ACNB Corporation
Annual Report 2015

Plain-text annual report

OPENING Opening New DOORS 2015 ANNUAL REVIEW Table of Contents Business Profile and Geography . . . . . . . . . . . . . . 1 Consolidated Statements of Income . . . . . . . . . . 9 Report to Shareholders . . . . . . . . . . . . . . . . . . . . . . 2 Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . 10 Three-Year Financial Highlights . . . . . . . . . . . . . . 6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Five-Year Financial Overview . . . . . . . . . . . . . . . . 7 Office Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Consolidated Statements of Condition . . . . . . . . 8 Shareholder Information Annual Meeting The 2016 Annual Meeting of Shareholders for ACNB Corporation will be held on Tuesday, May 3, at 1:00 p.m. at Transfer Agent, Registrar and Dividend Disbursing Agent Computershare Shareholder Services the ACNB Corporation Operations Center, 100 V-Twin Drive, P.O. Box 30170 Gettysburg, PA. All proxy and other materials for the Annual College Station, TX 77842-3170 Meeting are available on the Internet at acnb.com under www.computershare.com/investor ACNB Corporation. Stock Listing ACNB Corporation common stock is listed and traded on The NASDAQ Capital Market under the symbol ACNB. For shareholder inquiries or information regarding the ACNB Corporation Dividend Reinvestment and Stock Purchase Plan, call Computershare toll free at 1.800.368.5948. Annual Report on Form 10-K A copy of ACNB Corporation’s Annual Report on Form 10-K, Market Makers Boenning & Scattergood, Inc. West Conshohocken, PA as filed with the Securities and Exchange Commission, may be 610.832.1212/1.800.883.1212 Janney Montgomery Scott LLC York, PA 717.779.2720/1.800.999.0503 Local Broker Wells Fargo Advisors, LLC Hanover, PA 717.637.3817/1.800.242.1331 obtained, without charge, by contacting: Lynda L. Glass Executive Vice President/ Secretary & Chief Governance Officer ACNB Corporation PO Box 3129 Gettysburg, PA 17325 717.339.5085 The Annual Report and other Corporation reports are also filed electronically with the Securities and Exchange Commission and are accessible by the public on the Internet at www.sec.gov/edgar.shtml. 1 | O P E N I N G N E W D O O R S Business Profile & Geography Business Russell Insurance Group, Inc., Westminster, MD. ACNB Corporation, headquartered in Gettysburg, PA, is the financial holding company for the wholly-owned subsidiaries of ACNB Bank, Gettysburg, PA, and Through its banking subsidiary of ACNB Bank, ACNB Franklin and York. In addition, the Bank operates a loan Corporation provides a wide array of consumer, office in York, York County, PA. Russell Insurance Group, commercial and fiduciary services to fulfill the financial Inc., the insurance subsidiary of ACNB Corporation, offers needs of individuals, businesses, public entities, and a broad range of commercial and personal insurance community organizations in its trading area. Originally lines through licenses in 42 states, including Maryland founded in 1857, ACNB Bank serves its marketplace via and Pennsylvania. This full-service insurance agency has a network of 21 retail banking offices located in the four office locations in Westminster, Carroll County, MD, and southcentral Pennsylvania counties of Adams, Cumberland, Germantown, Montgomery County, MD. Two ACNB Bank Locations in Franklin County Including the Chambersburg Drive-Up Opened at 915 Wayne Avenue on May 1, 2015 Cumberland County Newville Dillsburg Five ACNB Bank Locations in York County Including the York Loan Office Franklin County Chambersburg Fourteen ACNB Bank Offices Located Throughout Adams County Maryland Adams County Gettysburg Carroll County Westminster Pennsylvania York County York Hanover Two Office Locations for Russell Insurance Group, Inc. Germantown Montgomery County 2 01 5 A N N UA L R E V I E W | 1 Report To Shareholders o S Report To STo ST hareholders o Shareholders New doors are opening at ACNB Corporation. For its wholly-owned subsidiaries of ACNB Bank and Russell Insurance Group, Inc. For its customers and communities served. New doors promise opportunity as our organization enters 2016, after nearly 160 years of continued growth and independence since its founding in 1857. 2015 Financial Performance income is the most significant component of net The past year of 2015 was one of growth and income. Essentially, this is the income derived from achievement for ACNB Corporation as earnings, the interest earned on loans and investments, less the assets, loans, deposits, and stockholders’ equity all interest paid on deposits and borrowings. Net interest advanced year over year. income is impacted by changes in interest rates, the For the year ended December 31, 2015, net income was $11,017,000, or $1.83 per share. In comparison to 2014, this is an increase of $727,000 or 7%. Net income for the year ended December 31, 2014, was $10,290,000, or $1.71 per share. THE PAST YEAR of 2015 was one of growth and achievement for ACNB Corporation. Overall, the increase in earnings was the direct result of the Corporation’s long-term strategy, through its volume of interest earning assets and interest bearing liabilities, and the composition of these assets and liabilities. By its inherent nature, this income source is predominantly influenced by market interest rates, local economic conditions, stock market impacts, and competitive market dynamics. In 2015, there was again no relief on the net interest margin—a key measure of changes in net interest income—due to the prolonged low interest rate environment. ACNB Corporation’s net interest margin was 3.45% in 2015 and 3.47% in 2014. However, the Corporation’s net interest income improved to $35,606,000 for the year ended December 31, 2015, as compared to $33,880,000 for the year ended December 31, 2014, due to consistent loan growth in recent years. banking subsidiary, to enhance loan growth in local The Corporation’s return on average assets rose year markets served, while maintaining a reasonable over year to 0.99% for 2015, in comparison to 0.97% funding base by offering competitive deposit products for 2014. The return on average equity increased to and related services. Improved earnings was achieved 9.77% for 2015 from 9.32% for 2014, even given the 4% while also dedicating the necessary human and rise in stockholders’ equity as of December 31, 2015. monetary resources to ensure the organization’s ongoing safety and soundness as a financial institution, as well as to enhance long-term organizational infrastructure through prudent investments in such areas as technology and risk management. ACNB Corporation’s total assets grew to $1.15 billion at year-end 2015, up 5% from $1.09 billion at December 31, 2014. Total deposits increased by 8% from the previous year-end to $913 million at December 31, 2015. And, total loans rose by 7% to $853 million, as compared to Similar to other financial holding companies of December 31, 2014. community banks, ACNB Corporation’s net interest 2 | O P E N I N G N E W D O O R S o S o Shareholders hareholders Shareholder Dividends & Equity Once again, ACNB Corporation shareholders benefitted from the organization’s financial performance in 2015 as the Corporation furthered its long history of paying meaningful dividends to its shareholders. ACNB Corporation paid $4,820,000, or $0.80 per share, in cash dividends to shareholders during 2015. This compares to $4,622,000, or $0.77 per share, paid in 2014. The dividend payout ratios were 44% and 45% for 2015 and 2014, respectively. Unlike many of our competitors in the industry, the Corporation paid a stable quarterly dividend throughout the financial crisis and industry turmoil in past years. This was a substantial commitment of financial resources, but also a testament to ACNB Corporation’s continued soundness and determination in providing shareholders value on their investment. Further, total stockholders’ equity continues to grow and remains strong at $115 million as of December 31, 2015. Ongoing capital enhancement is fundamentally dependent upon sustained earnings growth. The ACNB Corporation Dividend Reinvestment and Stock Purchase Plan offers registered shareholders the opportunity to purchase additional shares of the Corporation’s common stock through the automatic reinvestment of cash dividends and voluntary cash payments on a quarterly basis. The benefit to the registered shareholders who elect to participate in the plan includes the convenience of the acquisition of additional shares of ACNB Corporation common stock, as well as the ability to do so without paying service fees or brokerage commissions. Since the plan’s introduction in January 2011, new shares of ACNB ACNB CORPORATION paid $4,820,000, or $0.80 per share, in cash dividends to shareholders during 2015. Corporation common stock, totaling 111,381 in number and plan investments of nearly $2,000,000, have been issued to plan participants as a result of both dividend reinvestment and voluntary cash purchases, which continue to fortify the Corporation’s equity position. ACNB Bank ACNB Corporation’s banking subsidiary, ACNB Bank, is the primary driver of the organization’s revenues and profit. This source of strength has been built on the precepts of community banking—reinvesting depositors’ dollars in loans to others for the economic benefit of the shared community. The definition of community implies a common bond. ACNB Bank is a vital link in contributing to the economic strength in its markets. Today, ACNB Bank serves customers in the four southcentral Pennsylvania counties of Adams, Cumberland, Franklin and York through a retail banking network of 21 offices and a loan production office. In 2015, the Bank opened a second location in Franklin County. The Chambersburg Drive-Up, situated at 915 Wayne Avenue, first welcomed customers on May 1, 2015, complementing the full-service Chambersburg Office at 850 Norland Avenue which opened for business on July 24, 2014. 2 01 5 A N N UA L R E V I E W | 3 o S Report To STo ST hareholders o Shareholders In York County, the establishment of the York Loan school districts. To fund this loan growth, a concerted Office at 1601 South Queen Street in July 2014 has initiative to enhance core deposits was implemented proven to be a successful endeavor, opening the across the Bank’s footprint in 2015. This marketing way for further expansion of the retail banking office and sales focus resulted in significantly increased new network eastward into the York market. At the current account volume and overall core account balances, time, ACNB Bank is applying for regulatory approval of which fueled the 8% increase in deposits for 2015. a new retail banking office at 201 Pauline Drive, York, in the South York Plaza. In October 2015, the Bank broke ground for the construction of a new South Hanover Office at 1801 Baltimore Pike, Hanover, for the relocation of operations from the current site at 865 Baltimore Street. This new retail banking office site provides improved visibility and accessibility for current and prospective customers in this area of the key Hanover market. The plan is for the new South Hanover Office to open its doors for business in May 2016. THE KEY TO SUCCESS at ACNB Corporation is the willingness to open new doors for the organization and its customers. Competition for loans and deposits remains intense. Products, pricing and service all factor into the customer’s decision making. Once again, the Bank’s staff has responded to the demands of both commercial and retail customers in the local financial services marketplace—resulting in the hard-earned loan and deposit growth attained in 2015. The 7% growth in loans for 2015 was centered in commercial credits, including governmental lending to municipalities and 4 | O P E N I N G N E W D O O R S Asset quality, as always, is a high priority at ACNB Bank. There was marked improvement in the ratio of non-performing loans to total loans, which was 0.68% and 1.04%, respectively, at year-end 2015 and 2014. This credit quality metric is favorable in comparison to peers, as well as contributed to the slightly lowered allowance for loan losses in the amount of $14,747,000 at year-end 2015. The resulting ratio of the allowance for loan losses to total loans was 1.73% as of December 31, 2015, and the coverage ratio of the allowance for loan losses to non-performing loans was strong at 252.91% as of the same date. Today’s banking and regulatory environments, including the new requirements related to the Basel III standards and the Dodd-Frank Wall Street Reform and Consumer Protection Act, necessitate an emphasis on capital as the fundamental element for organizational strength and sustainability. The Bank’s total risk-based capital ratio advanced to 14.48% at December 31, 2015, which exceeds the regulatory requirement of 10.00% to be considered a well capitalized financial institution by regulators. Improvement in the capital position of the Bank is predominantly a function of retained earnings, which is the amount of net income after the payment of dividends to the Corporation for issuance to ACNB Corporation shareholders. o S o Shareholders hareholders Looking toward the future, effective September 1, 2015, revenue for Russell Insurance Group was $4,634,000— James P. Helt was promoted to President of ACNB down 4% in comparison to 2014, primarily due to lower Bank as a result of management succession planning. contingent commissions and decreased commercial As we entered 2016, the Bank’s executive management insurance volume. leadership continued to evolve with the naming of three new Executive Vice Presidents as of January 1—Laurie A. Laub as Chief Credit & Operations Officer, Douglas A. Seibel as Chief Lending & Revenue Officer, and Thomas R. Stone as Chief Community Banking Officer. These key promotions position the Bank well as multi- year strategic plans are implemented in anticipation of a dynamic and challenging future. Trust & Investment Services ACNB Bank’s Trust & Investment Services staff provides fiduciary, estate, investment and related services to clients. This business line of the Bank In Closing The key to success at ACNB Corporation is the willingness to open new doors for the organization and its customers. Equally important is the commitment to step over the threshold and enter through these open doors. Those at ACNB Corporation possess this willingness and commitment—with the strategic focus on future independence. As a shareholder, we thank you and welcome your continued investment in ACNB Corporation as we open new doors of opportunity together in 2016 and beyond. expanded its presence and client base in 2015, especially in the new market of Chambersburg. Assets under administration rose to $178 million at December 31, 2015, Sincerely, from $165 million at December 31, 2014. 2015 revenue from Trust & Investment Services was $1,589,000, Frank Elsner, III Chairman of the Board exceeding 2014 by $171,000 or 12%. Russell Insurance Group, Inc. Russell Insurance Group, Inc., the insurance subsidiary of ACNB Corporation, is a full-service insurance agency Thomas A. Ritter President & Chief Executive Officer offering a broad range of property and casualty, life, and health insurance to both commercial and individual clients through licenses in 42 states, with a major focus in Maryland and Pennsylvania. The agency is based in Westminster, Maryland, as well as conducts business at a second office location in Germantown, Maryland. Income from this subsidiary’s commissions on insurance sales is the most significant source of other income for ACNB Corporation. 2015 commission Lynda L. Glass Executive Vice President/ Secretary & Chief Governance Officer David W. Cathell Executive Vice President/ Treasurer & Chief Financial Officer 2 01 5 A N N UA L R E V I E W | 5 TH R E E -Y E A R F I N A N CIA L H I G H LI G HT S For the Year Net interest income Net income Cash dividends paid Per Share Statistics Basic earnings Cash dividends paid Book value (year-end) At Year-End Total assets Total loans Total deposits 2015 2014 2013 $35,606,000 $33,880,000 $33,612,000 11,017,000 10,290,000 9,315,000 4,820,000 4,622,000 4,542,000 $ 1.83 0.80 18.99 $ 1.71 0.77 18.29 $ 1.56 0.76 17.83 $1,147,925,000 $1,089,808,000 $1,046,047,000 852,960,000 799,272,000 728,648,000 912,980,000 844,876,000 800,643,000 Total stockholders’ equity 114,715,000 110,022,000 106,802,000 Key Ratios Return on average assets Return on average equity 0.99% 9.77% 0.97% 9.32% Dividend payout 43.75% 44.92% Average stockholders’ equity to average assets 10.10% 10.43% 0.90% 9.00% 48.76% 9.95% 6 | O P E N I N G N E W D O O R S F IV E -Y E A R F I N A N CIA L OV E RVI E W Total Assets In millions of dollars Total Deposits In millions of dollars $1,147.9 $1,089.8 $1,050.0 $1,046.0 $1,004.8 $913.0 $834.2 $844.9 $800.6 $782.8 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Total Loans In millions of dollars Total Stockholders’ Equity In millions of dollars $853.0 $799.3 $114.7 $110.0 $106.8 $708.1 $728.6 $694.5 $101.3 $97.5 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Net Income In millions of dollars Book Value Per Share In dollars $11.0 $10.3 $9.3 $8.5 $8.9 $16.98 $16.39 $18.99 $18.29 $17.83 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2 01 5 A N N UA L R E V I E W | 7 CO N SO LI DATE D S TATE M E NT S O F CO N D ITI O N Dollars in thousands, except per share data Assets Cash and due from banks Interest bearing deposits with banks Total Cash and Cash Equivalents Securities available for sale Securities held to maturity (fair value $71,363 in 2015 and $73,057 in 2014) Loans held for sale Loans, net of allowance for loan losses ($14,747 in 2015 and $15,172 in 2014) Premises and equipment Restricted investment in bank stocks Investment in bank-owned life insurance Investments in low-income housing partnerships Goodwill Intangible assets Foreclosed assets held for resale Other assets TOTAL ASSETS Liabilities Deposits Non-interest bearing Interest bearing Total Deposits Short-term borrowings Long-term borrowings Other liabilities TOTAL LIABILITIES Stockholders’ Equity Preferred stock (par value $2.50; 20,000,000 shares authorized; no shares outstanding) Common stock (par value $2.50; 20,000,000 shares authorized; 6,102,324 and 6,078,250 shares issued in 2015 and 2014, respectively; 6,039,724 and 6,015,650 shares outstanding in 2015 and 2014, respectively) Treasury stock, at cost (62,600 shares in 2015 and 2014) Additional paid-in capital Retained earnings Accumulated other comprehensive loss TOTAL STOCKHOLDERS’ EQUITY December 31 2015 2014 $ 1 3 , 4 68 $ 1 3 , 5 0 2 5 , 2 89 1 8 , 7 5 7 1 2 5 , 6 93 7 1 , 5 4 2 1 , 8 35 8 3 8, 2 1 3 1 8 , 044 4 , 4 1 4 3 9 , 64 2 3 , 34 5 6 , 308 1 , 0 33 5 80 1 8 , 5 1 9 6 , 1 7 1 1 9 , 6 7 3 1 1 8,000 7 3,3 4 6 1 , 6 2 3 7 8 4 , 1 0 0 1 7 , 7 2 5 4 , 2 1 6 3 7, 9 42 3, 7 93 6 , 3 08 1 , 1 9 6 1 , 6 1 7 20, 269 $1, 1 4 7 , 9 25 $1,0 8 9 , 808 $ 1 6 6 , 2 24 $ 1 4 4 , 9 8 7 7 4 6 , 7 56 9 1 2 , 9 80 3 5 , 20 2 76 , 500 8 , 5 28 6 9 9 , 8 89 8 4 4 , 8 76 4 5 , 699 80 , 9 3 7 8 , 2 74 1,0 3 3 , 2 10 9 7 9 , 7 86 — — 1 5 , 2 56 ( 7 28 ) 1 0 , 3 87 94 , 5 26 ( 4 , 7 26 ) 1 1 4 , 7 1 5 1 5 , 1 96 (7 2 8 ) 9 , 948 8 8 , 329 ( 2 , 7 2 3) 1 1 0 ,0 2 2 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1, 1 4 7 , 9 25 $ 1,0 89 ,808 See the consolidated financial statements and accompanying notes presented in the Corporation’s Annual Report on Form 10-K. 8 | O P E N I N G N E W D O O R S CO N SO LI DATE D S TATE M E NT S O F I N CO M E Dollars in thousands, except per share data Interest Income Loans, including fees Securities Taxable Tax-exempt Dividends Other Years Ended December 31 2015 2014 2013 $ 3 5 ,0 90 $ 3 2 , 5 7 3 $ 3 2 , 0 8 4 3, 1 2 7 8 5 9 3 0 1 8 7 3 , 6 4 7 1 , 0 4 2 1 94 70 4 , 2 3 0 1 , 1 9 7 2 2 6 8 TOTAL INTEREST INCOME 3 9 , 4 64 3 7 , 5 2 6 3 7 , 6 0 1 Interest Expense Deposits Short-term borrowings Long-term borrowings TOTAL INTEREST EXPENSE NET INTEREST INCOME PROVISION FOR LOAN LOSSES 2 , 1 20 4 7 1 , 6 9 1 3, 8 5 8 1 , 8 1 0 6 3 1 , 7 7 3 3 , 64 6 2 , 1 7 7 6 1 1 , 7 5 1 3 , 9 8 9 3 5, 6 06 3 3 , 8 8 0 3 3 , 6 1 2 — 1 5 0 1 , 4 5 0 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 3 5 , 6 06 3 3 , 7 3 0 3 2 , 1 6 2 Other Income Service charges on deposit accounts Income from fiduciary activities Earnings on investment in bank-owned life insurance Gains on sales or calls of securities Service charges on ATM and debit card transactions Commissions from insurance sales Other TOTAL OTHER INCOME Other Expenses Salaries and employee benefits Net occupancy Equipment Other tax Professional services Supplies and postage Marketing and corporate relations FDIC and regulatory Intangible assets amortization Foreclosed real estate expenses Other operating TOTAL OTHER EXPENSES INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES NET INCOME Per Share Data Basic earnings Cash dividends paid 2 , 30 8 1 , 5 8 9 1 , 1 00 2 6 1 1 , 4 5 6 4, 6 34 1 ,0 5 8 2 , 1 1 8 1 , 4 1 8 1 , 0 9 9 6 2 1 ,5 5 0 4 , 8 3 9 8 1 8 2 , 2 4 6 1 , 2 9 9 9 7 5 — 1 , 4 3 4 4 , 6 7 1 1 , 0 7 8 1 2 ,4 06 1 1 , 9 0 4 1 1 , 7 0 3 20, 9 3 2 1 9 , 5 1 6 1 8 , 9 50 2 , 1 70 3, 00 7 2 , 05 0 2 , 7 6 8 1 , 9 5 7 2 , 8 2 6 7 7 9 8 44 6 3 9 4 5 2 6 6 5 3 36 1 1 9 3, 2 9 1 3 3, 2 34 1 4 , 7 7 8 3, 7 6 1 7 3 7 9 3 6 6 0 2 5 8 7 7 4 8 6 4 9 3 4 6 9 0 1 8 9 5 5 8 3 3 9 6 7 6 8 6 4 1 5 7 6 3, 3 2 5 3 2 ,2 6 4 1 3 , 3 7 0 3 ,0 8 0 3 , 5 2 2 3 2 , 0 1 5 1 1 , 8 5 0 2 , 5 3 5 $ 1 1 ,0 1 7 $ 1 0 , 2 9 0 $ 9 , 3 1 5 $ $ 1.8 3 0.80 $ $ 1 . 7 1 0.77 $ $ 1 .5 6 0.76 2 01 5 A N N UA L R E V I E W | 9 Boards of Directors Directors ACNB Corporation and ACNB Bank Boards of Directors Frank Elsner, III Owner & Managing Director Richard L. Alloway II Pennsylvania State Senator Robert W. Miller Vice President Daniel W. Potts Partner James J. Lott President Bonnie Brae Fruit Farms, Inc. 33rd State Senate District IBM Banking & Insurance Consulting Practice ODT Global, LLC Miller, Brown, Ohm & Thomas A. Ritter President & Chief Alan J. Stock Owner David L. Sites Owner & Managing Partner Realty Leasing & Management Co. Chairman of the Board Associates, P.C. ACNB Corporation and ACNB Bank James P. Helt* President ACNB Bank Scott L. Kelley, Esquire President Donna M. Newell President & Chief Executive Officer NTM Engineering, Inc. J. Emmett Patterson President & Owner JDCS Enterprise & Stonesifer and Kelley, P.C. Fry Guy Corporation Executive Officer ACNB Corporation Eicholtz Company Vice Chairman Chief Executive Officer ACNB Corporation ACNB Bank and ACNB Bank Marian B. Schultz Retired Dean James E. Williams President Shippensburg University C.E. Williams Sons, Inc. *Serves on ACNB Bank Board only Russell Insurance Group, Inc. Board of Directors Thomas A. Ritter Chairman of the Board Frank Elsner, III Vice Chairman Lynda L. Glass Daniel W. Potts Frank C. Russell, Jr. ACNB Bank Honorary Directors Dana P. Brandt Frank C. Egger William B. Lower Mervin J. Morrison W. Irvin Nelson 1 0 | O P E N I N G N E W D O O R S Officers Offi cers Lynda L. Glass Executive Vice President/ Frank Elsner, III Chairman of the Board Thomas A. Ritter President & ACNB Corporation Chief Governance Officer Chief Executive Officer ACNB Bank Secretary & Frank Elsner, III Chairman of the Board David W. Cathell Executive Vice President/ Laurie A. Laub Executive Vice President/ David W. Cathell Executive Vice President/ Treasurer & Chief Financial Officer Sandra A. Deaner Senior Vice President/ Thomas A. Ritter Chief Executive Officer James P. Helt President Treasurer & Chief Credit & Operations Human Resources Manager Chief Financial Officer Officer Lynda L. Glass Executive Vice President/ Douglas A. Seibel Executive Vice President/ Michelle N. Paulnock Senior Vice President/ Information Systems Secretary and Chief Risk Chief Lending & Revenue Manager & Governance Officer Officer Thomas R. Stone Executive Vice President/ Chief Community Banking Officer Carl L. Ricker Senior Vice President/ Retail Lending Manager First Vice Presidents Karen B. Arthur Barry C. Dillman Kathy S. Hansel Scott E. Hartlaub L. John Hicks Dennis R. Hollinger Lauren L. Shutt Vice Presidents Brian T. Adair Daniel K. Baer Mark P. Bernier Cara Lynn Clabaugh David W. Deaner Tiffany M. Faust Stephen C. Hawbaker Debra T. Little Kevin J. Hayes Vickie L. Hoffheins Gary R. Holder Leslie R. Horn John E. Kashner Laura L. McCusker Cheryl A. McVay Donald C. McVay Celeste M. Miller Scott A. Miller Lauren J. Muzzy Charlene L. Feuchtenberger Beth W. Lesko Claire M. Forbush Gregory S. Liegey Jeffrey A. Pottorff Assistant Vice Presidents Kevin L. Cook Andrée V. Dennis Carolyn M. Dull Kim D. Elmo Kimberly S. Flickinger Jacqueline A. Grasley Carolyn E. Groft Edward J. Groft Barbara D. Guise Jane E. Gwyn Grant J. Holub Susan R. Lang Russell Insurance Group, Inc. George F. Marguglio Shelby L. Pentz R. Mark Purdy Karen J. Redding Susan M. Saylor Patrick O. Sease Edward C. Price, Jr. Gary W. Rappoldt Wendy D. Roth Christine R. Settle James E. Showvaker Debra T. Sites Rhonda L. Winterstein Merle J. Zehr Christina D. Ziser Jody M. Shealer Lisa A. Smith Jeffrey B. Stambaugh Tina M. Steckler Ruby L. Sullivan Frank C. Russell, Jr. President & Chief Executive Officer Daniel J. Coughlin Vice President David W. Cathell Vice President & Treasurer Lynda L. Glass Vice President & Secretary 2 01 5 A N N UA L R E V I E W | 1 1 Office Locations Office Locations ACNB BankLocations Locations Office LocationsLocations Fairfield/Carroll Valley Fairfield/Carroll Arendtsville Arendtsville Office Littlestown Littlestown Office Arendtsville, PA 17303 444 West King Street Littlestown, PA 17340 4910 Fairfield Road ACNB Bank ACNB Bank 101 Main Street Valley Office Fairfield, PA 17320 McSherrystown McSherrystown Office 369 Main Street McSherrystown, PA 17344 New Oxford New Oxford Office 318 Lincoln Way East New Oxford, PA 17350 Newville Newville Office 39 Carlisle Road Newville, PA 17241 Spring Grove Spring Grove Office 221 North Main Street Spring Grove, PA 17362 York Opening 2016 South York Plaza Office 201 Pauline Drive York, PA 17402 York Loan Office 1601 South Queen Street York, PA 17403 York Springs York Springs Office 202 Main Street York Springs, PA 17372 Bendersville Bendersville Office 101 North Main Street Bendersville, PA 17306 Biglerville Biglerville Office 3459 Biglerville Road Biglerville, PA 17307 Cashtown Franklin Township Drive-Up 10 High Street Cashtown, PA 17310 Chambersburg Chambersburg Office 850 Norland Avenue Chambersburg, PA 17201 Chambersburg Drive-Up 915 Wayne Avenue Chambersburg, PA 17201 Dillsburg Dillsburg Office 3 Tristan Drive Dillsburg, PA 17019 East Berlin East Berlin Office 1677 Route 194 North East Berlin, PA 17316 Gettysburg Adams Commerce Center Office 100 V-Twin Drive Gettysburg, PA 17325 Lincoln Square Office 2 Chambersburg Street Gettysburg, PA 17325 North Gettysburg Office 675 Old Harrisburg Road Gettysburg, PA 17325 West Gettysburg Office 545 West Middle Street Gettysburg, PA 17325 Hanover North Hanover Office 1127 Eichelberger Street Hanover, PA 17331 South Hanover Office 865 Baltimore Street Hanover, PA 17331 Relocating May 2016 1801 Baltimore Pike Hanover, PA 17331 Russell Insurance Group, Inc. Westminster Office 2526 West Liberty Road Westminster, MD 21157 Germantown Office 19500 Amaranth Drive, Suite C Germantown, MD 20874 1 2 | O P E N I N G N E W D O O R S Contact Information ACNB Bank acnb.com Customer Contact Center Toll Free 1.888.334.ACNB (2262) 24-Hour Telephone Banking Line Toll Free 1.888.338.ACNB (2262) Russell Insurance Group, Inc. riginsurance.com Toll Free 1.800.289.4097 Forward-Looking Statements In addition to historical information, this document contains forward-looking statements. Examples of forward-looking statements include, but are not limited to, (a) projections or statements regarding future earnings, expenses, net interest income, other income, earnings or loss per share, asset mix and quality, growth prospects, capital structure, and other financial terms, (b) statements of plans and objectives of management or the Board of Directors, and (c) statements of assumptions, such as economic conditions in the Corporation’s market areas. Such forward-looking statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “intends”, “will”, “should”, “anticipates”, or the negative of any of the foregoing or other variations thereon or comparable terminology, or by discussion of strategy. Forward-looking statements are subject to certain risks and uncertainties such as local economic conditions, competitive factors, and regulatory limitations. Actual results may differ materially from those projected in the forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: the effects of governmental and fiscal policies, as well as legislative and regulatory changes; the effects of new laws and regulations, specifically the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act; impacts of the new capital and liquidity requirements of the Basel III standards; the effects of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Financial Accounting Standards Board and other accounting standard setters; ineffectiveness of the business strategy due to changes in current or future market conditions; future actions or inactions of the United States government, including the effects of short- and long-term federal budget and tax negotiations and a failure to increase the government debt limit or a prolonged shutdown of the federal government; the effects of economic deterioration and the prolonged economic malaise on current customers, specifically the effect of the economy on loan customers’ ability to repay loans; the effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities, and interest rate protection agreements, as well as interest rate risks; difficulties in acquisitions and integrating and operating acquired business operations, including information technology difficulties; challenges in establishing and maintaining operations in new markets; the effects of technology changes; volatilities in the securities markets; slow economic conditions; the failure of assumptions underlying the establishment of reserves for loan losses and estimations of values of collateral and various financial assets and liabilities; acts of war or terrorism; disruption of credit and equity markets; the ability to manage current levels of impaired assets; the loss of certain key officers; the ability to maintain the value and image of the Corporation’s brand and protect the Corporation’s intellectual property rights; continued relationships with major customers; and, potential impacts to the Corporation from continually evolving cybersecurity and other technological risks and attacks, including additional costs, reputational damage, regulatory penalties, and financial losses. 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 Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Please also carefully review any Current Reports on Form 8-K filed by the Corporation with the Securities and Exchange Commission. 2 01 5 A N N UA L R E V I E W | 1 3 16 LINCOLN SQUARE | PO BOX 3129 | GETTYSBURG, PA 17325 | ACNB.COM ACNB CORPORATION 002CSN62DF 

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