ACNB CORP

Note 1 – Basis of Presentation and Nature of Operations

ACNB Corporation, headquartered in Gettysburg, Pennsylvania, provides banking, wealth management, mortgage and insurance services to businesses and consumers through its wholly-owned subsidiaries, ACNB Bank and ACNB Insurance Services. The Bank engages in full-service commercial and consumer banking and wealth management services, including trust and retail brokerage, through its 33 community banking offices, including 24 community banking office locations in Adams, Cumberland, Franklin, Lancaster and York Counties, Pennsylvania, andnine community banking office locations in Carroll and Frederick Counties, Maryland. There is also a loan production office in Hunt Valley, Maryland.

Recent Acquisition

Effective February 1, 2025, ACNB closed the acquisition of Traditions Bancorp, Inc., holding company for Traditions Bank, York, Pennsylvania. Traditions was merged with and into a wholly-owned subsidiary of ACNB Corporation immediately followed by the merger of Traditions Bank with and into ACNB Bank. ACNB Bank is operating the former Traditions Bank offices as “Traditions Bank, A Division of ACNB Bank”. Traditions Bank operated eight community banking offices in South Central Pennsylvania which were included in the Acquisition. In April 2025, ACNB closedtwo of theeight Traditions Bank offices.

ACNB Insurance Services is a full-service insurance agency based in Westminster, Maryland, with an additional location in Gettysburg, Pennsylvania. The agency offers a broad range of property, casualty, health, life and disability insurance to both individual and commercial clients.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary for a fair presentation. All such adjustments are of a normal recurring nature. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2024. The Corporation evaluates subsequent events through the filing date of this Form 10-Q with the SEC. The results of operations for the three and nine month periods ended September 30, 2025, are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications have been made to the prior period financial statements to conform to the current period presentation. Reclassifications had no material effect on prior year net income or stockholders’ equity.

Significant Accounting Policies

The significant accounting policies used in preparation of the Consolidated Financial Statements are disclosed in the Corporation’s 2024 Annual Report on Form 10-K. Those significant accounting policies are unchanged at September 30, 2025 with the exception of the following modifications or additions:

Loans Held for Sale —The Corporation previously elected to measure loans originated and intended for sale in the secondary market at the lower of aggregate cost or fair value. Net unrealized losses were recognized through a valuation allowance by charges to income. During the first quarter of 2025, management made the decision to measure loans held for sale at fair value to more appropriately reflect the performance of its entire mortgage banking activities in its Consolidated Financial Statements. The impact of the change in accounting policy for prior periods presented was deemed to be immaterial. Derivative financial instruments related to mortgage banking activities are also recorded at fair value, as detailed under the header “Derivative Financial Instruments and Hedging Activities” below and in Note 9, “Derivative Financial Instruments.” Changes in the fair value of loans held for sale and derivative financial instruments related to mortgage banking during the period are recorded as components of gain from mortgage loans held for sale on the Consolidated Statements of Income. Interest income earned on mortgage loans held for sale is classified within interest income on the Consolidated Statements of Income.

Derivative Financial Instruments and Hedging Activities —FASB ASC 815, Derivatives and Hedging, provides the disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Corporation’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Corporation may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Corporation elects not to apply hedge accounting.

Acquisition Accounting —The Corporation accounts for its mergers and acquisitions using the acquisition method of accounting, in accordance with the provisions of ASC 805– Business Combinations. Under ASC 805, assets acquired and liabilities assumed in a business combination are at acquisition date fair value and transaction costs and restructuring costs associated with the business combination are expensed as incurred. The determination of fair values involves significant judgment regarding methods and assumptions, including discount rates, future expected cash flows, market conditions and other future events. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The results of operations of the acquired entity are included in the consolidated statements of operations from the Acquisition date. In accordance with business combination accounting guidance, the Company's review of the fair values of the assets and liabilities acquired is ongoing, with management evaluating these fair values for up to one year following the Acquisition date. Adjustments would be recorded to goodwill in the period in which they were determined.

Accounting Standards Pending Adoption

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740)”. This ASU is intended to improve the disclosures for income taxes to address requests from investors, lenders, creditors and other allocators of capital that use the financial statements to make capital allocation decisions. The amendments in ASU 2023-09 will require consistent categories and greater disaggregation of information in the rate reconciliation disclosure as well as disclosure of income taxes paid disaggregated by jurisdiction. The amendments of ASU 2023-09 are effective for annual periods beginning after December 15, 2024, and early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Corporation intends to adopt the amendments of ASU 2023-09 effective January 1, 2025, and will include the required disclosures in its Annual Report on Form 10-K for the year ending December 31, 2025. The Corporation is currently evaluating the impact of this standard, and believes that its adoption will not have a material impact on the Corporation’s Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (Subtopic 220-40)”. This ASU is intended to improve the decision usefulness of expense information on public business entities’ income statements through the disaggregation of relevant expense captions in the notes to the financial statements. The amendments of ASU 2024-03 are effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and early adoption is permitted. The Corporation is currently evaluating the impact of this standard, and believes that its adoption will not have a material impact on the Corporation’s Consolidated Financial Statements.

Note 2 –Business Combination

Effective February 1, 2025, ACNB Corporation completed its acquisition of Traditions Bancorp, Inc., holding company for Traditions Bank, York, Pennsylvania. Traditions was merged with and into a wholly-owned subsidiary of ACNB Corporation immediately followed by the merger of Traditions Bank with and into ACNB Bank. ACNB Bank is operating the former Traditions Bank offices as “Traditions Bank, A Division of ACNB Bank”. In connection with the close of the Acquisition, Traditions stockholders received 0.7300 shares of ACNB Corporation common stock for each share of Traditions common stock that they owned as of the closing date, with cash paid in lieu of fractional shares. ACNB issued 2,035,246 shares of its common stock, and cash in exchange for fractional shares based on $41.10 per whole share of ACNB common stock. The transaction is valued at $83.8 million.

Traditions’ results of operations were included in the ACNB’s results of operations beginning on February 1, 2025. Net interest income and income before income taxes for Traditions were estimated to be $23.4 million and $8.1 million, respectively, since the date of acquisition through September 30, 2025 and is included in the Corporation’s Consolidated Statements of Income. ACNB’s financial results for any periods ended prior to February 1, 2025 reflect ACNB on a standalone basis. As a result,

ACNB’s financial results for the three and nine months ended September 30, 2025 may not be directly comparable to prior reported periods. Merger-related costs totaled $169 thousand and $10.1 million for the three and nine months ended September 30, 2025, respectively.

The acquisition method of accounting, in accordance with the provisions of FASB ASC Topic 805, Business Combinations, was used to account for the Acquisition. ACNB recorded the assets and liabilities of Traditions at their respective fair values as of February 1, 2025. Under the acquisition method of accounting, the total merger consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Traditions based on their estimated fair value as of the acquisition date of the merger. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. ACNB recorded goodwill of $20.3 million in connection with the Acquisition, which is not amortized for financial reporting purposes, but is subject to annual impairment testing.

The total merger consideration of $83.8 million is allocated to Traditions’ tangible and intangible assets and liabilities based on their fair values as follows:

ACNB used an independent valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities. As permitted under GAAP, the Corporation has up to twelve months following the date of the Acquisition to finalize the fair values of the acquired assets and assumed liabilities related to the Acquisition. During this measurement period, ACNB may record subsequent adjustments to goodwill for provisional amounts recorded at the Acquisition date, with provisional merger-related tax adjustments.

ACNB completed, shortly following the Acquisition date, the sale of approximately $98.0 million of Traditions’ investment securities with a yield of 5.03%. With the proceeds from the sale, ACNB paid off $40.2 million of FHLB borrowings with a cost of 4.73% and invested the remainder of the proceeds into investment securities with a yield of 5.07%. The acquisition accounting adjustment on the AFS securities represents the difference between the fair value of the AFS securities as of January 31, 2025 and the final proceeds received as a result of the sales. For the fair value policy see Note 10 – “Fair Value Measurements” in the Notes to Consolidated Financial Statements under Part I, Item I.

ACNB evaluated and classified the acquired loans between non-PCD or PCD. ACNB’s senior credit management team reviewed Traditions’ loan portfolio on a loan-by-loan basis to determine which loans met the definition of an ASC 326-20 PCD loan. PCD loans include loans which experienced more-than-insignificant credit deterioration since origination. PCD loans included loans on nonaccrual status, loans risk-rated pass/watch or worse, COVID-19 loan deferrals, loans more than 90 days past due and still accruing, accruing loans but were more than 60 days past due in the past, accruing loans but were more than 30 days past due more than 3 times in the past and other loans evaluated. The acquisition accounting adjustments for non-PCD loans and PCD loans were $21.6 million and $4.4 million, respectively, on the Acquisition date. Included in the acquisition accounting adjustment for loans was $635 thousand of net deferred income that served to decrease the acquisition accounting adjustment of the loans acquired.

ACNB recorded an allowance for credit losses of $6.9 million at the Acquisition date, comprised of $5.5 million for non-PCD loans, which was recognized through the provision for credit losses, and $1.5 million for accruing PCD loans, which was recognized as an acquisition accounting adjustment to the amortized cost basis of the acquired loans. The following table presents details related to the fair value of acquired PCD loans at the Acquisition date:

The acquisition accounting adjustment for premises and equipment was $362 thousand at the Acquisition date as a result of updated independent market-based appraisals on real estate and the write-off of obsolete fixed assets.

Pursuant to customer-related intangible assets ASC 805-20-55-13(b), ACNB, with the assistance of an independent valuation specialist, completed a core deposit intangible asset valuation that resulted in a core deposit intangible asset of $18.9 million at the Acquisition date. To establish the core deposit intangible asset, ACNB used a present value analysis that calculated the expected after-tax cash flow benefits of each acquired core deposit type versus the cost of obtaining an alternative source of funding (brokered deposits) over the expected life of each acquired core deposit type, discounted at a long-term market oriented after-tax rate of return. The core deposit intangible asset is amortized based on the sum-of-the-years digits method over the expected life of 10 years.

The acquisition accounting adjustment for other assets was $1.4 million at the Acquisition date driven primarily by a net deferred tax position for each acquisition accounting adjustment. The acquisition accounting adjustment for deposits was $215 thousand at the Acquisition date as a result of acquisition accounting adjustments on certificates of deposits using a present value approach that represents the present value of the certificates’ expected contractual payments discounted by market rates for similar certificates of deposits. The acquisition accounting adjustment for the allowance for unfunded commitments was $852 thousand as a result of applying ACNB’s existing policies, procedures and methodologies in calculating the allowance for Traditions’ unfunded commitments. The acquisition accounting adjustment for other liabilities was $41 thousand at the Acquisition date as a result of the write-off of unearned letter of credit fees.

The following table presents supplemental pro forma information for the three and nine months ended September 30, 2025 and 2024 as if the acquisition had occurred January 1, 2024. The unaudited pro forma information includes acquisition accounting adjustments for interest income on loans acquired, amortization of core deposit intangibles arising from the transaction, depreciation expense on property acquired, interest expense of deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been affected on the assumed dates. In addition, the unaudited proforma information excludes merger-related expenses and the provision for credit losses on non-PCD loans at the Acquisition date, and does not reflect management’s estimate of any revenue-enhancing opportunities or anticipated cost savings as a result of the integration:

Note 3 – Earnings Per Share

The Corporation has a simple capital structure. Basic earnings per share of common stock is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding less unvested restricted stock at the end of the period. Diluted earnings per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.

There were no antidilutive instruments at September 30, 2025 and 2024.

Share Repurchase Plans

On June 18, 2025, the Corporation announced that the Board of Directors approved a plan to repurchase, in open market transactions at prevailing market prices, up to 314,000 shares, or approximately 3%, of the outstanding shares of ACNB’s common stock. This common stock repurchase program replaced and superseded any and all earlier announced repurchase plans. There were 61,586 shares purchased under this plan during the three months ended September 30, 2025.

On October 24, 2022, the Corporation announced that the Board of Directors approved on October 18, 2022, a plan to repurchase, in open market and privately negotiated transactions, up to 255,575, or approximately 3%, of the outstanding shares of the Corporation’s common stock. The plan was replaced by the plan announced on June 18, 2025. There were 215,372 treasury shares purchased under this plan through June 30, 2025.

Note 4 –Investment Securities

Fair value of equity securities with readily determinable fair values at September 30, 2025 and December 31, 2024, are as follows:

Amortized cost and fair value of investment securities were as follows:

The following table shows the Corporation’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2025, and December 31, 2024:

All mortgage-backed securities, and those of a similar asset class, are government-sponsored enterprise pass-through instruments issued by the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation or they are issued by the Government National Mortgage Association which is backed by the U.S. government which guarantees the timely payment of principal on these investments.

The Company evaluates AFS debt securities for impairment in unrealized loss positions at each measurement date to determine whether the decline in the fair value below the amortized cost basis is due to credit-related factors or noncredit-related factors. In estimating credit events, management considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before anticipated recovery or if it does not expect to recover the entire amortized cost basis. There was no impairment on AFS debt securities as of September 30, 2025 and December 31, 2024. The Company evaluates HTM debt securities for expected credit losses at each measurement date to determine if an ACL is required. The Corporation did not have an ACL for HTM investment securities as of September 30, 2025 and December 31, 2024.

Amortized cost and fair value at September 30, 2025, by contractual maturity, where applicable, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties. Securities not due at a single maturity date are shown separately below.

The proceeds from sales and calls of securities and the associated gains and losses are listed below:

ACNB received $97.7 million in proceeds from the sale of Traditions’ investments subsequent to the Acquisition date.

At September 30, 2025 and December 31, 2024, securities with a carrying value of $200.0 million and $157.3 million, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.

Note 5 –Loans and Allowance for Credit Losses

The following table presents the composition of the loan portfolio:

Loans with a fair value of $648.5 million at the Acquisition date were assumed and included an acquisition accounting adjustment of $25.3 million.

One of the factors used to monitor the performance and credit quality of the loan portfolio is to analyze the age of the loans receivable as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the past due status:

Nonaccrual and Nonperforming Loans

Loans individually evaluated consist of nonaccrual loans, presented in the following table:

During the nine months ended September 30, 2025, no material amount of interest income was recognized on nonaccrual loans subsequent to their classification as nonaccrual.

Total nonperforming loans are as follows:

Nonperforming loans include consumer residential mortgages and home equity lines of credit which are well secured by residential real estate properties and are in the process of collection are not considered nonaccrual.

Collateral-Dependent Loans

A loan is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the collateral-dependent loan’s carrying value to the fair value of the collateral less cost to sell. Substantially all of the collateral supporting collateral-dependent loans consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land. Changes in the fair value of the collateral for individually evaluated loans are reported as provision for credit losses or a reversal of provision for credit losses in the period of change.

The following table presents the amortized cost basis of individually evaluated loans by type of collateral as of the periods presented:

Loan Modifications

The Corporation evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, or combinations of the above. Therefore, the disclosures related to loan restructurings are only for modifications that directly affect cash flows.

During the three and nine months ended September 30, 2025 the Corporation did not modify any loans nor were there any commitments to lend any additional funds on existing modified loans. During the three and nine months ended September 30, 2024 the Corporation modified $4.0 million of commercial real estate and commercial and industrial loans that were experiencing financial difficulty with a combination of payment deferrals and interest only payments. These loans were current as of September 30, 2025. There were no loans modified in the previous twelve months as of September 30, 2025 and no loans defaulted during the period that had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification. For purposes of this disclosure, a default occurs when, within 12 months of the original modification, either a full or partial charge-off occurs or the loan becomes 90 days or more past due.

Allowance for Credit Losses

The Corporation maintains an ACL at a level determined to be adequate to absorb expected credit losses associated with the Corporation’s financial instruments over the life of those instruments as of the balance sheet date. The ACL consists of loans evaluated collectively and individually for expected credit losses. The Corporation considers the performance of the loan portfolio and its impact on the ACL and does not assign internal risk ratings to smaller balance, homogeneous loans such as certain residential mortgage, home equity lines of credit, construction loans to individuals secured by residential real estate and consumer loans. For these loans, the Corporation evaluates credit quality based on the aging status of the loan and designates as performing and nonperforming.

The following summarizes designated internal risk categories by portfolio segment for loans assigned a risk rating and those evaluated based on the performance status:

The following table presents the activity in the ACL by loan portfolio segment:

Note 6 –Goodwill and Intangible Assets

Goodwill, which has an indefinite useful life, is evaluated for impairment annually or more frequently if events and circumstances indicate that the asset might be impaired. The Corporation did not identify any goodwill impairment on the Bank or ACNB Insurance Services from its most recent testing performed as of November 30, 2024. There were no impairment losses or accumulated impairment losses associated with goodwill as of September 30, 2025 and December 31, 2024.

The following table presents goodwill as of the periods presented:

The following table presents intangible assets, net of accumulated amortization, for the periods shown below:

The following table shows the amortization expense of the intangible assets for future periods:

Note 7 –Deposits

Deposits were comprised of the following for the periods presented:

Time deposits include brokered deposits totaling $44.0 million at September 30, 2025 and $24.1 million at December 31, 2024. Deposits with a fair value of $741.5 million at the date of the Acquisition were assumed and included an acquisition accounting adjustment of $215 thousand.

Scheduled maturities of time deposits at September 30, 2025 are as follows:

Note 8 –Borrowings

Short-term borrowings and weighted-average interest rates for the periods presented:

Borrowings with original maturities of one year or less are classified as short-term. Securities sold under repurchase agreements are comprised of customer repurchase agreements, which are sweep accounts with next-day maturities utilized by larger commercial customers to earn interest on their funds. Securities are pledged to these customers in an amount at least equal to the outstanding balance. Under an agreement with the FHLB, the Bank has short-term borrowing capacity included within its maximum borrowing capacity. All FHLB advances are collateralized by a security agreement covering qualifying loans. In addition, all FHLB advances are secured by the FHLB capital stock owned by the Bank having a par value of $14.2 million at September 30, 2025.

Long-term borrowings and their weighted-average contractual rates were comprised of the following for the periods presented:

1 Net of purchase accounting fair value mark.

The long-term FHLB advances have a weighted average rate of 4.52%, and are collateralized by the assets defined in the security agreement and FHLB capital stock described previously. Based on this collateral and ACNB’s holding of FHLB stock, ACNB is eligible to borrow up to $1.29 billion, of which $1.01 billion was available at September 30, 2025.

The trust preferred subordinated debt is comprised of debt securities issued by FCBI in December 2006 and assumed by ACNB Corporation through the acquisition of FCBI. FCBI completed the private placement of an aggregate of $6.0 million of trust preferred securities. The interest rate on the subordinated debentures is adjusted quarterly to 163 bps over the three-month CME Term SOFR plus applicable tenor spread adjustment. On September 15, 2025, the most recent interest rate reset date, the interest rate was adjusted to 5.93% through the period ending December 14, 2025. The trust preferred securities mature on December 15, 2036, and may be redeemed at par, at the Corporation’s option, on any interest payment date. The trust preferred subordinated debt is considered Tier 1 capital for the consolidated capital ratios.

On March 30, 2021, the Company entered into Purchase Agreements with the Purchasers pursuant to which the Company sold and issued $15.0 million in aggregate principal amount of its 4.00% fixed-to-floating rate subordinated notes due March 31, 2031. The Subordinated Notes bear interest at a fixed rate of 4.00% per year, from and including March 30, 2021 to, but excluding, March 31, 2026 or earlier redemption date. From and including March 31, 2026 to, but excluding the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current 90-day average SOFR plus 329 bps. As provided in the Subordinated Notes, the interest rate on the Subordinated Notes during the applicable floating rate period may be determined based on a rate other than the 90-day average SOFR. The Subordinated Notes were issued by the Corporation to the Purchasers at a price equal to 100% of their face amount. The Subordinated Notes have a stated maturity of March 31, 2031, are redeemable by the Company at its option, in whole or in part, on or after March 30, 2026, and at any time upon the occurrences of certain events. The Subordinated Notes are considered Tier 2 capital for the consolidated capital ratios.

Note 9 –Derivative Financial Instruments

ACNB is exposed to certain risks arising from both its business operations and economic conditions. ACNB manages market risk, including interest rate risk, primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Corporation enters into derivative financial instruments to manage interest rate risk that arise from business operations.

All derivatives are recognized as either assets or liabilities in the Consolidated Statements of Condition. Until a derivative is settled, favorable changes in fair values result in unrealized gains that are recognized as assets, while unfavorable changes result in unrealized losses that are recognized as liabilities.

Interest rate-lock commitments extended to borrowers relate to the origination of residential mortgage loans. To mitigate the interest rate risk inherent in these commitments, ACNB enters into mandatory delivery and best efforts forward commitments to sell adjustable-rate and fixed-rate residential mortgage loans (servicing released). Forward commitments and interest rate-lock commitments on residential mortgage loans are considered derivatives. Hedge accounting has not been applied for these derivatives. Accordingly, changes in the fair value of forward and interest rate-lock commitments are recognized in current earnings.

ACNB executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously offset with essentially matching interest rate swaps with ACNB’s counterparties, such that ACNB minimizes its net risk exposure resulting from such transactions. Hedge accounting has not been applied for these derivatives. Accordingly, changes in the fair value of all such interest rate swaps are recognized in current earnings.

ACNB applies hedge accounting, when applicable, to its derivatives used for interest rate risk management purposes. Hedge accounting is permitted only if specific criteria are met, including a requirement that a highly effective relationship exist between the derivative instrument and the hedged item, both at inception of the hedge and on an ongoing basis. The hedge accounting method depends upon whether the derivative instrument is classified as a fair value hedge (i.e. hedging an exposure related to a recognized asset or liability, or a firm commitment) or a cash flow hedge (i.e. hedging an exposure related to the variability of future cash flows associated with a recognized asset or liability, or a forecasted transaction). Changes in the fair value of effective fair value hedges are recognized in current earnings (with the change in fair value of the hedged asset or liability also recorded in earnings). Changes in the fair value of effective cash flow hedges are recognized in other comprehensive income or loss until earnings are affected by the variability in cash flows of the designated hedged item. Ineffective portions of hedge results are recognized in current earnings. Changes in the fair value of derivatives for which hedge accounting is not applied are recognized in current earnings.

The following table presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the Consolidated Statements of Condition as of September 30, 2025 and December 31, 2024:

The following presents a summary of the fair value gains and losses on derivative financial instruments for the three and nine months ended September 30, 2025 and 2024:

The following table presents the effect of fair value and cash flow hedge accounting on AOCI for the periods presented:

As of September 30, 2025 the fair value of interest rate derivatives used in cash flow hedges in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $125 thousand. As of September 30, 2025, the Company has posted $260 thousand of collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2025, it could have been required to settle its obligations under the agreements at their termination value of $125 thousand.

The following table presents the effect of fair value and cash flow hedge accounting on the Consolidated Statements of Income for the periods presented:

Note 10 –Fair Value Measurements

Fair value is the exchange price that would be received to sell the asset or transfer the liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions.

Fair value measurement establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 — Quoted prices for similar assets or liabilities in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following tables present assets measured at fair value and the basis of measurement used at the periods presented:

The valuation techniques used to measure fair value for the items in the preceding tables are as follows:

Equity securities — The fair value of equity securities with readily determinable fair values is recorded on the Consolidated Statements of Condition, with realized and unrealized gains and losses reported in noninterest income on the Consolidated Statements of Income. They are classified as Level 1 assets.

Available for sale investment securities —Included in this asset category are debt and pass through securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing. Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.

• U.S. Government and agencies —These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.

• Collateralized mortgage obligations, Mortgage-backed securities and State and Municipal securities —These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.

• Corporate bonds —This category consists of subordinated and senior debt issued by financial institutions and are classified as Level 2 investments. The fair values for these corporate debt securities are determined by a third-party pricing service, as detailed above.

Loans held for sale —This category includes mortgage loans held for sale that are measured at fair value utilizing Level 2 measurements. Fair values are measured as the price that secondary market investors were offering for loans with similar characteristics.

Derivative financial instruments —Derivative financial instruments include interest rate lock commitments, forward commitments and interest rate derivatives. The fair value of interest rate lock commitments is derived from the value of the underlying loans, adjusted for changes in market interest rates relative to the committed rate. The fair value of forward commitments is based on quoted prices for mortgage-backed securities with similar characteristics. The fair value of interest rate derivatives are based upon broker quotes. The fair value of both the assets and the related liabilities are determined in the same manner and are all classified as Level 2 assets.

Individually evaluated loans —This category consists of loans that were individually evaluated for impairment and have a specific reserve. They are classified as Level 3 assets.

Foreclosed assets held for resale —This category consists of foreclosed assets that are held for resale and classified as Level 3 assets, for which the fair values are based on estimated selling prices less estimated selling costs for similar assets in active markets.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:

1 Fair value is generally determined through management’s estimate or independent third-party appraisals of the underlying collateral, which generally

includes various Level 3 inputs which are not observable.

2 Appraisals may be adjusted downward by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percentage of the appraisal. Higher downward adjustments are caused by negative changes to the collateral or conditions in the real estate market, actual offers or sales contracts received, and/or age of the appraisal.

The following information should not be interpreted as an estimate of the fair value of the entire Corporation since a fair value calculation is only provided for a limited portion of the Corporation’s assets and liabilities. Management uses its best judgment in estimating the fair value of the Corporation’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Corporation could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective reporting dates and have not been reevaluated or updated for purposes of these Consolidated Financial Statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period end. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Corporation’s disclosures and those of other companies may not be meaningful.

The following tables present the carrying amount and the estimated fair value of the Corporation’s financial instruments:

Note 11 –Stock-Based Compensation

The Corporation grants equity awards to employees in the form of restricted stock awards under its ACNB Corporation 2018 Omnibus Stock Incentive Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the vesting period of the stock issued. During the nine months ended September 30, 2025,36,887 restricted stock awards were granted,969 were forfeited, and 38,476 restricted stock awards vested.

The following table presents compensation expense and the related tax benefits for equity awards recognized in the Consolidated Statements of Income:

Note 12 –Defined Benefit Pension Plan

The components of net periodic benefit income related to the non-contributory, defined benefit pension plan were as follows:

The Corporation has determined that it will not be contributing to the defined benefit plan in 2025 based on current levels and expected returns on plan assets. Effective April 1, 2012, no inactive or former participant in the plan is eligible to again participate in the plan, and no employee hired after March 31, 2012, is eligible to participate in the plan.

Note 13 –Commitments and Contingencies

Commitments

The Corporation is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit (typically mortgages and commercial loans) and, to a lesser extent, standby letters of credit. To varying degrees, these instruments involve elements of credit and interest rate risk in excess of the amount recognized on the Consolidated Statements of Condition.

The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on balance sheet instruments. The Corporation does not anticipate any material losses from these commitments.

Commitments to extend credit, including commitments to grant loans and unfunded commitments under lines of credit, are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extensions of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, inventory, property and equipment and income-producing commercial properties. On loans secured by real estate, the Corporation generally requires loan to value ratios of no greater than 80%.

Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third-party. Those guarantees are primarily issued to support public and private borrowing arrangements and similar transactions. The terms of the letters of credit vary and may have renewal features. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Corporation generally holds collateral and/or personal guarantees supporting those commitments for which collateral is deemed necessary. Management believes that the proceeds obtained through a liquidation of such collateral and the enforcement of guarantees would be sufficient to cover the maximum potential amount of future payments required under the corresponding guarantees.

The Corporation maintains a $5.0 million unsecured line of credit with a correspondent bank. The Corporation guarantees a note related to a $1.5 million commercial line of credit with a correspondent bank, with normal terms and conditions for such a line, for ACNB Insurance Services, the borrower. The commercial line of credit is for general working capital needs as they arise by the ACNB Insurance Services. The liability is recorded for the net drawn amount of this line, no further liability is recorded for the remaining line as to the guarantor’s obligation as the guarantor would have full recourse from all assets of its wholly-owned subsidiary. There were no advances on these lines at September 30, 2025 and at December 31, 2024.

The Corporation has not been required to perform on any financial guarantees, and has not incurred any losses on its commitments during the past three years.

A summary of the Corporation’s commitments were as follows:

Contingencies

The Corporation is subject to claims and lawsuits which arise primarily in the ordinary course of business. Based on information presently available and advice received from legal counsel representing the Corporation in connection with any such claims and lawsuits, it is the opinion of management that the disposition or ultimate determination of any such claims and lawsuits will not have a material adverse effect on the consolidated financial position, consolidated results of operations or liquidity of the Corporation.

Note 14 –Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of taxes, are as follows:

Note 15 –Segment Reporting

The Corporation’s reportable segments are determined by the ACNB Board of Directors. The reportable segments are determined by how operating decisions are made and performance is assessed. The CODM evaluates the financial performance of the various business components by evaluating revenue streams, significant expenses and budget to actual results in assessing the performance of the Corporation’s segments and in order to determine the allocation of resources. The ACNB Board of Directors has determined that the Corporation hastwo reporting segments, the Bank and ACNB Insurance Services and considers the President and CEO of ACNB Corporation to be the CODM of both reporting segments. Key measurements of performance in the banking segment are the net interest margin and the provision for credit losses, both which indicate the Bank’s ability to manage risk, and also the Bank’s ability to grow noninterest income and manage the largest noninterest expense, salaries and employee benefits. AIS Insurance Services is a subsidiary of the Corporation and is governed by its own Board of Directors. Key measurements of performance are revenues from commissions on insurance policies and the significant expense associated with those revenues are salaries and employee benefits. These two factors are significant in assessing the performance of the agency.

Segment information as of and for the periods listed below is as follows:

1 Includes the holding company and intercompany eliminations, including the intersegment elimination of interest income and interest expense.

2 Other noninterest expense for Banking includes equipment, net occupancy, professional services, other tax, FDIC and regulatory and merger-related expenses.

Other noninterest expense for Insurance includes equipment, net occupancy and professional services expenses.

1 Includes the holding company and intercompany eliminations, including the intersegment elimination of interest income and interest expense.

2 Other noninterest expense for Banking includes equipment, net occupancy, professional services, other tax, FDIC and regulatory and merger-related expenses.

Other noninterest expense for Insurance includes equipment, net occupancy and professional services expenses.

Note 16 -Subsequent Event

On October 14, 2025 ACNB executed a forward-starting, two year $20.0 million receive-floating/pay-fixed interest rate swap at a rate of 3.20% to begin on October 27, 2025. On October 27, 2025 ACNB executed a three month FHLB borrowing of $20.0 million at a rate of 4.08%.

On October 15, 2025 ACNB purchased an additional $8.4 million in bank-owned life insurance policies.