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, 2001. 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) 16 LINCOLN SQUARE 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 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 --- --- 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 --- As of February 28, 2002, ACNB Corporation had outstanding 5,436,101 shares of Common Stock. The aggregate market value of such Common Stock held by nonaffiliates as of February 28, 2002, was approximately $94,501,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 2001 Annual Report to Shareholders are incorporated by reference into Parts II, III and IV. Portions of the Proxy Statement for the Annual Meeting of Shareholders, to be held May 7, 2002, 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 (hereinafter the "Bank"). The Registrant, organized in 1983 and headquartered in Gettysburg, Pennsylvania, presently has no significant operations other than serving as a financial 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 ACNB Corporation for every share of Farmers National Bancorp, Inc. Then, effective October 1, 2000, Farmers National Bank of Newville became a division of Adams County National Bank. The Bank engages in a full-service commercial and consumer banking and trust business. Adams County National Bank provides financial services to its customers through its retail banking network of fifteen offices located throughout Adams County, Pennsylvania, and in Hanover, York County, Pennsylvania. Farmers National Bank of Newville, a division of Adams County National Bank, serves its marketplace via three banking offices in the Newville, Cumberland County, Pennsylvania area. As of December 31, 2001, the Registrant had a total of 174 full-time and 68 part-time employees. The Bank's primary services include accepting demand, savings and time deposits including NOW, SuperNOW, money market, passbook and statement savings, a diversified array of certificates of deposit, IRAs, and club accounts. These 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 Bank's business loans include seasonal credit, collateral loans and term loans. Trust and investment services provided by Adams County National Bank include services as executor and trustee under wills and deeds; estate planning and settlement; personal trust administration; and, investment planning and management. Trust services also include employee benefit services for employers such as pension and profit-sharing plans. The Bank has 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 2001 Annual Report to Shareholders. The Bank has not experienced any significant seasonal fluctuations in the amount of its deposits. During 2000, ACNB Corporation, along with seven other banks, entered into a joint venture to form Pennsbank Insurance Company, an offshore reinsurance company. Each bank owns an insurance cell through which its premiums and losses from credit life, health and accident insurance are funded. Each bank is responsible for the activity in its respective cell. The 2000 and 2001 financial activity for the insurance cell has been included in the consolidated financial statements. SUPERVISION AND REGULATION The Registrant and the Bank 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 Gramm-Leach-Bliley Act of 1999, also called the Financial Services Modernization Act, repealed the Glass-Steagall Act, which prohibits commercial banks from engaging in the securities industry. The Financial Services Modernization Act permits national banks to engage in expanded activities, such as having a subsidiary engaged in any activity authorized for national banks, except for insurance underwriting, insurance investments, real estate investment or development, or merchant banking, which must be conducted through a subsidiary of a Financial Holding Company. The Registrant became a Financial Holding Company in Fourth Quarter 2000, as permitted under an amendment to the Bank Holding Company Act. COMPETITION All phases of the Bank's business are highly competitive. The Bank's 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 Bank competes with local commercial banks, other commercial banks with branches in the Bank's market area, savings banks, and other financial service providers. The Bank considers its major competition to be PNC Bank, Allfirst Bank, Bank of Hanover, Peoples State Bank, M&T Bank, F&M Trust, and Orrstown Bank. GOVERNMENT MONETARY POLICIES AND ECONOMIC CONTROLS The earnings and growth of the Bank 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 Bank's 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 Bank cannot be accurately predicted. FORM 10-K ITEM 2. PROPERTIES The Registrant owns two offices and leases one office in Gettysburg, Pennsylvania. The office at 16 Lincoln Square is the main office and administrative headquarters. The Registrant owns eight other offices and leases three facilities, which are spread throughout Adams County. In addition, the Registrant owns one office in western York County and two in central Cumberland County. A third facility in Cumberland County is leased. All three counties are located in southcentral Pennsylvania. ITEM 3. LEGAL PROCEEDINGS In the opinion of the management of the Registrant, there are no proceedings pending to which the Registrant and the Bank are a party or to which its property is subject, which, if determined adversely to the Registrant and the Bank, would be material in relation to the Registrant's and Bank's financial condition. There are no proceedings pending other than ordinary routine litigation incident to the business of the Registrant and the Bank. In addition, no material proceedings are pending or are known to be threatened or contemplated against the Registrant and the Bank 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 45 of the Registrant's 2001 Annual Report to Shareholders and incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is set forth on pages 7 and 38 of the Registrant's 2001 Annual Report to Shareholders and incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is set forth on pages 8 through 16 of the Registrant's 2001 Annual Report to Shareholders 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 12 through 13 of the Registrant's 2001 Annual Report to Shareholders and incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is set forth on pages 18 through 37 of the Registrant's 2001 Annual Report to Shareholders 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 2002 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, 2001, through December 31, 2001, its officers and directors were in compliance with all filing requirements applicable to them. FORM 10-K PART IV ITEM 14C. 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 10.2 Executive Employment Agreement Dated as of January 1, 2000, between Adams County National Bank, ACNB Corporation and Thomas A. Ritter A copy of the Executive Employment Agreement dated as of January 1, 2000, between Adams County National Bank, ACNB Corporation and Thomas A. Ritter is 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 the Computation of Earnings Per Share EXHIBIT 12 Statements Regarding the Computation of Ratios The information required by this Exhibit is set forth on page 38 of the Registrant's 2001 Annual Report to Shareholders and incorporated herein by reference. EXHIBIT 21 Subsidiaries of the Registrant The Registrant has one banking subsidiary, Adams County National Bank, a national bank, which is wholly-owned by the Registrant. EXHIBIT 23 Consents 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 19, 2002 -------------------------- Date BY: /s/ Ronald L. Hankey BY: /s/ John W. Krichten ------------------------ ------------------------ Ronald L. Hankey John W. Krichten Chairman & CEO Secretary & Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on March 19, 2002, 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/ Thomas A. Ritter - --------------------------------------- -------------------------------------- Guy F. Donaldson Thomas A. Ritter Director Director & President /s/ D. Richard Guise /s/ Ralph S. Sandoe - --------------------------------------- -------------------------------------- D. Richard Guise Ralph S. Sandoe Director & Vice Chairman of the Board Director /s/ Ronald L. Hankey /s/ Marian B. Schultz - --------------------------------------- -------------------------------------- Ronald L. Hankey Marian B. Schultz Director, Chairman & CEO Director /s/ Edgar S. Heberlig /s/ Jennifer L. Weaver - --------------------------------------- -------------------------------------- Edgar S. Heberlig Jennifer L. Weaver Director Director /s/ Wayne E. Lau /s/ Harry L. Wheeler - --------------------------------------- -------------------------------------- Wayne E. Lau Harry L. Wheeler Director Director