ACNB CORP (ACNB)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion and analysis of the significant changes in the financial condition, results of operations, comprehensive income, capital resources and liquidity presented in its accompanying Consolidated Financial Statements for ACNB Corporation, a financial holding company. Please read this discussion in conjunction with the Consolidated Financial Statements and disclosures included herein. Current performance does not guarantee, assure or indicate similar performance in the future.

Forward-Looking Statements

In addition to historical information, this Form 10-Q may contain 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, noninterest 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 national, regional and 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: short-term and long-term effects of inflation and rising costs on the Corporation, customers and economy; legislative and regulatory changes; banking system instability caused by failures and financial uncertainty of various banks which may adversely impact the Corporation and its securities and loan values, deposit stability, capital adequacy, financial condition, operations, liquidity, and results of operations; effects of governmental and fiscal policies, as well as legislative and regulatory changes; effects of new laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) and their application with which the Corporation and its subsidiaries must comply; impacts of the capital and liquidity requirements of the Basel III standards or any similar standards; 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-term 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; effects of economic conditions particularly with regard to the negative impact of any pandemic, epidemic or health-related crisis and the responses thereto on the operations of the Corporation and current customers, specifically the effect of the economy on loan customers’ ability to repay loans; effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; inflation, securities market and monetary fluctuations; 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; effects of technology changes; effects of general economic conditions and more specifically in the Corporation’s Market Areas; failure of assumptions underlying the establishment of reserves for credit losses and estimations of values of collateral and various financial assets and liabilities; acts of war or terrorism or geopolitical instability; disruption of credit and equity markets; ability to manage current levels of impaired assets; loss of certain key officers; 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; 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; and, trade and tariff uncertainties and volatility. Management considers subsequent events occurring after the balance sheet date for matters which may require adjustments to, or disclosure in, the Consolidated Financial Statements. 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 SEC, including the Annual Reports on Form 10-K and the Quarterly Reports on Form 10-Q. Please also carefully review any Current Reports on Form 8-K filed by the Corporation with the SEC.

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Executive Overview

ACNB Corporation is the financial holding company for the wholly-owned subsidiaries of ACNB Bank and ACNB Insurance Services. ACNB Bank provides a full range of retail and commercial financial services in Pennsylvania and Maryland primarily through its network of 33 community banking offices and two loan production offices. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance serving personal and commercial clients through office locations in Westminster, Maryland, and Gettysburg, Pennsylvania and is licensed to do business in 46 states.

The primary source of the Corporation’s revenues is net interest income derived from interest earned on loans and investments, less deposit and borrowing funding costs. Revenues are influenced by general economic factors, including market interest rates, the economies of the markets served, stock market conditions, as well as competitive forces within the markets. The Corporation also generates revenue through commissions and fees earned on various services and financial products offered to its customers and through gains on sales of assets such as loans, investments and properties. The Corporation incurs expenses to generate the revenue through provision for credit losses, noninterest expense and income taxes. The Corporation’s overall strategy is to increase loan growth in its local markets while maintaining a reasonable funding base by offering competitive deposit products and services.

Financial results for the six months ended June 30, 2025 were impacted by two discrete items that were related to the Acquisition of Traditions Bancorp, Inc. which was completed on February 1, 2025: a provision for credit losses on non-PCD loans of $4.2 million, net of taxes, and merger-related expenses totaling $7.8 million, net of taxes. Financial results for the six months ended June 30, 2025 include ACNB’s standalone results for the month of January 2025.

The following table presents a summary of the Corporation’s earnings and selected performance and asset quality ratios:

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1 Income on interest-earning assets has been computed on a FTE basis using the 21% federal income tax statutory rate.

2 Non-performing loans consists of loans on nonaccrual status and loans greater than 90 days past due and still accruing interest.

3 Non-performing assets consists of non-performing loans and foreclosed assets held for resale.

Summary Financial Results

•Net Interest Income — Net interest income was $34.0 million for the three months ended June 30, 2026 compared to $31.0 million for the same period of 2025, an increase of $3.0 million. For the six months ended June 30, 2026, net interest income was $66.5 million compared to $58.1 million for the same period of 2025. The increase in net interest income was driven primarily by loan growth, new loans and investment securities funded during the quarter at higher rates than those that paid off or matured, and the continued benefit of lower funding costs. In addition, the yield on investment securities during the six months ended June 30, 2026 compared to the same period in the prior year was impacted by a repositioning of the investment securities portfolio completed during the three months ended December 31, 2025.

◦Net Interest Margin — FTE net interest margin increased to 4.56% for the three months ended June 30, 2026 compared to 4.21% in the same period of 2025, an increase of 35 bps. FTE net interest margin increased to 4.51% for the six months ended June 30, 2026 compared to 4.14% in the same period of 2025, an increase of 37 bps. The accretion impact of acquisition accounting adjustments on loans and deposits from the

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Acquisition was $1.8 million and $2.2 million for the three months ended June 30, 2026 and 2025, respectively, and $3.6 million and $3.7 million for the six months ended June 30, 2026 and 2025, respectively.

◦Loan Growth — Average loans increased $46.0 million for the three months ended June 30, 2026, compared to the same period of 2025, driven primarily by organic growth in the commercial real estate portfolio and increased $126.9 million for the six months ended June 30, 2026, compared to the same period of 2025 driven primarily by organic growth in the commercial real estate portfolio and the Acquisition.

◦Deposit Growth — Average noninterest-bearing deposits increased $20.1 million and $30.8 million for the three and six months ended June 30, 2026, respectively, compared to same periods of 2025 driven primarily by promotional incentives on commercial checking accounts and the Acquisition. Average interest-bearing deposits decreased $14.0 million, for three months ended June 30, 2026 primarily as a result of attrition of higher cost money market deposits from the Acquisition. Averag

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EXECUTIVE OVERVIEW

ACNB Corporation is the financial holding company for the wholly-owned subsidiaries of ACNB Bank and ACNB Insurance Services. ACNB Bank provides a full range of retail and commercial financial services in Pennsylvania and Maryland primarily through its network of 33 community banking offices. ACNB Insurance Services offers a broad range of property, casualty, health, life and disability insurance serving personal and commercial clients through office locations in Westminster, Maryland, and Gettysburg, Pennsylvania and is licensed to do business in 46 states.

The primary source of the Corporation’s revenues is net interest income derived from interest earned on loans and investments, less deposit and borrowing funding costs. Revenues are influenced by general economic factors, including market interest rates, the economies of the markets served, stock market conditions, as well as competitive forces within the markets. The Corporation also generates revenue through commissions and fees earned on various services and financial products offered to its customers and through gains on sales of assets, such as loans, investments and properties. The Corporation incurs expenses to generate the revenue through provision for credit losses, noninterest expense and income taxes. The Corporation’s overall strategy is to increase loan growth in its local markets, while maintaining a reasonable funding base by offering competitive deposit products and services.

ACNB reported earnings of $37.1 million in 2025 impacted by three discrete items: $8.3 million merger-related expenses, net of tax impact, a provision for credit losses on non-PCD loans of $4.2 million, net of tax impact, both incurred as a result of the Acquisition, and a $2.8 million loss on sales of investment securities, net of tax impact, incurred as a result of the repositioning of the investment securities portfolio.

Traditions Acquisition

ACNB closed the Acquisition of Traditions effective February 1, 2025. Traditions contributed, after acquisition accounting adjustments, $877.7 million in assets, $648.5 million in loans and $741.5 million in deposits at the Acquisition date. See Note 2 — “Business Combination” in the Notes to Consolidated Financial Statements under Part II, Item 8 — “Financial Statements and Supplementary Data,” for more information.

Investment Securities Portfolio Repositioning

ACNB completed a repositioning of the investment securities portfolio by selling $74.6 million in book value of available for sale investment securities for an after-tax loss of $2.8 million as announced on Form 8-K on December 5, 2025. For additional information see “Investment Securities” in the Financial Condition section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Table of Contents

The following table presents a summary of the Corporation’s earnings and selected performance and asset quality ratios for the years ended December 31:

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1 Income on interest-earning assets has been computed on a fully taxable equivalent basis using the 21% federal income tax statutory rate.

Summary Financial Results for the year ended December 31, 2025

•Net Interest Income — Net interest income was $123.1 million in 2025 compared to $83.6 million for the same period of 2024, an increase of $39.5 million. The increase in net interest income and growth in average loans and deposits was driven primarily by the Acquisition.

◦Net Interest Margin — The Corporation’s FTE net interest margin increased to 4.23% in 2025 compared to 3.79% for the same period of 2024, an increase of 44 bps. The accretion impact of acquisition accounting adjustments on loans and deposits from the Acquisition was $7.7 million for the year ended December 31, 2025.

◦Yield on Average Interest-earning Assets — ACNB experienced an increase of 75 bps in the yield on average interest-earning assets to 5.61% compared to the same period of 2024.

◦Loan Growth — Average loans grew $635.8 million compared to the same period of 2024.

◦Deposit Growth — Average interest-bearing deposits increased $542.1 million compared to the same period of 2024.

•Asset Quality — The ACL was $23.7 million at December 31, 2025 compared to $17.3 million at December 31, 2024. The increase was driven primarily by an initial ACL of $5.5 million for non-PCD loans and $1.5 million for accruing PCD loans at the Acquisition date.

◦The provision for credit losses was $5.3 million and the provision for unfunded commitments was a reversal of $532 thousand for the year ended December 31, 2025 compared to the reversal of $2.4 million provision for credit losses and the reversal of $326 thousand for unfunded commitments for the same period of 2024.

◦Non-performing loans were $10.7 million, or 0.46% of total loans at December 31, 2025 compared to $6.8 million, or 0.40% of total loans for the same period of 2024. The increase was driven primarily by the Acquisition and, to a lesser extent, three unrelated relationships in the commercial real estate and residential mortgage portfolios.

◦Net charge-offs for the year ended December 31, 2025 were 0.01% of total average loans compared to 0.02% for the same period of 2024.

•Noninterest income — Excluding net (losses) gains on sales or calls of securities, noninterest income was $32.1 million for the year ended December 31, 2025, an increase of $7.5 million from the same period of 2024. The increase was driven primarily by a $5.0 million increase in gain from mortgage loans held for sale, a $697 thousand increase in service charges on deposits and $614 thousand higher earnings on investment in bank-owned life insurance, which were driven primarily by the Acquisition.

•Noninterest expenses — Noninterest expenses totaled $100.5 million, an increase of $29.8 million in 2025 compared to $70.7 million in 2024. The increase was driven primarily by the Acquisition.

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Table of Contents

A more thorough discussion of the Corporation’s results of operations and financial condition is included in the following pages.

CRITICAL ACCOUNTING ESTIMATES

The accounting policies that the Corporation’s management deems to be most important to the presentation of its financial condition and results of operations, because they require management’s most difficult, subjective or complex judgment, often result in the need to make estimates about the effect of such matters which are inherently uncertain. The following accounting policies are deemed to be critical by management:

Allowance for Credit Losses — The ACL represents an amount which, in management’s judgment, is adequate to absorb expected credit losses on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions and prepayment experience. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased or decreased by a provision for (reversal of) credit losses, which is recorded as a current period operating expense.

Determination of an appropriate ACL is inherently complex and requires the use of significant and highly subjective estimates. The reasonableness of the ACL is reviewed quarterly by management.

Management believes it uses relevant information available to make determinations about the ACL and that it has established the existing allowance in accordance with GAAP. However, the determination of the ACL requires significant judgment, and estimates of expected credit losses in the loan portfolio can vary from the amounts actually observed. While management uses available information to recognize expected credit losses, future additions to the ACL may be necessary based on changes in the loans comprising the portfolio, changes in the current and forecasted economic conditions, changes in the interest rate environment which may directly impact prepayment and curtailment rate assumption, and changes in the financial condition of borrowers. As of December 31, 2025, the Company believes that its ACL was adequate.

Business Combinations — The Company is required to record the assets acquired, including identified intangible assets such as core deposit intangibles, and the liabilities assumed at their respective fair values in an acquisition. The difference between consideration paid and the net fair value of assets acquired is recorded as goodwill. Management uses significant estimates and assumptions to determine the fair value of such items in accordance with ASC 820, including projected cash flows, repayment rates, default rates and losses assuming default, discount rates, and realizable collateral values. The ACL for PCD loans is recognized as a component of acquisition accounting. The ACL for non-PCD assets is recognized as provision for credit losses in the same reporting period as the acquisition. Fair value adjustments are amortized or accreted into the income statement over the estimated life of the acquired assets or assumed liabilities. The purchase date valuations and any subsequent adjustments determine the amount of goodwill recognized in connection with the acquisition. The use of different assumptions could produce significantly different valuation results, which could have material positive or negative effects on our results of operations.

The determination of fair values in accordance with ASC 820 is based on valuations using management’s assumptions of future growth rates, future attrition, discount rates, multiples of earnings or other relevant factors. In addition, we engaged third party specialists to assist in the development of fair values. Preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Adjustments recorded during this period are recognized in the current reporting period. Management uses various valuation methodologies to estimate the fair value of these assets and liabilities, and often involves a significant degree of judgment, particularly when liquid markets do not exist for the particular item being valued. Examples of such items include loans, deposits, identifiable intangible assets, and certain other assets and liabilities.

Changes in these factors, as well as downturns in economic or business conditions, could have a significant adverse impact on the carrying value of assets, including goodwill and liabilities, which could result in impairment losses affecting our financial statements. As of December 31, 2025, the Company believes that the fair value of the assets acquired, liabilities assumed, consideration paid, and any non-contr

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