
----- -----
3,319 3,717
Page 5
<PAGE>
3. Gross loans are summarized as follows:
June 30 December 31
1998 1997
-------- -----------
(000 omitted)
Real Estate 302,692 303,270
Real Estate Construction 12,188 13,674
Commercial and Industrial 11,913 9,758
Consumer 15,111 15,106
-------- --------
Total Loans $341,904 $341,808
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 six month periods ended June 30, 1998 and 1997 were 5,253,278 and
5,255,893 respectively.
5. Dividends per share were $.38 and $.36 for the six month periods ended June
30, 1998 and 1997 respectively. This represented a 54% payout of net income
in 1998 and a 52% payout in 1997.
6. The results of operations for the six month periods ended June 30, 1998 and
1997 are not necessarily indicative of the results to be expected for the
full year.
Page 6
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
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 (the Corporation), and its wholly-owned subsidiary, Adams County
National Bank (the Bank). The Corporation's consolidated financial condition and
results of operations consist almost entirely of the Bank's financial condition
and results of operations. This discussion should be read in conjunction with
the 1997 Annual Report. Current performance does not guarantee, assure, or is
necessarily indicative of similar performance in the future.
In addition to historical information, this Form 10-Q may contain
forward-looking statements. From time to time, the Corporation may publish
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, the
Corporation notes that a variety of factors could cause the Corporation's actual
results and experience to differ materially from the anticipated results or
other expectations expressed in the Corporation's forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development and results of the Corporation's business include the following:
general economic conditions, including their impact on capital expenditures;
business conditions in the banking industry; the regulatory environment; rapidly
changing technology and evolving banking industry standards; competitive
factors, including increased competition with community, regional and national
financial institutions; new service and product offerings by competitors and
price pressures; and similar items.
Three months ended June 30,1998 compared to three months ended June 30, 1997
- ----------------------------------------------------------------------------
Net Income for the three month period ending June 30, 1998 was $1,908,000, down
$9,000 from the second quarter of 1997. The decrease in net income was due
primarily to increased provision for loan losses and a 6% increase in other
expenses as discussed below. Net income per share, for the second quarter, was
$.36, comparable to the $.36 earned in the same period in 1997.
An explanation of the factors and trends that caused changes between the two
periods, by major earnings category, follows.
Total interest income for the second three month period of 1998 was $8,912,000,
up $121,000 or 1% above the $8,791,000 earned in the same period of 1997. The
$121,000 increase in interest income was due to a greater volume of securities
and due from banks. The average yield on earning assets has decreased 4 basis
points over the same quarter in 1997. In an effort to manage interest rate risk,
the Bank continues to invest in mortgage-backed securities classified as
available-for-sale and now holds a total volume of over $71 million. Income from
securities and due from banks during the current period increased due to growth
of approximately $15 million.
Page 7
<PAGE>
Total interest expense for the second three month period of 1998 was $3,797,000,
up $99,000 or 3% above the $3,698,000 incurred for the same period in 1997. The
$99,000 increase in interest expense was due primarily to an increase in the
average volume of interest bearing liabilities, which was $8.6 million greater
in the current quarter compared to the same quarter in 1997.
Net interest income after provision for loan losses for the second three month
period of 1998 was $5,025,000, compared to the $5,033,000 earned in the same
period of 1997. Income before provision for loan losses was actually greater in
1998, but a $30,000 greater provision reduced it to $8,000 less than 1997.
Total non-interest income for the second three month period of 1998 at $636,000,
was $168,000 or 36% greater than the same quarter in 1997. This was primarily
due to ATM surcharges, which the Company did not levy in 1997, Visa debit card
fees, another service instituted in late 1997, and a very good quarter for the
Trust Department which settled a particularly large estate.
Total non-interest expense for the second three month period of 1998 was
$2,807,000, up $171,000 or 6% more than the $2,636,000 incurred for the second
quarter of 1997. Most of the increase was in salaries and benefits which were up
$83,000 or 5%.
The provision for income taxes in the second quarter decreased $9,000 due to a
lower level of pretax earnings.
Six months ended June 30, 1998 compared to six months ended June 30, 1997
- -------------------------------------------------------------------------
Net income for the first six months of 1998 was $3,674,000, up $51,000 or 1%
above the $3,623,000 earned for the same period of 1997. The increase in net
income was due primarily to greater volume of securities and due from banks. For
the six month period (annualized) of 1998, the return on average assets (ROA)
and return on average equity (ROE) were 1.56% and 14.01%, respectively, compared
to 1.58% and 14.65%, respectively, for 1997.
At June 30, 1998, total assets were approximately $484 million, reflecting an
$18 million or 4% increase above June 30, 1997. As explained more fully under
Capital Management section, book value per share was $10.17 on June 30, 1998,
compared to $9.59 on June 30, 1997. The Corporation's capital remained sound as
evidenced by a Tier 1 Risked-Based Capital Ratio of 18.4% and a Total Risk-Based
Capital Ratio of 19.5% on June 30, 1998.
Total interest income for the current six month period was $17,622,000 up
$219,000 or 1% above the $17,403,000 earned in the same period of 1997. The
$219,000 increase in total interest income was due primarily to a larger volume
of securities and due from banks. Securities totaled $118,669,000 at June 30,
1998 compared to $103,355,000 at June 30, 1997.
Total interest expense for the current six month period was $7,480,000, up
$138,000 or 2% above the $7,342,000 incurred for the same period in 1997. The
$138,000 increase in total interest expense was due to an increase in average
interest bearing liabilities, principally time deposits. The year to date
average volume of interest bearing liabilities increased approximately $4.9
million or 1% above the same period of 1997.
Page 8
<PAGE>
Net interest income was $10,142,000 for the current period, up $81,000 above the
first six months in 1997. Income from a larger volume of investment securities
out paced funding costs. Nevertheless, the net yield on average earning assets
was 4.50% for the current six month period compared to 4.53% for the same period
in 1997. The additional income was not sufficient to offset a decline in
margins.
Total non-interest income for the current six month period was $1,106,000, up
$186,000 or 20% above the same period in 1997. Improvement was in major
categories but centered mainly in the Trust Department, which was up $47,000,
caused by greater activity in estate settlements, and other operating income due
to ATM surcharges and debit card fees.
Total non-interest expense for the current six month period was $5,576,000, up
$95,000 or 2% above the $5,481,000 incurred for the same period in 1997. The
increase in total non-interest expense was primarily the result of increases in
ATM costs and building repair and maintenance.
The provision for income taxes was $1,818,000 for the current period, $31,000
above the same period in 1997 due to a higher level of pretax earnings.
INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
Six Months Ended
------------------
6/30/98 6/30/97
Rate Rate
------- -------
Earning Assets 7.82% 7.86%
Interest Bearing Liabilities 4.06% 4.03%
Interest Rate Spread 3.76% 3.82%
Net Yield on Earning Assets 4.50% 4.53%
Net Yield on Earning Assets is the difference, stated in percentages, between
the interest earned on loans and other investments and the interest paid on
deposits and other sources of funds. The Net Yield on Earning Assets is one of
the best analytical tools available to demonstrate the effect of interest rate
changes on the Corporation's earning capacity.
The Net Yield on Earning Assets, for the first six months of 1998, was down 4
basis points compared to the same period in 1997. This is a result of lower
market yields on loans and securities without relief on the deposit side.
PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
Reserve for Possible Loan Losses
(In Thousands)
Six Months Ended
------------------
6/30/98 6/30/97
------- -------
Balance at Beginning of Period 3,174 3,183
Provision Charged to Expense 180 90
Loans Charged Off 143 111
Recoveries 48 8
Balance at End of Period 3,259 3,170
Page 9
<PAGE>
Ratios:
Net Charge-offs to:
Net Income 2.59% 2.84%
Total Loans .03% .03%
Reserve for Possible Loan Losses 2.92% 3.25%
Reserve for Possible Loan Losses to:
Total Loans .95% .93%
The Reserve for Possible Loan Losses at June 30, 1998 was $3,259,000 (.95% of
Total Loans), an increase of $89,000 from $3,170,000 (.93% of Total Loans) at
the end of the first six months of 1997. Loans past due 90 days and still
accruing amounted to $1,738,000 and non-accrual loans totaled $1,961,000 as of
June 30, 1998. The ratio of non-performing assets plus other real estate owned
to total assets was .87% at June 30, 1998. 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 $1,197,000 at year end 1997 while
non-accruals stood at $1,640,000. The bulk of the Corporation's real estate
loans are in owner occupied dwellings. Management believes that internal loan
review procedures will be effective in recognizing and correcting any real
estate lending problems that may occur due to current economic conditions.
Interest not accrued, due to an average of $1,801,000 in non-accrual loans, was
approximately $81,000 for the first six months of 1998.
A loan is considered impaired when, based on current information and events, it
is probable that a creditor will be unable to collect all amounts due. Impaired
loans are measured 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 creditor 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 amounted to $54,471,000 at June 30, 1998 compared to
$50,731,000 at June 30, 1997, an increase of $3,740,000 or 7% over that period.
The ratio of Total Shareholders' Equity to Total Assets was 10.88% at June 30,
1997, 11.27% at December 31, 1997, and 11.26% at June 30, 1998. The total
risk-based capital ratio was 19.55% at June 30, 1998. The leverage ratio was
11.50% at June 30, 1998, and 10.94% during the same period in 1997. Capital at
ACNB Corporation remains strong even with a 54% dividend payout ratio.
Page 10
<PAGE>
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 hold to maturity investment securities
maturing within one year) equal 21% of total assets at June 30, 1998. This mix
of assets would be readily available for funding any cash requirements. In
addition, the Bank has an approved line of credit of $200,902,000 at the Federal
Home Loan Bank of Pittsburgh with $0 outstanding at June 30, 1998.
As of June 30, 1998, the cumulative asset sensitive gap was 6.9% of total assets
at one month, 4.5% at six months, and 12.0% at one year. Adjustable rate
mortgages, which have an annual interest rate cap of 2%, are considered rate
sensitive. Passbook savings and NOW accounts are carried in the one to five year
category while half of money market deposit accounts are spread over the four to
twelve month category and the other half are shown to mature in the one to three
year category.
There are no known trends or demands, commitments, events or uncertainties that
will result in, or that are reasonably likely to result in, liquidity increasing
or decreasing in any material way. Aside from those matters described above,
management does not currently believe that there are any known trends or
uncertainties which 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.
COMPANY IS IN THE PROCESS OF BECOMING YEAR 2000 COMPLIANT - EXPENSES NOT
MATERIAL
The Company is in the process of assessing the cost and extent of vulnerability
of the Company's computer systems to the "Year 2000 problem". Modifications or
replacements of computer systems to attain Year 2000 compliance have begun, and
the Company expects to attain Year 2000 compliance and institute appropriate
testing of its modifications and replacements before the Year 2000 date change.
The Company believes that, with modifications to existing software and
conversions to new software, the Year 2000 problem will not pose a significant
operational problem for the Company. However, because most computer systems are,
by their very nature, interdependent, it is possible that non-compliant third
party computers could "reinfect" the Company's computer systems. The Company
could be adversely affected by the Year 2000 problem if it or unrelated parties
fail to successfully address this problem. The Company has taken steps to
communicate with the unrelated parties with whom it deals to coordinate Year
2000 compliance. Most of the costs incurred in addressing the Year 2000 problem
are expected to be expenses as incurred, in compliance with GAAP.
The financial impact to the Company of Year 2000 compliance has not been and is
not anticipated to be material to the Company's financial position or results of
operations in any given year.
Page 11
<PAGE>
In February 1998, the Financial Accounting Standards Board issued Statement No.
132, (SFAS No. 132), "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This Statement revises employers' disclosures about
pension and other postretirement benefit plans. It standardizes the disclosure
requirements for these plans to the extent practicable, requires additional
information on changes in the benefit obligation and fair values of plan assets,
and eliminates certain previously required disclosures. This Statement has been
adopted by the Corporation as of January 1, 1998. The impact of this Statement
on the Corporation will be to require additional disclosures in the
Corporation's annual financial statements for 1998.
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
(SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities."
This Statement establishes accounting and reporting standards for derivative
instruments and for hedging activities. The Corporation does not expect the
provisions of this statement to have a material effect on the liquidity, results
of operations, or capital resources of the Corporation when it becomes effective
in the first quarter of 2000.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management monitors and evaluates changes in market conditions on a regular
basis. Based upon the most recent review management has determined that there
have been no material changes in market risks since year end. For further
discussion of year end information, refer to the annual report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Nothing to report.
Item 2. Changes in Securities and Use of Proceeds - Nothing to report.
Item 3. Defaults Upon Senior Securities - Nothing to report.
Item 4. Submission of Matters to a Vote of Security Holders
(a) An annual meeting of shareholders was held at 1:00 p.m. on May 5, 1998 at
the main office of Adams County National Bank, 675 Old Harrisburg Road,
Gettysburg, PA 17325.
(b) (c) Two matters were voted upon, as follows:
Proposal to fix the number of shareholders to be elected as Class 1 Directors at
four (4):
Votes Cast Votes Cast Votes
"FOR" "AGAINST" ABSTAINED
---------- ---------- ---------
3,892,095 24,501 27,499
Page 12
<PAGE>
Four Class 1 directors were elected, as below:
Votes Cast Votes
Reelected Term Expires "FOR" "WITHHELD"
- --------- ------------ ---------- ----------
Philip P. Asper 2001 3,855,784 88,311
D. Richard Guise 2001 3,907,381 36,714
Ronald L. Hankey 2001 3,901,511 42,584
Marian B. Schultz 2001 3,830,560 113,535
Directors whose term continued after meeting:
(Class 2 Directors) (Class 3 Directors)
Richard L. Galusha 2000 Guy F. Donaldson 1999
Wayne E. Lau 2000 Frank Elsner, Jr. 1999
Paul G. Pitzer 2000 Philip M. Jones 1999
Jennifer L. Weaver 2000 William B. Lower 1999
Ralph S. Sandoe 1999
L. Robert Snyder 1999
Item 5. Other Information - Nothing to report.
Item 6. Exhibits and Reports on Form 8-K - No Form 8-K was filed during the last
three months.
(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, 1994).
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 11 Statement Regarding Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule.
Pursuant to the requirements 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
--------------------------------------------------
Ronald L. Hankey, President
August 3, 1998
--------------------------------------------------
John W. Krichten, Secretary/Treasurer
Page 13
<PAGE>
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, 1994).
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 11 Statement Regarding Computation of Earnings Per Share.
Exhibit 27 Financial Data Schedule.
Page 14
<PAGE>
EXHIBIT 11
Statement Regarding the Computation of Earnings Per Share
For the six month period
ending June 30
------------------------
1998 1997
--------- ---------
Weighted average shares outstanding: 5,253,278 5,255,893
Common Stock
Common Stock Equivalents
Stock Options 0 0
Stock Awards 0 0
ESOP Shares 0 0
Total Common Stock Equivalents 0 0
Total weighted average shares outstanding 5,253,278 5,255,893
Net Income 3,674,000 3,623,000
Net Income Per Share .70(cent) .68(cent)
Fully Diluted Income Per Share .70(cent) .68(cent)
Page 15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.000
<CASH> 14,170
<INT-BEARING-DEPOSITS> 1,510
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<INVESTMENTS-MARKET> 33,403
<LOANS> 341,904
<ALLOWANCE> 3,259
<TOTAL-ASSETS> 483,940
<DEPOSITS> 408,491
<SHORT-TERM> 450
<LIABILITIES-OTHER> 3,763
<LONG-TERM> 0
0
0
<COMMON> 13,133
<OTHER-SE> 41,338
<TOTAL-LIABILITIES-AND-EQUITY> 54,471
<INTEREST-LOAN> 13,963
<INTEREST-INVEST> 3,319
<INTEREST-OTHER> 340
<INTEREST-TOTAL> 17,622
<INTEREST-DEPOSIT> 7,134
<INTEREST-EXPENSE> 7,480
<INTEREST-INCOME-NET> 10,142
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,576
<INCOME-PRETAX> 5,492
<INCOME-PRE-EXTRAORDINARY> 5,492
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,674
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
<YIELD-ACTUAL> 4.50
<LOANS-NON> 1,961
<LOANS-PAST> 1,738
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<ALLOWANCE-OPEN> 3,174
<CHARGE-OFFS> 143
<RECOVERIES> 48
<ALLOWANCE-CLOSE> 3,259
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