May 2009 In This Issue

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					O u r j o b i s t o h e l p c o m m u n i t y b a n k s c o m p e t e m o r e e f f e c t i v e l y.                  May 2009
                              ACBB 1st Quarter Results
In This Issue
                                ACBB reported net income for the three month period ending March 31, 2009 of
                                $578,544 (un-audited). This represents a decrease of 28.55% over the prior year and
•   ACBB’s 1st
                                was due primarily to increased loan loss provisions. The good news is that our current
    Quarter Results
                                earnings to budget is on track to surpass earnings of $2.0MM in 2008. The annualized
                                ROAA & ROAE are 0.36% and 4.65% respectively.
•   Why Silverton
                                   Tier 1 Leverage…………..….. 7.90%         Non-Performing Assets/Total Assets……3.07%
                                   Tier 1 Risk Based Capital……13.13%       Loan Loss Reserve/NPAs………………53.74%
•   BITS Update
                                                         Total Risk Based Capital……..14.40%
•   Light & Dark
                                            Highline Rating Within the Nation as of December 31, 2008 : C+
                                            LACE Data Peer Rating as of December 31, 2008:     C
•   EBAs                         A quick note on our financials. Our record core earnings continue to allow us to be
                                 conservative in our provisioning of loan losses while maintaining profitability. We have
•   Correspondent                been aggressive with additions to the loan loss reserve since the beginning of 2008 which
    Services Update
                                 has fared well for us.
•   ACBB Stock                   Things seem to be leveling off and we have been successful in managing our exposure to
    Issuance Price               Acquisition, Development, or Construction (“AD&C”) product. AD&C loans as a
                                 percentage of capital is 110.3% at the end of March, down from 188.9% as of December
•   Annual Meeting               31, 2007.

•   New Faces at                 We recently completed a rigorous Safety and Soundness examination and not only were
    ACBB                         the results favorable, not a single loan credit was downgraded. In addition, all of our FAS
                                 114 valuations were deemed acceptable.
                                 Bill Sayre and his team continue to work diligently through any issues. Tony Renzo, who
                                 joined us recently, will assist Bill and his team in these efforts.
                                 We added 8 new shareholders in the first quarter or $480 M in new capital and we expect
                                 to double that in the second quarter. With the Silverton fallout we expect 8-10 new
                                 clients. We appreciate the references that many of you gave– Thank you.
                                 Finally, we’ve been the safe haven for many banks with their overnight investment needs
                                 which has caused our balance sheet to grow through the addition of fed fund sales to us.
                                 Once the EBA’s (see page 4) are instituted, we anticipate that we’ll be able to move about
                                 $100 million in principal fed funds off our balance sheet to the Fed who will act like an
                                 agent bank. This should improve our leverage ratio approximately 100 bspts. Please call
  1400 Market Street             or email Jon Evans if you have any questions regarding our financials (717) 441-4616;
    P.O. Box 1109      
 Camp Hill, PA 17001-1109
 Phone: 717.737.9335
  Fax: 717.737.7975
          Why Silverton Failed                                                                   Written by Jon Evans

         On Friday, May 1, 2009 the FDIC shut down Silverton Bank, a correspondent bank located in Atlanta, Georgia. The
         FDIC appointed an interim operations bank in order to provide a smooth transition in closing them down. There was
         no loss as a result of the takeover. Specifically, demand deposits on hand or principal fed fund sales and their
         customers have been given until July 29, 2009 to find another correspondent institution. Unfortunately, the press has
         labeled Silverton as a bankers bank. Formerly known as the Georgia Bankers Bank, Silverton gave up their bankers
         bank charter almost two years ago as their aggressive growth model had strayed away from the traditional bankers
         bank model years earlier.
         Their aggressive growth model included offices in all major markets in the U.S. and was funded by an extremely
         leveraged strategy. In addition Silverton maintained a significant investment in construction lending throughout the U.S.
         The latter turned out to be a strategy they could not overcome, especially with significant real estate and construction
         exposure in Georgia and Florida.
         Please note that ACBB still maintains the traditional role of a bankers bank; is profitable, is well capitalized, and is well
         reserved. In addition, our financial statements are easy to understand and all of our capital is true capital.
         We at ACBB just finished up with an extensive Safety and Soundness Regulatory Exam. The results of the exam were
         favorable and it should be noted that not a single loan credit was downgraded beyond management’s current rating.
         Our core earnings continue at record levels and our outlook is positive.
         Currently we are receiving numerous phone calls from Silverton customers and hope you’ll be a reference if called
         We remain committed to our customers and their success!

         Silverton adopted an extremely risky strategy. They leveraged up (‘doubled up’ as it is known when you leverage up
         both the bank and the holding company) in order to pursue an aggressive growth strategy. This growth strategy was
         national in scope and included a concentration in construction financing – particularly in the Southeast (Georgia and
         Silverton’s holding company (HC) employed virtually every class of regulatory capital permitted: Trust Preferred
         Stock; Subordinated Debt; and Double Leverage - all to accommodate (speculative) growth.
         Silverton’s HC capital structure consisted of:

                  •    $31,364K Reserves for possible loan losses counted as Tier 2 capital, while reserves totaled $42,194K a
                       portion being disqualified
                  •    $56,500K Sub debt and notes, of which $25,500 K counted as Tier 2 capital
                  •    $63,920 K Trust Preferred stock, of which $44,534K counted as Tier 1 capital
                  •    $115,067 K Common Equity, all of which counted as Tier 1 capital
         Compounding this excessive use of financial leverage was their extra-ordinary investment of parent company debt in
         the bank as common equity … the investment in banks subs totaled $195 million while parent/consolidated equity was
         a mere $115 million. Tangible common equity/tangible assets was a weak 3.6%!!! Once equity dropped and NPAs rose
         at an alarming rate, their funding sources dried up. The action that the FDIC took on May 1, 2009 was appropriate.
         Silverton gave up its state charter and bankers bank designation when it switched to the OCC in 2007. To be
         designated as a bankers bank a bank must be owned by depository financial institutions and it is also prohibited from
         doing business directly with the public.
         There are currently 22 bankers banks providing correspondent sources to over 5,000 financial institutions. Primary
         services include overnight investments, loan participations and operational services through an aggregation model.
         It should be noted that all 22 bankers banks have more traditional models, which are less focused on accelerated
         growth, operate regionally and adhere to the rules governing bankers banks.

Page 2
 Dark & Light Matter                                                                                 Written by Jon Evans

 REGULATORY HOT BUTTONS – Look for more stress                      This is about a third less than in the early nineties and will
 testing of liquidity and capital on balance sheets and             mostly affect the Southeast and Western regions of the country.
                       more granularity within real estate          As a result of the steady stream of a few bank failures per week,
                       portfolios as relates to loan loss reserve   bank directors will be more receptive to ‘equal of’ mergers’ and
                       analysis. This is especially true of your    we’ll see more forced sales by FDIC. Troubled banks with
                       Acquisition, Development and Con-            franchise value and decent core deposits are faring much better.
                       struction product. Keeping your Board
                       abreast of these metrics is also             LOAN LOSS RESERVE LEVELS – We look at about 150 call
                       important. Although we’re not going to       reports per quarter from banks who maintain liquidity facilities
                       have the same level of scrutiny as the       with us. Overall, most of us are significantly under reserved as
                       larger banks, the more you’re prepared       relates to NPA coverage. In addition, the early warning signs are
       Jon Evans       for the above, the easier your exam will     increasing significantly as are the migration of these categories.
   President & CEO     be.
       ACBB                                                         LARGE PROVISIONS – I’ll take the positive side on this one and
                                                                    say that we’re finally recognizing our rose colored glasses were
 FDIC SPECIAL ASSESSMENT – Let’s join our banking trade             never that rosy. Until we ‘pay the piper,’ we can’t move
 associations in calling for more relief with the expectation of    forward. Also, because of the current low cost funding
 a roll back in the one time 20 bspts special assessment. This      environment, we’ve got the ability to help earn our way through
 would have been a killer for us at a time when our bad debt        the next wave of problems – commercial real estate. We were
 provisions are reaching record levels. We should also              able to withstand the writedowns in our investment portfolios
 request that the FDIC releases the revenue numbers for the         and now its time to work through the CRE issues.
 TLGP. The last I looked, there was $340 billion in debt
 guaranteed through the TLGP which carried a fee of 75-100          EFFICIENCY RATIOS – For the first time I’m seeing bankers
 bspts. Our premiums have basically doubled and a one time          aggressively cutting expenses. The expense cuts are seen in
 assessment of 10 bspts is tough enough. A 20 bspt premium          staffing, advertising, entertainment and conventions. Oh yes, and
 assessment will wipe out the entire earnings for some              for the 65 banks on the BITS platform, I’m seeing lower
 banks. Please note thatsome banks are asking their large           technology expenses.
 business and corporate clients to move into repos for one
 day at June 30, 2009.                                              MARK TO MARKET RELIEF – Hopefully, it not only helps
                                                                    community banks, but also the FHLBs. These guys need to get
 BANK FAILURES – I’ve repeatedly been optimistic on this            healthy ASAP. They are a major source for long term funding
 forum. Several times on CNBC, I’ve predicted a 5% loss             for us and need better access to capital. This should be on our
 rate (5% of 8,000 institutions = 400 banks) during this cycle.     Washington agenda before year end.

  Excess Balance Accounts (EBAs)

  The word out of Washington, D.C. is that as early as June we could have the ability to offer EBAs. Basically, an EBA will be an
  account established at the Federal Reserve Bank whereby ACBB will become an agent for banks wishing to invest their excess
  funds at the Fed. The Federal Reserve will essentially become another agent bank for overnight excess balances. The safety of
  the Fed, coupled with a rate of 25 bspts. (the same rate the Fed pays on excess reserves) should be a win/win for everyone.
  The Fed would receive more balance sheet funding and the banks gain with another choice.
  Please note: ACBB’s overnight principal federal funds rate as well as our earnings credit rate on account balances will continue
  to exceed the 25 bspts rate the Fed will be offering.

Quarterly Agent Bank Listing Updated
The December 31, 2008 Highline (formerly Sheshunoff) and LACE ratings have been updated
on our website: (see Agent Banks, ratings are at the bottom
of the page). For those of you with access to ACBBXNET, you can view the
Ratings from the XNET Homepage.
                                                                                                                            Page 5
If you have any questions, please contact Regina Malloy at 717-441-4617.
 ACBB Correspondent Services Update


   PRINCIPAL FED FUNDS - .325% (There are limitations)*


   WIRE FEES - $3.00 for Outgoing and $2.00 for Incoming

   *Please call Janine Salisbury (717.441.4605) for details.

      ACBB Stock Issuance Price Update
      Please note that we delayed the increase on our stock issuance price until June 1st.
         Effective   June 1, 2009 our per share price for newly issued stock will increase $250
         (from $3,000 to $3,250 per share).

 ACBB Annual Meeting

 ACBB had its annual meeting on April 20, 2009 at its headquarters in Camp Hill, Pennsylvania. We received 67.04%
 of all eligible votes.

 Two directors were reelected while a new director joined us. (See below.) Also note that the shareholders voted
 unanimously for the engagement of a new accounting firm, Beard Miller Company.

 New Faces at ACBB
 Jim Deutsch, CEO of Team Capital Bank in Bethlehem, Pennsylvania, officially joined our Board
 of Directors on April 20, 2009. Jim will be serving a three year term.
 Also, Robert King,, CEO of Sterling Bank in Mt. Laurel, New Jersey and Rodney Seidel, CEO of
 First National Bank of Fredericksburg, Pennsylvania, were each elected to a second three year
 ACBB OFFICERS                                                                                          Jim Deutsch
                                                                                                      Team Capital CEO
 Tony Renzo joined the ACBB team on April 27, 2009. Tony, who previously was President of
 Pennsylvania Business Bank of Philadelphia, Pennsylvania, has spent the majority of his career in the banking industry.
 Tony will be helping us with specialty credit lines of business as well as other commercial lending functions.

Next Issue
                         • 2009 Mid Year Results

                         • Tracking TARP

                                                                                                                           Page 6
BIT S’ Cus tomer Po r tal Makes Debu t                                                  Written by: Chuck Daniels

BITS’ New Customer Portal a BIG Hit with Customers . . .

                     BITS greatly appreciates your decision to become one of our customers. Our commitment to
                     you as a customer does not end with the sale. We continue to look for ways we can improve
                     our services to help your community bank. One of our goals is to give our customers access to
                     the same tools that BITS uses to monitor and maintain our network and the information our
                     customers need to meet their regulatory requirements. The BITS’ customer portal is a major
                     step towards this goal.

    Chuck Daniels
       CEO           In the coming months we will be introducing the Customer Portal. In addition to accessing the
    ACBB-BITS     same network management and monitoring tools BITS uses, another purpose of the portal is to
provide each community bank with the necessary BITS documentation at their finger tips for their annual IT audit.

The BITS’ Customer Handbook is an example of one of these documents. This Handbook is intended to be your
single source for key information about your BITS service. Consolidating this information in one place that can be
accessed by you when needed will make this information more useful to you.

With our initial release of the portal and in addition to
the Customer Handbook, customers will have the ability
to view FAQs, browse support documentation and
access the Network Performance Monitor (NPM) – a
tool that allows you to view how your BITS network is

The Customer Portal will be the platform to provide
additional information and capabilities to BITS’
customers. Future features and enhancements include:

•   Self Service Helpdesk (Opening and Tracking
    Trouble Tickets and Work Orders),

•   Ordering of BITS’ Hardware and Services,

•   Enhanced integration with various portal

                                                                                                                    Page 3
BIT S Launches New Websi te

BITS Launches Completely Updated Website
In January BITS launched a completely updated website that provides many new features for our current and
future customers. In addition to a new “look and feel” the website contains valuable information for our current
customers, such as:
  • Product & Service descriptions for your annual IT audit
  • Training demonstrations and User Guides for the Cisco IP Phones
  • BITS video created by Cisco

Please visit our website and we look forward to your feedback. The BITS’ website can be viewed at or

 BIT S & Nor th Salem State Bank Win Award

 North Salem State Bank, located in North Salem, IN, joined the BITS family in early 2008. Bank Technology
 News, the technology publication for the American Banker Association, selected North Salem State Bank as one
 of the “Top 10 Community Bank IT Initiatives in 2008” from 100’s of submittals from across the US. North
 Salem notified BITS last month that they received this award.
 BITS & North Salem were selected by Bank Technology News because BITS was able to save North Salem State
 Bank over 50% on their total costs for all of their voice & data services.

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