HARRISBURG, Pa., Oct. 18 /PRNewswire-FirstCall/ -- 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 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. 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
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. 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 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. 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) Average Fourth Third Second First 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 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) COMMUNITY BANKS, INC.
& SUBSIDIARIES Fiscal Insight - SEPTEMBER 30, 2007 CONDENSED
CONSOLIDATED QUARTERLY AVERAGE STATEMENTS OF CONDITION (dollars in
thousands) 2007 Third Second First Quarter Quarter Quarter Assets
Earning Assets: Loans $2,578,729 $2,574,074 $2,404,530 Federal
funds sold and other 27,494 79,230 10,701 Investment securities
682,695 671,210 682,592 Total earning assets 3,288,918 3,324,514
3,097,823 Cash and due from banks 62,333 60,873 55,542 Allowance
for loan losses (25,490) (25,985) (24,022) Goodwill and other
intangible assets 279,494 278,950 259,083 Premises, equipment and
other assets 173,083 167,442 155,763 Total assets $3,778,338
$3,805,794 $3,544,189 Liabilities and equity Interest-bearing
liabilities: Deposits Savings and NOW accounts $937,362 $942,150
$858,469 Time 1,017,512 1,030,564 994,824 Time deposits greater
than $100,000 327,450 324,099 268,268 Short-term borrowings 81,387
65,019 124,985 Long-term debt 435,014 456,769 391,196 Subordinated
debt 75,260 75,260 56,817 Total interest-bearing liabilities
2,873,985 2,893,861 2,694,559 Non-interest bearing deposits 356,064
363,298 340,580 Other liabilities 27,200 26,226 22,122 Total
liabilities 3,257,249 3,283,385 3,057,261 Stockholders' equity
521,089 522,409 486,928 Total liabilities and stockholders' equity
$3,778,338 $3,805,794 $3,544,189 CHANGE IN AVERAGE BALANCES* 2007
Third Second First Quarter Quarter Quarter Loans 10.2 % 11.3 % 5.0
% Total assets 11.6 % 12.2 % 4.8 % Deposits 8.2 % 11.7 % 7.0 %
Stockholders' equity 10.4 % 11.0 % 1.8 % (dollars in thousands)
2006 Fourth Third Quarter Quarter Assets Earning Assets: Loans
$2,353,774 $2,339,352 Federal funds sold and other 37,059 29,324
Investment securities 610,312 566,772 Total earning assets
3,001,145 2,935,448 Cash and due from banks 62,318 62,636 Allowance
for loan losses (24,102) (24,385) Goodwill and other intangible
assets 259,373 259,023 Premises, equipment and other assets 153,361
153,183 Total assets $3,452,095 $3,385,905 Liabilities and equity
Interest-bearing liabilities: Deposits Savings and NOW accounts
$876,404 $873,670 Time 1,010,249 984,415 Time deposits greater than
$100,000 267,747 235,264 Short-term borrowings 77,910 60,680
Long-term debt 318,078 340,162 Subordinated debt 51,548 51,548
Total interest-bearing liabilities 2,601,936 2,545,739 Non-interest
bearing deposits 342,766 344,708 Other liabilities 25,659 23,547
Total liabilities 2,970,361 2,913,994 Stockholders' equity 481,734
471,911 Total liabilities and stockholders' equity $3,452,095
$3,385,905 CHANGE IN AVERAGE BALANCES* 2006 Fourth Third Quarter
Quarter Loans 6.9 % 9.3 % Total assets 4.2 % 2.1 % Deposits 10.4 %
8.4 % Stockholders' equity 1.3 % (1.9)% * Compares the current
quarter to the comparable quarter of the prior year COMMUNITY
BANKS, INC. & SUBSIDIARIES Fiscal Insight - SEPTEMBER 30, 2007
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands)
2007 Third Second First Quarter Quarter Quarter Interest income
$56,668 $56,703 $52,239 Tax equivalent adjustment 2,260 2,234 2,253
58,928 58,937 54,492 Interest expense 28,532 28,124 25,972 Net
interest income 30,396 30,813 28,520 Provision for loan losses
1,050 700 1,300 Net interest income after provision 29,346 30,113
27,220 Non-interest income 9,915 10,554 8,924 Investment security
gains (losses) --- --- (4,388) Mortgage banking activities income
459 694 548 Non-interest expenses 22,932 24,491 22,141 Merger
expenses 754 --- --- Income before income taxes 16,034 16,870
10,163 Income taxes 3,281 3,686 1,323 Tax equivalent adjustment
2,260 2,234 2,253 NET INCOME $10,493 $10,950 $6,587 Tax effect of
security transactions $ --- $ --- ($1,536) 2006 Fourth Third
Quarter Quarter Annual Interest income $51,364 $50,443 $197,634 Tax
equivalent adjustment 1,998 1,916 7,802 53,362 52,359 205,436
Interest expense 25,273 23,505 90,734 Net interest income 28,089
28,854 114,702 Provision for loan losses 650 250 2,050 Net interest
income after provision 27,439 28,604 112,652 Non-interest income
8,194 8,279 32,063 Investment security gains (losses) 415 28 732
Mortgage banking activities income 591 533 2,172 Non-interest
expenses 22,482 21,172 84,885 Merger expenses --- --- --- Income
before income taxes 14,157 16,272 62,734 Income taxes 2,759 3,798
13,901 Tax equivalent adjustment 1,998 1,916 7,802 NET INCOME
$9,400 $10,558 $41,031 Tax effect of security transactions $145 $10
$256 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 $12,419 $13,069 $12,009 $12,154 $11,611
$46,434 benefits 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 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%
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 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 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 FTE Average Average FTE Average Balance Interest Rate
Balance Interest Rate Income/ Earned/ Income/ Earned/ Expense Paid
Expense 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% 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 FTE Average Average FTE Average Balance
Interest Rate Balance Interest Rate Income/ Earned/ Income/ Earned/
Expense Paid Expense 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% 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 FTE Average Average FTE Average Balance Interest Rate
Balance Interest Rate Income/ Earned/ Income/ Earned/ Expense Paid
Expense 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% 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 COMMUNITY BANKS, INC.
& SUBSIDIARIES Fiscal Insight - SEPTEMBER 30, 2007
Reconciliation of GAAP to Non-GAAP Measures: (in thousands, except
per share data) 2007 Third Second First Quarter Quarter Quarter
Income statement data: Net income Net income $10,493 $10,950 $6,587
Amortization of core deposit and other intangible assets (1) 488
528 429 Merger expenses (1) 490 --- --- Net operating (tangible)
income $11,471 $11,478 $7,016 Earnings per share Diluted earnings
per common share $0.42 $0.44 $0.28 Amortization of core deposit and
other intangible assets (1) 0.02 0.02 0.02 Merger expenses (1) 0.02
--- --- Diluted operating (tangible) earnings per share $0.46 $0.46
$0.30 Balance sheet data: Average assets Average assets $3,778,338
$3,805,794 $3,544,189 Goodwill (265,048) (263,694) (246,400) Core
deposit and other intangible assets (14,446) (13,229) (13,369)
Average tangible assets $3,498,844 $3,526,844 $3,285,106 Operating
return on average tangible assets 1.30% 1.31% 0.87% Average equity
Average equity $521,089 $522,409 $486,928 Goodwill (265,048)
(263,694) (246,400) Core deposit and other intangible assets
(14,446) (15,256) (12,683) Deferred taxes 2,349 2,468 1,547 Average
tangible equity $243,944 $245,927 $229,392 Operating return on
average tangible equity 18.66% 18.72% 12.40% At end of quarter:
Total assets Total assets $3,789,634 $3,750,844 $3,627,739 Goodwill
(265,136) (265,129) (246,449) Core deposit and other intangible
assets (14,083) (14,834) (12,363) Total tangible assets $3,510,415
$3,470,881 $3,368,927 Total equity Total equity $526,475 $517,193
$490,564 Goodwill (265,136) (265,129) (246,449) Core deposit and
other intangible assets (14,083) (14,834) (12,363) Deferred taxes
2,277 2,403 1,482 Total tangible equity $249,533 $239,633 $233,234
Tangible book value at end of period $10.05 $9.68 $9.91 Tangible
equity to assets 7.11% 6.90% 6.92% (1)Net of related tax effect
Reconciliation of GAAP to Non-GAAP Measures: (in thousands, except
per share data) 2006 Fourth Third Quarter Quarter Annual Income
statement data: Net income Net income $9,400 $10,558 $41,031
Amortization of core deposit and other intangible assets (1) 406
428 1,715 Merger expenses (1) --- --- --- Net operating (tangible)
income $9,806 $10,986 $42,746 Earnings per share Diluted earnings
per common share $0.40 $0.45 $1.72 Amortization of core deposit and
other intangible assets (1) 0.01 0.01 0.07 Merger expenses (1) ---
--- --- Diluted operating (tangible) earnings per share $0.41 $0.46
$1.79 Balance sheet data: Average assets Average assets $3,452,095
$3,385,905 $3,403,421 Goodwill (246,287) (245,794) (245,652) Core
deposit and other intangible assets (13,086) (13,229) (13,369)
Average tangible assets $3,192,722 $3,126,882 $3,144,400 Operating
return on average tangible assets 1.22% 1.39% 1.36% Average equity
Average equity $481,734 $471,911 $475,710 Goodwill (246,287)
(245,794) (245,652) Core deposit and other intangible assets
(13,086) (13,229) (13,368) Deferred taxes 1,652 1,755 1,744 Average
tangible equity $224,013 $214,643 $218,434 Operating return on
average tangible equity 17.37% 20.31% 19.57% At end of quarter:
Total assets Total assets $3,496,370 $3,431,208 $3,496,370 Goodwill
(246,383) (245,864) (246,383) Core deposit and other intangible
assets (13,023) (13,641) (13,023) Total tangible assets $3,236,964
$3,171,703 $3,236,964 Total equity Total equity $486,161 $479,584
$486,161 Goodwill (246,383) (245,864) (246,383) Core deposit and
other intangible assets (13,023) (13,641) (13,023) Deferred taxes
1,591 1,698 1,591 Total tangible equity $228,346 $221,777 $228,346
Tangible book value at end of period $9.71 $9.45 $9.71 Tangible
equity to assets 7.05% 6.99% 7.05% (1)Net of related tax effect
DATASOURCE: Community Banks, Inc. CONTACT: Donald F. Holt, EVP/CFO
Community Banks, Inc., +1-717-920-5801, Fax, +1-717-920-1683 Web
site: http://www.communitybanks.com/
Copyright