FOR IMMEDIATE RELEASE
Date: October 18, 2007
Contact: Donald F. Holt, EVP/CFO
(717) 920-5801, Fax (717) 920-1683
COMMUNITY REPORTS EARNINGS, INCLUDES MERGER EXPENSES
Harrisburg, PA- Community Banks, Inc. (“Community”) (Listed on NASDAQ: CMTY) today reported third quarter earnings per share for 2007 of $0.42, which was $0.03 less than the $0.45 recorded in the same period of 2006. Net income reached $10.5 million, almost equal to the net income recorded in the prior year’s quarter. Results for the third quarter of 2007 were inclusive of $754,000 of merger-related expenses incurred in connection with the upcoming merger with Susquehanna Bancshares, Inc. (Listed on NASDAQ: SUSQ), which reduced the current quarter’s earnings by more than $0.02 per share.
Net income and earnings per share for the first nine months of 2007 were hampered by the March 31, 2007, recognition of securities losses that were attributed to Community’s portfolio restructuring initiative in the first quarter. The first quarter investment losses reduced year-to-date net income and earnings per share by $2.9 million and $0.12, respectively. Primarily as a result of the restructuring charge, year-to-date earnings per share performance for the first nine months of 2007 declined to $1.14 versus $1.32 for the same period of 2006. The losses stemming from that initiative facilitated the reinvestment of investment sale proceeds into higher-yielding securities.
On May 1, 2007, Community announced the signing of a definitive merger agreement with Susquehanna Bancshares, Inc., ("Susquehanna") pursuant to which Community will be merged with Susquehanna in a stock and cash transaction that was valued at approximately $860 million. Under the terms of the merger agreement, shareholders of Community will be entitled to elect to receive for each share of Community common stock they own, either $34.00 in cash or 1.48 shares of Susquehanna common stock. Community shareholders may elect to receive cash for some shares and stock for others, but all shareholder elections will be subject to allocation procedures that will result in the exchange of 90 percent of Community's common shares outstanding for shares of Susquehanna common stock and the remaining 10 percent of Community common shares outstanding for cash. The transaction will consolidate the companies' presence in southeastern Pennsylvania and the Mid-Atlantic region, particularly in the attractive York and Lancaster markets. The combined company will have over $12 billion in assets and approximately $2 billion in market capitalization, making it the 45th largest bank holding company in the United States.
"We have remained determined in our efforts to favorably position the Community franchise even as we finalize our preparation for the upcoming affiliation with Susquehanna,” commented Eddie L. Dunklebarger, President and Chief Executive Officer. “The favorable earnings trends that have occurred since the time of our announcement, particularly in light of continuing unfavorable conditions for the banking industry, have reflected the tireless efforts of our employees. We know that this same dedication will carry over as we prepare to become a vital part of a much larger franchise.”
Community Banks, Inc. • 777 East Park Drive, 2nd Floor • Harrisburg, PA 17111 • Phone 717-920-5800
Community completed two mergers of its own effective April 1, 2007, and the results for the six months ended September 30, 2007 reflect the combined results of both BUCS Financial Corp (BUCS) and East Prospect State Bank (East Prospect). BUCS’ four branches, located primarily in central Maryland, and East Prospect's single banking office in York County, have provided an important market extension into the desirable, adjacent Maryland market and bolstered Community’s position in the vibrant York County, Pennsylvania, market. With the completion of the two mergers, Community’s operating footprint boasts assets of $3.8 billion and 81 banking offices that extend throughout the center of Pennsylvania from the Pocono region into suburban Baltimore, Maryland. Community Banks, Inc., is the 8th largest financial services holding company headquartered in Pennsylvania and the largest financial institution headquartered in its capital city of Harrisburg.
Comparisons of operating performance in the third quarter are slightly distorted by the impact of the two mergers that occurred on April 1, 2007. A number of performance metrics serve to illustrate the continuing difficulties presented by the external operating environment. Despite these challenges, Community has continued to record results ahead of many of its competitors. Net interest margin, a primary driver of net interest income performance, declined only slightly from the second quarter, from 3.72% to 3.67%. At the same time, non-interest income as a percent of total income also declined, from 26.8% to 25.38%. The efficiency ratio, which expresses non-interest expenses as a percent of total revenues was a bright spot at 56.31% and served to illustrate Community’s ongoing efforts to keep operating expenses in line with revenue performance. Loan, total asset and deposit growth were all in the 8% to11% range, though a significant portion of the growth was attributed to the additional loans, assets and deposits brought on in the mergers.
Like many banks of its size, Community has begun to experience increases in the level of non-accrual loans, which grew from $12.5 million at December 31, 2006, to $26.4 million at September 30, 2007. Community continues to maintain an allowance for loan losses that it believes is adequate to absorb losses, if any, by deterioration in these credit relationships. During the third quarter, Community added nearly $1.1 million to the allowance via its provision to loan losses. Such provision was in excess of the $0.5 million of net-charge offs which occurred for the three months ended September 30, 2007.
This press release contains “forward looking” information as defined by the Private Securities Litigation Reform Act of 1995, which is based on Community’s current expectations, estimates and projections about future events and financial trends affecting the financial condition of its business. These statements are not historical facts or guarantees of future performance, events, or results. Such statements involve potential risks and uncertainties and, accordingly, actual performance results may differ materially. Community undertakes no obligation to publicly update or revise forward looking information, whether as a result of new, updated information, future events, or otherwise.
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COMMUNITY BANKS, INC. | ||||||||||||||||
Selected Financial Information | ||||||||||||||||
(Dollars in thousands, except per share data) (1) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Consolidated Summary of Operations: | ||||||||||||||||
| Interest income | $ | 56,668 | $ | 50,443 | $ | 165,610 | $ | 146,270 | ||||||||
| Interest expense | 28,532 | 23,505 | 82,628 | 65,461 | ||||||||||||
| Net interest income | 28,136 | 26,938 | 82,982 | 80,809 | ||||||||||||
| Provision for loan losses | 1,050 | 250 | 3,050 | 1,400 | ||||||||||||
| Net interest income after provision for loan losses | 27,086 | 26,688 | 79,932 | 79,409 | ||||||||||||
| Non-interest income: | ||||||||||||||||
| Investment management and trust services | 1,211 | 968 | 4,259 | 3,069 | ||||||||||||
| Service charges on deposit accounts | 4,278 | 3,037 | 11,951 | 8,423 | ||||||||||||
| Other service charges, commissions, and fees | 2,209 | 1,817 | 6,494 | 5,420 | ||||||||||||
| Investment security gains (losses) | --- | 28 | (4,388 | ) | 317 | |||||||||||
| Trading activities gains | 38 | --- | 4 | --- | ||||||||||||
| Insurance premium income and commissions | 1,079 | 1,053 | 3,318 | 3,098 | ||||||||||||
| Mortgage banking activities | 459 | 533 | 1,701 | 1,581 | ||||||||||||
| Earnings on investment in life insurance | 755 | 679 | 2,199 | 2,010 | ||||||||||||
| Other | 345 | 725 | 1,168 | 1,849 | ||||||||||||
| Total non-interest income | 10,374 | 8,840 | 26,706 | 25,767 | ||||||||||||
| Non-interest expenses: | ||||||||||||||||
| Salaries and employee benefits | 12,419 | 11,611 | 37,497 | 34,280 | ||||||||||||
| Net occupancy and equipment expense | 3,917 | 3,452 | 11,691 | 10,350 | ||||||||||||
| Payment card processing expense | 848 | 553 | 2,235 | 1,391 | ||||||||||||
| Marketing expense | 350 | 354 | 1,407 | 1,194 | ||||||||||||
| Telecommunications expense | 718 | 542 | 1,855 | 1,659 | ||||||||||||
| Merger expenses | 754 | --- | 754 | --- | ||||||||||||
| Amortization of intangibles | 750 | 659 | 2,222 | 2,015 | ||||||||||||
| Other | 3,930 | 4,001 | 12,657 | 11,514 | ||||||||||||
| Total non-interest expenses | 23,686 | 21,172 | 70,318 | 62,403 | ||||||||||||
| Income before income taxes | 13,774 | 14,356 | 36,320 | 42,773 | ||||||||||||
| Income taxes | 3,281 | 3,798 | 8,290 | 11,142 | ||||||||||||
| Net income | $ | 10,493 | $ | 10,558 | $ | 28,030 | $ | 31,631 | ||||||||
| Net loan charge-offs | $ | 480 | $ | 4 | $ | 2,416 | $ | 331 | ||||||||
| Net interest margin (FTE) | 3.67 | % | 3.90 | % | 3.71 | % | 3.94 | % | ||||||||
Efficiency ratio (2) | 56.31 | % | 56.25 | % | 57.59 | % | 56.12 | % | ||||||||
| Return on average assets | 1.10 | % | 1.24 | % | 1.01 | % | 1.25 | % | ||||||||
| Return on average stockholders’ equity | 7.99 | % | 8.88 | % | 7.34 | % | 8.93 | % | ||||||||
Net operating (tangible) income (3) | $ | 11,471 | $ | 10,986 | $ | 29,965 | $ | 32,940 | ||||||||
Operating return on average tangible assets (3)(4) | 1.30 | % | 1.39 | % | 1.17 | % | 1.41 | % | ||||||||
Operating return on average tangible equity (3)(4) | 18.66 | % | 20.31 | % | 16.71 | % | 20.34 | % | ||||||||
Consolidated Per Share Data: | ||||||||||||||||
| Basic earnings per share | $ | 0.42 | $ | 0.45 | $ | 1.15 | $ | 1.34 | ||||||||
| Diluted earnings per share | $ | 0.42 | $ | 0.45 | $ | 1.14 | $ | 1.32 | ||||||||
| Book value at end of period | $ | 21.21 | $ | 20.43 | $ | 21.21 | $ | 20.43 | ||||||||
Tangible book value at end of period (4) | $ | 10.05 | $ | 9.45 | $ | 10.05 | $ | 9.45 | ||||||||
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COMMUNITY BANKS, INC.
Selected Financial Information
(Dollars in thousands, except per share data) (1)
Consolidated Balance Sheet Data:
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
| Average total loans | $ | 2,578,729 | $ | 2,339,352 | $ | 2,519,749 | $ | 2,314,257 | ||||||||
| Average earning assets | 3,288,918 | 2,935,448 | 3,237,785 | 2,939,506 | ||||||||||||
| Average assets | 3,778,338 | 3,385,905 | 3,710,298 | 3,387,018 | ||||||||||||
Average tangible assets (4) | 3,498,844 | 3,126,882 | 3,437,714 | 3,128,116 | ||||||||||||
| Average deposits | 2,638,388 | 2,438,057 | 2,587,525 | 2,374,197 | ||||||||||||
| Average stockholders’ equity | 521,089 | 471,911 | 510,268 | 473,680 | ||||||||||||
Average tangible equity (4) | 243,944 | 214,643 | 239,808 | 216,553 | ||||||||||||
| Average diluted shares outstanding | 24,988,695 | 23,662,529 | 24,601,460 | 23,925,653 | ||||||||||||
9/30/2007 | ||||||||||||||||
vs. | ||||||||||||||||
September 30, | December 31, | September 30, | 9/30/2006 | |||||||||||||
2007 | 2006 | 2006 | % Change | |||||||||||||
| Assets | $ | 3,789,634 | $ | 3,496,370 | $ | 3,431,208 | 10 | % | ||||||||
| Total loans | 2,609,744 | 2,370,889 | 2,348,159 | 11 | % | |||||||||||
| Deposits | 2,626,788 | 2,513,182 | 2,483,519 | 6 | % | |||||||||||
| Stockholders’ equity | 526,475 | 486,161 | 479,584 | 10 | % | |||||||||||
| Common shares outstanding | 24,824,773 | 23,519,041 | 23,682,673 | 5 | % | |||||||||||
| Non-accrual loans | $ | 26,390 | $ | 12,545 | $ | 11,626 | 127 | % | ||||||||
| Loans renegotiated with borrowers | 815 | --- | --- | NM | ||||||||||||
| Foreclosed real estate | 3,175 | 37 | 52 | NM | ||||||||||||
| Total non-performing assets | 30,380 | 12,582 | 11,678 | 160 | % | |||||||||||
| Accruing loans 90 days past due | 33 | 659 | 685 | (95 | )% | |||||||||||
| Total risk elements | $ | 30,413 | $ | 13,241 | $ | 12,363 | 146 | % | ||||||||
| Allowance for loan losses | $ | 25,580 | $ | 23,626 | $ | 24,034 | 6 | % | ||||||||
Asset Quality Ratios: | ||||||||||||||||
| Allowance for loan losses to total loans | 0.98 | % | 1.00 | % | 1.02 | % | ||||||||||
| Allowance for loan losses to non-accrual loans | 97 | % | 188 | % | 207 | % | ||||||||||
| Non-accrual loans to total loans | 1.01 | % | 0.53 | % | 0.50 | % | ||||||||||
| Non-performing assets to total assets | 0.80 | % | 0.36 | % | 0.34 | % | ||||||||||
(1) Per share data reflect stock splits and stock dividends. | ||||||||||||||||
(2) The efficiency ratio does not include net securities transactions or merger expenses. | ||||||||||||||||
(3) Net operating (tangible) income excludes amortization of core deposit and other intangible assets, net of applicable income tax effects. A reconciliation of net income and net operating (tangible) income appears on page 5. | ||||||||||||||||
(4) The difference between total assets and total tangible assets, and stockholders’ equity and tangible stockholders’ equity, represents goodwill and core deposit and other intangibles net of applicable deferred tax balances. A reconciliation of these balances appears on page 5. | ||||||||||||||||
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COMMUNITY BANKS, INC.
Selected Financial Information
(Dollars in thousands, except per share data)
Reconciliation of GAAP to Non-GAAP Measures (1):
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Income statement data: | ||||||||||||||||
Net income | ||||||||||||||||
| Net income | $ | 10,493 | $ | 10,558 | $ | 28,030 | $ | 31,631 | ||||||||
Amortization of core deposit and other intangible assets (1) | 488 | 428 | 1,445 | 1,309 | ||||||||||||
Merger expenses (1) | 490 | --- | 490 | --- | ||||||||||||
| Net operating (tangible) income | $ | 11,471 | $ | 10,986 | $ | 29,965 | $ | 32,940 | ||||||||
Balance sheet data: | ||||||||||||||||
Average assets | ||||||||||||||||
| Average assets | $ | 3,778,338 | $ | 3,385,905 | $ | 3,710,298 | $ | 3,387,018 | ||||||||
| Goodwill | (265,048 | ) | (245,794 | ) | (258,449 | ) | (245,439 | ) | ||||||||
| Core deposit and other intangible assets | (14,446 | ) | (13,229 | ) | (14,135 | ) | (13,463 | ) | ||||||||
| Average tangible assets | $ | 3,498,844 | $ | 3,126,882 | $ | 3,437,714 | $ | 3,128,116 | ||||||||
Operating return on average tangible assets | 1.30 | % | 1.39 | % | 1.17 | % | 1.41 | % | ||||||||
Average equity | ||||||||||||||||
| Average equity | $ | 521,089 | $ | 471,911 | $ | 510,268 | $ | 473,680 | ||||||||
| Goodwill | (265,048 | ) | (245,794 | ) | (258,449 | ) | (245,439 | ) | ||||||||
| Core deposit and other intangible assets | (14,446 | ) | (13,229 | ) | (14,135 | ) | (13,463 | ) | ||||||||
| Deferred taxes | 2,349 | 1,755 | 2,124 | 1,775 | ||||||||||||
| Average tangible equity | $ | 243,944 | $ | 214,643 | $ | 239,808 | $ | 216,553 | ||||||||
Operating return on average tangible equity | 18.66 | % | 20.31 | % | 16.71 | % | 20.34 | % | ||||||||
At end of quarter: | ||||||||||||||||
Total assets | ||||||||||||||||
| Total assets | $ | 3,789,634 | $ | 3,431,208 | $ | 3,789,634 | $ | 3,431,208 | ||||||||
| Goodwill | (265,136 | ) | (245,864 | ) | (265,136 | ) | (245,864 | ) | ||||||||
| Core deposit and other intangible assets | (14,083 | ) | (13,641 | ) | (14,083 | ) | (13,641 | ) | ||||||||
| Total tangible assets | $ | 3,510,415 | $ | 3,171,703 | $ | 3,510,415 | $ | 3,171,703 | ||||||||
Total equity | ||||||||||||||||
| Total equity | $ | 526,475 | $ | 479,584 | $ | 526,475 | $ | 479,584 | ||||||||
| Goodwill | (265,136 | ) | (245,864 | ) | (265,136 | ) | (245,864 | ) | ||||||||
| Core deposit and other intangible assets | (14,083 | ) | (13,641 | ) | (14,083 | ) | (13,641 | ) | ||||||||
| Deferred taxes | 2,277 | 1,698 | 2,277 | 1,698 | ||||||||||||
| Total tangible equity | $ | 249,533 | $ | 221,777 | $ | 249,533 | $ | 221,777 | ||||||||
Tangible book value at end of period | $ | 10.05 | $ | 9.45 | $ | 10.05 | $ | 9.45 | ||||||||
(1) Net of related tax effect | ||||||||||||||||
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COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
KEY RATIOS(1) | ||||||||||||||||||||||||
| 2007 | 2006 | |||||||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Annual | |||||||||||||||||||
| Diluted earnings per share | $ | 0.42 | $ | 0.44 | $ | 0.28 | $ | 0.40 | $ | 0.45 | $ | 1.72 | ||||||||||||
Tangible operating earnings per share (1) | $ | 0.46 | $ | 0.46 | $ | 0.30 | $ | 0.41 | $ | 0.46 | $ | 1.79 | ||||||||||||
| Return on average assets | 1.10 | % | 1.15 | % | 0.75 | % | 1.08 | % | 1.24 | % | 1.21 | % | ||||||||||||
| Return on average equity | 7.99 | % | 8.41 | % | 5.49 | % | 7.74 | % | 8.88 | % | 8.63 | % | ||||||||||||
Operating return on average tangible assets (2) | 1.30 | % | 1.31 | % | 0.87 | % | 1.22 | % | 1.39 | % | 1.36 | % | ||||||||||||
Operating return on average tangible equity (2) | 18.66 | % | 18.72 | % | 12.40 | % | 17.37 | % | 20.31 | % | 19.57 | % | ||||||||||||
| Net interest margin | 3.67 | % | 3.72 | % | 3.73 | % | 3.71 | % | 3.90 | % | 3.88 | % | ||||||||||||
Non-interest income/revenues (FTE excluding security gains) | 25.38 | % | 26.80 | % | 24.93 | % | 23.83 | % | 23.40 | % | 22.99 | % | ||||||||||||
Provision for loan losses/average loans (annualized) | 0.16 | % | 0.11 | % | 0.22 | % | 0.11 | % | 0.04 | % | 0.09 | % | ||||||||||||
Efficiency ratio (4) | 56.31 | % | 58.17 | % | 58.32 | % | 60.97 | % | 56.25 | % | 57.33 | % | ||||||||||||
| Non-performing assets to period-end loans | 1.16 | % | 0.85 | % | 0.65 | % | 0.53 | % | 0.50 | % | ||||||||||||||
| 90 day past due loans to period-end loans | --- | % | --- | % | --- | % | 0.03 | % | 0.03 | % | ||||||||||||||
| Total risk elements to period-end loans | 1.16 | % | 0.85 | % | 0.65 | % | 0.56 | % | 0.53 | % | ||||||||||||||
| Allowance for loan losses to loans | 0.98 | % | 0.97 | % | 1.00 | % | 1.00 | % | 1.02 | % | 1.00 | % | ||||||||||||
| Allowance for loan losses to | ||||||||||||||||||||||||
| non-accrual loans | 97 | % | 131 | % | 155 | % | 188 | % | 207 | % | 188 | % | ||||||||||||
| Net charge-offs/average loans (annualized) | 0.07 | % | 0.22 | % | 0.09 | % | 0.18 | % | 0.00 | % | 0.06 | % | ||||||||||||
| Equity to assets | 13.89 | % | 13.79 | % | 13.52 | % | 13.90 | % | 13.98 | % | 13.90 | % | ||||||||||||
Tangible equity to assets (3) | 7.11 | % | 6.90 | % | 6.92 | % | 7.05 | % | 6.99 | % | 7.05 | % | ||||||||||||
(1) Per share data reflect stock splits and stock dividends. | ||||||||||||||||||||||||
(2)Net tangible operating income excludes amortization of core deposit and other intangible assets, and merger, conversion and restructuring expenses, net of applicable income tax effects. A reconciliation of net income and net tangible operating income appears on page 19. | ||||||||||||||||||||||||
(3) The difference between total assets and total tangible assets, and stockholders’ equity and tangible stockholders’ equity, represents goodwill and core deposit and other intangibles net of applicable deferred tax balances. A reconciliation of these balances appears on page 19. | ||||||||||||||||||||||||
(4)The efficiency ratio does not include net securities transactions or merger expenses. | ||||||||||||||||||||||||
6
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||
PER SHARE STATISTICS * | ||||||||||||||||||||
| Diluted Earnings (Loss) per Share | ||||||||||||||||||||
| Fourth | Third | Second | First | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Total | ||||||||||||||||
| 2007 | $ | 0.42 | $ | 0.44 | $ | 0.28 | $ | 1.14 | ||||||||||||
| 2006 | $ | 0.40 | $ | 0.45 | $ | 0.44 | $ | 0.44 | $ | 1.72 | ||||||||||
| 2005 | $ | 0.45 | $ | 0.42 | $ | (0.09 | ) | $ | 0.42 | $ | 1.35 | |||||||||
| Average Diluted Shares Outstanding | ||||||||||||||||||||
| (in thousands) | Fourth | Third | Second | First | Average for | |||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Year | ||||||||||||||||
| 2007 | 24,989 | 24,962 | 23,683 | 24,601 | ||||||||||||||||
| 2006 | 23,728 | 23,663 | 23,858 | 24,189 | 23,918 | |||||||||||||||
| 2005 | 24,421 | 24,750 | 13,240 | 13,192 | 18,975 | |||||||||||||||
| Book Value per Share | ||||||||||||||||||||
| Fourth | Third | Second | First | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
| 2007 | $ | 21.21 | $ | 20.85 | $ | 20.83 | ||||||||||||||
| 2006 | $ | 20.67 | $ | 20.43 | $ | 19.86 | $ | 19.96 | ||||||||||||
| 2005 | $ | 19.81 | $ | 19.83 | $ | 11.82 | $ | 11.74 | ||||||||||||
| Tangible Book Value per Share | ||||||||||||||||||||
| Fourth | Third | Second | First | |||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | |||||||||||||||||
| 2007 | $ | 10.05 | $ | 9.66 | $ | 9.91 | ||||||||||||||
| 2006 | $ | 9.71 | $ | 9.45 | $ | 8.91 | $ | 9.19 | ||||||||||||
| 2005 | $ | 9.12 | $ | 9.26 | $ | 11.43 | $ | 11.35 | ||||||||||||
| * Per share data reflect stock splits and stock dividends | ||||||||||||||||||||
7
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||
QUARTER END INFORMATION | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Total loans | $ | 2,609,744 | $ | 2,567,638 | $ | 2,442,318 | $ | 2,370,889 | $ | 2,348,159 | ||||||||||
| Allowance for loan losses | (25,580 | ) | (25,010 | ) | (24,379 | ) | (23,626 | ) | (24,034 | ) | ||||||||||
| Loans, net | 2,584,164 | 2,542,628 | 2,417,939 | 2,347,263 | 2,324,125 | |||||||||||||||
| Earning assets | 3,298,191 | 3,249,928 | 3,153,614 | 3,033,585 | 2,971,391 | |||||||||||||||
| Goodwill and other intangible assets | 279,219 | 279,963 | 258,812 | 259,406 | 259,505 | |||||||||||||||
| Total assets | 3,789,634 | 3,750,844 | 3,627,739 | 3,496,370 | 3,431,208 | |||||||||||||||
| Deposits | 2,626,788 | 2,608,164 | 2,529,187 | 2,513,182 | 2,483,519 | |||||||||||||||
| Long-term debt | 413,483 | 455,104 | 438,196 | 315,079 | 336,954 | |||||||||||||||
| Subordinated debt | 75,260 | 75,260 | 72,167 | 51,548 | 51,548 | |||||||||||||||
| Total shareholder's equity | 526,475 | 517,193 | 490,564 | 486,161 | 479,584 | |||||||||||||||
| Accumulated other comprehensive income (loss) (net of tax) | (4,692 | ) | (8,300 | ) | 650 | (1,806 | ) | (2,670 | ) | |||||||||||
8
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||
CONDENSED CONSOLIDATED QUARTERLY AVERAGE STATEMENTS OF CONDITION | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
Assets | �� | |||||||||||||||||||
| Earning Assets: | ||||||||||||||||||||
| Loans | $ | 2,578,729 | $ | 2,574,074 | $ | 2,404,530 | $ | 2,353,774 | $ | 2,339,352 | ||||||||||
| Federal funds sold and other | 27,494 | 79,230 | 10,701 | 37,059 | 29,324 | |||||||||||||||
| Investment securities | 682,695 | 671,210 | 682,592 | 610,312 | 566,772 | |||||||||||||||
| Total earning assets | 3,288,918 | 3,324,514 | 3,097,823 | 3,001,145 | 2,935,448 | |||||||||||||||
| Cash and due from banks | 62,333 | 60,873 | 55,542 | 62,318 | 62,636 | |||||||||||||||
| Allowance for loan losses | (25,490 | ) | (25,985 | ) | (24,022 | ) | (24,102 | ) | (24,385 | ) | ||||||||||
| Goodwill and other intangible assets | 279,494 | 278,950 | 259,083 | 259,373 | 259,023 | |||||||||||||||
| Premises, equipment and other assets | 173,083 | 167,442 | 155,763 | 153,361 | 153,183 | |||||||||||||||
| Total assets | $ | 3,778,338 | $ | 3,805,794 | $ | 3,544,189 | $ | 3,452,095 | $ | 3,385,905 | ||||||||||
Liabilities and equity | ||||||||||||||||||||
| Interest-bearing liabilities: | ||||||||||||||||||||
| Deposits | ||||||||||||||||||||
| Savings and NOW accounts | $ | 937,362 | $ | 942,150 | $ | 858,469 | $ | 876,404 | $ | 873,670 | ||||||||||
| Time | 1,017,512 | 1,030,564 | 994,824 | 1,010,249 | 984,415 | |||||||||||||||
| Time deposits greater than $100,000 | 327,450 | 324,099 | 268,268 | 267,747 | 235,264 | |||||||||||||||
| Short-term borrowings | 81,387 | 65,019 | 124,985 | 77,910 | 60,680 | |||||||||||||||
| Long-term debt | 435,014 | 456,769 | 391,196 | 318,078 | 340,162 | |||||||||||||||
| Subordinated debt | 75,260 | 75,260 | 56,817 | 51,548 | 51,548 | |||||||||||||||
| Total interest-bearing liabilities | 2,873,985 | 2,893,861 | 2,694,559 | 2,601,936 | 2,545,739 | |||||||||||||||
| Non-interest bearing deposits | 356,064 | 363,298 | 340,580 | 342,766 | 344,708 | |||||||||||||||
| Other liabilities | 27,200 | 26,226 | 22,122 | 25,659 | 23,547 | |||||||||||||||
| Total liabilities | 3,257,249 | 3,283,385 | 3,057,261 | 2,970,361 | 2,913,994 | |||||||||||||||
| Stockholders' equity | 521,089 | 522,409 | 486,928 | 481,734 | 471,911 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 3,778,338 | $ | 3,805,794 | $ | 3,544,189 | $ | 3,452,095 | $ | 3,385,905 | ||||||||||
| CHANGE IN AVERAGE BALANCES* | ||||||||||||||||||||
| 2007 | 2006 | |||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Loans | 10.2 | % | 11.3 | % | 5.0 | % | 6.9 | % | 9.3 | % | ||||||||||
| Total assets | 11.6 | % | 12.2 | % | 4.8 | % | 4.2 | % | 2.1 | % | ||||||||||
| Deposits | 8.2 | % | 11.7 | % | 7.0 | % | 10.4 | % | 8.4 | % | ||||||||||
| Stockholders' equity | 10.4 | % | 11.0 | % | 1.8 | % | 1.3 | % | (1.9 | )% | ||||||||||
| * Compares the current quarter to the comparable quarter of the prior year | ||||||||||||||||||||
9
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Annual | |||||||||||||||||||
| Interest income | $ | 56,668 | $ | 56,703 | $ | 52,239 | $ | 51,364 | $ | 50,443 | $ | 197,634 | ||||||||||||
| Tax equivalent adjustment | 2,260 | 2,234 | 2,253 | 1,998 | 1,916 | 7,802 | ||||||||||||||||||
| 58,928 | 58,937 | 54,492 | 53,362 | 52,359 | 205,436 | |||||||||||||||||||
| Interest expense | 28,532 | 28,124 | 25,972 | 25,273 | 23,505 | 90,734 | ||||||||||||||||||
| Net interest income | 30,396 | 30,813 | 28,520 | 28,089 | 28,854 | 114,702 | ||||||||||||||||||
| Provision for loan losses | 1,050 | 700 | 1,300 | 650 | 250 | 2,050 | ||||||||||||||||||
| Net interest income after provision | 29,346 | 30,113 | 27,220 | 27,439 | 28,604 | 112,652 | ||||||||||||||||||
| Non-interest income | 9,915 | 10,554 | 8,924 | 8,194 | 8,279 | 32,063 | ||||||||||||||||||
| Investment security gains (losses) | --- | --- | (4,388 | ) | 415 | 28 | 732 | |||||||||||||||||
| Mortgage banking activities income | 459 | 694 | 548 | 591 | 533 | 2,172 | ||||||||||||||||||
| Non-interest expenses | 22,932 | 24,491 | 22,141 | 22,482 | 21,172 | 84,885 | ||||||||||||||||||
| Merger expenses | 754 | --- | --- | --- | --- | --- | ||||||||||||||||||
| Income before income taxes | 16,034 | 16,870 | 10,163 | 14,157 | 16,272 | 62,734 | ||||||||||||||||||
| Income taxes | 3,281 | 3,686 | 1,323 | 2,759 | 3,798 | 13,901 | ||||||||||||||||||
| Tax equivalent adjustment | 2,260 | 2,234 | 2,253 | 1,998 | 1,916 | 7,802 | ||||||||||||||||||
| NET INCOME | $ | 10,493 | $ | 10,950 | $ | 6,587 | $ | 9,400 | $ | 10,558 | $ | 41,031 | ||||||||||||
| Tax effect of security transactions | $ | --- | $ | --- | $ | (1,536 | ) | $ | 145 | $ | 10 | $ | 256 | |||||||||||
10
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
ANALYSIS OF NON-INTEREST INCOME | ||||||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Annual | |||||||||||||||||||
| Investment management and trust services | $ | 1,211 | $ | 1,603 | $ | 1,445 | $ | 1,325 | $ | 968 | $ | 4,394 | ||||||||||||
| Service charges on deposit accounts | 4,278 | 4,677 | 2,996 | 3,084 | 3,037 | 11,507 | ||||||||||||||||||
| Other service charges, commissions and fees | 2,209 | 2,257 | 2,028 | 1,852 | 1,817 | 7,272 | ||||||||||||||||||
| Insurance premium income and commissions | 1,079 | 1,063 | 1,176 | 1,022 | 1,053 | 4,120 | ||||||||||||||||||
| Earnings on investment in life insurance | 755 | 756 | 688 | 715 | 679 | 2,725 | ||||||||||||||||||
| Trading activities loss | 38 | (34 | ) | --- | --- | --- | --- | |||||||||||||||||
| Other income | 345 | 232 | 591 | 196 | 725 | 2,045 | ||||||||||||||||||
| Total non-interest income | $ | 9,915 | $ | 10,554 | $ | 8,924 | $ | 8,194 | $ | 8,279 | $ | 32,063 | ||||||||||||
ANALYSIS OF NON-INTEREST EXPENSES | ||||||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Annual | |||||||||||||||||||
| Salaries and employee benefits | $ | 12,419 | $ | 13,069 | $ | 12,009 | $ | 12,154 | $ | 11,611 | $ | 46,434 | ||||||||||||
| Net occupancy and equipment expense | 3,917 | 3,980 | 3,794 | 3,767 | 3,452 | 14,117 | ||||||||||||||||||
| Payment card processing expense | 848 | 774 | 613 | 530 | 553 | 1,922 | ||||||||||||||||||
| Marketing expense | 350 | 552 | 505 | 558 | 354 | 1,752 | ||||||||||||||||||
| Telecommunications expense | 718 | 612 | 525 | 584 | 542 | 2,243 | ||||||||||||||||||
| Amortization of intangibles | 750 | 811 | 661 | 624 | 659 | 2,639 | ||||||||||||||||||
| Other operating expenses | 3,930 | 4,693 | 4,034 | 4,265 | 4,001 | 15,778 | ||||||||||||||||||
| �� | ||||||||||||||||||||||||
| Total non-interest expenses | $ | 22,932 | $ | 24,491 | $ | 22,141 | $ | 22,482 | $ | 21,172 | $ | 84,885 | ||||||||||||
11
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||
RISK ELEMENTS ANALYSIS | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Non-performing assets: | ||||||||||||||||||||
| Non-accrual loans | $ | 26,390 | $ | 19,032 | $ | 15,715 | $ | 12,545 | $ | 11,626 | ||||||||||
| Loans renegotiated with borrowers | 815 | 665 | --- | --- | --- | |||||||||||||||
| Foreclosed real estate | 3,175 | 2,122 | 61 | 37 | 52 | |||||||||||||||
| Total non-performing assets | 30,380 | 21,819 | 15,776 | 12,582 | 11,678 | |||||||||||||||
| Accruing loans 90 days or more past due | 33 | 64 | 101 | 659 | 685 | |||||||||||||||
| Total risk elements | $ | 30,413 | $ | 21,883 | $ | 15,877 | $ | 13,241 | $ | 12,363 | ||||||||||
| Non-performing assets to period-end loans | 1.16 | % | 0.85 | % | 0.65 | % | 0.53 | % | 0.50 | % | ||||||||||
| 90 day past due loans to period-end loans | --- | % | --- | % | --- | % | 0.03 | % | 0.03 | % | ||||||||||
| Total risk elements to period-end loans | 1.16 | % | 0.85 | % | 0.65 | % | 0.56 | % | 0.53 | % | ||||||||||
12
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||
ALLOWANCE FOR LOAN LOSSES | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Balance at beginning of period | $ | 25,010 | $ | 24,379 | $ | 23,626 | $ | 24,034 | $ | 23,788 | ||||||||||
| Loans charged off | (618 | ) | (1,564 | ) | (660 | ) | (1,136 | ) | (499 | ) | ||||||||||
| Recoveries | 138 | 175 | 113 | 78 | 495 | |||||||||||||||
| Net loans charged off | (480 | ) | (1,389 | ) | (547 | ) | (1,058 | ) | (4 | ) | ||||||||||
| Provision for loan losses | 1,050 | 700 | 1,300 | 650 | 250 | |||||||||||||||
| Allowance established for acquired credit risk | --- | 1,320 | --- | --- | --- | |||||||||||||||
| Balance at end of period | $ | 25,580 | $ | 25,010 | $ | 24,379 | $ | 23,626 | $ | 24,034 | ||||||||||
| Net loans charged-off to average loans* | 0.07 | % | 0.22 | % | 0.09 | % | 0.18 | % | 0.00 | % | ||||||||||
| Provision for loan losses to average loans* | 0.16 | % | 0.11 | % | 0.22 | % | 0.11 | % | 0.04 | % | ||||||||||
| Allowance for loan losses to loans | 0.98 | % | 0.97 | % | 1.00 | % | 1.00 | % | 1.02 | % | ||||||||||
| *Annualized | ||||||||||||||||||||
13
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||
OTHER RATIOS | ||||||||||||||||||||
| 2007 | 2006 | |||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Investment portfolio – fair value to amortized cost | 99.4 | % | 98.6 | % | 100.6 | % | 100.0 | % | 99.9 | % | ||||||||||
| Dividend payout ratio | 49.7 | % | 47.6 | % | 75.1 | % | 50.0 | % | 44.4 | % | ||||||||||
| Net loans to deposits ratio, average | 96.8 | % | 95.8 | % | 96.7 | % | 93.3 | % | 95.0 | % | ||||||||||
MARKET PRICE AND DIVIDENDS DECLARED * | ||||||||||||
| Closing Bid Price Range | Dividends | |||||||||||
| Year / Quarter | High | Low | Declared | |||||||||
2007 | ||||||||||||
| First | $ | 28.11 | $ | 22.96 | $ | 0.2100 | ||||||
| Second | $ | 34.39 | $ | 22.82 | $ | 0.2100 | ||||||
| Third | $ | 33.13 | $ | 24.89 | $ | 0.2100 | ||||||
| Fourth | ||||||||||||
| $ | 0.6300 | |||||||||||
2006 | ||||||||||||
| First | $ | 27.85 | $ | 25.67 | $ | 0.1905 | ||||||
| Second | $ | 27.39 | $ | 24.38 | $ | 0.2000 | ||||||
| Third | $ | 27.29 | $ | 24.58 | $ | 0.2000 | ||||||
| Fourth | $ | 28.48 | $ | 25.74 | $ | 0.2000 | ||||||
| $ | 0.7905 | |||||||||||
2005 | ||||||||||||
| First | $ | 27.15 | $ | 22.57 | $ | 0.1619 | ||||||
| Second | $ | 25.24 | $ | 21.94 | $ | 0.1810 | ||||||
| Third | $ | 27.48 | $ | 25.39 | $ | 0.1810 | ||||||
| Fourth | $ | 28.42 | $ | 23.90 | $ | 0.1905 | ||||||
| $ | 0.7144 | |||||||||||
| * Per share data reflect stock splits and dividends | ||||||||||||
14
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
NET INTEREST MARGIN - YEAR-TO-DATE | ||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2007 | September 30, 2006 | ||||||||||||||||||||||
| Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | |||||||||||||||||||
Federal funds sold and interest-bearing deposits in banks | $ | 39,203 | $ | 1,524 | 5.20 | % | $ | 39,340 | $ | 1,427 | 4.85 | % | ||||||||||||
| Investment securities | 678,833 | 31,311 | 6.17 | % | 585,909 | 26,084 | 5.95 | % | ||||||||||||||||
| Loans - commercial | 942,456 | 55,779 | 7.91 | % | 825,241 | 47,844 | 7.75 | % | ||||||||||||||||
| - commercial real estate | 806,338 | 43,304 | 7.18 | % | 819,887 | 42,741 | 6.97 | % | ||||||||||||||||
| - residential real estate | 169,051 | 7,892 | 6.24 | % | 151,751 | 6,933 | 6.11 | % | ||||||||||||||||
| - consumer | 601,904 | 32,547 | 7.23 | % | 517,378 | 27,045 | 6.99 | % | ||||||||||||||||
| Total earning assets | $ | 3,237,785 | $ | 172,357 | 7.12 | % | $ | 2,939,506 | $ | 152,074 | 6.92 | % | ||||||||||||
| Deposits - savings and NOW accounts | $ | 912,949 | $ | 16,144 | 2.36 | % | $ | 840,397 | $ | 12,363 | 1.97 | % | ||||||||||||
| - time | 1,321,206 | 44,516 | 4.50 | % | 1,177,600 | 34,700 | 3.94 | % | ||||||||||||||||
| Short-term borrowings | 90,304 | 3,240 | 4.80 | % | 62,340 | 2,080 | 4.46 | % | ||||||||||||||||
| Long-term debt | 427,820 | 15,008 | 4.69 | % | 403,828 | 13,611 | 4.51 | % | ||||||||||||||||
| Subordinated debt | 69,180 | 3,720 | 7.19 | % | 49,282 | 2,707 | 7.34 | % | ||||||||||||||||
| Total interest-bearing liabilities | $ | 2,821,459 | $ | 82,628 | 3.92 | % | $ | 2,533,447 | $ | 65,461 | 3.45 | % | ||||||||||||
| Interest income to earning assets | 7.12 | % | 6.92 | % | ||||||||||||||||||||
| Interest expense to paying liabilities | 3.92 | % | 3.45 | % | ||||||||||||||||||||
| Interest spread | 3.20 | % | 3.47 | % | ||||||||||||||||||||
| Impact of non-interest funds | 0.51 | % | 0.47 | % | ||||||||||||||||||||
| Net interest margin | $ | 89,729 | 3.71 | % | $ | 86,613 | 3.94 | % | ||||||||||||||||
15
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
NET INTEREST MARGIN - QUARTER-TO-DATE | ||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2007 | September 30, 2006 | ||||||||||||||||||||||
| Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | |||||||||||||||||||
Federal funds sold and interest-bearing deposits in banks | $ | 27,494 | $ | 346 | 4.99 | % | $ | 29,324 | $ | 390 | 5.28 | % | ||||||||||||
| Investment securities | 682,695 | 10,664 | 6.20 | % | 566,772 | 8,556 | 5.99 | % | ||||||||||||||||
| Loans - commercial | 958,605 | 19,019 | 7.87 | % | 831,950 | 16,687 | 7.96 | % | ||||||||||||||||
| - commercial real estate | 807,618 | 14,631 | 7.19 | % | 831,288 | 14,810 | 7.07 | % | ||||||||||||||||
| - residential real estate | 178,487 | 2,709 | 6.02 | % | 150,926 | 2,364 | 6.21 | % | ||||||||||||||||
| - consumer | 634,019 | 11,559 | 7.23 | % | 525,188 | 9,552 | 7.22 | % | ||||||||||||||||
| Total earning assets | $ | 3,288,918 | $ | 58,928 | 7.11 | % | $ | 2,935,448 | $ | 52,359 | 7.08 | % | ||||||||||||
| Deposits - savings and NOW accounts | $ | 937,362 | $ | 5,659 | 2.40 | % | $ | 873,670 | $ | 4,969 | 2.26 | % | ||||||||||||
| - time | 1,344,962 | 15,397 | 4.54 | % | 1,219,679 | 12,889 | 4.19 | % | ||||||||||||||||
| Short-term borrowings | 81,387 | 918 | 4.47 | % | 60,680 | 739 | 4.83 | % | ||||||||||||||||
| Long-term debt | 435,014 | 5,207 | 4.75 | % | 340,162 | 3,936 | 4.59 | % | ||||||||||||||||
| Subordinated debt | 75,260 | 1,351 | 7.12 | % | 51,548 | 972 | 7.48 | % | ||||||||||||||||
| Total interest-bearing liabilities | $ | 2,873,985 | $ | 28,532 | 3.94 | % | $ | 2,545,739 | $ | 23,505 | 3.66 | % | ||||||||||||
| Interest income to earning assets | 7.11 | % | 7.08 | % | ||||||||||||||||||||
| Interest expense to paying liabilities | 3.94 | % | 3.66 | % | ||||||||||||||||||||
| Interest spread | 3.17 | % | 3.42 | % | ||||||||||||||||||||
| Impact of non-interest funds | 0.50 | % | 0.48 | % | ||||||||||||||||||||
| Net interest margin | $ | 30,396 | 3.67 | % | $ | 28,854 | 3.90 | % | ||||||||||||||||
16
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight – SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
NET INTEREST MARGIN - QUARTER-TO-DATE | ||||||||||||||||||||||||
| (dollars in thousands) | September 30, 2007 | June 30, 2007 | ||||||||||||||||||||||
| Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | Average Balance | FTE Interest Income/ Expense | Average Rate Earned/Paid | |||||||||||||||||||
Federal funds sold and interest-bearing deposits in banks | $ | 27,494 | $ | 346 | 4.99 | % | $ | 79,230 | $ | 1,042 | 5.28 | % | ||||||||||||
| Investment securities | 682,695 | 10,664 | 6.20 | % | 671,210 | 10,438 | 6.24 | % | ||||||||||||||||
| Loans - commercial | 958,605 | 19,019 | 7.87 | % | 972,907 | 18,967 | 7.82 | % | ||||||||||||||||
| - commercial real estate | 807,618 | 14,631 | 7.19 | % | 800,711 | 14,499 | 7.26 | % | ||||||||||||||||
| - residential real estate | 178,487 | 2,709 | 6.02 | % | 177,820 | 2,786 | 6.28 | % | ||||||||||||||||
| - consumer | 634,019 | 11,559 | 7.23 | % | 622,636 | 11,205 | 7.22 | % | ||||||||||||||||
| Total earning assets | $ | 3,288,918 | $ | 58,928 | 7.11 | % | $ | 3,324,514 | $ | 58,937 | 7.11 | % | ||||||||||||
| Deposits - savings and NOW accounts | $ | 937,362 | $ | 5,659 | 2.40 | % | $ | 942,150 | $ | 5,651 | 2.41 | % | ||||||||||||
| - time | 1,344,962 | 15,397 | 4.54 | % | 1,354,663 | 15,068 | 4.46 | % | ||||||||||||||||
| Short-term borrowings | 81,387 | 918 | 4.47 | % | 65,019 | 757 | 4.67 | % | ||||||||||||||||
| Long-term debt | 435,014 | 5,207 | 4.75 | % | 456,769 | 5,301 | 4.65 | % | ||||||||||||||||
| Subordinated debt | 75,260 | 1,351 | 7.12 | % | 75,260 | 1,347 | 7.18 | % | ||||||||||||||||
| Total interest-bearing liabilities | $ | 2,873,985 | $ | 28,532 | 3.94 | % | $ | 2,893,861 | $ | 28,124 | 3.90 | % | ||||||||||||
| Interest income to earning assets | 7.11 | % | 7.11 | % | ||||||||||||||||||||
| Interest expense to paying liabilities | 3.94 | % | 3.90 | % | ||||||||||||||||||||
| Interest spread | 3.17 | % | 3.21 | % | ||||||||||||||||||||
| Impact of non-interest funds | 0.50 | % | 0.51 | % | ||||||||||||||||||||
| Net interest margin | $ | 30,396 | 3.67 | % | $ | 30,813 | 3.72 | % | ||||||||||||||||
17
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||
PERIOD-END LOAN PORTFOLIO ANALYSIS | ||||||||||||||||||||
| (dollars in thousands) | 2007 | 2006 | ||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||
| Commercial: | ||||||||||||||||||||
| Commercial | $ | 882,338 | $ | 860,868 | $ | 824,301 | $ | 763,800 | $ | 757,714 | ||||||||||
| Obligations of political subdivisions | 95,143 | 100,338 | 101,090 | 101,555 | 79,028 | |||||||||||||||
| Total commercial | 977,481 | 961,206 | 925,391 | 865,355 | 836,742 | |||||||||||||||
| Commercial real estate: | ||||||||||||||||||||
| Commercial mortgages | $ | 813,877 | $ | 802,922 | $ | 804,652 | $ | 815,028 | $ | 820,619 | ||||||||||
| Residential real estate: | ||||||||||||||||||||
| Residential mortgages | $ | 168,534 | $ | 169,890 | $ | 145,719 | $ | 141,826 | $ | 144,047 | ||||||||||
| Construction | 9,855 | 7,648 | 6,730 | 7,290 | 6,918 | |||||||||||||||
| Total residential real estate | 178,389 | 177,538 | 152,449 | 149,116 | 150,965 | |||||||||||||||
| Consumer: | ||||||||||||||||||||
| Home equity loans | $ | 369,264 | $ | 358,949 | $ | 331,418 | $ | 322,712 | $ | 308,173 | ||||||||||
| Home equity lines of credit | 103,625 | 104,586 | 90,675 | 92,163 | 96,608 | |||||||||||||||
| Indirect consumer loans | 76,472 | 74,687 | 69,097 | 65,699 | 66,126 | |||||||||||||||
| Other consumer loans | 90,636 | 87,750 | 68,636 | 60,816 | 68,926 | |||||||||||||||
| Total consumer | 639,997 | 625,972 | 559,826 | 541,390 | 539,833 | |||||||||||||||
| Total loans | $ | 2,609,744 | $ | 2,567,638 | $ | 2,442,318 | $ | 2,370,889 | $ | 2,348,159 | ||||||||||
18
COMMUNITY BANKS, INC. & SUBSIDIARIES | ||||||||||||||||||||||||
Fiscal Insight - SEPTEMBER 30, 2007 | ||||||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Measures: | ||||||||||||||||||||||||
| (in thousands, except per share data) | 2007 | 2006 | ||||||||||||||||||||||
| Third | Second | First | Fourth | Third | ||||||||||||||||||||
| Quarter | Quarter | Quarter | Quarter | Quarter | Annual | |||||||||||||||||||
Income statement data: | ||||||||||||||||||||||||
Net income | ||||||||||||||||||||||||
| Net income | $ | 10,493 | $ | 10,950 | $ | 6,587 | $ | 9,400 | $ | 10,558 | $ | 41,031 | ||||||||||||
Amortization of core deposit and other intangible assets (1) | 488 | 528 | 429 | 406 | 428 | 1,715 | ||||||||||||||||||
Merger expenses (1) | 490 | --- | --- | --- | --- | --- | ||||||||||||||||||
Net operating (tangible) income | $ | 11,471 | $ | 11,478 | $ | 7,016 | $ | 9,806 | $ | 10,986 | $ | 42,746 | ||||||||||||
Earnings per share | ||||||||||||||||||||||||
| Diluted earnings per common share | $ | 0.42 | $ | 0.44 | $ | 0.28 | $ | 0.40 | $ | 0.45 | $ | 1.72 | ||||||||||||
Amortization of core deposit and other intangible assets (1) | 0.02 | 0.02 | 0.02 | 0.01 | 0.01 | 0.07 | ||||||||||||||||||
Merger expenses (1) | 0.02 | --- | --- | --- | --- | --- | ||||||||||||||||||
Diluted operating (tangible) earnings per share | $ | 0.46 | $ | 0.46 | $ | 0.30 | $ | 0.41 | $ | 0.46 | $ | 1.79 | ||||||||||||
Balance sheet data: | ||||||||||||||||||||||||
Average assets | ||||||||||||||||||||||||
| Average assets | $ | 3,778,338 | $ | 3,805,794 | $ | 3,544,189 | $ | 3,452,095 | $ | 3,385,905 | $ | 3,403,421 | ||||||||||||
| Goodwill | (265,048 | ) | (263,694 | ) | (246,400 | ) | (246,287 | ) | (245,794 | ) | (245,652 | ) | ||||||||||||
| Core deposit and other intangible assets | (14,446 | ) | (15,256 | ) | (12,683 | ) | (13,086 | ) | (13,229 | ) | (13,369 | ) | ||||||||||||
| Average tangible assets | $ | 3,498,844 | $ | 3,526,844 | $ | 3,285,106 | $ | 3,192,722 | $ | 3,126,882 | $ | 3,144,400 | ||||||||||||
Operating return on average tangible assets | 1.30 | % | 1.31 | % | 0.87 | % | 1.22 | % | 1.39 | % | 1.36 | % | ||||||||||||
Average equity | ||||||||||||||||||||||||
| Average equity | $ | 521,089 | $ | 522,409 | $ | 486,928 | $ | 481,734 | $ | 471,911 | $ | 475,710 | ||||||||||||
| Goodwill | (265,048 | ) | (263,694 | ) | (246,400 | ) | (246,287 | ) | (245,794 | ) | (245,652 | ) | ||||||||||||
| Core deposit and other intangible assets | (14,446 | ) | (15,256 | ) | (12,683 | ) | (13,086 | ) | (13,229 | ) | (13,368 | ) | ||||||||||||
| Deferred taxes | 2,349 | 2,468 | 1,547 | 1,652 | 1,755 | 1,744 | ||||||||||||||||||
| Average tangible equity | $ | 243,944 | $ | 245,927 | $ | 229,392 | $ | 224,013 | $ | 214,643 | $ | 218,434 | ||||||||||||
Operating return on average tangible equity | 18.66 | % | 18.72 | % | 12.40 | % | 17.37 | % | 20.31 | % | 19.57 | % | ||||||||||||
At end of quarter: | ||||||||||||||||||||||||
Total assets | ||||||||||||||||||||||||
| Total assets | $ | 3,789,634 | $ | 3,750,844 | $ | 3,627,739 | $ | 3,496,370 | $ | 3,431,208 | $ | 3,496,370 | ||||||||||||
| Goodwill | (265,136 | ) | (265,129 | ) | (246,449 | ) | (246,383 | ) | (245,864 | ) | (246,383 | ) | ||||||||||||
| Core deposit and other intangible assets | (14,083 | ) | (14,834 | ) | (12,363 | ) | (13,023 | ) | (13,641 | ) | (13,023 | ) | ||||||||||||
| Total tangible assets | $ | 3,510,415 | $ | 3,470,881 | $ | 3,368,927 | $ | 3,236,964 | $ | 3,171,703 | $ | 3,236,964 | ||||||||||||
Total equity | ||||||||||||||||||||||||
| Total equity | $ | 526,475 | $ | 517,193 | $ | 490,564 | $ | 486,161 | $ | 479,584 | $ | 486,161 | ||||||||||||
| Goodwill | (265,136 | ) | (265,129 | ) | (246,449 | ) | (246,383 | ) | (245,864 | ) | (246,383 | ) | ||||||||||||
| Core deposit and other intangible assets | (14,083 | ) | (14,834 | ) | (12,363 | ) | (13,023 | ) | (13,641 | ) | (13,023 | ) | ||||||||||||
| Deferred taxes | 2,277 | 2,403 | 1,482 | 1,591 | 1,698 | 1,591 | ||||||||||||||||||
| Total tangible equity | $ | 249,533 | $ | 239,633 | $ | 233,234 | $ | 228,346 | $ | 221,777 | $ | 228,346 | ||||||||||||
Tangible book value at end of period | $ | 10.05 | $ | 9.68 | $ | 9.91 | $ | 9.71 | $ | 9.45 | $ | 9.71 | ||||||||||||
Tangible equity to assets | 7.11 | % | 6.90 | % | 6.92 | % | 7.05 | % | 6.99 | % | 7.05 | % | ||||||||||||
(1)Net of related tax effect | ||||||||||||||||||||||||
19