ACNB CORP - 10-Q Quarterly Report

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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 September 30, 2002
------------------------------------------------

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
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)

16 LINCOLN SQUARE, GETTYSBURG, PA 17325
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(Address of principal executive offices) (Zip Code)

(717) 334-3161
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(corporation's telephone number, including area code)

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(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
-- ---

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 November 7, 2002 - 5,436,101

PART I

ITEM I FINANCIAL INFORMATION
ACNB CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION

9/30 9/30 12/31
2002 2001 2001
ASSETS (000 omitted)
Cash and Due from Banks $25,652 $48,495 $21,925
Investment Securities
Securities Held to Maturity 27,378 45,556 48,480
Securities Available for Sale 272,249 107,913 175,017
------- ------- -------
Total Investment Securities 299,627 153,469 223,497

Loans 368,539 359,659 362,579
Less: Reserve for Loan Losses -3,652 -3,778 -3,723
------- ------- -------
Net Loans 364,887 355,881 358,856

Premises and Equipment 6,748 5,133 5,704
Other Real Estate 585 1,357 1,646
Other Assets 19,193 18,365 18,606
------- ------- -------
TOTAL ASSETS $716,692 $582,700 $630,234
======== ======== ========
LIABILITIES
Deposits
Noninterest Bearing $75,947 $66,990 $70,907
Interest Bearing 483,777 409,919 438,328
------- ------- -------
Total Deposits 559,724 476,909 509,235

Securities Sold Under
Agreement To Repurchase 39,717 35,181 33,239
Borrowing Federal Home Loan Bank 37,300 17,850
Demand Notes U.S. Treasury 450 450 412
Other Liabilities 7,290 5,336 6,805
------- ------- -------
TOTAL LIABILITIES 644,481 517,876 567,541

SHAREHOLDERS' EQUITY
Common Stock ($2.50 par value)
20,000,000 shares authorized:
5,436,101 shares issued and
outstanding at 9/30/02 13,590 13,590 13,590
Retained Earnings 52,215 49,059 48,661
Accumulated Other Comprehensive
Income 6,406 2,175 442
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 72,211 64,824 62,693

TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $716,692 $582,700 $630,234
======== ======== ========

See accompanying notes to financial statements.

PAGE 2

*Based on a weighted average of 5,436,101 shares outstanding in 2002 and
5,436,122 in 2001

See accompanying notes to financial statements.

Page 3

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

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 September 30, 2002 and 2001 and
December 31, 2001 and the results of its operations for the nine months
ended September 30, 2002 and 2001 and changes in financial position for the
nine 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 2001 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 value of securities owned at September 30,
2002 and December 31, 2001 were as follows:

9/30/02 12/31/01
Amortized Fair Amortized Fair
Cost Value Cost Value
(000 omitted)

U.S. Treasury and U.S. Government
Agencies (held to maturity) $ 25,541 $ 28,486 $ 40,744 $ 42,388
State and Municipal (held to
maturity) 1,509 1,523 2,123 2,126
Corporate (held to maturity) 328 331 1,957 1,974
Corporate (available for sale) 44,648 45,658
Municipal (available for sale) 10,337 10,690
U.S. Government Agencies
(available for sale) 203,145 212,149 173,845 175,017
Restricted Equity Securities 3,752 3,752 3,656 3,656
-------- -------- -------- --------
TOTAL $289,260 $302,589 $222,325 $225,161

Income earned on investment securities was as follows:

Nine Months Ended September 30
2002 2001
(000 omitted)
U.S. Treasury $ 38 $ 414
U.S. Government Agencies 8,787 6,750
State and Municipal 116 92
Other Investments 532 437
----- -----
$9,473 $7,693

Page 5

3. Gross loans are summarized as follows:

September 30 December 31
(000 omitted)
2002 2001

Real Estate $321,853 $316,928
Real Estate Construction 13,575 15,497
Commercial and Industrial 21,363 18,027
Consumer 11,748 12,127
-------- --------
Total Loans $368,539 $362,579

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 September 30, 2002 and 2001 were
5,436,101 and 5,436,101, respectively.

5. Dividends paid per share were $.80 and $.60 for the nine month periods
ended September 30, 2002 and 2001, respectively. This represented a 64%
payout of net income in 2002 and a 53% payout in 2001.

6. The results of operations for the nine month periods ended September 30,
2002 and 2001 are not necessarily indicative of the results to be expected
for the full year.

Page 6

ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Results of Operations

The Registrant'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 subsidiary, Adams County National Bank, follow. The Registrant'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 corporation's 2001 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 September 30, 2002 compared to three months ended
- ---------------------------------------------------------------------
September 30, 2001
- ------------------

Net Income for the three month period ending September 30, 2002 was $2,294,000,
up $181,000 from the third quarter of 2001. Net interest income was up, total
other income was up and total other expense was up. The third quarter increase
is due to improved net interest income. Net income per share, for the third
quarter, was $.42, compared to the $.39 earned in the same period in 2001. For
the three month period (annualized) in 2002, the return on average assets and
return on average equity were 1.37% and 13.45%, respectively, compared to 1.47%
and 13.27%, respectively for 2001.

An explanation of the factors and trends that caused changes between the two
periods, by major earnings category, follows.

Total interest income for the third three month period of 2002 was $9,491,000,
down $146,000 or 1.5% below the $9,637,000 earned in the same period of 2001.
The $146,000 decrease in interest income was due to a sustained fall in interest
rates during 2001. In an effort to manage interest rate risk, the Registrant
lowered interest rates on transaction accounts to historic lows. Income from
loans and due from depository institutions during the current period decreased
approximately $1,007,000 due to lower interest rates even though loan volumes
continued to grow. Security income is up $862,000 due to greater volume of
securities.

Page 7

Total interest expense for the third quarter of 2002 was $3,324,000, down
$517,000 or 13.5% from the $3,841,000 incurred for the same period in 2001. The
$517,000 decrease in interest expense was due to lower interest rates,
especially in the transaction account area. Because the decrease in interest
expense exceeded the decrease in interest income, net interest income increased
$371,000.

Total other income for the third quarter of 2002 at $1,199,000, was $355,000
greater than the same quarter in 2001. This was due to increased service charges
on deposit accounts. The bank introduced a new service called overdraft
privilege in mid-year 2001. The increase continued until the third quarter of
this year, but management believes performance should match rather than exceed
fourth quarter of 2001.

Total other expense for the third quarter of 2002 was $4,209,000, up $731,000
from the $3,478,000 incurred for the third quarter of 2001. Fifty-six (56%)
percent of the increase was in salary and employee benefits, which totaled
$408,000, and write off of deposit purchase premium and professional services
associated with the overdraft plan, mentioned above.

The provision for income taxes in the third quarter decreased $186,000 due to a
lower level of pretax earnings and the use of historic tax credits.

Nine months ended September 30, 2002 compared to nine months ended September
- ----------------------------------------------------------------------------
30, 2001
- --------

Net income for the first nine months of 2002 was $6,788,000, up $662,000 or
10.8% above the $6,126,000 earned for the same period of 2001. The increase in
net income was due primarily to stronger net interest income but partially
offset by growing total other expense, as explained below. For the nine month
period (annualized) of 2002, the return on average assets (ROA) and return on
average equity (ROE) were 1.42% and 13.97%, respectively, compared to 1.44% and
13.17%, respectively, for 2001.

At September 30, 2002, total assets were approximately $717 million, reflecting
a $134 million or 23% increase above September 30, 2001. This increase in assets
stems from migration of funds from the equities market, the purchase of
approximately $24 million in deposits in November 2001, and new borrowings from
the Federal Home Loan Bank. As explained more fully under the Capital Management
section, book value per share was $13.28 on September 30, 2002, compared to
$11.92 on September 30, 2001. The corporation's capital remained in excess of
federal requirements as evidenced by Total Shareholders Capital Ratio of 10.08%
and a Total Risk-Based Capital Ratio of 19.08% on September 30, 2002.

Total interest income for the current nine month period was $28,250,000, down
$1,351,000 or 4.6% from the $29,601,000 earned in the same period of 2001. The
$1,351,000 decrease in total interest income was due to falling interest rates
in the general market economy in 2002, translating to lower rates on new loans
and securities. In 2001, market rates fell rapidly and have remained at
unusually low levels. The effect is still affecting yields on components of the
corporation's balance sheet.

Total interest expense for the current nine month period was $9,844,000, down
$2,618,000 or 21% below the $12,462,000 incurred for the same period in 2001.
The $2,618,000 decrease in total interest expense was due to falling interest
rates through the year 2001 and their effect continuing into 2002.

Page 8

Net interest income was $18,226,000 for the current period, $1,267,000 above the
first nine months in 2001. Margins are decreasing, but assets are increasing and
helping net interest income. The bank has shifted to a funds purchased position
from a funds sold position since June of 2001, and has been able to improve
dollar denominated net yield, but not margins.

Total non-interest income for the current nine month period was $3,552,000,
$1,046,000 or 42% above the same period in 2001. The increase was caused by a
$467,000 improvement in service charges on deposit accounts, as a result of the
new product mentioned above, $110,000 in trust services (mainly in estates and
brokerage fees), $36,000 in loan application fees, $147,000 from Bank Owned Life
Insurance, a $60,000 litigation settlement, and $128,000 in gains on sale of
other real estate.

Total non-interest expense for the current nine month period was $12,214,000,
$1,731,000 or 17% above the $10,483,000 incurred for the same period in 2001.
The increase was located in a $1,052,000 increase in salaries and benefits, a
$207,000 increase in write-off of deposit purchase premium, a $28,000 increase
in audit fees, a $128,000 increase in depreciation, and $92,000 increase in
charged-off cash items.

The provision for income taxes was $2,776,000 for the current period, $80,000
less than the same period in 2001 due to greater tax-free income and historical
tax credits, both of which began to decrease the corporation's tax liability in
the third quarter. Both of these conditions will exist through the fourth
quarter.

OVERVIEW OF THE BALANCE SHEET

The changes in the balance sheet were driven by strong growth in deposits and
borrowed funds. The following are some of the results:

o Total investment securities were $299,627,000 at September 30, 2002, an
increase of $146,158,000 or 95% since September 30, 2001. Securities have
increased from 26% of total assets to 42% of total assets.

o Total deposits have grown from $476,909,000 at September 30, 2001 to
$559,724,000 at September 30, 2002, an increase of $82,815,000 or 17%.
Approximately $24,000,000 of those deposits were obtained through a branch
purchase transaction with Farmers and Mechanics Bank of Frederick, Maryland.
Certificates of deposit were up $11,919,000 or 7% from the September 30, 2001
total. Approximately 93% of the $82,815,000 increase was from checking and
savings accounts. Management believes that the corporation must compete with
Wall Street money market mutual funds and is currently paying higher than
market rates to attract transaction accounts. This requires vigilance when
rates rise and these depositors demand competitive rates or leave in search
of better rates.

o Accumulated other comprehensive income has increased from $442,000 at
December 31, 2001 to $6,406,000 at September 30, 2002. This indicates the
after tax effect in the change in market value of the available for sale
securities portfolio. The change in value is related to both lower interest
and higher volume. This shift helped to reposition the portfolio for income
purposes, as interest rates fell in the second quarter. Certain low rate
securities were sold in July to shorten maturities. Shorter term securities
will make it possible to sell and repurchase securities with better yields in
a rising rate environment.

Page 9

o The borrowings from the Federal Home Loan Bank have increased since year end
2001. The Bank entered into a $10,000,000, ten year term loan, which it used
to purchase municipals with comparable maturities. The remainder is overnight
borrowings used to fund short term corporate securities. Management believes
this should increase earnings, and provide cash flow for a rising rate
environment.

INTEREST RATE SPREAD AND NET YIELD ON EARNING ASSETS
Nine Months Ended
9/30/02 9/30/01
Rate Rate

Earning Assets 6.26% 7.40%
Interest Bearing Liabilities 2.63% 3.82%
Interest Rate Spread 3.63% 3.58%

Net Yield on Earning Assets 4.08% 4.28%

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 nine months of 2002, was down 20
basis points compared to the same period in 2001. Yields on loans and securities
have changed more rapidly than deposit rates as interest rates in the general
economy have continued to fall over the last twelve months.

PROVISION AND RESERVE FOR POSSIBLE LOAN LOSSES
Reserve for Possible Loan Losses
(In Thousands)
Nine Months Ended
9/30/02 9/30/01

Balance at Beginning of Period 3,723 3,695
Provision Charged to Expense 180 180
Loans Charged Off 304 142
Recoveries 53 45

Balance at End of Period 3,652 3,778

Ratios:
Net Charge-offs to:
Net Income 3.70% 1.58%
Total Loans .07% .03%
Reserve for Possible Loan Losses 6.87% 2.57%

Reserve for Possible Loan Losses to:
Total Loans .99% 1.05%

The Reserve for Possible Loan Losses at September 30, 2002 was $3,652,000 (.99%
of Total Loans), a decrease of $126,000 from $3,778,000 (1.05% of Total Loans)
at the end of the first nine months of 2001. Loans past due 90 days and still
accruing were $1,484,000 and non-accrual loans were $650,000, as of September
30, 2002. The ratio of non-performing assets plus other real estate owned to
total assets was .38%, as of September 30, 2002. 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. In addition, a parcel of other real
estate owned with a book value of $782,000 was sold during the second quarter
for $890,000, reducing other real estate owned (OREO) by over 50%.

Page 10

Loans past due 90 days and still accruing were $1,003,000, at year end 2001,
while non-accruals were at $837,000. 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 $744,000 in non-accrual loans, was
approximately $40,000 for the first nine months of 2002.

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 $72,211,000 at September 30, 2002, compared to
$64,824,000 at September 30, 2001, an increase of $7,387,000 or 11.4% over that
period. The ratio of Total Shareholders' Equity to Total Assets was 9.95% at
December 31, 2001, 11.12% at September 30, 2001, and 10.08% at September 30,
2002. The total risk-based capital ratio was 19.08% at September 30, 2002. The
leverage ratio was 11.29% at September 30, 2002, and 11.45% during the same
period in 2001. Capital at the corporation remains above federal requirements.
The corporation paid a special 20 cents per share in January 2002 which did not
decrease capital growth from the previous period.

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 42% of total assets at September 30, 2002. This
mix of assets would be readily available for funding any cash requirements. In
addition, the Bank has an approved line of credit of $324,656,000 at the Federal
Home Loan Bank of Pittsburgh, with $27,300,000 outstanding at September 30,
2002.

As of September 30, 2002, the cumulative asset sensitive gap was (1.1)% of total
assets at one month, (1.8)% at six months, and 2.9% 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
accounts, money market deposit accounts and sweep accounts are carried in the
overnight category. The remaining 75% are carried in over 5 year category in
order to reflect their core deposit characteristics and the fact that rates on
these deposits do not change as rapidly as asset rates.

Management does not believe there are any 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.

Page 11

CONTROLS AND PROCEDURES

We maintain a system of controls and procedures designed to provide reasonable
assurance as to the reliability of the financial statements and other
disclosures included in this report, as well as to safeguard assets from
unauthorized use or disposition. We evaluated the effectiveness of the design
and operation of our disclosure controls and procedures under the supervision
and with the participation of management, including our Chief Executive Officer
and Chief Financial Officer, within 90 days prior to the filing date of this
report. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic Securities and Exchange Commission filings. No
significant changes were made to our internal controls or other factors that
could significantly affect these controls subsequent to the date of their
evaluation.

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 - 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, 1998
between Adams County National Bank, ACNB Corporation and
Ronald L. Hankey (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 (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.

Page 12

Exhibit 99.1 Certification of 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 September 30, 2002.

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
November 7, 2002

John W. Krichten, Secretary/Treasurer

Page 13

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: November 7, 2002
Page 14

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: November 7, 2002
Page 15

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, 1998
between Adams County National Bank, ACNB Corporation and
Ronald L. Hankey (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 (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 Chief Executive Officer

Exhibit 99.2 Certification of Chief Financial Officer

Page 16