Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE Act OF 1934
For the fiscal year ended December 31, 1995 Commission file number 0-15786
COMMUNITY BANKS, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2251762
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Market Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 692-4781
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $5 per share NASDAQ National Market System
(effective February 1, 1996:
NASDAQ Small-Cap Market)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
As of March 1, 1996, the aggregate market value (based on recent selling
prices) of the voting stock of the registrant held by its nonaffiliates
(2,109,300 shares) was $55,369,125
Indicate the number of shares outstanding of each registrant's classes of
common stock, as of the latest practical date.
2,609,947 shares of common stock outstanding on March 1, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit 13 contains portions of the Annual Report to Stockholders
incorporated by reference into Parts I, II, and III.
Exhibit index is located on page 18. This document contains 20 pages.
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
PART I
Item 1. Business:
Community Banks, Inc. (Bank) is a bank holding company whose banking
subsidiary is Community Banks, N.A. (CBNA) and whose non-banking subsidiaries
are Community Banks Investments, Inc. (CBI) and Community Banks Life Insurance
Company, Inc. (CBLIC).
The Bank conducts a full service commercial banking business and provides
trust services in northern Dauphin County, Northumberland County, western
Schuylkill County, and southern Luzerene County. The Bank currently has
eighteen offices. There are 66 offices of commercial banks and savings and
loan associations within its market area with which the Bank competes.
Deposits of the Bank represent approximately 10% of the total deposits in the
market area. The Bank has seven offices in Dauphin County, two offices in
Northumberland County, six offices in Schuylkill County, and three offices in
Luzerne County. On January 12, 1996, Community Banks, Inc. completed its
merger of the Citizens National Bank of Ashland (Citizens). Citizens has three
banking offices which are located in Ashland, Gordon, and Lavelle,
Pennsylvania. This transaction was accounted for as a pooling of interests.
Like other depository institutions, the Bank has been subjected to
competition from brokerage firms, money market funds, consumer finance and
credit card companies and other companies providing financial services and
credit to consumers. As a result of federal legislation, regulatory
restrictions previously imposed on the Bank with respect to establishing
money market fund accounts have been eliminated and the Bank is now better
able to compete with other financial institutions in its service area with
respect to interest rates paid on time and savings deposits, service charges
on deposit accounts and interest rates charged on loans.
During 1986 the Bank formed CBLIC to provide credit life insurance to its
consumer credit borrowers. Total premiums earned were $423,000 for the year
ended December 31, 1995. During 1985 the Bank formed CBI to make investments
primarily in equity securities of other banks. Total assets of CBI at December
31, 1995 were $2,895,000.
The Bank has approximately 199 full and part-time employees and considers
its employee relations to be satisfactory.
Community Banks, Inc. is registered as a bank holding company with the
Board of Governors of the Federal Reserve System in accordance with the
requirements of the Bank Holding Company Act of 1956. It is subject to
regulation by the Federal Reserve Board and the Comptroller of the Currency.
In 1989, the Federal Reserve Board issued final risk-based capital
guidelines for bank holding companies which were phased in through December
31, 1992. The intent of regulatory capital guidelines is to measure capital
adequacy based upon the credit risk of various assets and off-balance sheet
items. Risk categories, weighted at 0%, 20%, 50% and 100%, are specifically
identified. The sum of the results of each such category is then related to
the adjusted capital account of the Company. A minimum required capital ratio
at December 31, 1995, was 8 percent. The Bank's December 31, 1995 ratio
approximated 17%. Subsequently, in August 1990 the board announced approval of
capital to total assets (leverage) guidelines. This minimum leverage ratio was
set at 4% and would apply only to those banking organizations receiving a
regulatory composite 1 rating. Most banking organizations will be required to
maintain a leverage ratio ranging from 1 to 2 percentage points above the
minimum standard. The Bank's leverage ratio at December 31, 1995, approximated
10.6%. Risk-based capital requirements replace previous capital guidelines
which established minimum primary and total capital requirements.
The following summarizes the Bank's capital adequacy position:
Required
Bank Regulatory Capital
(in thousands) December 31, 1995 December 31, 1995
Risk-based capital $37,888 17.2% $17,675 8.0%
Leverage ratio
(tier 1 capital) 33,838 10.6% 12,815 4.0%
-2-
Statistical Data:
Pages 19 through 21 of the Community Banks, Inc. Annual report to
stockholders dated December 31, 1995 contain information concerning:
Financial Highlights
Average Balances, Effective Interest Differential, and Interest Yields
for the three years ended December 31, 1995.
Rate/Volume Analysis for the two years ended December 31, 1995.
Appendix A attached to Part I contains information concerning:
Return on Equity and Assets for the five years ended December 31, 1995.
Amortized cost and Estimated Market Values of Investment Securities as
of December 31, 1995, 1994, and 1993.
Maturity Distribution of Securities as of December 31, 1995 (Market
Value).
Loan Account Composition as of December 31, 1995, 1994, 1993, 1992, and
1991.
Maturities and Sensitivity to Changes in Interest Rates for Commercial,
Financial, and Agricultural Loans as of December 31, 1995.
Nonperforming Loans as of December 31, 1995, 1994, 1993, 1992, and 1991.
Loan Loss Experience for the five years ended December 31, 1995.
Loans Charged Off and Recovered for the five years ended December 31,
1995.
Allowance for Loan Losses as of December 31, 1995, 1994, 1993, 1992, and
1991.
Maturity Distribution of Time Deposits over $100,000 as of December 31,
1995.
Interest Rate Sensitivity as of December 31, 1995.
-3-
Item 2. Properties:
The Bank owns no real property except through its subsidiary bank, CBNA
which owns the following buildings: 150 Market Street, Millersburg,
Pennsylvania (its corporate headquarters); 13-23 South Market Street,
Elizabethville, Pennsylvania; 3679 Peters Mountain Road, Halifax, Pennsylvania;
906 N. River Road, Halifax, Pennsylvania; 800 Peters Mountain Road, Dauphin,
Pennsylvania; Main and Market Streets, Lykens, Pennsylvania; Route 209, Porter
Township, Schuylkill County, Pennsylvania; 29 E. Main Street, Tremont,
Schuylkill County, Pennsylvania; Second and Carroll Streets, St. Clair,
Schuylkill County, Pennsylvania; R.D. 3, Mill Creek Manor, Pottsville,
Schuylkill County, Pennsylvania; 300 East Independence Street, Shamokin,
Northumberland County, Pennsylvania; Route 61, R.D. 1, Orwigsburg, Schuylkill
County, Pennsylvania; One South Arch Street, Milton, Northumberland County,
Pennsylvania; and 4 West Broad Street, Hazleton, Luzerne County, Pennsylvania.
In addition thereto, CBNA leases an office at Main Street, Pillow,
Pennsylvania, pursuant to a lease which, with renewal options, will extend to
the year 2008. Also, the Bank leases offices at Route 93, Conyngham, Luzerne
County, Pennsylvania; 77 Airport Road, Hazleton, Luzerne County, Pennsylvania;
6700 Derry Street, Rutherford, Dauphin County, Pennsylvania; and 702 West Main
Street, Valley View, Schuylkill County, Pennsylvania. From time to time,
the subsidiary bank also acquires real estate by virtue of foreclosure
proceedings, which real estate is disposed of in the usual and ordinary course
of business as expeditiously as is prudently possible.
All the buildings used by the Bank are free-standing and are used
exclusively for banking purposes with the exception of offices and retail
space rented at the St. Clair and Milton locations.
Item 3. Legal Proceedings:
There are no material pending legal actions, other than routine
litigation incidental to the business of the Bank, to which the Bank is a
party.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
-4-
APPENDIX A
RETURN ON EQUITY AND ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, and 1991
1995 1994 1993 1992 1991
Return on average equity 13.10% 13.63% 13.85% 13.61% 10.81%
Return on average assets 1.41% 1.40% 1.41% 1.36% 1.05%
Average equity to average assets 10.76% 10.23% 10.16% 10.01% 9.70%
Dividend payout ratio 36.68% 34.24% 32.10% 30.88% 35.08%
-5-
APPENDIX A
Continued
AMORTIZED COST AND ESTIMATED VALUES OF INVESTMENT
SECURITIES
(dollars in thousands)
AT DECEMBER 31, 1995, 1994, and 1993
1995 1994 1993
Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Mortgage backed U.S. Government agencies $ 37,601 $ 37,825 $ 43,926 $41,900 $ 58,764 $ 59,444
U.S. Treasury and U.S. Government agencies 14,732 14,842 18,807 17,832 4,192 4,312
Obligations of states and political sub-
divisions 26,379 27,048 33,185 32,733 32,216 33,805
Other securities 6,757 7,824 6,387 6,784 6,204 7,218
Total $ 85,469 $ 87,539 $102,305 $99,249 $101,376 $104,779
COMMUNITY BANKS, INC. and SUBSIDIARIES
MATURITY DISTRIBUTION OF SECURITIES (Market Value)
(dollars in thousands)
as of December 31, 1995
One Five Weighted
Within Through Through After Average Average
One Year Five Years Ten Years Ten Years Total Maturity Yield (a)
U.S. Government and agencies $ 110 $31,449 $10,398 $10,710 $52,667 7 yr. 3 mos. 6.84%
Obligations of states and political
subdivisions 1,956 13,697 11,143 252 27,048 5 yr. 3 mos. 8.16%
Other 6,764 1,060 --- --- 7,824 1 yr. 11 mos. 5.76%
Total $8,830 $46,206 $21,541 $10,962 $87,539 6 yr. 2 mos. 7.15%
Percentage of total 10.1% 52.8% 24.6% 12.5% 100.0%
Weighted average yield 6.72% 6.60% 8.36% 7.43% 7.15%
Weighted average yields were computed on a tax equivalent basis using a
federal income tax rate of 34%.
The Bank monitors investment performance and valuation on an ongoing basis to
evaluate investment quality. An investment which has experienced a decline in
market value considered to be other than temporary is written down to its net
realizable value and the amount of the write down is accounted for as a
realized loss.
-6-
APPENDIX A
Continued
LOAN ACCOUNT COMPOSITION
(dollars in thousands)
as of December 31
1995 1994 1993 1992 1991
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Commercial, financial and agricultural $ 37,774 17.5% $ 31,227 16.4% $ 26,990 16.2% $ 20,818 13.2% $ 21,625 13.5%
Real estate-construction 3,283 1.5 3,354 1.8 1,573 .9 1,796 1.1 1,916 1.2
Real estate-mortgage 112,190 51.9 103,851 54.4 89,116 53.2 84,389 53.3 81,245 51.0
Personal-installment 56,793 26.3 46,342 24.3 43,193 25.8 43,774 27.6 45,911 28.8
Other 6,012 2.8 6,018 3.1 6,549 3.9 7,572 4.8 8,741 5.5
216,052 100.0% 190,792 100.0% 167,421 100.0% 158,349 100.0% 159,438 100.0%
Less:
Unearned discount (11,067) (8,522) (7,389) (7,708) (7,860)
Reserve for loan losses (2,280) (2,069) (1,837) (1,589) (1,467)
$202,705 $180,201 $158,195 $149,052 $150,111
The Corporation's loan activity is principally with customers located within
the local market area. The Corporation continues to maintain a diversified
loan portfolio and has no significant loan concentration in any economic
sector. Increased loan demand in 1995 resulted in increases in commercial,
financial, and agricultural; real estate; and personal installment loan
balances of 21%, 8%, and 23%, respectively. Commercial, financial and
agricultural loans represented 17.5% of total loans at December 31, 1995 and
consist principally of commercial lending secured by financial assets of
businesses including account receivables, inventories and equipment, and, in
most cases, include liens on real estate. Real estate construction and
mortgage loans are primarily 1 to 4 family residential loans secured by
residential properties within the bank's market area. Personal-installment
loans comprised 26.3% of total loans at December 31, 1995 and consist
principally of secured loans for items such as automobiles, property
improvement, household and other consumer goods. The Corporation continues
to sell fixed rate mortgages in the secondary market to avoid associated
interest rate risk. Historically, relative credit risk of commercial,
financial, and agricultural loans has generally been greater than that of
other types of loans.
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST
RATES FOR COMMERCIAL, FINANCIAL AND AGRICULTURAL AND REAL ESTATE -
CONSTRUCTION LOANS
(dollars in thousands)
as of December 31, 1995
Maturity Distribution
One Year One to Over Five
Or Less Five Years Years Total
Commercial, Financial and
agricultural $15,209 $17,114 $5,451 $37,774
Real estate-construction 3,283 --- --- 3,283
$18,492 $17,114 $5,451 $41,057
Interest Sensitivity
Variable Fixed Total
Due in one year or less $15,484 $3,008 $18,492
Due after one year 22,148 417 22,565
$37,632 $3,425 $41,057
-7-
APPENDIX A
Continued
NONPERFORMING LOANS
(dollars in thousands)
as of December 31
1995 1994 1993 1992 1991
Loans past due 90 days or more:
Commercial, financial and agricultural $ 120 $ 152 $ 9 $ 196 $ 331
Mortgages 197 114 87 544 361
Personal installment 145 59 99 121 226
Other 0 1 9 10 4
. 462 326 204 871 922
Loans renegotiated with the borrowers NONE NONE NONE NONE NONE
Loans on which accrual of interest has
been discontinued:
Commercial, financial and agricultural 415 327 50 64 158
Mortgages 934 475 809 539 169
Other 99 30 59 77 102
. 1,448 832 918 680 429
Other real estate owned 302 338 366 145 631
Total $2,212 $1,496 $1,488 $1,696 $1,982
The determination to discontinue the accrual of interest on nonperforming
loans is made on the individual case basis. Such factors as the character and
size of the loan, quality of the collateral and the historical
creditworthiness of the borrower and/or guarantors are considered by
management in assessing the collectibility of such amounts.
The approximate amount that would have been accrued on those loans for which
interest was discontinued in 1995 was $108,000. Interest income from these
loans would have approximated $77,000 in 1994.
The change in nonperforming loans is primarily a result of the impact of
economic conditions upon the loan portfolio. The economic outlook remains
uncertain. If the economy in the Bank's trading area improves this could have
a positive impact on delinquency trends and collectibility of loans. However,
the commercial real estate market in the Bank's trading area remains stagnant.
The ability of borrowers to liquidate collateral is dependent upon the demand
for commercial real estate projects and a buyer's ability to finance
commercial real estate projects.
-8-
APPENDIX A
Continued
LOAN LOSS EXPERIENCE
(dollars in thousands)
For the years ended December 31, 1995, 1994, 1993, 1992, and 1991
. 1995 1994 1993 1992 1991
Loans at year-end, net of unearned income $204,985 $182,270 $160,032 $150,641 $151,578
Average loans balance $196,138 $170,945 $159,976 $152,049 $151,900
Balance, allowance for loan losses,
January 1 $ 2,069 $ 1,837 $ 1,589 $ 1,467 $ 1,307
Net charge-offs (501) (230) (454) (561) (577)
Provision for loan losses 712 462 702 683 737
Balance, allowance for loan losses,
December 31 $ 2,280 $ 2,069 $ 1,837 $ 1,589 $ 1,467
Net charge-offs to loans at year end .24% .13% .28% .37% .38%
Net charge-offs to average loans .26 .13 .28 .37 .38
Balance of allowance for loan losses
to loans at year end 1.11 1.14 1.15 1.05 .97
Averages are a combination of monthly and daily averages.
For detail, see Schedule of Loans Charged Off and Recovered.
The allowance for loans losses is based upon management's continuing
evaluation of the loan portfolio. A review as to loan quality, current macro-
economic conditions and delinquency status is performed at least on a
quarterly basis. The provision for loan losses is adjusted quarterly based
upon current review. The table on page 10 presents an allocation by loan
categories of the allowance for loan losses at December 31 for the last five
years. In retrospect, the specific allocation in any particular category
may prove excessive or inadequate and consequently may be reallocated in the
future to reflect the then current condition. Accordingly, the entire
allowance is available to absorb losses in any category.
As discussed in the Corporation's Annual Report, the Corporation adopted SFAS
114, as amended by SFAS 118, on January 1, 1995. The adoption of SFAS 114 did
not result in any additional provision for loan losses.
The provision for loan losses totalled $712,000 for the year ended December
31, 1995 compared to $462,000, $702,000, $683,000, and $737,000 for the years
ended December 31, 1994, 1993, 1992, and 1991, respectively. The relationship
of the allowance for loan losses to loans at year end approximated 1.11%
compared to ratios of .97% to 1.15% for the previous four years. In reviewing
the adequacy of the allowance for loan losses, management considered the
relationship of nonaccrual loans, other real estate owned, and accruing loans
contractually past due 90 days or more to total assets. This relationship
approximated .69%, .49%, .52%, .62%, and .80%, at year-end 1995, 1994, 1993,
1992, and 1991, respectively.
-9-
. APPENDIX A,
. Continued
LOANS CHARGED OFF AND RECOVERED
(dollars in thousands)
for the years ended December 31, 1995, 1994, 1993, 1992, and 1991
. 1995 1994 1993 1992 1991
Loans charged off:
Commercial, financial and agricultural --- --- --- $ 63 $113
Real estate-mortgage $105 $ 82 $149 181 6
Personal installment 561 396 472 432 541
Other 78 99 66 59 34
Total 744 577 687 735 694
Loans recovered:
Commercial, financial and agricultural --- --- --- 6 4
Real estate-mortgage 29 83 77 4 --
Personal installment 199 231 142 154 112
Other 15 33 14 10 1
Total 243 347 233 174 117
. Net charge-offs $501 $230 $454 $561 $577
ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
as of December 31
. 1995 1994 1993 1992 1991
Loans:
Commercial, financial and agricultural $ 315 $ 399 $ 500 $ 601 $ 562
Real estate-construction -- 1 --- 16 15
Real estate-mortgage 611 311 225 477 386
Installment 566 527 489 405 405
Unallocated 788 831 623 90 99
Balance $2,280 $2,069 $1,837 $1,589 $1,467
See Schedule "Loan Account Composition" for the percent of loan
classification to total loans.
MATURITY DISTRIBUTION OF TIME
DEPOSITS OF $100,000 OR MORE
(dollars in thousands)
as of December 31, 1995
Remaining to Maturity:
Less than three months $ 1,580
Three months to six months 1,937
Six months to twelve months 2,350
More than twelve months 4,621
. $10,488
-10-
. APPENDIX A
. Continued
INTEREST RATE SENSITIVITY
The excess of interest-earning assets over interest-bearing liabilities which
are expected to mature or reprice within a given period is commonly referred
to as the "GAP" for that period. For an institution with a negative GAP, the
amount of income earned on its assets fluctuates less than the cost of its
liabilities in response to changes in the prevailing rates of interest during
the period. Accordingly, in a period of decreasing interest rates,
institutions with a negative GAP will experience a smaller decrease in the
yield on their assets than in the cost of their liabilities. Conversely, in a
period of rising interest rates, institutions with a negative GAP face a
smaller increase in the yield on their assets than in the cost of their
liabilities. A decreasing interest rate environment is favorable to
institutions with a negative GAP because more of their liabilities than their
assets adjust during the period and, accordingly, the decrease in the cost of
their liabilities is greater than the decrease in the yield on their assets.
The negative GAP between the Bank's interest-earning assets and interest-
bearing liabilities maturing or repricing within one year approximated 0.6% of
total assets at December 31, 1995.
Significant maturity/repricing assumptions include the presentation of all
savings and NOW accounts as being 100% interest rate sensitive. Equity
securities are reflected in the shortest time interval. Assumed paydowns on
mortgage-backed securities and loans have also been included in all time
intervals.
The following table sets forth the scheduled repricing or maturity of the
Bank's interest-earning assets and interest-bearing liabilities at
December 31, 1995.
Interest Rate Sensitivity
At December 31, 1995 1-90 90-180 180-365 1 year Total
Dollars in thousands days days days or more
Assets
Interest-bearing deposits in
other banks $ 334 $ 100 --- --- $ 434
Investment securities 4,771 757 $ 3,302 $ 78,709 87,539
Federal funds sold --- --- --- --- ---
Loans, net of unearned income 65,485 86,935 12,584 39,981 204,985
Loans held for sale 2,233 --- --- --- 2,233
Total $72,823 $87,792 $15,886 $118,690 $295,191
Liabilities
Savings 111,818 --- --- --- $111,818
Time 24,308 17,797 17,505 66,967 126,577
Time in denominations of
$100,000 or more 1,580 1,937 2,350 4,621 10,488
Short-term borrowings 1,016 --- --- --- 1,016
Long-term debt --- --- --- 7,000 7,000
Total $138,722 $19,734 $19,855 $78,588 $256,899
Interest Sensitivity Gap
Periodic $(65,899) $68,058 $(3,969) $40,102
Cumulative 2,159 (1,810) 38,292
Does not include nonaccrual loans.
-11-
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters:
Incorporated by reference is the information appearing under the
heading "Market for the Holding Company's Common Stock and Related Securities
Holder Matters" on page 3 of the Annual Report to Stockholders for the year
ended December 31, 1995 (hereafter referred to as the "Annual Report").
Item 6. Selected Financial Data:
Incorporated by reference is the information appearing under the
heading "Financial Highlights" on page 19 of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Incorporated by reference is the information appearing under the
headings "Rate/Volume Analysis"; "Average Balances, Effective Interest
Differential and Interest Yields"; and "Management's Discussion of Financial
Condition and Results of Operations" on pages 20 through 24 of the Annual
Report.
Item 8. Financial Statements and Supplementary Data:
The consolidated financial statements, together with the report
thereon of Coopers & Lybrand L.L.P. dated January 13, 1996, are incorporated
by reference to pages 6 through 19 of the Annual Report.
Item 9. Disagreements on Accounting and Financial Disclosures:
None.
-12-
. PART III
Item 10. Directors and Executive Officers of the Registrant:
The following table sets forth the name and age of each director of
Community Banks, Inc. as well as the director's business experience, including
occupation for the past 5 years, the period during which he has served as a
director of the Bank, or its wholly-owned subsidiary, Community Banks, N.A.
(Formerly Upper Dauphin National Bank), and the number and percentage of
outstanding shares of Common Stock of the Bank beneficially owned by said
directors as of December 31, 1995.
. Percentage
. Business Experience Amount and of
. Including Principal Nature of Outstanding
. Occupation for the Director Beneficial Common Stock
Name and Age Past Five Years Since (1) Ownership(2) Owned
Thomas L. Miller Chairman of Bank 1966 20,973 (12) 1.03%
Age 63
Kenneth L. Deibler Self-Employed 1966 19,663 (3) .97%
Age 73 Insurance Broker
Elizabethville, PA
Leon E. Kocher Chairman of the Board, 1963 15,705 .77%
Age 83 Kocher Enterprise, Inc.
Millersburg, PA
Ernest L. Lowe President of Bank 1990 11,127 (11) .55%
Age 59
Robert W. Rissinger Sec./Treasurer 1968 137,020 (4) 6.75%
Age 69 Alvord Polk Tool Co. (5)
(cutting tools)
Engle Rissinger Auto Group
Millersburg, PA
Allen Shaffer Attorney-at-Law 1961 24,613 (9) 1.21%
Age 70 Millersburg and
Harrisburg, PA
William C. Troutman President, 1968 84,065 (6) 4.14%
Age 80 The A. W. Troutman Co.
(automobile dealership)
Millersburg, PA
James A. Ulsh Attorney-at-Law 1977 8,839 .44%
Age 49 Mette, Evans &
Woodside
Harrisburg, PA
Samuel E. Cooper Superintendent, 1991 1,067 .05%
Age 62 Warrior Run
School District
Turbotville, PA
-13-
. Percentage
. Business Experience Amount and of
. Including Principal Nature of Outstanding
. Occupation for the Director Beneficial Common Stock
Name and Age Past Five Years Since (1) Ownership(2) Owned
Ronald E. Boyer President, 1981 11,449(7) .56%
Age 58 Alvord-Polk Tool Co.
(manufacturing of
cutting tools)
Millersburg, PA
Peter DeSoto President, 1981 23,479 1.16%
Age 56 Metal Industries, Inc.
(manufacturing of metal
products)
Elizabethville, PA
Thomas W. Long President, 1981 12,521 (8) .62%
Age 66 Millersburg Hardware
Millersburg, PA
Donald L. Miller President, Miller Bros. 1981 50,797 2.50%
Age 66 Dairy
Millersburg, PA
Ray N. Leidich Dentist 1985 38,948(10) 1.92%
Age 67 Tremont, PA
(1) Includes service as a director of CBNA (formerly Upper Dauphin National
Bank), a wholly-owned subsidiary of the bank, prior to 1983 and service as a
director of the bank after 1983.
(2) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they may
include securities owned by or for, among others, the wife and/or children of
the individual and any other relative who has the same home as such individual,
as well as other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock options
within 60 days after December 31, 1995. Beneficial ownership may be disclaimed
as to certain of the securities.
(3) Includes 1,497 shares owned by Mr. Deibler's grandchildren.
(4) Includes 3,363 shares owned by Alvord-Polk Tool Co., Inc. the stock of
which is held 50% by Robert Rissinger and 50% by Ronald E. Boyer.
(5) Includes 7,493 shares owned by Engle Ford, Inc., 372 shares owned by Mr.
Rissinger's spouse, Shirley Rissinger, and 4,133 shares owned by Engle Ford,
Inc. Profit Sharing Plan in which Mr. Rissinger is Co-Trustee.
(6) Includes 18,703 shares owned by Mr. Troutman's spouse, Dorothy Troutman
and 5,295 shares owned by W.C. Troutman Co.
(7) Includes 3,363 shares owned by Alvord-Polk Tool Co., Inc., the stock of
which is held 50% by Robert W. Rissinger and 50% by Ronald E. Boyer, and 134
shares owned by Mr. Boyer's wife, Judith Boyer.
(8) Includes 7,416 shares owned by the Trust of Mr. Long's mother, Leah Long.
(9) Includes 4,198 shares owned by Mr. Shaffer's Pension Plan.
-14-
(10) Includes 19,474 shares owned by Dr. Leidich's wife, Dolores Leidich.
(11) Includes 99 shares owned by Mr. Lowe's wife, Barbara and 62 shares owned
by Mr. Lowe's children and incentive stock options to acquire 9,999 shares.
(12) Includes incentive stock options to acquire 17,299 shares.
(13) Includes incentive stock options to acquire 5,880 shares.
(14) Includes incentive stock options to acquire 3,160 shares and 101 shares
registered to Mr. Lawley for his minor children.
(15) Includes incentive stock options to acquire 1,440 shares.
Compliance with Section 16(a) of Securities Exchange Act
In 1995, to the knowledge of CBI, all Executive Officers and
directors timely filed all reports with the Securities Exchange Commission,
except for Terry L. Burrows, who filed a Form 4 in an untimely manner.
None of the directors or nominee directors are directors of other
companies with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
Executive Officers:
The following table sets forth the executive officers of Community
Banks, Inc., their ages, their positions with Community Banks, Inc. and the
beneficial ownership (as determined in accordance with the rules and
regulations of the Securities and Exchange Commission) of Common Stock of the
Bank by each of such persons as of December 31, 1995.
. Amount and Percentage
. Principal Occupation Nature of of
. for the Past Five Beneficial Outstanding
Name and Age Years Term(1) Ownership(2)Common Stock
Thomas L. Miller Chairman & Chief Executive 1966 20,973 (12) 1.03%
Age 63 Officer
Ernest L. Lowe President, 1985 11,127 (11) .55%
Age 59 Chief Operating Officer
David E. Hawley Executive Vice President, 1975 6,002 (13) .30%
Age 57 Corporate Property Officer
Robert W. Lawley Executive Vice President, 1980 3,291 (14) .16%
Age 41 Chief Lending Officer
Terry L. Burrows Executive Vice President, 1977 7,024 (15) .35%
Age 47 Chief Financial Officer
(1) Initial year employed in this capacity.
-15-
The following is all shares beneficially owned by all directors and executive
officers of the Bank as a group:
Amount and Nature
of Beneficial
Ownership
. Percent
Title of Class Direct Indirect of Class
Common 366,465 110,118 23.48%
Item 11. Executive Compensation:
Information regarding executive compensation is omitted from this
report as the holding company has filed a definitive proxy statement for its
annual meeting of shareholders to be held April 16, 1996; and the information
included therein with respect to this item is incorporated herein by reference.
Pension Plan:
The Bank maintains a pension plan for its employees. An employee
becomes a participant in the pension plan on January 1 or July 1 after
completion of one year of service (12 continuous months) and attainment of the
age 21 years. The cost of the pension is actuarially determined and paid by
the Bank. The amount of monthly pension is equal to 1.15% of average monthly
pay up to $650, plus .60% of average monthly pay in excess of $650, multiplied
by the number of years of service completed by an employee. Average
-16-
monthly pay is based upon the 5 consecutive plan years of highest pay
preceding retirement. The maximum amount of annual compensation used in
determining retirement benefits is $150,000. A participant is eligible for
early retirement after attainment of the age of 60 years and the completion
of 5 years of service. The early retirement benefit is the actuarial
equivalent of the pension accrued to the date of early retirement. Thomas
L. Miller and Ernest L. Lowe have been credited with 37 and 11 years of
service, respectively, under the pension plan as of December 31, 1995.
The amounts shown on the following table assume an annual retirement
benefit for an employee who chose a straight-line annuity and who is presently
50 years old and who will retire at the age of 65 years.
Remuneration
Years of
Service $35,000 $55,000 $75,000 $95,000 $115,000 $135,000 $150,000 $175,000 $195,000 $225,000
15 $ 8,486 $13,736 $18,986 $24,236 $29,486 $34,736 $38,763 $38,763 $38,763 $38,673
20 $11,314 $18,314 $25,314 $32,314 $39,314 $46,316 $51,564 $51,564 $51,564 $51,564
25 $14,143 $22,893 $31,643 $40,393 $49,143 $57,893 $64,455 $64,455 $64,455 $64,455
30 $16,971 $27,471 $37,971 $48,471 $58,971 $69,471 $77,346 $77,346 $77,346 $77,346
35 $19,800 $32,050 $44,300 $56,550 $68,800 $81,050 $90,237 $90,237 $90,237 $90,237
40 $22,138 $35,778 $49,418 $63,058 $76,698 $90,338 $100,568 $100,568 $100,568 $100,568
Directors' Compensation:
Each director of CBI is paid a quarterly fee of $600.00. In
addition, each outside director receives a fee of $200.00 for attendance at
the regular quarterly meetings of the Board of Directors of CBI. Each director
who is not an executive officer also receives $150 for attendance at each
committee meeting of CBI.
Item 12. Security Ownership of Certain Beneficial
Owners and Management:
Refer to Item 10 on pages 13 through 16.
Item 13. Certain Relationships and Related Transactions:
(a) Transactions with Management and Others
Incorporated by reference is the information appearing in Note 12
(Related Parties) of Notes to Consolidated Financial Statements on page 15 of
the Annual Report.
(b) Certain Business Relationships
Allen Shaffer, a director of the Bank, is an attorney practicing in
Harrisburg and Millersburg, Pennsylvania, who has been retained in the last
two fiscal years by the Bank and who the Bank proposes to retain in the
current fiscal year. James A. Ulsh, a director of the Bank, is a shareholder/
employee of the law firm of Mette, Evans & Woodside, Harrisburg, Pennsylvania
which the Bank has retained in the last two fiscal years and proposes to
retain in the current fiscal year. Thomas J. Carlyon, a director of CBNA, is
a partner in the law firm of Carlyon & McNelis, Hazleton, Pennsylvania, which
CBI has retained in the last fiscal year and proposes to retain in the current
fiscal year.
All loans to directors and their business affiliates, executive
officers and their immediate families were made by the subsidiary bank in the
ordinary course of business, at the subsidiary bank's normal credit terms,
including interest rates and collateralization prevailing at the time for
comparable transactions with other non-related persons, and do not represent
more than a normal risk of collection.
-17-
PART IV
Item 14. Exhibits, Financial Statements Schedules and
Reports on Form 8-K:
. Reference (page)
. Annual
. Form Report to
. 10-K Shareholders
(a) (1) Consolidated Financial Statements
Report of Independent Public
Accountants -- 19
Balance Sheets as of December 31, 1995
and 1994 -- 6
Statements of Income for each of the three
years ended December 31, 1995 -- 7
Statements of Changes in Stockholders'
Equity for each of the three years ended
December 31, 1995 -- 8
Statements of Cash Flows for each of the
three years ended December 31, 1995 -- 8
Notes to Financial Statements -- 9-18
All other schedules are omitted since the required information is not
applicable or is not present in amounts sufficient to require submission of
the schedule.
(3) Exhibits
(3) Articles of Incorporation and By-Laws. Incorporated Registration
by reference to the Proxy Statements dated April 14, 1987 and April 12, 1988
and Amendment 2 to Form S-2 dated May 13, 1987.
(13) Portions of the Annual Report to Security Holders incorporated by
reference within this document is filed as part of this report.
(21) Subsidiaries of the Registrant (see Item 1, pages 2 and 3).
(b) The registrant did not file on Form 8-K during the Fourth quarter of the
Fiscal year ended December 31, 1995.
-18-
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Community Banks, Inc. on Form S-8 (File No. 0-15786 and File No. 33-24908) of
our report, dated January 13, 1996 on our audits of the consolidated financial
statements of Community Banks, Inc. as of December 31, 1995 and 1994, and for
each of the years ended December 31, 1995, 1994, and 1993, which report is
incorporated by reference in this Annual Report on Form 10-K.
. /S/ Coopers & Lybrand, L.L.P.
One South Market Square
Harrisburg, Pennsylvania
March 11, 1996
-19-
. Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Community Banks, Inc.
By:/S/ Thomas L. Miller
(Thomas L. Miller)
Chairman
Chief Executive Officer
and Director
Date: March 6, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
/S/ Terry L. Burrows Ex. Vice President and 3/6/96
(Terry L. Burrows) Principal Financial Officer
/S/ Samuel E. Cooper Director 3/6/96
(Samuel E. Cooper)
/S/ Kenneth L. Deibler Director 3/6/96
(Kenneth L. Deibler)
/S/ Peter Desoto Director 3/6/96
(Peter DeSoto)
/S/ Ray N. Leidich Director 3/6/96
(Ray N. Leidich)
/S/ Ernest L. Lowe Director 3/6/96
(Ernest L. Lowe)
/S/ Allen Shaffer _ Director 3/6/96
(Allen Shaffer)
/S/ James A. Ulsh _ Director 3/6/96
(James A. Ulsh)
-20-