COMMUNITY BANKS, INC. & SUBSIDIARIES
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Fiscal Insight - DECEMBER 31, 2003
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KEY RATIOS
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2003 2002
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Fourth Third Second First Fourth
Annual Quarter Quarter Quarter Quarter Annual Quarter
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Earnings per share - basic (1) $ 1.76 $ 0.45 $ 0.44 $ 0.43 $ 0.44 $ 1.59 $ 0.40
Earnings per share - diluted (1) $ 1.71 $ 0.43 $ 0.43 $ 0.42 $ 0.43 $ 1.55 $ 0.39
Return on average assets 1.15% 1.13% 1.12% 1.12% 1.21% 1.17% 1.13%
Return on average equity 15.03% 14.75% 14.95% 14.62% 15.82% 15.46% 14.46%
Return on average realized equity (2) 15.81% 15.26% 15.65% 15.68% 16.70% 15.62% 15.14%
Net interest margin 3.50% 3.41% 3.45% 3.49% 3.68% 3.78% 3.65%
Non-interest income/revenues (FTE excluding security gains) 23.92% 26.98% 25.89% 23.56% 18.64% 18.70% 18.51%
Provision for loan losses/average loans (annualized) 0.25% 0.22% 0.35% 0.25% 0.18% 0.38% 0.26%
Efficiency ratio 60.47% 62.41% 59.33% 59.89% 60.00% 56.81% 59.09%
Non-performing assets to period-end loans 1.20% 1.11% 1.16% 1.17% 1.17%
90 day past due loans to period-end loans 0.01% 0.01% 0.01% 0.01% 0.11%
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Total risk elements to period-end loans 1.21% 1.12% 1.17% 1.18% 1.28%
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Allowance for loan losses to loans 1.22% 1.26% 1.29% 1.35% 1.36%
Allowance for loan losses to
non-accrual loans 163% 119% 115% 123% 131%
Net charge-offs/average loans (annualized) 0.32% 0.15% 0.14% 0.04% 0.45%
Equity to assets 7.71% 7.53% 7.71% 7.40% 7.69%
(1) Per share data has been restated to reflect stock dividends and the stock
split payable in the form of a 20% stock dividend declared in November, 2003
(2) Excludes other comprehensive income items
1
PER SHARE STATISTICS *
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Diluted Earnings per Share
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Fourth Third Second First
Quarter Quarter Quarter Quarter Total
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2003 $0.43 $0.43 $0.42 $0.43 $1.71
2002 $0.39 $0.40 $0.39 $0.37 $1.55
2001 $0.37 $0.36 $0.34 $0.07 $1.14
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Average Diluted Shares Outstanding
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Fourth Third Second First Average for
Quarter Quarter Quarter Quarter Year
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2003 12,022 11,906 11,841 11,786 11,902
2002 11,816 11,895 11,942 11,932 11,896
2001 11,974 11,914 11,891 11,637 11,869
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Book Value per Share
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Fourth Third Second First
Quarter Quarter Quarter Quarter
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2003 $12.31 $11.82 $12.31 $11.37
2002 $11.20 $11.09 $10.47 $ 9.50
2001 $ 9.50 $ 9.80 $ 9.52 $ 9.26
Realized Book Value per Share (excludes other comprehensive income items)
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Fourth Third Second First
Quarter Quarter Quarter Quarter
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2003 $11.75 $11.43 $11.13 $10.85
2002 $10.63 $10.42 $10.25 $10.01
2001 $ 9.85 $ 9.61 $ 9.37 $ 9.15
* Per share data has been restated to reflect stock dividends and the stock
split payable in the form of a 20% stock dividend declared in November, 2003.
2
QUARTER END INFORMATION
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Loans, net $1,065,433 $1,055,527 $ 991,145 $ 928,077 $ 892,225
Earning assets 1,750,263 1,707,752 1,722,320 1,662,218 1,576,269
Goodwill and identifiable intangible assets 4,773 4,699 2,446 1,741 1,760
Total assets 1,860,130 1,816,008 1,842,683 1,767,944 1,679,898
Deposits 1,230,685 1,210,632 1,194,225 1,146,143 1,132,913
Long-term debt 411,422 348,082 319,112 319,823 320,533
Trust preferred securities 30,000 15,000 15,000 15,000 15,000
Total shareholder's equity 143,406 136,710 142,062 130,838 129,162
Accumulated other comprehensive income (net of tax) 6,596 4,451 13,624 5,972 6,538
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3
CONDENSED CONSOLIDATED QUARTERLY AVERAGE STATEMENTS OF CONDITION
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Assets
Earning Assets:
Loans $1,067,506 $1,026,429 $ 979,173 $ 915,652 $ 906,574
Federal funds sold and other 21,773 5,241 4,591 4,680 3,726
Taxable investment securities 423,723 469,450 483,410 488,680 434,243
Tax-exempt investment securities 207,841 213,158 211,985 197,524 196,272
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Total Earning Assets 1,720,843 1,714,278 1,679,159 1,606,536 1,540,815
Cash and due from banks 38,394 37,037 37,945 32,430 32,775
Allowance for loan losses (13,444) (13,121) (12,859) (12,642) (12,636)
Goodwill and other identifiable intangibles 4,634 3,220 2,155 1,753 1,769
Premises, equipment and other assets 72,757 73,818 72,985 74,807 71,136
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Total assets $1,823,184 $1,815,232 $1,779,385 $1,702,884 $1,633,859
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Liabilities and equity
Interest-bearing liabilities:
Deposits
Savings $ 445,881 $ 417,872 $ 386,797 $ 356,668 $ 334,036
Time 492,401 496,945 498,676 503,995 506,896
Time deposits greater than $100,000 108,225 108,006 115,359 109,336 117,557
Short-term borrowings 45,278 124,568 125,384 96,119 59,110
Long-term debt 407,515 343,508 334,550 335,263 313,257
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Total interest-bearing liabilities 1,499,300 1,490,899 1,460,766 1,401,381 1,330,856
Noninterest-bearing deposits 167,874 174,042 169,220 158,128 161,639
Other liabilities 16,784 13,715 12,910 12,575 14,138
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Total liabilities 1,683,958 1,678,656 1,642,896 1,572,084 1,506,633
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Shareholders' equity 139,226 136,576 136,489 130,800 127,226
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Total liabilities and
shareholders' equity $1,823,184 $1,815,232 $1,779,385 $1,702,884 $1,633,859
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Change in Average Balances *
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2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Loans 17.8% 14.0% 10.5% 6.4% 6.3%
Total assets 11.6% 13.2% 13.9% 12.0% 9.9%
Deposits 8.4% 7.4% 6.9% 8.7% 12.2%
Shareholders' equity 9.4% 9.6% 19.7% 10.9% 9.2%
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* Compares the current quarter to the comparable quarter of the prior year.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Annual Quarter Quarter Quarter Quarter Annual Quarter
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Interest income $ 94,865 $23,602 $23,769 $23,723 $23,771 $ 96,700 $23,965
Tax equivalent adjustment 6,352 1,615 1,630 1,589 1,518 5,788 1,447
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101,217 25,217 25,399 25,312 25,289 102,488 25,412
Interest expense 42,329 10,422 10,515 10,694 10,698 46,212 11,233
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Net interest income 58,888 14,795 14,884 14,618 14,591 56,276 14,179
Provision for loan losses 2,500 600 900 600 400 3,350 600
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Net interest income after provision 56,388 14,195 13,984 14,018 14,191 52,926 13,579
Non-interest income 15,982 4,742 4,263 4,061 2,916 11,720 2,795
Investment security gains 1,927 78 302 500 1,047 1,034 434
Mortgage banking activities 2,532 725 936 445 426 1,221 425
Non-interest expenses 45,718 11,962 11,578 11,389 10,789 39,300 10,287
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Income before income taxes 31,111 7,778 7,907 7,635 7,791 27,601 6,946
Income taxes 4,359 987 1,130 1,070 1,172 3,367 863
Tax equivalent adjustment 6,352 1,615 1,630 1,589 1,518 5,788 1,447
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NET INCOME $ 20,400 $ 5,176 $ 5,147 $ 4,976 $ 5,101 $ 18,446 $ 4,636
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Tax effect of security transactions $ 674 $ 27 $ 106 $ 175 $ 366 $ 362 $ 152
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5
ANALYSIS OF NON-INTEREST INCOME
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Annual Quarter Quarter Quarter Quarter Annual Quarter
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Investment management and trust services $ 1,326 $ 384 $ 292 $ 333 $ 317 $ 993 $ 228
Service charges on deposit accounts 5,128 1,442 1,350 1,295 1,041 3,440 932
Other service charges, commissions and fees 2,958 629 799 776 754 2,471 616
Insurance premium income and commissions 2,822 745 819 848 410 2,016 503
Other income 3,748 1,542 1,003 809 394 2,800 516
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Total non-interest income $15,982 $ 4,742 $ 4,263 $ 4,061 $ 2,916 $11,720 $2,795
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ANALYSIS OF NON-INTEREST EXPENSES
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Annual Quarter Quarter Quarter Quarter Annual Quarter
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Salaries and employee benefits $25,397 $ 6,598 $ 6,623 $ 6,276 $ 5,900 $21,636 $ 5,668
Net occupancy expense 7,200 1,836 1,820 1,778 1,766 6,051 1,718
Other operating expenses 13,121 3,528 3,135 3,335 3,123 11,613 2,901
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Total non-interest expenses $45,718 $11,962 $11,578 $11,389 $10,789 $39,300 $10,287
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6
RISK ELEMENTS ANALYSIS
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Non-performing assets:
Non-accrual loans $ 8,073 $11,310 $11,281 $10,263 $ 9,393
Troubled debt restructurings - - - - -
Foreclosed real estate 4,865 572 359 729 1,183
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Total non-performing assets 12,938 11,882 11,640 10,992 10,576
Accruing loans 90 days or more past due 90 71 61 105 961
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Total risk elements $13,028 $11,953 $11,701 $11,097 $11,537
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Non-performing assets to period-end loans 1.20% 1.11% 1.16% 1.17% 1.17%
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90 day past due loans to period-end loans 0.01% 0.01% 0.01% 0.01% 0.11%
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Total risk elements to period-end loans 1.21% 1.12% 1.17% 1.18% 1.28%
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7
ALLOWANCE FOR LOAN LOSSES
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(dollars in thousands) 2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Balance at beginning of period $13,440 $12,922 $12,653 $12,343 $12,769
Loans charged off (1,479) (564) (504) (292) (1,557)
Recoveries 617 182 173 202 531
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Net loans charged off (862) (382) (331) (90) (1,026)
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Provision for loan losses 600 900 600 400 600
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Balance at end of period $13,178 $13,440 $12,922 $12,653 $12,343
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Net loans charged-off to average loans* 0.32% 0.15% 0.14% 0.04% 0.45%
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Provision for loan losses to average loans* 0.22% 0.35% 0.25% 0.18% 0.26%
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Allowance for loan losses to loans 1.22% 1.26% 1.29% 1.35% 1.36%
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8
*Annualized
OTHER RATIOS
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2003 2002
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Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter
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Investment portfolio - market to amortized cost 102.1% 101.5% 103.4% 101.6% 101.9%
Dividend payout ratio 37.5% 37.5% 38.6% 35.9% 39.5%
Net loans to deposits ratio, average 86.8% 84.7% 82.6% 80.4% 80.1%
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MARKET PRICE AND DIVIDENDS DECLARED
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Closing Bid Price Range*
--------------------------------- Dividends
Quarter High Low Declared *
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2003
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I $23.63 $21.83 $0.1587
II $25.00 $23.22 $0.1667
III $27.92 $24.88 $0.1667
IV $33.75 $28.00 $0.1667
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$0.6588
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2002
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I $22.02 $19.33 $0.1270
II $23.57 $20.28 $0.1429
III $21.98 $18.97 $0.1429
IV $23.02 $20.62 $0.1587
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$0.5715
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2001
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I $16.54 $15.40 $0.1270
II $22.56 $15.95 $0.1270
III $22.52 $16.33 $0.1270
IV $20.60 $18.37 $0.1270
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$0.5080
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* Restated to reflect stock dividends and the stock split payable in the form
of a 20% stock dividend declared in November, 2003.
9
Net Interest Margin
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(dollars in thousands) 2003 2002
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Average FTE Interest Average Rate Average FTE Interest Average Rate
Balance Income/Expense Earned/Paid Balance Income/Expense Earn/Paid
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Interest-bearing deposits in other banks $ 1,160 $ 9 0.78% $ 1,742 $ 261 0.49%
Investment securities 673,943 34,564 5.13% 584,516 34,557 5.91%
Fed funds sold 4,015 40 1.00% 11,126 193 1.73%
Loans 1,001,086 66,605 6.65% 889,912 67,712 7.61%
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Total earning assets $1,680,204 $101,218 6.02% $1,487,296 $102,488 6.89%
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Savings deposits $ 401,805 $ 3,320 0.83% $ 322,632 $ 4,151 1.29%
Time deposits 608,236 19,777 3.25% 605,682 24,498 4.04%
Short-term borrowings 97,837 1,243 1.27% 54,178 977 1.80%
Long-term debt 355,209 17,989 5.06% 302,406 16,586 5.48%
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Total interest-bearing liabilities $1,463,087 $ 42,329 2.89% $1,284,898 $ 46,212 3.60%
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Interest income to earning assets 6.02% 6.89%
Interest expense to paying liabilities 2.89% 3.60%
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Interest spread 3.13% 3.29%
Impact of noninterest funds 0.37% 0.49%
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Net interest margin $ 58,889 3.50% $ 56,276 3.78%
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10