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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, 1998 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:
Name of each exchange
Title of each class on which registered
Common Stock, par value $5 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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, 1999, the aggregate market value (based on recent selling prices)
of the voting stock of the registrant held by its nonaffiliates (5,407,169
shares) was $141,262,290
Indicate the number of shares outstanding of each registrant's classes of common
stock, as of the latest practical date.
6,518,129 shares of common stock outstanding on March 1, 1999
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 21. This document contains 23 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. (Corporation) is a bank holding company whose banking
subsidiaries are Community Banks, N.A. (CBNA) and Peoples State Bank (PSB) and
whose non-banking subsidiaries are Community Banks Investments, Inc. (CBII)
and Community Banks Life Insurance Company, Inc. (CBLIC).
The Corporation conducts a full service commercial banking business and
provides trust services in Adams County, Dauphin County, southern Luzerne
County, Northumberland County, western Schuylkill County, Snyder County, and
York County. The Corporation currently has 29 offices. There are 58
offices of commercial banks and savings and loan associations within its market
area with which the Corporation competes. Deposits of the Corporation represent
approximately 14% of the total deposits in the market area. The Corporation
has 1 office in Adams County, 7 offices in Dauphin County, 3 offices in Luzerne
County, 2 offices in Northumberland County, 10 offices in Schuylkill County, 1
office in Snyder County, and 5 offices in York County. On March 31, 1998,
Community Banks, Inc. completed its merger of the Peoples State Bank of East
Berlin. PSB's banking offices are located in Dover, Hanover, and Manchester,
Pennsylvania. The transaction was accounted for as a pooling of interests.
Like other depository institutions, the Corporation 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 Corporation formed CBLIC to provide credit life insurance
to its consumer credit borrowers. Total premiums earned were $493,000 for the
year ended December 31, 1998. During 1985 the Corporation formed CBII to make
investments primarily in equity securities of other banks. Total assets of
CBII at December 31, 1998 were $4,462,000.
The Corporation has approximately 400 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 Corporation. A minimum required capital ratio
at December 31, 1998, was 8 percent. The Bank's December 31, 1998 ratio
approximated 14%. 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 Corporation's leverage ratio at December 31, 1998,
approximated 9%. Risk-based capital requirements replace previous capital
guidelines which established minimum primary and total capital requirements.
The following summarizes the Corporation's capital adequacy position:
Required
Bank Regulatory Capital
(in thousands) December 31, 1998 December 31, 1998
Risk-based capital $81,767 14.0% $46,745 8.0%
Leverage ratio
(tier 1 capital) 74,813 8.8% 23,372 4.0%
-2-
Statistical Data:
Pages 19 through 21 of the Community Banks, Inc. Annual report to
stockholders dated December 31, 1998 contain information concerning:
Financial Highlights
Average Balances, Effective Interest Differential, and Interest Yields for
the three years ended December 31, 1998.
Rate/Volume Analysis for the two years ended December 31, 1998.
Appendix A attached to Part I contains information concerning:
Return on Equity and Assets for the five years ended December 31, 1998.
Amortized cost and Estimated Market Values of Investment Securities as
of December 31, 1998, 1997, and 1996.
Maturity Distribution of Securities as of December 31, 1998 (Market Value).
Loan Account Composition as of December 31, 1998, 1997, 1996, 1995, and
1994.
Maturities and Sensitivity to Changes in Interest Rates for Commercial,
Financial, and Agricultural Loans as of December 31, 1998.
Nonperforming Loans as of December 31, 1998, 1997, 1996, 1995, and
1994.
Loan Loss Experience for the five years ended December 31, 1998.
Loans Charged Off and Recovered for the five years ended December 31, 1998.
Allowance for Loan Losses as of December 31, 1998, 1997, 1996, 1995, and
1994.
Maturity Distribution of Time Deposits over $100,000 as of
December 31, 1998.
Interest Rate Sensitivity as of December 31, 1998.
-3-
Item 2. Properties:
The Corporation owns no real property except through its subsidiary
banks. CBNA 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; 22 S. Church Street, Hazleton, Luzerne County, Pennsylvania;
702 West Main Street, Valley View, Schuylkill County, Pennsylvania; 735 Center
Street, Ashland, Schuylkill County, Pennsylvania; P.O. Box 44, Gordon,
Schuylkill County, Pennsylvania; 436 Main Street, Lavelle, Schuylkill County,
Pennsylvania; and 9-11 N. Centre Street, Pottsville, Schuylkill County,
Pennsylvania; and One Westside Drive, Shamokin Dam, Snyder 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; and 6700
Derry Street, Rutherford, Dauphin County, Pennsylvania.
All the buildings used by CBNA are free-standing and are used exclusively
for banking purposes with the exception of offices and retail space rented at
the St. Clair, Milton, Pottsville and Hazleton locations.
PSB owns the following buildings: 100 E. King Street, East Berlin,
Pennsylvania; and 3421 Carlisle Road, Dover, Pennsylvania. In addition thereto,
PSB leases and office at 600 Carlisle Street, Hanover, Pennsylvania, pursuant to
a lease which, with renewal options, will extend to the year 2006. PSB also owns
real property through its subsidiary, PSB Realty, at the following locations:
1191 Eichelberger Street, Hanover, Pennsylvania; 155 Glen Drive, Manchester,
Pennsylvania; and 1345 Baltimore Street, Hanover, Pennsylvania.
All the Buildings used by PSB are free-standing and are used exclusively
for banking purposes with the exception of offices and retail space rented at
the Carlisle Street, Hanover location.
From time to time, the subsidiary banks also acquire 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.
Item 3. Legal Proceedings:
There are no material pending legal actions, other than routine litigation
incidental to the business of the Corporation, to which the Corporation 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 1998.
-4-
APPENDIX A
RETURN ON EQUITY AND ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996, 1995, and 1994
1998 1997 1996 1995 1994
Return on average equity 13.04% 11.49% 11.39% 10.36% 10.76%
Return on average assets 1.31% 1.16% 1.18% 1.06% 1.05%
Average equity to average assets 10.06% 10.12% 10.36% 10.25% 9.74%
Dividend payout ratio 40.83% 39.66% 39.02% 42.09% 39.37%
-5-
APPENDIX A
Continued
AMORTIZED COST AND ESTIMATED VALUES OF INVESTMENT
SECURITIES
(dollars in thousands)
AT DECEMBER 31, 1998, 1997, and 1996
1998 1997 1996
Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Mortgage backed U.S. Government agencies $ 82,887 $ 83,260 $ 84,568 $ 85,137 $ 73,407 $ 71,984
U.S. Treasury and U.S. Government agencies 78,800 79,449 66,940 67,389 83,432 83,573
Obligations of states and political sub-
divisions 85,771 87,676 55,248 56,633 31,144 31,601
Other securities 40,858 42,157 7,623 10,125 5,767 6,845
Total $288,316 $292,542 $214,379 $219,284 $193,750 $194,003
======== ======== ======== ======== ======== ========
COMMUNITY BANKS, INC. and SUBSIDIARIES
MATURITY DISTRIBUTION OF SECURITIES (Market Value)
(dollars in thousands)
as of December 31, 1998
One Five Weighted
Within Through Through After Average Average
One Year Five Years Ten Years Ten Years Total Maturity Yield
U.S. Government and agencies $ 4,547 $14,868 $27,235 $116,059 $162,709 14 yr. 11 mos. 7.51%
Obligations of states and political
subdivisions 3,627 13,119 10,260 60,670 87,676 15 yr. 9 mos. 7.34%
Other 10,466 2,224 2,487 26,980 42,157 13 yr. 1 mos. 5.34%
Total $18,640 $30,211 $39,982 $203,709 $292,542 14 yr. 11 mos. 7.15%
======= ======= ======= ======== ========
Percentage of total 6.4% 10.3% 13.7% 69.6% 100.0%
===== ===== ===== ===== ======
Weighted average yield 4.23% 6.11% 6.25% 7.75% 7.15%
===== ===== ===== ===== =====
Weighted average yields were computed on a tax equivalent basis using a
federal income tax rate of 34%.
The Corporation 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
1998 1997 1996 1995 1994
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Commercial, financial and agricultural $ 65,698 12.8% $ 53,520 11.8% $ 52,844 12.6% $ 45,017 12.3% $ 37,991 11.9%
Real estate-construction 17,381 3.4 5,553 1.2 5,724 1.4 5,890 1.6 4,645 1.4
Real estate-mortgage 324,709 63.4 299,529 65.7 268,276 63.8 229,830 62.8 214,561 67.0
Personal-installment 97,561 19.0 88,046 19.3 87,381 20.8 78,771 21.5 56,470 17.6
Other 6,931 1.4 9,182 2.0 5,982 1.4 6,662 1.8 6,695 2.1
512,280 100.0% 455,830 100.0% 420,207 100.0% 366,170 100.0% 320,362 100.0%
Less: ===== ===== ===== ===== =====
Unearned discount (10,018) (11,799) (11,965) (11,671) (9,141)
Reserve for loan losses (6,954) (6,270) (5,561) (4,955) (4,407)
$495,308 $437,761 $402,681 $349,544 $306,814
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.
Changes in loan demand in 1998 resulted in increases in commercial, financial,
and agricultural loans and personal-installment loans of 22.8% and 10.8%,
respectively. Real estate loans increased 12.1% during this same period.
Commercial, financial, and agricultural loans represented 12.8% of total loans
at December 31, 1998 and consist principally of commercial lending secured by
financial assets of businesses including account receivables, inventories and
equipment, and, in most cases, include liens or 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 19.0% of total loans at December 31, 1998 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, 1998
Maturity Distribution
One Year One to Over Five
Or Less Five Years Years Total
Commercial, Financial and
agricultural $29,080 $17,866 $18,752 $65,698
Real estate-construction 8,502 2,064 6,815 17,381
$37,582 $19,930 $25,567 $83,079
======= ======= ======= =======
Interest Sensitivity
Variable Fixed Total
Due in one year or less $36,688 $ 894 $37,582
Due after one year 44,033 1,464 45,497
$80,721 $2,358 $83,079
======= ====== =======
-7-
APPENDIX A
Continued
NONPERFORMING LOANS
(dollars in thousands)
as of December 31
1998 1997 1996 1995 1994
Loans past due 90 days or more:
Commercial, financial and agricultural $ 47 $ 53 $ 20 $ 120 $ 152
Mortgages 353 405 588 558 440
Personal installment 34 72 189 239 226
Other 7 21 11 --- 1
441 551 808 917 819
Loans renegotiated with the borrowers 248 626 277 494 366
Loans on which accrual of interest has
been discontinued:
Commercial, financial and agricultural 866 926 791 579 743
Mortgages 2,282 3,388 3,645 2,346 1,985
Other 282 300 318 252 174
3,430 4,614 4,754 3,177 2,902
Other real estate owned 625 866 883 901 1,846
Total
$4,744 $6,657 $6,722 $5,489 $5,933
====== ====== ====== ====== ======
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 1998 was $358,000. Interest income from
these loans would have approximated $425,000 in 1997.
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 Corporation'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 Corporation'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, 1998, 1997, 1996, 1995, and 1994
1998 1997 1996 1995 1994
Loans at year-end, net of unearned income $502,262 $444,031 $408,242 $354,499 $311,221
======== ======== ======== ======== ========
Average loans balance $467,094 $421,283 $385,956 $332,630 $299,343
======== ======== ======== ======== ========
Balance, allowance for loan losses,
January 1 $ 6,270 $ 5,561 $ 4,955 $ 4,407 $ 4,832
Net charge-offs (780) (608) (961) (530) (2,338)
Provision for loan losses 1,464 1,317 1,567 1,078 1,913
Balance, allowance for loan losses,
December 31 $ 6,954 $ 6,270 $ 5,561 $ 4,955 $ 4,407
======== ======== ======== ======== ========
Net charge-offs to loans at year end .16% .14% .24% .15% .75%
Net charge-offs to average loans .17 .14 .25 .16 .78
Balance of allowance for loan losses
to loans at year end 1.38 1.41 1.36 1.40 1.42
Averages are a combination of monthly and daily averages.
For detail, see Schedule of Loans Charged Off and Recovered.
The allowance for loan 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 $1,464,000 for the year ended December
31, 1998 compared to $1,317,000, $1,567,000, $1,078,000, and $1,912,000 for
the years ended December 31, 1997, 1996, 1995, and 1994, respectively. The
relationship of the allowance for loan losses to loans at year end
approximated 1.38% compared to ratios of 1.36% to 1.42% 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 .56%, .93%, 1.03%, .99%, and 1.13% at year-end 1998,
1997, 1996, 1995, and 1994, respectively.
-9-
APPENDIX A
Continued
LOANS CHARGED OFF AND RECOVERED
(dollars in thousands)
for the years ended December 31, 1998, 1997, 1996, 1995, and 1994
1998 1997 1996 1995 1994
Loans charged off:
Commercial, financial and agricultural $ 138 $ 83 $ 165 $ 135 $ 762
Real estate-mortgage 223 361 382 298 1,358
Personal installment 820 926 1,327 774 806
Other 77 96 93 78 119
Total 1,258 1,466 1,967 1,285 3,045
Loans recovered:
Commercial, financial and agricultural 53 428 336 234 63
Real estate-mortgage 104 63 131 136 169
Personal installment 296 343 509 369 443
Other 25 24 30 15 33
Total 478 858 1,006 754 708
Net charge-offs $ 780 $ 608 $ 961 $ 531 $2,337
====== ====== ====== ====== ======
ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES
(dollars in thousands)
as of December 31
1998 1997 1996 1995 1994
Loans:
Commercial, financial and agricultural $2,199 $1,663 $1,541 $1,268 $1,177
Real estate-construction --- --- 2 --- 1
Real estate-mortgage 1,366 1,780 1,868 1,702 1,532
Installment 1,161 1,458 1,125 841 695
Unallocated 2,228 1,369 1,025 1,144 1,002
Balance $6,954 $6,270 $5,561 $4,955 $4,407
====== ====== ====== ====== ======
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, 1998
Remaining to Maturity:
Less than three months $ 6,620
Three months to six months 3,117
Six months to twelve months 6,233
More than twelve months 9,697
$25,667
=======
-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 positive GAP between the Corporation's interest-earning assets and
interest-bearing liabilities maturing or repricing within one year approximated
2% of total assets at December 31, 1998.
Significant maturity/repricing assumptions (based on internal analysis) include
the presentation of all savings and NOW accounts as being 62% 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
Corporation's interest-earning assets and interest-bearing liabilities at
December 31, 1998.
Interest Rate Sensitivity
At December 31, 1998 1-90 90-180 180-365 1 year Total
Dollars in thousands days days days or more
Assets
Interest-bearing deposits in
other banks $ 1,258 --- --- --- $ 1,258
Investment securities 42,184 $17,125 $26,124 $207,109 292,542
Federal funds sold 2,208 --- --- --- 2,208
Loans, net of unearned income 215,540 29,664 53,266 203,792 502,262
Loans held for sale 3,319 --- --- --- 3,319
Total $264,509 $46,789 $79,390 $410,901 $801,589
Liabilities
Savings $ 79,935 $32,509 $ 46,250 $ 95,622 $254,316
Time 49,068 48,825 54,324 113,667 265,884
Time in denominations of
$100,000 or more 6,620 3,117 6,233 9,697 25,667
Short-term borrowings 7,910 --- --- --- 7,910
Long-term debt 15,000 10,000 14,000 122,000 161,000
Total $158,533 $94,451 $120,807 $340,986 $714,777
Interest Sensitivity Gap
Periodic $105,976 $(47,662) $(41,417) $69,915
Cumulative 58,314 16,897 86,812
Does not include nonaccrual loans.
-11-
Forward-Looking Statements:
Certain statements in this document may be considered to be
"forward-looking statements" as that term is defined in the U.S.
Private Securities Litigation Reform Act of 1995, such as
statements that include the words "expect", "estimate",
"project", "anticipate", "should", "intend", "probability",
"risk", "target", "objective", and similar expressions or
variations on such expressions. In particular, this document
includes forward-looking statements relating, but not limited to,
the Corporation's potential exposures to various types of market
risks such as interest rate risk and credit risk. Such statements
are subject to certain risks and uncertainties. For example,
certain of the market risk disclosures are dependent on choices
about key model characteristics and assumptions and are subject
to various limitations. By their nature, certain of the market
risk disclosures are only estimates and could be materially
different from what actually occurs in the future. As a result,
actual income gains and losses could materially differ from those
that have been estimated. Other factors that could cause actual
results to differ materially from those estimated by the
forward-looking statements contained in this document include,
but are not limited to: general economic conditions in market
areas which the Corporation has significant business activities
or investments; the monetary and interest rate policies of the
Board of Governors of the Federal Reserve System; inflation;
deflation; unanticipated turbulence in interest rates; changes in
laws, environments; natural disasters; the inability to hedge
certain risks economically; the adequacy of loan reserves;
acquisitions or restructurings' technological changes; in
consumer spending and savings habits; and the success of the
Corporation in managing the risks involved in the foregoing.
Quantitative and Qualitative Disclosures About Market Risk.
Community Banks, Inc. has only a limited involvement with
derivative financial instruments and does not use them for
trading purposes. The business of the Corporation and the
composition of its balance sheet consists of investments in
interest-earning assets (primarily loans, mortgage-backed
securities and investment securities) which are primarily funded
by interest-bearing liabilities (deposits and borrowings). Such
financial instruments have varying levels of sensitivity to
changes in market interest rates resulting in market risk. Other
than loans which are originated and held for sale, all of the
financial instruments of the Corporation are for other than
trading purposes.
Interest rate sensitivity results when the maturity or
repricing intervals are interest rate indices of the
interest-earning assets, interest-bearing liabilities, and
off-balance sheet financial instruments are different, creating a
risk that changes in the level of market interest rates will
result in disproportionate changes in the value of, and the net
earnings generated from, the Corporation's interest-earning
assets, interest-bearing liabilities, and off-balance sheet
financial instruments. the Corporation's exposure to interest
rate sensitivity is managed primarily through the Corporation's
strategy of selecting the types and terms of interest-earning
assets and interest-bearing liabilities which generate favorable
earnings, while limiting the potential negative effects of
changes in market interest rates. Since the Corporation's primary
source of interest-bearing liabilities is customer deposits, it's
ability to manage the types and terms of such deposits may be
-12-
somewhat limited by customer preferences in the market areas in
which it operates. Borrowings, which include Federal Home Loan
Bank (FHLB) advances and short-term loans, subordinated notes,
and other short-term and long-term borrowings are generally
structured with specific terms which in management's judgement,
when aggregated with the terms for outstanding deposits and
matched with interest-earning assets, mitigate the Corporation's
exposure to interest rate sensitivity.
The rates, terms and interest rate indices of the
Corporation's interest-earning assets result primarily from
its strategy on investing in loans and securities (a
substantial portion of which have adjustable-rate terms)
which permit the Corporation to limit its exposure to
interest rate sensitivity, together with credit risk, while
at the same time achieving a positive interest rate spread
from the difference between the interest-bearing
liabilities.
Significant Assumptions Utilized in Managing Interest Rate
Sensitivity
Managing the Corporation's exposure to interest rate
sensitivity involves significant assumptions about the
exercise of imbedded options and the relationship of various
interest rate indices of certain financial instruments.
Imbedded Options
A substantial portion of the Corporation's loans and
mortgage-backed securities and residential mortgage loans
containing significant imbedded options which permit the
borrower to prepay the principal balance of the loan prior
to maturity ("prepayments") without penalty. A loan's
propensity for prepayment is dependent upon a number of
factors, including the current interest rate and interest
rate index, (if any) of the loan, the financial ability of
the borrower to refinance, the economic benefit to be
obtained from refinancing, availability of refinancing at
attractive terms, as well as economic and other factors in
specific geographic areas which affect the sales and price
levels of residential property. In a changing interest
rate environment, prepayments may increase or decrease on
fixed and adjustable-rate loans depending on the current
relative levels and expectations of future short and
long-term interest rates. Since a significant portion of the
Corporation's loans are variable rate loans, prepayments on
such loans generally increase when long-term interest rates
fall or are at historically low levels relative to
short-term interest rates making fixed-rate loans more
desirable.
Investment securities, other than those with early call
provisions, generally do not have significant imbedded
options and repay pursuant to specific terms until maturity,
While savings and checking deposits generally may be
withdrawn upon the customer's request without prior notice,
a continuing relationship with customers resulting in future
deposits and withdrawals is generally predictable resulting
in a dependable and uninterrupted source of funds. Time
deposits generally have early withdrawal penalties, while
term FHLB borrowings and subordinated notes have prepayment
penalties, which discourage customer withdrawal of time
deposits and prepayment of FHLB borrowings and subordinated
notes prior to maturity.
-13-
Interest Rate Indices
The Corporation's loans and mortgage-backed securities are primarily indexed to
the national interest indices. When such loans and mortgage-backed securities
are funded by interest-bearing liabilities which are determined by other
indices, primarily deposits and FHLB borrowings, a changing interest rate
environment may result in different levels of changes in the different indices
leading to disproportionate changes in the value of, and net earnings
generated from, the Corporation's financial instruments. Each index is unique
and is influenced by different external factors, therefore, the historical
relationships in various indices may not be indicative of the actual change
which may result in a changing interest rate environment.
Interest Rate Sensitivity Measurement
In addition to periodic gap reports comparing the sensitivity of interest-
earning assets and interest-bearing liabilities to changes in interest rates,
management also utilizes a quarterly report which measures the Corporation's
exposure to interest rate risk. The model calculates the present value of
assets, liabilities and equity at current interest rates, and at hypothetical
higher and lower interest rates at one percent intervals. The present value of
each major category of financial instrument is calculated by the model using
estimated cash flows based on prepayments, early withdrawals, weighted average
contractual rates and terms, and discount rates for similar financial
instruments. The resulting present value of longer term fixed-rate financial
instruments are more sensitive to change in a higher or lower interest rate
scenario, while adjustable-rate financial instruments largely reflect only a
change in present value representing the difference between the contractual
and discounted rates until the next interest rate repricing date.
The following table reflects the estimated present value of assets, liabilities
and equity financial instruments using the model for Community Banks, Inc. as
of December 31, 1998 consolidated with the estimated present values of other
financial instruments of the Corporation, at current interest rates and
hypothetical higher and lower interest rates of one and two percent.
Base
-2% -1% Present Value +1% +2%
(dollars in thousands)
Assets
Cash, interest-bearing time deposits,
and federal funds sold............ $ 28,502 $ 28,502 $ 28,502 $ 28,502 $ 28,502
Investments securities............... 303,673 297,947 292,542 285,529 271,543
Loans, net of unearned income........ 504,784 501,851 498,552 493,911 489,085
Loans held for sale.................. 3,360 3,341 3,319 3,288 3,256
Other assets......................... 32,003 32,003 32,003 32,003 32,003
Total assets.................... $872,322 $863,644 $854,918 $843,233 $824,389
======== ======== ======== ======== ========
Liabilities
Deposits............................. $603,699 $601,143 $598,654 $596,228 $593,864
Short-term borrowings................ 7,910 7,910 7,910 7,910 7,910
Long-term debt....................... 174,802 167,530 160,822 155,899 155,129
Other liabilities.................... 7,983 7,983 7,983 7,983 7,983
Total liabilities............... 794,394 784,566 775,369 768,020 764,886
Total stockholders' equity...... 77,928 79,078 79,549 75,213 59,503
Total liab. and stockholders'
equity...................... $872,322 $863,644 $854,918 $843,233 $824,389
======== ======== ======== ======== ========
-14-
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 Corporation's Common Stock and Related Securities Holder
Matters" on page 3 of the Annual Report to Stockholders for the year ended
December 31, 1998 (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 21 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 22 through 26 of the Annual Report.
Item 8. Financial Statements and Supplementary Data:
The consolidated financial statements, together with the report thereon of
PricewaterhouseCoopers LLP dated January 14, 1999, are incorporated by
reference to pages 6 through 20 of the Annual Report.
Item 9. Disagreements on Accounting and Financial Disclosures:
None.
-15-
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, 1998.
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
Ernest L. Lowe Chairman-CBI 1990 37,998 (9) .58%
Age 62 Pres/CEO
Community Banks, N.A.
Prior to 12/31/97
Ex. V.P. of CBI
Eddie L. Dunklebarger President/CEO 1998 92,785 (19) 1.42%
Age 45 CBI & PSB
Prior to 3/31/98
Pres/CEO of PSB
Thomas L. Miller Retired CEO of 1966 57,721 (10) .88%
Age 66 CBI & CBNA
Kenneth L. Deibler Self-Employed 1966 34,703 (3) .53%
Age 76 Insurance Broker
Elizabethville, PA
Leon E. Kocher Chairman of the Board, 1963 27,206 .42%
Age 86 Kocher Enterprise, Inc.
Millersburg, PA
Robert W. Rissinger Sec./Treasurer 1968 242,365 (4) 3.71%
Age 72 Alvord Polk Tool Co. (5)
(cutting tools)
Engle Rissinger Auto Group
Millersburg, PA
Allen Shaffer Attorney-at-Law 1961 42,637 (7) .65%
Age 73 Millersburg and
Harrisburg, PA
James A. Ulsh Attorney-at-Law 1977 16,295 .25%
Age 52 Mette, Evans &
Woodside
Harrisburg, PA
Samuel E. Cooper Retired Superintendent 1992 2,069 .03%
Age 65 Warrior Run
School District
Turbotville, PA
Susan K. Nenstiel Regional Dir. of Dev. 1996 207 --
Age 47 Lutheran Welfare Serv.
Hazleton, PA
-16-
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 21,725 (6) .33%
Age 61 Alvord-Polk Tool Co.
(manufacturing of
cutting tools)
Millersburg, PA
Peter DeSoto CEO, J.T. Walker 1981 44,270 (14) .68%
Age 59 Industries, Inc.
(manufacturing of metal
products)
Elizabethville, PA
Thomas W. Long Partner, 1981 9,326 .14%
Age 69 Millersburg Hardware
Millersburg, PA
Donald L. Miller President, Miller Bros. 1981 88,003 1.35%
Age 69 Dairy
Millersburg, PA
Ray N. Leidich Retired Dentist 1985 67,476 (8) 1.03%
Age 70 Tremont, PA
John W. Taylor, Jr. President-Air Brake 1998 18,930 (15) .29%
Age 68 & Power Equip. Co.
Harry B. Nell Retired Merchant 1998 34,480 (16) .53%
Age 72
Earl L. Mummert Consulting Actuary 1998 32,643 (17) .50%
Age 54 Conrad M. Siegel, Inc.
Harrisburg
Wayne H. Mummert Retired U.S. Postal 1998 72,548 (18) 1.11%
Age 65 Service/Farmer
(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, 1998. Beneficial ownership may be disclaimed
as to certain of the securities.
(3) Includes 2,802 shares owned by Mr. Deibler's grandchildren.
(4) Includes 6,310 shares owned by Alvord-Polk Tool Co., Inc. the stock of
which is held 50% by Robert Rissinger and 50% by Ronald E. Boyer.
-17-
(5) Includes 14,062 shares owned by Engle Ford, Inc., 43,330 shares owned by
Mr. Rissinger's spouse, Shirley Rissinger, and 10,578 shares owned by Engle
Ford, Inc. Profit Sharing Plan.
(6) Includes 6,310 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 496
shares owned by Mr. Boyer's wife, Judith Boyer.
(7) Includes 7,270 shares owned by Mr. Shaffer's Retirement plan.
(8) Includes 33,738 shares owned by Dr. Leidich's wife, Dolores Leidich.
(9) Includes 180 shares owned by Mr. Lowe's wife, Barbara and 21 shares owned
by Mr. Lowe's son and incentive stock options to acquire 31,373 shares.
(10) Includes incentive stock options to acquire 24,964 shares and 788 in his
IRA.
(11) Includes incentive stock options to acquire 22,543 shares.
(12) Includes incentive stock options to acquire 13,068 shares and 142 shares
registered to Mr. Lawley for his minor children.
(13) Includes incentive stock options to acquire 1,443 shares.
(14) Includes 97 shares owned by Mr. DeSoto's son.
(15) Includes 1,210 shares owned by Mr. Taylor's wife, LouAnn and 865 in his
IRA.
(16) Includes 787 shares owned by Mr. Nell's wife, Helen and stock options to
acquire 2,004 shares.
(17) Includes stock options to acquire 2,004 shares and 13,723 shares in
Mr. Mummert's IRA.
(18) Includes stock options to acquire 2,004 shares and 16,380 shares owned by
Mr. Mummert's, wife Shirley.
(19) Includes 298 shares owned by Mr. Dunklebarger's wife, Connie, 8,867 shares
owned by Mr. Dunklebarger's children, 7,446 shares in his 401(k) plan, 6,336
shares in his IRA and 45,430 stock options (ISO and NQ's) to acquire shares.
(20) Includes 4,035 shares in his 401(k) plan and 14,272 (ISO and NQ) stock
options to acquire shares.
(21) Includes 3,447 shares in his 401(k) plan and 7,487 shares in his IRA and
15,930 stock options to acquire shares.
Section 16(a) Beneficial Ownership Reporting Compliance
In 1998, to the knowledge of CBI, all Executive Officers and directors timely
filed all reports with the Securities Exchange Commission, except Peter DeSoto
who filed one Form 4 report, regarding one transaction two days late.
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.
-18-
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, 1998.
Amount and Percentage
Principal Occupation Nature of of
for the Past Five Beneficial Outstanding
Name and Age Years Term (1) Ownership(2)Common Stock
Ernest L. Lowe Chairman-CBI 1985 37,998 (9) .58%
Age 62 Pres/CEO
Community Banks, N.A.
Prior to 12/31/97
Ex. V.P. of CBI
Eddie L. Dunklebarger President/CEO 1998 92,785 (19) 1.42%
Age 45 CBI & PSB
Prior to 3/31/98
Pres/CEO of PSB
Terry L. Burrows Executive Vice President, 1977 20,251 (13) .31%
Age 50 Chief Financial Officer
David E. Hawley Executive Vice President, 1975 23,088 (11) .35%
Age 60 Corporate Property Officer
Robert W. Lawley Executive Vice President, 1980 13,266 (12) .20%
Age 44 Chief Lending Officer
Anthony N. Leo Executive Vice President 1998 25,976 (20) .40%
Age 38
Jeffrey M. Seibert Executive Vice President 1998 33,998 (21) .52%
Age 39
(1) Initial year employed in this capacity.
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 687,751 365,730 16.16%
-19-
Item 11. Executive Compensation:
Information regarding executive compensation is omitted from this report as
the holding company will file a definitive proxy statement for its annual
meeting of shareholders to be held May 4, 1999; and the information included
therein with respect to this item is incorporated herein by reference.
Pension Plan:
CBNA 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 CBNA. 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. The years of service for the
additional portion are limited to a maximum of 37. Average 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 $160,000. 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. As of December 31, 1998, the
following officers have been credited with the following years of service:
Ernest L. Lowe-14 years of service, Robert W. Lawley-23 years of service, and
Terry L. Burrows-25 years of service.
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.
PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35 40
$35,000........ $ 8,486 $11,314 $14,143 $16,971 $19,800 $ 22,138
$55,000........ $13,736 $18,314 $22,893 $27,471 $32,050 $ 35,778
$75,000........ $18,986 $25,314 $31,643 $37,971 $44,300 $ 49,418
$95,000........ $24,236 $32,314 $40,393 $48,471 $56,550 $ 63,058
$115,000....... $29,486 $39,314 $49,143 $58,971 $68,800 $ 76,698
$135,000....... $34,736 $46,314 $57,893 $69,471 $81,050 $ 90,338
$150,000....... $38,673 $51,564 $64,455 $77,346 $90,237 $100,568
$175,000....... $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$200,000....... $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$225,000....... $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$250,000....... $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$275,000....... $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
Directors' Compensation:
Each director of CBI is paid a quarterly fee of $750.00. In addition, each
outside director receives a fee of $250.00 for attendance at the regular
quarterly meetings of the Board of Directors of CBI. Each director who is not
an executive officer also receives $250.00 for attendance at each committee
meeting of CBI.
Item 12. Security Ownership of Certain Beneficial
Owners and Management:
Refer to Item 10 on pages 16 through 19.
-20-
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 16 of
the Annual Report.
(b) Certain Business Relationships
Allen Shaffer, a director of CBI, is an attorney practicing in
Harrisburg and Millersburg, Pennsylvania, who has been retained in the last
fiscal year by CBI and who CBI proposes to retain in the current fiscal year.
James A. Ulsh, a director of CBI, is a shareholder/employee of the law firm of
Mette, Evans, & Woodside, Harrisburg, Pennsylvania, which CBI has retained in
the last fiscal year 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. Earl L. Mummert, a director
of CBI, is an actuarial consultant with Conrad M. Siegel, Inc., Harrisburg,
Pennsylvania, which provides actuarial services to CBI.
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.
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 -- 20
Balance Sheets as of December 31, 1998
and 1997 -- 6
Statements of Income for each of the three years
ended December 31, 1998 -- 7
Statements of Changes in Stockholders'
Equity for each of the three years ended
December 31, 1998 -- 8
Statements of Cash Flows for each of the three
years ended December 31, 1998 -- 9
Notes to Financial Statements -- 10-20
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 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).
-21-
(b) The registrant filed Form 8-K, November 23, 1998, subsequent to announcing
a stock repurchase program effective November 10, 1998. Up to five percent of
outstanding shares could be repurchased pursuant to the program.
CONSENT OF INDEPENDENT ACCOUNTS
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 14, 1999 on
our audits of the consolidated financial statements of Community
Banks, Inc. as of December 31, 1998 and 1997, and for the years
ended December 31, 1998, 1997, and 1996, which report is
incorporated by reference in the Annual Report on Form 10-K.
PricewaterhouseCoopers, LLP
One South Market Square
Harrisburg, Pennsylvania
March 25, 1999
-22-
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: Ernest L. Lowe _____
(Ernest L. Lowe)
Chairman of the Board
and Director
Date: March 5, 1999
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 3/5/99
(Terry L. Burrows) Chief Financial Officer
/S/ Ronald E. Boyer Director 3/5/99
(Ronald E. Boyer)
/S/ Samuel E. Cooper Director 3/5/99
(Samuel E. Cooper)
/S/ Kenneth L. Deibler Director 3/5/99
(Kenneth L. Deibler)
/S/ Eddie L. Dunklebarger President & CEO and 3/5/99
(Eddie L. Dunklebarger) Director
/S/ Leon E. Kocher Director 3/5/99
(Leon E. Kocher)
/S/ Ray N. Leidich Director 3/5/99
(Ray N. Leidich)
/S/ Thomas L. Miller Director 3/5/99
(Thomas L. Miller)
/S/ Earl L. Mummert Director 3/5/99
(Earl L. Mummert)
/S/ Wayne H. Mummert Director 3/5/99
(Wayne H. Mummert)
/S/ Harry B. Nell Director 3/5/99
(Harry B. Nell)
/S/ Robert W. Rissinger Director 3/5/99
(Robert W. Rissinger)
/S/ Allen Shaffer Director 3/5/99
(Allen Shaffer)
/S/ John W. Taylor Director 3/5/99
(John W. Taylor)
/S/ James A. Ulsh _ Director 3/5/99
(James A. Ulsh)
-23-