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, 1994 Commission file number 0-15786
COMMUNITY BANKS,INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2251762
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Market Street, Millersburg, PA 17061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (717) 692-4781
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $5 per share NASDAQ National Market System
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 15, 1995, the aggregate market value (based on recent selling
prices) of the voting stock of the registrant held by its nonaffiliates
(1,500,863 shares) was $38,272,007.
Indicate the number of shares outstanding of each registrant's classes of common
stock, as of the latest practical date.
2,028,310 shares of common stock outstanding on March 15, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit 13 contains portions of the Annual Report to Stockholders
incorporated by reference into Parts I, II, and III.
Exhibit index is located on page 18. This document contains 20 pages.
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
-1-
PART I
Item 1. Business:
Community Banks, Inc. (Bank) is a bank holding company whose banking
subsidiary is Community Banks, N.A. (CBNA) and whose non-banking subsidiaries
are Community Banks Investments, Inc. (CBI) and Community Banks Life Insurance
Company, Inc. (CBLIC).
The Bank conducts a full service commercial banking business and provides
trust services in northern Dauphin County, Northumberland County, western
Schuylkill County, and southern Luzerene County. The Bank currently has fifteen
offices. There are 57 offices of commercial banks and savings and loan
associations within its market area with which the Bank competes. Deposits of
the Bank represent approximately 11% of the total deposits in the market area.
The Bank has six offices in Dauphin County, two offices in Northumberland
County, five offices in Schuylkill County, and two offices in Luzerne County.
Like other depository institutions, the Bank has been subjected to
competition from brokerage firms, money market funds, consumer finance and
credit card companies and other companies providing financial services and
credit to consumers. As a result of federal legislation, regulatory restrictions
previously imposed on the Bank with respect to establishing money market fund
accounts have been eliminated and the Bank is now better able to compete with
other financial institutions in its service area with respect to interest rates
paid on time and savings deposits, service charges on deposit accounts and
interest rates charged on loans.
During 1986 the Bank formed CBLIC to provide credit life insurance to its
consumer credit borrowers. Total premiums earned were $396,000 for the year
ended December 31, 1994. During 1985 the Bank formed CBI to make investments
primarily in equity securities of other banks. Total assets of CBI at December
31, 1994 were $1,735,000.
The Bank has approximately 172 full and part-time employees and considers
its employee relations to be satisfactory.
Community Banks, Inc. is registered as a bank holding company with the
Board of Governors of the Federal Reserve System in accordance with the
requirements of the Bank Holding Company Act of 1956. It is subject to
regulation by the Federal Reserve Board and the Comptroller of the Currency.
In 1989, the Federal Reserve Board issued final risk-based capital
guidelines for bank holding companies which were phased in through December 31,
1992. The intent of regulatory capital guidelines is to measure capital adequacy
based upon the credit risk of various assets and off-balance sheet items. Risk
categories, weighted at 0%, 20%, 50% and 100%, are specifically identified. The
sum of the results of each such category is then related to the adjusted capital
account of the Company. A minimum required capital ratio at December 31, 1994,
was 8 percent. The Bank's December 31, 1994 ratio approximated 17%.
Subsequently, in August 1990 the board announced approval of capital to total
assets (leverage) guidelines. This minimum leverage ratio was set at 4% and
would apply only to those banking organizations receiving a regulatory composite
1 rating. Most banking organizations will be required to maintain a leverage
ratio ranging from 1 to 2 percentage points above the minimum standard. The
Bank's leverage ratio at December 31, 1994, approximated 10.%. Risk-based
capital requirements replace previous capital guidelines which established
minimum primary and total capital requirements.
The following summarizes the Bank's capital adequacy position:
Required
Bank Regulatory Capital
(in thousands) December 31, 1994 December 31, 1994
Risk-based capital $34,136 17.2% $15,877 8.0%
Leverage ratio
(tier 1 capital) 30,740 10.0% 12,296 4.0%
-2-
Statistical Data:
Pages 18 through 20 of the Community Banks, Inc. Annual report to
stockholders dated December 31, 1994 contain information concerning:
Financial Highlights
Average Balances, Effective Interest Differential, and Interest Yields
for the three years ended December 31, 1994.
Rate/Volume Analysis for the two years ended December 31, 1994.
Appendix A attached to Part I contains information concerning:
Return on Equity and Assets for the five years ended December 31, 1994.
Amortized cost and Estimated Market Values of Investment Securities as
of December 31, 1994, 1993, and 1992.
Maturity Distribution of Securities as of December 31, 1994 (Market
Value).
Loan Account Composition as of December 31, 1994, 1993, 1992, 1991, and
1990.
Maturities and Sensitivity to Changes in Interest Rates for Commercial,
Financial, and Agricultural Loans as of December 31, 1994.
Nonperforming Loans as of December 31, 1994, 1993, 1992, 1991, and
1990.
Loan Loss Experience for the five years ended December 31, 1994.
Loans Charged Off and Recovered for the five years ended December 31, 1994.
Allowance for Loan Losses as of December 31, 1994, 1993, 1992, 1991, and
1990.
Maturity Distribution of Time Deposits over $100,000 as of December 31,
1994.
Interest Rate Sensitivity as of December 31, 1994.
-3-
Item 2. Properties:
The Bank owns no real property except through its subsidiary bank, CBNA
which owns the following buildings: 150 Market Street, Millersburg,
Pennsylvania (its corporate headquarters); 13-23 South Market Street,
Elizabethville, Pennsylvania; 3679 Peters Mountain Road, Halifax, Pennsylvania;
906 N. River Road, Halifax, Pennsylvania; 800 Peters Mountain Road, Dauphin,
Pennsylvania; Main and Market Streets, Lykens, Pennsylvania; Route 209, Porter
Township, Schuylkill County, Pennsylvania; 29 E. Main Street, Tremont,
Schuylkill County, Pennsylvania; Second and Carroll Streets, St. Clair,
Schuylkill County, Pennsylvania; R.D. 3, Mill Creek Manor, Pottsville,
Schuylkill County, Pennsylvania; 300 East Independence Street, Shamokin,
Northumberland County, Pennsylvania; Route 61, R.D. 1, Orwigsburg, Schuylkill
County, Pennsylvania; One South Arch Street, Milton, Northumberland County,
Pennsylvania; 4 West Broad Street, Hazleton, Luzerne County, Pennsylvania; and
Route 93, Conyngham, Luzerne County, Pennsylvania. In addition thereto, CBNA
leases an office on Main Street, Pillow, Pennsylvania, pursuant to a lease
which, with renewal options, will extend to the year 2008. From time to time,
the subsidiary bank also acquires real estate by virtue of foreclosure
proceedings, which real estate is disposed of in the usual and ordinary course
of business as expeditiously as is prudently possible.
All the buildings used by the Bank are free-standing and are used
exclusively for banking purposes with the exception of offices and retail space
rented at the St. Clair and Milton locations.
Item 3. Legal Proceedings:
There are no material pending legal actions, other than routine litigation
incidental to the business of the Bank, to which the Bank is a party.
Item 4. Submission of Matters to a Vote of Security Holders:
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
-4-
APPENDIX A
RETURN ON EQUITY AND ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, 1992, 1991, and 1990
1994 1993 1992 1991 1990
Return on average equity 13.63% 13.85% 13.61% 10.81% 9.90%
Return on average assets 1.40% 1.41% 1.36% 1.05% 1.00%
Average equity to average assets 10.23% 10.16% 10.01% 9.70% 10.14%
Dividend payout ratio 34.24% 32.10% 30.88% 35.08% 40.23%
-5-
APPENDIX A
Continued
AMORTIZED COST AND ESTIMATED VALUES OF INVESTMENT
SECURITIES
(dollars in thousands)
AT DECEMBER 31, 1994, 1993, and 1992
1994 1993 1992
Estimated Estimated Estimated
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
Mortgage backed U.S. Government agencies $ 43,926 $41,900 $ 58,764 $ 59,444 $ 60,437 $ 60,855
U.S. Treasury and U.S. Government agencies 18,807 17,832 4,192 4,312 4,578 4,672
Obligations of states and political sub-
divisions 33,185 32,733 32,216 33,805 27,267 28,251
Other securities 6,387 6,784 6,204 7,218 7,972 8,207
Total $102,305 $99,249 $101,376 $104,779 $100,254 $101,985
======== ======= ======== ======== ======== ========
COMMUNITY BANKS, INC. and SUBSIDIARIES
MATURITY DISTRIBUTION OF SECURITIES (Market Value)
(dollars in thousands)
as of December 31, 1994
One Five Weighted
Within Through Through After Average Average
One Year Five Years Ten Years Ten Years Total Maturity Yield <F1>
U.S. Government and agencies $2,000 $31,475 $12,246 $14,011 $59,732 3 yr. 1 mos. 6.86%
Obligations of states and political
subdivisions 1,535 6,167 21,112 3,919 32,733 7 yr. 5 mos. 8.58%
Other securities 3,285 2,556 943 --- 6,784 1 yr. 5 mos. 5.96%
Total $6,820 $40,198 $34,301 $17,930 $99,249 4 yr. 5 mos. 7.37%
====== ======= ======= ======= =======
Percentage of total 6.9% 40.5% 34.6% 18.0% 100.0%
===== ===== ===== ===== ======
Weighted average yield<F1> 6.84% 7.38% 7.50% 7.30% 7.37%
===== ===== ===== ===== =====
<FN>
<F1>
(a) Weighted average yields were computed on a tax equivalent basis using a federal income tax rate of 34%.
The Bank monitors investment performance and valuation on an ongoing basis to evaluate investment quality. An investment
which has experienced a decline in market value considered to be other than temporary is written down to its net realizable
value and the amount of the write down is accounted for as a realized loss.
</FN>
-6-
APPENDIX A
Continued
LOAN ACCOUNT COMPOSITION
(dollars in thousands)
as of December 31
1994 1993 1992 1991 1990
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Commercial, financial and agricultural $ 31,227 16.4% $ 26,990 16.2% $ 20,818 13.2% $ 21,625 13.5% $ 21,150 13.7%
Real estate-construction 3,354 1.8 1,573 .9 1,796 1.1 1,916 1.2 2,057 1.3
Real estate-mortgage 103,851 54.4 89,116 53.2 84,389 53.3 81,245 51.0 77,499 50.3
Personal-installment 46,342 24.3 43,193 25.8 43,774 27.6 45,911 28.8 43,996 28.6
Other 6,018 3.1 6,549 3.9 7,572 4.8 8,741 5.5 9,337 6.1
190,792 100.0% 167,421 100.0% 158,349 100.0% 159,438 100.0% 154,039 100.0%
Less: ===== ===== ===== ===== =====
Unearned discount (8,522) (7,389) (7,708) (7,860) (7,942)
Reserve for loan losses (2,069) (1,837) (1,589) (1,467) (1,307)
$180,201 $158,195 $149,052 $150,111 $144,790
======== ======== ======== ======== ========
<FN>
The Corporation's loan activity is with customers located within the local
market area. The Corporation maintains a diversified loan portfolio and has no
significant loan concentration in any economic sector.
</FN>
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, 1994
One Year One to Over Five
Or Less Five Years Years
Maturity distribution $15,815 $18,766 ---
======= ======= ======
Variable Fixed Total
Interest sensitivity:
Due in one year or less $12,864 $2,950 $15,814
Due after one year 18,363 404 18,767
$31,227 $3,354 $34,581
======= ====== =======
-7-
APPENDIX A
Continued
NONPERFORMING LOANS <F1>
(dollars in thousands)
as of December 31
1994 1993 1992 1991 1990
Loans past due 90 days or more:
Commercial, financial and agricultural $ 152 $ 9 $ 196 $ 331 $ 194
Mortgages 114 87 544 361 452
Personal installment 59 99 121 226 197
Other 1 9 10 4 10
326 204 871 922 853
Loans renegotiated with the borrowers NONE NONE NONE NONE NONE
Loans on which accrual of interest has
been discontinued:
Commercial, financial and agricultural 327 50 64 158 169
Mortgages 475 809 539 169 16
Other 30 59 77 102 75
832 918 680 429 260
Other real estate owned 338 366 145 631 290
Total $1,496 $1,488 $1,696 $1,982 $1,403
====== ====== ====== ====== ======
<FN>
<F1>
(a) 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 1994 was $77,000. Interest income from these loans would have approximated
$66,000 in 1993.
The change in nonperforming loans is primarily a result of the impact of
economic conditions upon the loan portfolio. The economic outlook remains
uncertain. If the economy in the Bank's trading area improves this could have a
positive impact on delinquency trends and collectibility of loans. However,
the commercial real estate market in the Bank's trading area remains
stagnant. The ability of borrowers to liquidate collateral is dependent upon
the demand for commercial real estate projects and a buyer's ability to
finance commercial real estate projects. Prolonged continued weakness in the
commercial real estate market could result in an increase in delinquencies or
losses in commercial real estate loans.
</FN>
-8-
APPENDIX A
Continued
LOAN LOSS EXPERIENCE
(dollars in thousands)
For the years ended December 31, 1994, 1993, 1992, 1991, and 1990
1994 1993 1992 1991 1990
Loans at year-end, net of unearned income $182,270 $160,032 $150,641 $151,578 $146,097
======== ======== ======== ======== ========
Average loans balance <F1> $170,945 $159,976 $152,049 $151,900 $140,059
======== ======== ======== ======== ========
Balance, allowance for loan losses,
January 1 $ 1,837 $ 1,589 $ 1,467 $ 1,307 $ 1,186
Net charge-offs <F2> (230) (454) (561) (577) (541)
Provision for loan losses 462 702 683 737 662
Balance, allowance for loan losses,
December 31 <F2> $ 2,069 $ 1,837 $ 1,589 $ 1,467 $ 1,307
======== ======== ======== ======== =========
Net charge-offs to loans at year end .13% .28% .37% .38% .37%
Net charge-offs to average loans <F1> .13 .28 .37 .38 .39
Balance of allowance for loan losses
to loans at year end 1.14 1.15 1.05 .97 .89
<FN>
<F1>
(a) Averages are a combination of monthly and daily averages.
<F2>
(b) For detail, see Schedule of Loans Charged Off and Recovered.
The allowance for loans losses is based upon management's continuing
evaluation of the loan portfolio. A review as to loan quality, current
macro-economic conditions and delinquency status is performed at least on a
quarterly basis. The provision for loan losses is adjusted quarterly based upon
current review. The table on page 10 presents an allocation by loan
categories of the allowance for loan losses at December 31 for the last five
years. In retrospect, the specific allocation in any particular category may
prove excessive or inadequate and consequently may be reallocated in the future
to reflect the then current condition. Accordingly, the entire allowance is
available to absorb losses in any category.
The provision for loan losses totalled $462,000 for the year ended December 31,
1994 compared to $702,000, $683,000, $737,000, and $662,000 for the years ended
December 31, 1993, 1992 1991, and 1990, respectively. The 1994 provision for
loan losses reflected managements' continued concern for the strength of the
local economy. The relationship of the allowance for loan losses to loans at
year end approximated 1.14% compared to ratios of .89% to 1.15% for the
previous four years. In reviewing the adequacy of the allowance for loan
losses, management considered the relationship of nonaccrual loans, other real
estate owned, and accruing loans contractually past due 90 days or more to
total assets. This relationship approximated .49%,.52%, .62%, .80%, and .60%,
at year-end 1994, 1993, 1992, 1991, and 1990, respectively.
</FN>
-9-
APPENDIX A,
Continued
LOANS CHARGED OFF AND RECOVERED
(dollars in thousands)
for the years ended December 31, 1994, 1993, 1992, 1991, and 1990
1994 1993 1992 1991 1990
Loans charged off:
Commercial, financial and agricultural --- --- $ 63 $113 $324
Real estate-mortgage $ 82 $149 181 6 4
Personal installment 396 472 432 541 243
Other 99 66 59 34 39
Total 577 687 735 694 610
Loans recovered:
Commercial, financial and agricultural --- --- 6 4 25
Real estate-mortgage 83 77 4 -- 1
Personal installment 231 142 154 112 43
Other 33 14 10 1 --
Total 347 233 174 117 69
Net charge-offs $230 $454 $561 $577 $541
==== ==== ==== ==== ====
ALLOCATION OF
ALLOWANCE FOR LOAN LOSSES*
(dollars in thousands)
as of December 31
1994 1993 1992 1991 1990
Loans:
Commercial, financial and agricultural $ 399 $ 500 $ 601 $ 562 $ 501
Real estate-construction 1 --- 16 15 11
Real estate-mortgage 311 225 477 386 371
Installment 527 489 405 405 328
Unallocated 831 623 90 99 96
Balance $2,069 $1,837 $1,589 $1,467 $1,307
====== ====== ====== ====== ======
<FN>
*See Schedule "Loan Account Composition" for the percent of loan classification to total loans.
</FN>
MATURITY DISTRIBUTION OF TIME
DEPOSITS OF $100,000 OR MORE
(dollars in thousands)
as of December 31, 1994
Remaining to Maturity:
Less than three months $ 522
Three months to six months 1,846
Six months to twelve months 998
More than twelve months 4,706
$8,072
=======
-10-
APPENDIX A
Continued
INTEREST RATE SENSITIVITY
The excess of interest-earning assets over interest-bearing
liabilities which are expected to mature or reprice within a given period is
commonly referred to as the "GAP" for that period. For an institution with a
negative GAP, the amount of income earned on its assets fluctuates less than the
cost of its liabilities in response to changes in the prevailing rates of
interest during the period. Accordingly, in a period of decreasing interest
rates, institutions with a negative GAP will experience a smaller decrease in
the yield on their assets than in the cost of their liabilities. Conversely, in
a period of rising interest rates, institutions with a negative GAP face a
smaller increase in the yield on their assets than in the cost of their
liabilities. A decreasing interest rate environment is favorable to institutions
with a negative GAP because more of their liabilities than their assets adjust
during the period and, accordingly, the decrease in the cost of their
liabilities is greater than the decrease in the yield on their assets.
The negative GAP between the Bank's interest-earning assets and
interest-bearing liabilities maturing or repricing within one year approximated
10.3% of total assets at December 31, 1994.
Significant maturity/repricing assumptions include the presentation of
all savings and NOW accounts as being 100% interest rate sensitive. Equity
securities are reflected in the shortest time interval. Assumed paydowns on
mortgage-backed securities and loans have also been included in all time
intervals.
The following table sets forth the scheduled repricing or maturity of
the Bank's interest-earning assets and interest-bearing liabilities at December
31, 1994.
Interest Rate Sensitivity
At December 31, 1994 1-90 90-180 180-365 1 year Total
Dollars in thousands days days days or more
Assets
Interest-bearing deposits in
other banks $ 545 $ 100 --- --- $ 645
Investment securities 18,251 1,316 $ 3,195 $ 76,487 99,249
Federal funds sold --- --- --- --- ---
Loans, net of unearned income<F1> 55,173 62,503 14,323 50,271 182,270
Loans held for sale 35 --- --- --- 35
Total $ 74,004 $63,919 $17,518 $126,758 $282,199
Liabilities
Savings 115,104 --- --- --- 115,104
Time 18,124 15,484 19,508 55,477 108,593
Time in denominations of
$100,000 or more 422 1,846 998 4,806 8,072
Short-term borrowings 11,709 --- --- --- 11,709
Long-term debt --- --- 4,000 3,000 7,000
Total $145,359 $17,330 $24,506 $63,283 $250,478
Interest Sensitivity Gap
Periodic $(71,355) $46,589 $ (6,988) $63,475
Cumulative (24,766) (31,754) 31,721
<FN>
<F1>
*Does not include nonaccrual loans.
</FN>
-11-
PART II
Item 5. Market for Registrant's Common Stock and
Related Stockholder Matters:
Incorporated by reference is the information appearing under the
heading "Market for the Holding Company's Common Stock and Related Securities
Holder Matters" on page 3 of the Annual Report to Stockholders for the year
ended December 31, 1994 (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 18 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 19 through 23 of the Annual
Report.
Item 8. Financial Statements and Supplementary Data:
The consolidated financial statements, together with the report
thereon of Coopers & Lybrand L.L.P. dated January 15, 1995, are incorporated by
reference to pages 6 through 18 of the Annual Report.
Item 9. Disagreements on Accounting and Financial Disclosures:
None.
-12-
PART III
Item 10. Directors and Executive Officers of the Registrant:
The following table sets forth the name and age of each director
of Community Banks, Inc. as well as the director's business experience,
including occupation for the past 5 years, the period during which he has served
as a director of the Bank, or its wholly-owned subsidiary, Community Banks, N.A.
(Formerly Upper Dauphin National Bank), and the number and percentage of
outstanding shares of Common Stock of the Bank beneficially owned by said
directors as of December 31, 1994.
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 <F1> Ownership<F2> Owned
Thomas L. Miller Chairman of Bank 1966 16,964 <F12> .84%
Age 62
Kenneth L. Deibler Self-Employed 1966 19,527 <F3> .96%
Age 72 Insurance Broker
Elizabethville, PA
Leon E. Kocher Chairman of the Board, 1963 15,705 .78%
Age 82 Kocher Coal Co.
(coal mining)
Valley View, PA
Ernest L. Lowe President of Bank 1990 8,784 <F11> .43%
Age 58
Robert W. Rissinger President, 1968 134,932 <F4> 6.66%
Age 68 Kocher Coal Co. <F5>
(coal mining)
Valley View, PA
Allen Shaffer Attorney-at-Law 1961 24,613 <F9> 1.22%
Age 69 Millersburg and
Harrisburg, PA
William C. Troutman President, 1968 84,065 <F6> 4.15%
Age 79 The A. W. Troutman
Co. (automobile
dealership)
Millersburg, PA
James A. Ulsh Attorney-at-Law 1977 8,839 .44%
Age 48 Mette, Evans &
Woodside
Harrisburg, PA
Samuel E. Cooper Superintendent, 1991 1,034 .05%
Age 61 Warrior Run
School District
Turbotville, PA
Ronald E. Boyer President, 1981 9,469 <F7> .47%
Age 57 Alvord-Polk Tool Co.
(manufacturing of
cutting tools)
Millersburg, PA
Peter DeSoto President, 1981 23,479 1.16%
Age 55 Metal Industries,
Inc. (manufacturing
of metal products)
Elizabethville, PA
Thomas W. Long President, 1981 12,498 <F8> .62%
Age 65 Millersburg Hardware
Millersburg, PA
Donald L. Miller President, Miller 1981 50,797 2.51%
Age 65 Bros. Dairy
Millersburg, PA
Ray N. Leidich Dentist 1985 38,948 <F10> 1.92%
Age 66 Tremont, PA
<FN>
<F1> 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.
<F2> 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, 1994. Beneficial ownership may
be disclaimed as to certain of the securities.
<F3> Includes 1,451 shares owned by Mr. Deibler's grandchildren.
<F4> Includes 3,260 shares owned by Alvord-Polk Tool Co., Inc. the stock of which is
held 50% by Robert Rissinger and 50% by Ronald E. Boyer.
<F5> Includes 7,265 shares owned by Engle Ford, Inc., 372 shares owned by Mr.
Rissinger's spouse, Shirley Rissinger, and 3,394 shares owned by Engle Ford, Inc. Profit
Sharing Plan in which Mr. Rissinger is Co-Trustee.
<F6> Includes 18,703 shares owned by Mr. Troutman's spouse, Dorothy Troutman and 5,295
shares owned by W.C. Troutman Co.
<F7> Includes 3,260 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 130 shares owned by Mr.
Boyer's wife, Judith Boyer.
<F8> Includes 7,416 shares owned by the Trust of Mr. Long's mother, Leah Long.
<F9> Includes 4,198 shares owned by Mr. Shaffer's Pension Plan.
-14-
<F10> Includes 19,474 shares owned by Dr. Leidich's wife, Dolores Leidich.
<F11> Includes 87 shares owned by Mr. Lowe's wife, Barbara and 60 shares owned by Mr.
Lowe's children and incentive stock options to acquire 7,700 shares.
<F12> Includes incentive stock options to acquire 13,367 shares.
<F13> Includes incentive stock options to acquire 1,200 shares.
<F14> Includes incentive stock options to acquire 3,672 shares.
<F15> Includes incentive stock options to acquire 2,940 shares and 127 shares
registered to Mr. Lawley for his minor children.
<F16> Includes incentive stock options to acquire 1,120 shares.
</FN>
Compliance with Section 16(a) of Securities Exchange Act
In 1994, to the knowledge of CBI, all directors filed on a timely basis
reports required by the Securities Exchange Commission.
None of the directors or nominee directors are directors of other
companies with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
Executive Officers:
The following table sets forth the executive officers of Community Banks, Inc.,
their ages, their positions with Community Banks, Inc. and the beneficial ownership (as
determined in accordance with the rules and regulations of the Securities and Exchange
Commission) of Common Stock of the Bank by each of such persons as of December 31, 1994.
Amount and Percentage
Principal Occupation Nature of of
for the Past Five Beneficial Outstanding
Name and Age Years Term <F1> Ownership<F2>Common Stock
Thomas L. Miller Chairman & Chief Executive 1966 16,964 <F12> .84%
Age 62 Officer
Robert E. Lenker Executive Vice President, 1984 14,834 <F13> .73%
Age 66 Corporate Services
Ernest L. Lowe President, 1985 8,784 <F11> .43%
Age 58 Chief Operating Officer
David E. Hawley Executive Vice President, 1975 4,298 <F14> .21%
Age 56 Corporate Property Officer
Robert W. Lawley Executive Vice President, 1980 3,096 <F15> .15%
Age 40 Chief Lending Officer
Terry L. Burrows Executive Vice President, 1977 5,152 <F16> .25%
Age 46 Chief Financial Officer
<FN>
<F1> Initial year employed in this capacity.
<F11> Includes 87 shares owned by Mr. Lowe's wife, Barbara and 60 shares owned by Mr.
Lowe's children and incentive stock options to acquire 7,700 shares.
<F12> Includes incentive stock options to acquire 13,367 shares.
<F13> Includes incentive stock options to acquire 1,200 shares.
<F14> Includes incentive stock options to acquire 3,672 shares.
<F15> Includes incentive stock options to acquire 2,940 shares and 127 shares
registered to Mr. Lawley for his minor children.
<F16> Includes incentive stock options to acquire 1,120 shares.
</FN>
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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 375,803 101,231 23.21%
Item 11. Executive Compensation:
Information regarding executive compensation is omitted from this
report as the holding company has filed a definitive proxy statement for its
annual meeting of shareholders to be held May 2, 1995; and the information
included therein with respect to this item is incorporated herein by reference.
Pension Plan:
The Bank maintains a pension plan for its employees. An employee
becomes a participant in the pension plan on January 1 or July 1 after
completion of one year of service (12 continuous months) and attainment of the
age 21 years. The cost of the pension is actuarially determined and paid by the
Bank. The amount of monthly pension is equal to 1.15% of average monthly pay up
to $650, plus .60% of average monthly pay in excess of $650, multiplied by the
number of years of service completed by an employee. Average
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monthly pay is based upon the 5 consecutive plan years of highest pay
preceding retirement. The maximum amount of annual compensation used in
determining retirement benefits is $150,000. A participant is eligible for early
retirement after attainment of the age of 60 years and the completion of 5 years
of service. The early retirement benefit is the actuarial equivalent of the
pension accrued to the date of early retirement. Thomas L. Miller and Ernest L.
Lowe have been credited with 36 and 10 years of service, respectively, under the
pension plan as of December 31, 1994. The amounts shown on the following table
assume an annual retirement benefit for an employee who chose a straight-line
annuity and who is presently 50 years old and who will retire at the age of 65
years.
Remuneration
Years of
Service $35,000 $55,000 $75,000 $95,000 $115,000 $135,000 $150,000 $175,000 $195,000
15 $ 8,486 $13,736 $18,986 $24,236 $29,486 $34,736 $38,763 $38,763 $38,763
20 $11,314 $18,314 $25,314 $32,314 $39,314 $46,316 $51,564 $51,564 $51,564
25 $14,143 $22,893 $31,643 $40,393 $49,143 $57,893 $64,455 $64,455 $64,455
30 $16,971 $27,471 $37,971 $48,471 $58,971 $69,471 $77,346 $77,346 $77,346
35 $19,800 $32,050 $44,300 $56,550 $68,800 $81,050 $90,237 $90,237 $90,237
40 $22,138 $35,778 $49,418 $63,058 $76,698 $90,338 $100,568 $100,568 $100,568
Directors' Compensation:
Each director of CBI is paid a quarterly fee of $600.00. In
addition, each outside director receives a fee of $200.00 for attendance at the
regular quarterly meetings of the Board of Directors of CBI. Each director who
is not an executive officer also receives $150 for attendance at each committee
meeting of CBI.
Item 12. Security Ownership of Certain Beneficial
Owners and Management:
Refer to Item 10 on pages 13 through 16.
Item 13. Certain Relationships and Related Transactions:
(a) Transactions with Management and Others
Incorporated by reference is the information appearing in Note 12
(Related Parties) of Notes to Consolidated Financial Statements on page 14 of
the Annual Report.
(b) Certain Business Relationships
Allen Shaffer, a director of the Bank, is an attorney practicing
in Harrisburg and Millersburg, Pennsylvania, who has been retained in the last
two fiscal years by the Bank and who the Bank proposes to retain in the current
fiscal year. James A. Ulsh, a director of the Bank, is a shareholder/employee of
the law firm of Mette, Evans & Woodside, Harrisburg, Pennsylvania, which the
Bank has retained in the last two fiscal years and proposes to retain in the
current fiscal year.
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.
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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 -- 18
Balance Sheets as of December 31, 1994
and 1993 -- 6
Statements of Income for each of the three years
ended December 31, 1994 -- 7
Statements of Changes in Stockholders'
Equity for each of the three years ended
December 31, 1994 -- 8
Statements of Cash Flows for each of the three
years ended December 31, 1994 -- 8
Notes to Financial Statements -- 9-17
All other schedules are omitted since the required information is not
applicable or is not present in amounts sufficient to require submission of the
schedule.
(3) Exhibits
(3) Articles of Incorporation and By-Laws. Incorporated Registration
by reference to the Proxy Statements dated April 14, 1987 and April 12, 1988 and
Amendment 2 to Form S-2 dated May 13, 1987.
(13) Portions of the Annual Report to Security Holders incorporated by
within this document.
(21) Subsidiaries of the Registrant (see Item 1, pages 2 and 3).
(b) The registrant did not file on Form 8-K during the Fourth quarter of the
Fiscal year ended December 31, 1994.
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Community Banks, Inc. on Form S-8 (File No. 0-15786 and File No.
33-24908) of our report, dated January 13, 1995 on our audits of the
consolidated financial statements of Community Banks, Inc. as of December 31,
1994 and 1993, and for the years ended December 31, 1994, 1993, and 1992, which
report is incorporated by reference in this Annual Report on Form 10-K.
Signature
/S/ Coopers & Lybrand L.L.P.
One South Market Square
Harrisburg, Pennsylvania
March 22, 1995
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Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Community Banks, Inc.
By:/S/__Thomas L. Miller_____
(Thomas L. Miller)
Chairman
Chief Executive Officer
and Director
Date: March 17, 1995
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 3/17/95
(Terry L. Burrows) Principal Financial Officer
/S/ Ronald E. Boyer Director 3/17/95
(Ronald E. Boyer)
/S/ Samuel E. Cooper Director 3/17/95
(Samuel E. Cooper)
/S/ Kenneth L. Deibler Director 3/17/95
(Kenneth L. Deibler)
/S/ Ray N.Leidich Director 3/17/95
(Ray N. Leidich)
/S/ Ernest L. Lowe Director 3/17/95
(Ernest L. Lowe)
/S/ Donald L. Miller Director 3/17/95
(Donald L. Miller)
/S/ Robert W. Rissinger_ Director 3/17/95
(Robert W. Rissinger)
/S/ Allen Shaffer _ Director 3/17/95
(Allen Shaffer)
/S/ William C. Troutman Director 3/17/95
(William C. Troutman)
/S/ James A. Ulsh _ Director 3/17/95
(James A. Ulsh)
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