U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1999.
or
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from __________ to __________.
No. 000-29658
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(Commission File Number)
COMMUNITY INDEPENDENT BANK, INC.
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(Exact Name of Registrant as Specified in its Charter)
PENNSYLVANIA 23-2357593
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(State of Incorporation) (IRS Employer ID Number)
201 N. MAIN STREET, BERNVILLE, PA 19506
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(Address of Principal Executive Offices) (zip code)
(610) 488-1200
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(Registrant's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $5.00 Par Value
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(Title of Class)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 ___
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended December 31, 1999 were
$8,652,151.
The aggregate market value of voting stock held by non-affiliates of the
registrant is $7,082,000.
The number of shares of the Issuer's common stock, par value $5.00 per
share, outstanding as of February 29, 2000 was 699,502.
DOCUMENTS INCORPORATED BY REFERENCE:
Part III incorporates certain information by reference from the
registrant's Proxy Statement for the Annual Meeting of Shareholders.
Transitional Small Business Disclosure Format (check one): Yes ___ No [X]
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COMMUNITY INDEPENDENT BANK, INC.
FORM 10-KSB CROSS-REFERENCE INDEX
Page
Part I
Item 1. Business 4-10
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters 11-12
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-30
Item 7. Financial Statements
Independent Auditor's Report 31
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998 32
Consolidated Statements of Income for the Years Ended
December 31, 1999 and 1998 33
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999 and 1998 34
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 35
Notes to Consolidated Financial Statements 36-56
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 57
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) Of the Exchange Act 57
Item 10. Executive Compensation 57
Item 11. Security Ownership of Certain Beneficial Owners and Management 57
Item 12. Certain Relationships and Related Transactions 57
Item 13. Exhibits and Reports on Form 8-K 59-61
Signatures 58
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PART I
ITEM 1. BUSINESS
General
Community Independent Bank, Inc. (the "Company") is a Pennsylvania business
corporation which is registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Holding Company Act"). The Company was
incorporated on December 31, 1984 for the purpose of acquiring Bernville Bank,
N.A. (the "Bank") and thereby enabling the Bank to operate within a bank holding
company structure. The Company became an active bank holding company on December
31, 1984 when it acquired the Bank. The Bank is a wholly-owned subsidiary of the
Company.
The Company's principal activities consist of owning and supervising the
Bank, which engages in a full service commercial and consumer banking business.
The Company, through the Bank, derives substantially all of its income from the
furnishing of banking and bank related services.
The Company is a legal entity separate and distinct from the Bank. The
rights of the Company, and thus the rights of the Company's creditors and
shareholders, to participate in the distributions and earnings of the Bank, are
necessarily subject to the prior claims of the creditors of the Bank, except to
the extent that claims of the Company itself as a creditor may be recognized.
Such claims on the Bank by creditors other than the Company include obligations
in respect of federal funds purchased and certain other borrowings, as well as
deposit liabilities.
The Company directs the policies and coordinates the financial resources of
the Bank. The Company provides and performs various technical and advisory
services for the Bank, coordinates the Bank's general policies and activities,
and participates in the Bank's major business decisions.
As of December 31, 1999, the Company, on a consolidated basis, had total
assets of approximately $109.5 million, total deposits of approximately $90.6
million, and stockholders' equity of approximately $7.2 million.
Bernville Bank, N.A.
The Bank was incorporated in 1907 under the laws of the United States of
America as a national bank under the name "The First National Bank of
Bernville." In 1971, the charter was changed to a state charter under the name
"Bernville Bank." In 1983, the charter was again changed to a national banking
association under the current name. The Bank is a member of the Federal Reserve
System.
As of December 31, 1999, the Bank (exclusive of the holding company assets
and liabilities) had total assets of approximately $109.5 million, total
deposits of approximately $90.7 million, and stockholders' equity of
approximately $7.1 million. Its deposits are insured by the Bank Insurance Fund
("BIF") maintained by the Federal Deposit Insurance Corporation (the "FDIC") to
the maximum extent permitted by law.
The Bank engages in a full service commercial and consumer banking
business. The Bank, with its main office at 201 North Main Street, Bernville,
Pennsylvania, also provides services to its customers through three full service
branch banks which include drive-in facilities. The Bank's main office, three
full service branch offices and operations center are all located in Berks
County, Pennsylvania.
The Bank's services include accepting time, demand and saving deposits,
including NOW accounts, regular savings accounts, money market certificates,
fixed rate certificates of deposit and club accounts. Its services also include
making secured and unsecured commercial and consumer loans, making construction
and mortgage loans and the renting of safe deposit facilities. The Bank also
offers a check card to its customers and has instituted "Xpress Phone Banking"
which provides customers 24-hour access to their accounts. Additional services
include making residential mortgage loans and small business loans. The Bank's
business loans include seasonal credit, collateral loans and term loans. The
Bank is not authorized to exercise trust powers.
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No material amount of deposits is obtained from a single depositor or group
of depositors (including Federal, state and local governments). The Bank has not
experienced any significant seasonal fluctuations in the amount of its deposits.
Both fixed and adjustable rate residential mortgage loans are offered.
Fixed rate loans for residential mortgages have terms up to 30 years. Fixed rate
residential mortgage loans ranging from 20 to 30 years are generally sold in the
secondary market. Adjustable rate loans are held in portfolio. The current
residential mortgage portfolio is comprised of substantially all fixed rate
loans.
Home Equity loans are originated as fixed rate loans with terms generally
between 5 to 8 years, and occasionally up to 15 years. Variable-rate home equity
loans are also offered and represent approximately only 3% of the portfolio.
Commercial loans are offered as either variable rate loans for the life of
the loan or have a fixed term for 3 to 5 years and then vary according to an
index. Fixed rate loans currently represent 76% of the commercial portfolio.
Consumer loans are primarily fixed rates and represent 85% of the consumer
loan portfolio. Lines of credit are offered as adjustable rates and represent
15% of the portfolio.
The Bank requires private mortgage insurance for all residential mortgage
loans in excess of the 80% of the appraised value. For retail loans, the Bank's
general policy is not to lend above 95% of the collateral value. However, any
retail loan over 85% of the appraised value requires private mortgage insurance.
Commercial loans are generally held at 75% loan to value.
The Bank has no deposits or loans directly with foreign entities, and has a
minimal amount of deposits made by persons working in foreign countries. The
Bank's assets are not invested in foreign securities, Eurodollars or foreign
loans.
Market Area and Competition
The Bank's primary service area is the northwestern portion of Berks
County, Pennsylvania. By all indications, Berks County has experienced and will
continue to experience good economic growth. Much of Berks County's land is
dedicated to farming, while the number of manufacturing jobs in the area is
higher than the national average. Prominent manufacturing employers in Berks
County include East Penn Manufacturing Co., Inc., Carpenter Technology
Corporation, AT&T Microelectronics, Dana Corporation and Arrow International.
The unemployment level in the area has remained low during the recent past.
Additionally, Berks County continues to experience moderate population growth as
the Philadelphia metropolitan area grows north and west.
The Bank competes with local commercial banks as well as other commercial
banks with branches in the Bank's market area. All phases of the Bank's business
are highly competitive. The Bank considers its major competition to be Berks
County Bank, headquartered in Reading, Pennsylvania, First National Bank of
Leesport, headquartered in Leesport, Pennsylvania, First Union National Bank,
headquartered in Charlotte, North Carolina, Sovereign Bank, headquartered in
Reading, Pennsylvania, and National Penn Bank, headquartered in Boyertown,
Pennsylvania.
The Bank, along with other commercial banks, competes with respect to its
lending activities as well as in attracting demand deposits, with savings banks,
savings and loan associations, insurance companies, regulated small loan
companies and credit unions. Most of these competitors have substantially
greater financial resources than the Company including a larger capital base
which allows them to attract customers seeking larger loans than the Bank is
able to make.
The Bank is generally competitive with all competing financial institutions
in its service areas with respect to interest rates paid on time and savings
deposits, service charges on deposit accounts and interest rates charged on
loans.
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999, federal legislation intended to modernize the
financial services industry by establishing a comprehensive framework to permit
affiliations among commercial banks, insurance companies, securities firms, and
other financial services providers. As a result of the legislation, bank holding
companies will be permitted to engage in a wider variety of financial activities
than permitted under prior law, particularly with regard to insurance and
securities activities. Moreover, to the extent that it permits banks, securities
firms and insurance companies to affiliate, the financial services industry may
experience further consolidation. This could result in
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a growing number of larger financial institutions that offer a wider variety of
financial services than we currently offer and that can aggressively compete
in the markets we serve. This could adversely impact our profitability.
Supervision and Regulation
The Company is subject to regulation by the Pennsylvania Department of
Banking and the Federal Reserve Board. The deposits of the Bank are insured by
the FDIC and the Bank is a member of the Bank Insurance Fund which is
administered by the FDIC. The Bank is regulated and examined by the Office of
the Comptroller of the Currency.
The Company is required to file with the Federal Reserve Board an annual
report and such additional information as the Federal Reserve Board may require
pursuant to the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The Federal Reserve Board may also make examinations of the Company. The BHC Act
requires each bank holding company to obtain the approval of the Federal Reserve
Board before it may acquire substantially all the assets of any bank, or before
it may acquire ownership or control of any voting shares of any bank if, after
such acquisition, it would own or control, directly or indirectly, more than
five percent of the voting shares of such bank.
In addition, a bank holding company, which does not qualify or does not
elect to become a financial holding company under the Gramm-Leach-Bliley Act, is
generally prohibited from engaging in, or acquiring direct or indirect control
of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the Federal Reserve
Board to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto. Some of the principal activities that the Federal
Reserve Board has determined by regulation to be so closely related to banking
as to be a proper incident thereto are:
o Making or servicing loans;
o Performing certain data processing services;
o Providing discount brokerage services;
o Acting as fiduciary, investment or financial advisor;
o Leasing personal or real property;
o Making investments in corporations or projects designed primarily
to promote community welfare; and
o Acquiring a savings and loan association.
Bank holding companies that do qualify as a financial holding company may
engage in activities that are of a financial nature or incidental thereto. A
bank holding company may qualify to become a financial holding company if each
of its depository institution subsidiaries is "well capitalized", "well
managed," has at least a "satisfactory" CRA rating in its most recent
examination and the bank holding company has filed a certification with the
Federal Reserve Bank that it elects to become a financial holding company.
A bank holding company and its subsidiaries are subject to certain
restrictions imposed by the BHC Act on any extensions of credit to the bank or
any of its subsidiaries, investments in the stock or securities thereof, and on
the taking of such stock or securities as collateral for loans to any borrower.
A bank holding company and its subsidiaries are also prevented from engaging in
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.
Source of Strength Doctrine
Under Federal Reserve Board regulations, a bank holding company is required
to serve as a source of financial and managerial strength to its subsidiary
banks and may not conduct its operations in an unsafe or unsound manner. In
addition, it is the Federal Reserve Board's policy that in serving as a source
of strength to its subsidiary banks, a bank holding company should stand ready
to use available resources to provide adequate capital funds to its subsidiary
banks during periods of
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financial stress or adversity and should maintain the financial flexibility
and capital-raising capacity to obtain additional resources for assisting its
subsidiary banks. A bank holding company's failure to meet its obligations to
serve as a source of strength to its subsidiary banks will generally be
considered by the Federal Reserve Board to be an unsafe and unsound banking
practice or a violation of the Federal Reserve Board regulations or both. This
doctrine is commonly known as the "source of strength" doctrine.
Dividends
Dividends are paid by the Company from its assets, which are mainly
provided by dividends from the Bank. However, certain regulatory restrictions
exist regarding the ability of the Bank to transfer funds to the Company in the
form of cash dividends, loans or advances. The approval of the Comptroller of
the Currency is required if the total of all dividends declared by a national
bank in any calendar year exceeds the Bank's net profits (as defined) for that
year combined with its retained net profits for the preceding two calendar
years. Under this restriction, the Bank, without prior regulatory approval, can
declare dividends to the Company totaling $538,000 plus an additional amount
equal to the Bank's net profit for 2000, up to the date of any such dividend
declaration.
Capital Adequacy
The Federal banking regulators have adopted risk-based capital guidelines
for bank holding companies, such as the Company. Currently, the required minimum
ratio of total capital to risk-weighted assets (including off-balance sheet
activities, such as standby letters of credit) is 8%. At least half of the total
capital is required to be Tier 1 capital, consisting principally of common
shareholders' equity, non-cumulative perpetual preferred stock, a limited amount
of cumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries, less goodwill. The remainder (Tier 2
capital) may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and other
debt securities, perpetual preferred stock and a limited amount of the general
loan loss allowance.
In addition to the risk-based capital guidelines, the Federal banking
regulators established minimum leverage ratio (Tier 1 capital to total assets)
guidelines for bank holding companies. These guidelines provide for a minimum
leverage ratio of 3% for those bank holding companies which have the highest
regulatory examination ratings and are not contemplating or experiencing
significant growth or expansion. All other bank holding companies are required
to maintain a leverage ratio of at least 1% to 2% above the 3% stated minimum.
The Company and the Bank exceed all applicable capital requirements.
FDICIA
In 1991, the Federal Deposit Insurance Corporation Improvement Act
("FDICIA") was signed into law. FDICIA established five different levels of
capitalization of financial institutions, with "prompt corrective actions" and
significant operational restrictions imposed on institutions that are capital
deficient under the categories. The five categories are: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized.
To be considered well capitalized, an institution must have a total
risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of
at least 6%, a leverage capital ratio of 5%, and must not be subject to any
order or directive requiring the institution to improve its capital level. An
institution falls within the adequately capitalized category if it has a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at
least 4%, and a leverage capital ratio of at least 4%. Institutions with lower
capital levels are deemed to be undercapitalized, significantly undercapitalized
or critically undercapitalized, depending on their actual capital levels. In
addition, the appropriate federal regulatory agency may downgrade an institution
to the next lower capital category upon a determination that the institution is
in an unsafe or unsound condition, or is engaged in an unsafe or unsound
practice. Institutions are required under FDICIA to closely monitor their
capital levels and to notify their appropriate regulatory agency of any basis
for a change in capital category. On December 31, 1999, the Company and the Bank
exceeded the minimum capital levels of the well capitalized category.
Regulatory oversight of an institution becomes more stringent with each
lower capital category, with certain "prompt corrective actions" imposed
depending on the level of capital deficiency.
Other Provisions of FDICIA
Each depository institution must submit audited financial statements to its
primary regulator and the FDIC, which reports are made publicly available. In
addition, the audit committee of each depository institution must consist of
outside
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directors and the audit committee at "large institutions" (as defined by
FDIC regulation) must include members with banking or financial management
expertise. The audit committee at "large institutions" must also have access to
independent outside counsel. In addition, an institution must notify the FDIC
and the institution's primary regulator of any change in the institution's
independent auditor, and annual management letters must be provided to the FDIC
and the depository institution's primary regulator. The regulations define a
"large institution" as one with over $500 million in assets, which does not
include the Bank. Also, under the rule, an institution's independent auditor
must examine the institution's internal controls over financial reporting.
Under FDICIA, each federal banking agency must prescribe certain safety and
soundness standards for depository institutions and their holding companies.
Three types of standards must be prescribed: asset quality and earnings,
operational and managerial, and compensation. Such standards would include a
ratio of classified assets to capital, minimum earnings, and, to the extent
feasible, a minimum ratio of market value to book value for publicly traded
securities of such institutions and holding companies. Operational and
managerial standards must relate to: (i) internal controls, information systems
and internal audit systems, (ii) loan documentation, (iii) credit underwriting,
(iv) interest rate exposure, (v) asset growth, and (vi) compensation, fees and
benefits.
Provisions of FDICIA relax certain requirements for mergers and
acquisitions among financial institutions, including authorization of mergers of
insured institutions that are not members of the same insurance fund, and
provide specific authorization for a federally chartered savings association or
national bank to be acquired by an insured depository institution.
Under FDICIA, all depository institutions must provide 90 days notice to
their primary federal regulator of branch closings, and penalties are imposed
for false reports by financial institutions. Depository institutions with assets
in excess of $250 million must be examined on-site annually by their primary
federal or state regulator or the FDIC.
FDICIA also sets forth Truth in Savings disclosure and advertising
requirements applicable to all depository institutions.
FDIC Insurance Assessments
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") created two deposit insurance funds to be administered by the FDIC:
the Savings Association Insurance Fund (SAIF) and the Bank Insurance Fund (BIF).
The Bank's deposits are insured under BIF. The FDIC has implemented a
risk-related premium schedule for all insured depository institutions that
results in the assessment of premium based on capital and supervisory measures.
Under the risk-related premium schedule, the FDIC assigns, on a semiannual
basis, each institution to one of three capital groups (well capitalized,
adequately capitalized or undercapitalized) and further assigns such institution
to one of three subgroups within a capital group. The institution's subgroup
assignment is based upon the FDIC's judgment of the institution's strength in
light of supervisory evaluations, including examination reports, statistical
analyses and other information relevant to gauging the risk posed by the
institution. Only institutions with a total capital to risk-adjusted assets
ratio of 10.00% or greater, a Tier 1 capital to risk-adjusted assets ratio of
6.0% or greater and a Tier 1 leverage ratio of 5.0% or greater are assigned to
the well-capitalized group.
SAIF Re-capitalization Plan
On September 30, 1996, Congress enacted a SAIF Recapitalization Plan and a
plan for banks insured by the fully capitalized BIF to share the burden of
repaying outstanding Finance Corporation (FICO) bonds issued to fund SAIF's
predecessor (the "FSLIC") in the late 1980s. The legislation enacted by Congress
containing the Recapitalization Plan is entitled the Deposit Insurance Funds Act
of 1996.
Under the Recapitalization Plan, SAIF insured institutions were required to
pay a one time special assessment in the fourth quarter of 1996 equivalent to
65.7 cents for every $100 of insured deposits as of March 31, 1995. The one time
special assessment on SAIF insured deposits is intended to result in a major
decrease in annual insurance premiums paid by SAIF insured institutions. At the
end of 1996, SAIF insured institutions generally paid 23 cents for each $100 of
deposit insurance coverage while BIF insured banks insured by the fully
capitalized BIF paid virtually zero assessments.
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As part of the legislation, a new formula was adopted whereby BIF insured
institutions, such as the Bank, would be required to share in the burden of
repayment of the FICO bonds issued to finance the FSLIC in the 1980s. Commencing
in calendar year 1997, the only deposit insurance cost for most
well-capitalized, well-managed BIF insured and SAIF insured institutions will be
FICO bond payments. For years 1997 through 1999, SAIF insured institutions will
pay approximately 6.5 cents per $100 in deposits toward the FICO bond payments
while BIF insured institutions will pay approximately 1.3 cents per $100 in
deposits. During 1999, the Bank paid $10,086 to the FDIC based on average
deposits of approximately $88 million. From the year 2000 to 2017, both SAIF
insured institutions and BIF insured institutions will pay approximately 2.43
cents per $100 in deposits toward retirement of the FICO obligations.
The legislation also contains certain restrictions on the ability of SAIF
insured institutions to transfer deposits to BIF insured affiliates and a
requirement that Congress must eliminate the thrift charter before merging SAIF
into BIF. Finally, the legislation also contained a prohibition against the FDIC
assessing any deposit insurance premiums against well-managed, well-capitalized
banks when BIF reserves are at or above the statutory reserve requirement of
1.25% of total insured deposits.
Interstate Banking
Prior to the passage of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Riegle-Neal Act") in September 1994, interstate
acquisitions were prohibited under the terms of the Douglas Amendment to the BHC
Act unless the acquisition was specifically authorized by a reciprocal
interstate banking statute, such as the statute adopted in Pennsylvania in 1990.
Similarly, interstate branching was prohibited for national banks and
state-chartered member banks by the McFadden Act, although some states, not
including Pennsylvania, had passed laws permitting limited interstate branching
by non-Federal Reserve member state banks. The Riegle-Neal Act permits an
adequately capitalized, adequately managed bank holding company to acquire a
bank in another state as of September 29, 1994, whether or not the state permits
the acquisition, subject to certain deposit concentration caps and the Federal
Reserve Board's approval. A state may not impose discriminatory requirements on
acquisitions by out-of-state holding companies. In addition, beginning on June
1, 1997, under the Riegle-Neal Act, a bank can expand interstate by merging with
a bank in another state and also may consolidate the acquired bank into new
branch offices of the acquiring bank, unless the other state affirmatively opts
out of the legislation before that date. A state may also opt into the
legislation earlier than June 1, 1997 if it wishes to do so. The Riegle-Neal Act
also permits de novo interstate branching as of June 1, 1997 but only if a state
affirmatively opts in by appropriate legislation. Once a state opts in to
interstate branching, it may not opt out at a later date. The Riegle-Neal Act
also allows foreign banks to branch by merger or de novo branch to the same
extent as banks from the foreign bank's home state. The Riegle-Neal Act also
subjects foreign banks to some additional requirements, including extending
obligations under the Community Reinvestment Act to certain foreign bank
acquisitions and regulating the types of activities off-shore branches of
foreign banks may conduct. The Pennsylvania Legislature amended the Pennsylvania
Banking Code of 1965 in July, 1995, to opt in to all of the provisions of the
Riegle-Neal Act, including interstate bank mergers and de novo interstate
branching.
Community Reinvestment Act
Under the Community Reinvestment Act of 1977 ("CRA"), the FDIC is required
to assess the records of all financial institutions regulated by it to determine
if these institutions are meeting the credit needs of the communities (including
low and moderate income neighborhoods) which they serve. The FDIC also takes
this record into account in its evaluation of any application made by any of
such institutions for, among other things, approval of branch banking or other
deposit facilities, office relocation, or merger and acquisitions of financial
institutions.
The CRA requires the FDIC to provide a written evaluation of an
institution's CRA performance and requires public disclosure of an institution's
CRA rating. The Bank received a "satisfactory" rating in its last CRA
examination conducted by the FDIC.
Year 2000 Compliance
The transition to the year 2000 was made successfully, without experiencing
any problems. A staff of technical and support people was on hand over the New
Year's weekend in case problems would occur. All end of year processing was
completed without problems. Each community financial center successfully
completed a verification checklist without noting any problems. All utilities,
communications, and data transport systems worked flawlessly. No significant
withdrawals were made by customers at any of the bank's financial centers prior
to New Year's weekend, and none of the bank's ATM's experienced heavy demands
for cash. None of the bank's commercial customers, who had been contacted by the
bank in
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preparation for year 2000, reported any Y2K related problems.
Regulatory Agreement
On January 24, 2000, the Bank entered into a Memorandum of Understanding
("MOU") with the Office of the Comptroller of the Currency ("OCC"), whereby the
Bank has agreed to take certain actions in response to concerns raised by the
OCC. The MOU is not a formal supervisory action by the OCC. The actions which
the Bank agreed to take are generally in the nature of improving the Bank's
internal procedures and policies. The Bank is in the process of implementing the
steps necessary to comply with its obligations under the MOU.
Recent Development
Arlan J. Werst resigned as President and Chief Executive Officer of the
Company and the Bank effective March 23, 2000.
Legislative Developments
From time to time, various federal and state regulation is proposed that
could result in additional regulation of, and restriction on, the business of
the Company and the Bank, or otherwise change the business environment.
Management cannot predict whether any of this legislation, if enacted, will have
a material effect on the business of the Company.
Employees
As of December 31,1999, the Bank had a total of 44 full-time and 12
part-time employees. The Bank provides a variety of employment benefits and
considers its relationship with its employees to be good.
ITEM 2. PROPERTIES
The bank owns the main office of the Company and the Bank located at 201
North Main Street, Bernville, Pennsylvania and its branch offices located on
Route 422, R.D. 1, Robesonia, Pennsylvania, and on Roadside Drive,
Shartlesville, Pennsylvania. The property on which the main office is situated
is comprised of approximately 6,300 square feet of space in the aggregate, of
which approximately 2,100 square feet is used for banking facilities and the
remainder is used for corporate and other offices. The branch office located in
Robesonia is comprised of approximately 2,000 square feet. The branch office
located in Shartlesville is also comprised of approximately 2,000 square feet
with an additional basement comprised of approximately 1,000 square feet.
The Bank also leases the premises for one branch location and the
operations center under operating lease agreements expiring in various years
through October 2017. Certain lease agreements contain escalation provisions.
The Bank also has options to extend the lease agreements for additional lease
terms from five to thirty years. The Bank is responsible to pay all real estate
taxes, insurance, utilities and maintenance and repairs on the buildings. The
branch office is located on Commerce Drive in Wyomissing, Pennsylvania and is
comprised of approximately 3,300 square feet. The operations center is located
on Corporate Drive of the Berks Corporate Center in Reading, Pennsylvania, and
comprises approximately 7,500 square feet.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Since August 19, 1998, the Company's Common Stock is traded on the American
Stock Exchange under the symbol CMYI. Prior to that date, the Company's stock
was traded in the over the counter market. The Common Stock has not been
actively traded and there is no assurance that an active market will develop in
the future. The following broker-dealers currently make a market in the
Company's Common Stock: F.J. Morrissey & Co., Inc., Ryan, Beck & Co., Wheat,
First Union Securities Inc. and Berkshire Capital Management.
The following table sets forth high and low bid prices per share for the
Company's Common Stock for each quarter of 1998, and each quarter of 1999, based
upon information obtained from the American Stock Exchange (since August 19,
1998) and the OTC Bulletin Board. All such bid prices reflect inter-dealer
prices, without retail mark-up, markdown or commissions and may not necessarily
represent actual transactions. The table also reflects cash dividends declared
on the Company's Common Stock.
Dividends
1998 High bid Low Bid Declared
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First Quarter 12.75 11.75 .06
Second Quarter 14.375 12.625 .06
Third Quarter 16.00 13.50 .06
Fourth Quarter 14.625 12.00 .06
1999
First Quarter 15.125 11.50 .06
Second Quarter 14.250 12.00 .06
Third Quarter 12.00 11.50 .06
Fourth Quarter 11.50 11.00 .07
As of December 31, 1999, there were 698,637 shares of Common Stock
outstanding and outstanding options which were exercisable on that date (or
within 90 days thereof) for 10,467 additional shares of Common Stock. The
outstanding shares of Common Stock were held of record by approximately 473
shareholders.
The holders of the Company's Common Stock are entitled to receive
dividends, when declared by the Board of Directors, out of funds legally
available therefore. Funds for the payment of dividends of the Company are
obtained primarily from dividends paid by the Bank.
On June 25, 1998, the Company adopted a dividend reinvestment and stock
purchase plan available to stockholders who elect to reinvest their cash
dividends for the purchase of additional shares of the Company's Common Stock.
Participants also may elect to make voluntary cash payments not to exceed $2,500
each quarter for the purchase of additional shares of the Company's Common
Stock.
It is the present intention of the Company's Board of Directors to continue
to pay regular quarterly cash dividends; however, the declaration and payment of
future dividends is at the sole discretion of the Board of Directors, and the
amount of dividends depends upon the earnings, financial condition and capital
needs of the Company and the Bank and certain other factors, including
restrictions arising from federal banking laws and regulations to which the
Company and the Bank are subject.
The Bank is subject to certain limitations on the amount of cash dividends
that it can pay. The prior approval of the
11
<PAGE>
Comptroller of Currency of the United States is required if the total of
all cash dividends declared by a national bank, such as the Bank, in any
calendar year will exceed the sum of such bank's net profits (as defined by
statute) for that year combined with the retained net profits for the preceding
two calendar years, less any required transfers to surplus. Under this formula,
as of December 31, 1999, the Bank had approximately $538,000 legally available
for the payment of dividends without such approval. In addition, the Comptroller
of the Currency is authorized to determine under certain circumstances relating
to the financial condition of a national bank that the payment of dividends
would be an unsafe or unsound practice and to prohibit payment thereof. The
Federal Deposit Insurance Corporation Act generally prohibits all payments of
dividends by any bank which is in default of any assessment to the FDIC.
12
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
--------------------------------------------------
(Dollars In Thousands, Except Per Share Data)
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net interest income $ 3,939 $ 3,595 $ 2,932
Provision for loan losses 610 240 78
Noninterest income 699 684 431
Noninterest expense 3,733 3,276 2,489
Income before income taxes 295 763 796
Net income 242 544 587
Balance sheet data at year end:
Total assets $109,536 $101,722 $ 83,462
Loans, net 85,668 79,322 64,364
Securities available for sale 13,384 12,876 9,524
Securities held to maturity -- -- 1,001
Deposits 90,596 85,443 70,729
Long-term debt -- 5,000 5,000
Stockholders' equity 7,242 7,359 6,900
Per common share data:
Net income, basic and diluted $ .35 $ 0.78 $ 0.84
Cash dividends declared .25 0.24 0.22
Book value 10.37 10.56 9.91
Selected ratios:
Return on average assets .23% 0.58% 0.80%
Return on average stockholders' equity 3.34% 7.90% 9.17%
Average equity to average assets 6.80% 7.38% 8.71%
Allowance for loan losses to total loans at end of period 1.39% 0.89% 0.82%
Dividend payout ratio 72.14% 30.75% 26.71%
</TABLE>
The earnings per share data amounts prior to 1998 have been restated to reflect
the 100% stock dividend on July 31, 1998.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this discussion is to focus on information about the
Company's financial condition and results of operations which is not otherwise
apparent from the financial statements. Reference should be made to those
statements and the selected financial data presented elsewhere for an
understanding of the following discussion and analysis.
RESULTS OF OPERATIONS
Community Independent Bank, Inc. (the "Company") recorded net income of
$242,000 ($0.35 per share) for 1999 compared to $544,000 ($0.78 per share) in
1998. Return on average assets was .23% for 1999 and .58% for 1998. The decrease
in net income of $302,000 in 1999 was primarily caused by an increase in other
expenses of $457,000 and an increase in the provision for loan losses of
$370,000 from 1998 to 1999, which was offset by an increase in other income of
$15,000, and an increase in net interest income of $345,000 from 1998 to 1999. A
more detailed explanation for each contribution to the change in net income from
1998 to 1999 is included in the remainder of this analysis.
Net Interest Income
Net interest income is the primary source of operating income for the
Company. Net interest income is the difference between interest earned on loans
and securities and interest paid on deposits and other funding sources.
Generally, changes in net interest income are measured by the net interest rate
spread and net interest rate margin. The net interest rate spread is equal to
the difference between the average rate earned on earning assets and the average
rate incurred on interest-bearing liabilities. The net interest rate margin
represents the difference between interest income (including net loan fees
earned) and interest expense calculated as a percentage of average earning
assets. The factors that influence net interest income include changes in
interest rates and changes in the volume and mix of assets and liability
balances.
Net interest income increased $ 345,000 or 10% in 1999 compared to 1998.
Table 1 analyzes the factors contributing to the increase in net interest income
in 1999. The average balances, interest income and expense, and the average
rates earned and paid for assets and liabilities are found in Table 2.
During 1999, the average yield on earning assets decreased .23%, while the
average cost of funds decreased .12%. An increase of $9,646,000 or 13% in
average loan volume during 1999 resulted in additional loan interest income of
$847,000. However, lower interest rates resulted in a decrease in the yield
earned on average loans in 1999 to 8.54% compared to 8.79% in 1998.
The Company's securities' portfolio in 1999 grew by $2,379,000 or 21%
compared to 1998. Interest income increased $132,000 or 20% in 1999 compared to
1998 primarily due to the increased portfolio.
Average interest-bearing demand deposits, savings deposits and certificates
of deposit increased by $9,207,000 or 13% in 1999 compared to 1998. The
increase in interest expense on these deposits of $325,000 or 10% was primarily
a result of the increase in deposits during 1999 as the average rate paid on
deposits decreased 11 basis points from 4.50% to 4.39%.
14
<PAGE>
Net Interest Income (Continued)
Likewise, the Company increased its reliance on short-term borrowings as a
source of funds in 1999. Average short-term borrowings increased $ 3,122,000,
resulting in additional interest expense of $ 172,000 while the rate paid on
these borrowings decreased interest expense by $ 10,000. Long-term debt averaged
$ 3,836,000 in 1999 compared to $ 5,000,000 in 1998, resulting in a decrease in
interest expense of $ 70,000.
Table 1 - Volume/Rate Analysis
<TABLE>
<CAPTION>
1999 vs. 1998 Increase
(Decrease) Due to Changes In
Volume Rate Total
-------------------------------
(In Thousands)
<S> <C> <C> <C>
Interest income:
Interest-bearing deposits with other banks $ (8) $-- $ (8)
Securities:
Taxable 143 (9) 134
Tax-exempt (4) 2 (2)
Federal funds sold (1) -- (1)
Loans 847 (208) 639
----- ----- -----
977 (215) 762
----- ----- -----
Interest expense:
Interest-bearing demand deposits 144 (17) 127
Savings deposits (7) (3) (10)
Time deposits 293 (85) 208
Short-term borrowings 172 (10) 162
Long-term borrowings (70) -- (70)
----- ----- -----
532 (115) 417
----- ----- -----
Net interest income $ 445 $(100) $ 345
===== ===== =====
</TABLE>
15
<PAGE>
Net Interest Income (Continued)
Table 2 - Average Balances and Interest Rates
<TABLE>
<CAPTION>
1999 1998
------------------------------------------ ---------------------------------------
Interest Interest
Average Income Average Average Income Average
Balance (Expense) Rate Balance (Expense) Rate
------------------------------------------ ---------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets
Earning assets:
Interest-bearing deposits with
other banks $ 33 $ 1 6.06% $ 192 $ 10 5.21%
Taxable securities 13,354 760 5.69 10,871 626 5.76
Tax-exempt securities 580 27 4.66 684 29 4.24
Federal funds sold - - - 17 1 5.88
Loans, net of reserves 83,912 7,164 8.54 74,266 6,525 8.79
---------------------------- --------------------------
Total interest earning assets 97,879 7,952 8.13 86,030 7,191 8.36
Other assets 8,517 - 7,326 -
---------------------------- --------------------------
Total assets $ 106,396 7,952 7.47% $ 93,356 7,191 7.70%
=========== ===== ========== =====
Liabilities and Stockholders' Equity
Interest bearing deposits:
Demand deposits $ 23,189 769 3.32% $ 18,948 642 3.39%
Savings deposits 9,433 211 2.24 9,752 221 2.27
Time deposits 46,333 2,486 5.37 41,048 2,278 5.55
---------------------------- --------------------------
Total interest bearing deposits 78,955 3,466 4.39 69,748 3,141 4.50
Short-term borrowings 5,921 316 5.34 2,799 154 5.50
Long-term borrowings 3,836 231 6.02 5,000 301 6.02
---------------------------- --------------------------
Total interest bearing liabilities 88,712 4,013 4.52 77,547 3,595 4.64
Non-interest bearing demand deposits 9,678 - 8,303 -
Other liabilities 768 - 617 -
Stockholders' equity 7,238 - 6,889 -
---------------------------- -------------------------
Total liabilities and
stockholders' equity $ 106,396 $ 93,356
=========== ==========
Interest rate spread 2.95% 3.07%
===== =====
Net interest income/margin $ 3,939 4.03% $ 3,595 4.18%
====================== =======================
</TABLE>
For purposes of computing average loan balances, nonaccruing loans are included
in the daily average loan balance. Yields on tax-free securities are not
presented on a tax equivalent basis.
16
<PAGE>
Other Income
Other income increased by $ 8,000 or 3% from 1998 to 1999. Service charges
on deposit accounts increased $ 65,000 or 25% which directly correlated with the
increase in customer accounts. The increase in other income of $ 26,000 or 9% is
due to an increase in earnings on life insurance policies and loan related fees.
Gains on loan sales decreased $ 76,000 or 58% as a result of a decrease in the
volume of loan sales.
Other Expenses
Other expenses increased $ 457,000 or 14% in 1999 to $ 3,733,000 compared
to $ 3,276,000 in 1998. Salaries and benefits totaled $ 1,949,000 in 1999, an
increase of $ 255,000 or 15% from 1998. Occupancy expense totaled $ 377,000 in
1999, an increase of $ 52,000 or 16% compared to $ 325,000 in 1998. Equipment
and furniture expenses increased $ 50,000 or 16% in 1999 to $ 358,000 compared
to $ 308,000 in 1998. Professional fees decreased $ 18,000 or 20% from $ 90,000
in 1998 to $ 72,000 in 1999.
Other expenses increased to $ 754,000 in 1999 compared to $ 602,000 in
1998, an increase of $ 152,000 or 25%. Other expenses included in this category
include directors' fees, ATM fees, FDIC insurance premiums, examinations,
travel, telephone, dues and subscriptions, postage, training and charitable
contributions. The increase in such expense categories is primarily the result
of the Company's growth.
Provision for Federal Income Taxes
The provision for federal income taxes was $ 54,000 for 1999 as compared to
$ 219,000 for 1998. The effective tax rate, which is the ratio of income tax
expense to income before income taxes, was 18% in 1999 and 29% in 1998. The tax
rate for both periods was less than the federal statutory rate of 34%, primarily
because of tax-exempt securities and loan income.
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", income taxes are accounted for under the
liability method. Under the liability method, deferred tax assets and
liabilities are recognized for future tax consequences attributable to temporary
differences between the financial statement and tax basis of existing assets and
liabilities. At December 31, 1999, deferred tax assets amounted to $ 482,000 and
deferred tax liabilities amounted to $ 159,000. Deferred tax assets are
realizable primarily through carryback of existing temporary differences to
recover taxes paid in prior years, and through the future reversal of existing
temporary differences.
FINANCIAL CONDITION
The Company's financial condition can be evaluated in terms of trends in
its sources and uses of funds. Table 3 illustrates how the Company has managed
its sources and uses of funds which are directly affected by outside economic
factors, such as interest rate fluctuations.
17
<PAGE>
Table 3 - Sources and Uses of Funds
<TABLE>
<CAPTION>
1999 Increase (Decrease) 1998
--------------------------------------------------------
Average Average
Balance Amount % Balance
--------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Funding uses:
Loans:
Commercial ........................... $ 31,430 $ 8,909 39.56% $ 22,521
Mortgage ............................. 46,842 142 .30 46,700
Consumer ............................. 6,486 848 15.04 5,638
------------------------- ---------
84,758 9,899 13.22 74,859
Less allowance for loan losses ........... (846) (253) 42.66 (593)
------------------------- ---------
83,912 9,646 12.99 74,266
------------------------- ---------
Interest-bearing deposits with banks ..... 33 (159) (82.81) 192
------------------------- ---------
Securities:
Taxable .............................. 13,354 2,483 22.84 10,871
Tax-exempt ........................... 580 (104) (15.20) 684
------------------------- ---------
13,934 2,379 20.59 11,555
------------------------- ---------
Federal funds sold ....................... - (17) (100.00) 17
------------------------- ---------
Total interest earning assets ............ 97,879 11,849 13.77 86,030
Other assets ............................. 8,517 1,191 16.26 7,326
------------------------- ---------
Total uses ...................... $ 106,396 $ 13,040 13.97% $ 93,356
========================= =========
Funding sources:
Deposits:
Demand ............................... $ 9,678 $ 1,375 16.56% $ 8,303
Interest-bearing demand .............. 23,189 4,241 22.38 18,948
Savings .............................. 9,433 (319) (3.27) 9,752
Time under $ 100,000 ................. 36,133 (35) (.10) 36,168
------------------------- ---------
Total core deposits ............. 78,433 5,262 7.19 73,171
Time over $ 100,000 ...................... 10,200 5,320 109.02 4,880
------------------------- ---------
Total deposits .................. 88,633 10,582 13.56 78,051
------------------------- ---------
Funds borrowed:
Short-term ........................... 5,921 3,122 111.54 2,799
Long-term ............................ 3,836 (1,164) (23.28) 5,000
------------------------- ---------
Total funds borrowed ............ 9,757 1,958 25.11 7,799
Total deposits and funds borrowed 98,390 12,540 14.61 85,850
Other liabilities ........................ 768 151 24.47 617
Stockholders' equity ..................... 7,238 349 5.07 6,889
------------------------- ---------
Total sources ................... $ 106,396 $ 13,040 13.97% $ 93,356
========================= =========
</TABLE>
18
<PAGE>
Loans Receivable
Average loans receivable, net of the allowance for loan losses, increased
$9,646,000 or 13% in 1999. The increase in loans was directly attributable to
increased marketing efforts, favorable economic conditions in the Company's
market area and competitive pricing. Table 4 provides an analysis of the
Company's loan distribution at the end of each of the last two years. Consumer
loans include revolving credit plans, personal lines of credit, and installment
loans. Loans which are secured by real estate include residential and
nonresidential mortgages and home equity loans to individuals.
Table 4 - Loan Portfolio
December 31,
1999 1998
------------------------------
(In Thousands)
Commercial, financial and agricultural $ 22,810 $ 16,019
Consumer, net of unearned discount 5,721 5,185
Real estate 58,336 58,856
All other 384 464
------------------------------
$ 87,251 $ 80,524
==============================
Table 5 - Loan Maturities
The following table shows the maturity of loans (excluding residential mortgages
of 1-4 family residences and consumer loans) outstanding at December 31, 1999.
<TABLE>
<CAPTION>
Due In One Due In One Due In Over Five
Year Or Less To Five Years Years Total
------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 3,660 $ 13,226 $ 5,924 $ 22,810
All other 36 124 224 384
------------------------------------------------------------------
$ 3,696 $ 13,350 $ 6,148 $ 23,194
==================================================================
Interest rates on loans which are:
Fixed $ 10,899 $ 5,853
Floating 2,451 295
-------------------------------
$ 13,350 $ 6,148
===============================
</TABLE>
19
<PAGE>
Nonperforming Loans
Table 6 reflects the Company's nonaccrual, past due and restructured loans
for each of the past two years. A loan is generally placed on nonaccrual when
the contractual payment of principal or interest has become 90 days past due or
management has serious doubts about further collectibility of principal or
interest, even though the loan is currently performing.
Table 6 - Nonperforming Loans
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------------------
(In Thousands)
<S> <C> <C>
Average loans outstanding $ 84,758 $ 74,859
===============================
Nonaccrual loans:
Commercial $ 2,297 $ -
Real estate 153 93
Consumer - -
-------------------------------
Total nonaccrual loans 2,450 93
Accruing loans past due 90 days or more 584 202
Restructured loans - -
-------------------------------
$ 3,034 $ 295
===============================
Ratio of nonperforming loans to average loans outstanding 3.58% 0.39%
===============================
</TABLE>
All of the nonaccrual loans at December 31, 1999 are secured by real estate
or otherwise guaranteed as to repayment. Management has identified $2,525,000 as
potential problem loans that are not included in the above table.
Table 7 - Nonaccrual and Restructured Loans - Related Information
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
Interest income that would have been recorded under original terms $ 59 $ 8
Interest income reported during the period - -
Commitments to lend additional funds - -
</TABLE>
20
<PAGE>
Allowance for Loan Losses
The amount charged to operations and the related balance in the allowance
for loan losses is based upon periodic evaluations of the loan portfolio by
management. These evaluations consider several factors including, but not
limited to, current economic conditions, loan portfolio composition, prior loan
loss experience, trends in portfolio volume and management's estimation of
future potential losses. Management believes that the allowance for loan losses
is adequate. Table 8 is an analysis of the allowance for loan losses for the
past two years.
Table 8 - Summary of Loan Loss Experience
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
Average loans outstanding $ 84,758 $ 74,859
==============================
Allowance for loan losses at January 1 $ 720 $ 540
------------------------------
Losses charged to allowance:
Commercial 88 -
Real estate 40 42
Consumer 16 26
------------------------------
144 68
------------------------------
Recoveries credited to allowance:
Commercial 24 1
Real estate - 3
Consumer 2 4
------------------------------
26 8
------------------------------
Net charge-offs 118 60
Provision for loan losses 610 240
------------------------------
Allowance for loan losses at December 31 $ 1,212 $ 720
==============================
Ratio of net charge-offs to average loans outstanding 0.14% 0.08%
==============================
</TABLE>
21
<PAGE>
Allowance for Loan Losses (Continued)
The specific allocations of the allowance for loan losses are based on
management's evaluation of the risks inherent in the specific portfolios for the
dates indicated. Amounts in a particular category may be used to absorb losses
if another category allocation proves to be inadequate. Table 9 reflects the
allocations of the allowance for loan losses for each of the past two years.
Table 9 - Allocation of the Allowance for Loan Losses
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------------------------------
% Of % Of
Amount Loans Amount Loans
------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial $ 1,121 26.6% $ 602 20.2%
Real estate 75 66.8 103 73.4
Consumer 16 6.6 15 6.4
------------------------------------------------------
$ 1,212 100.0% $ 720 100.0%
======================================================
</TABLE>
Highly leveraged transactions (HLTs) generally include loans and
commitments made in connection with recapitalizations, acquisitions, and
leveraged buyouts and result in the borrower's debt-to-total assets ratio
exceeding 75%. The Bank had no loans at December 31, 1999 that qualified as
HLTs.
Securities
The Company's securities' portfolio is classified as either "held to
maturity" or "available for sale". At December 31, 1999, all of the Company's
securities were classified as available for sale. Securities classified as held
to maturity are carried at amortized cost and include those securities that the
bank has both the intent and ability to hold to maturity. Securities classified
as available for sale, which are those securities that the bank intends to hold
for an indefinite amount of time, but not necessarily to maturity, are carried
at fair value with the unrealized holding gains or losses, net of taxes,
reported as accumulated other comprehensive income on the balance sheet.
Average securities increased to $ 13,934,000 in 1999 from $ 11,555,000 in
1998. The increase of $ 2,379,000 or 21% was primarily due to the purchase of
U.S. Government agency obligations with proceeds from the deposit growth.
22
<PAGE>
Securities (Continued)
Table 10 sets forth the carrying amount of securities at the dates
indicated.
Table 10 - Securities Portfolio
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
Available for sale securities (at fair value):
U.S. Treasury securities $ 2,002 $ 4,568
U.S. Government agencies 9,370 7,099
State and political subdivisions 759 462
Corporate securities 384 -
Equity securities 869 747
------------------------------
$ 13,384 $ 12,876
==============================
</TABLE>
Table 11 sets forth the maturities and the weighted average yields of
securities by contractual maturities at December 31, 1999. Yields on obligations
of states and political subdivisions are not presented on a tax equivalent
basis.
Table 11 - Analysis of Securities
<TABLE>
<CAPTION>
Maturing
After One Year But After Five Years
Within One Year Within Five Years But Within Ten Years After Ten Years
-----------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
-----------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities $ 2,002 6.20% $ - -% $ - -% $ - -%
U.S. Government agencies 1,496 6.00 7,874 5.60 - - - -
Corporate securities - - 384 6.07 - - -
State and political subdivisions 85 4.10 369 4.55 204 4.55 101 4.10
---------- ---------- -------- --------
$ 3,583 6.07% $ 8,627 5.46% $ 204 4.55% $ 101 4.10%
========== ========== ======== ========
</TABLE>
Deposits
The Company's primary source of funds continues to be core deposit accounts
which include both interest and noninterest bearing demand, savings and time
deposits under $100,000. Core deposits increased an average of $5,262,000 or 7%
in 1999. The largest category of core deposits and the primary source of funds
continues to be time deposits under $100,000. This category includes
certificates of deposit, which allow customers to invest their funds at selected
maturity ranges from fourteen days to ten years, individual retirement accounts,
and the Bank's savings accounts. The average balance of these funds decreased
$35,000 or .10% in 1999. An increase in the average balance of demand deposits
of $1,375,000 was noted. This represents an increase of 17% over 1998 levels.
23
<PAGE>
Deposits (Continued)
Interest bearing demand accounts, consisting of N.O.W. and Money Market
accounts increased an average of $4,241,000 or 22% in 1999. The increase was a
result of competitive pricing of the money market product.
Table 12 - Average Deposits and Average Rates by Major Classification
<TABLE>
<CAPTION>
1999 1998
---------------------------------------------------
Amount Rate Amount Rate
---------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Non-interest bearing demand $ 9,678 -% $ 8,303 -%
Interest-bearing demand 23,189 3.32 18,948 3.39
Savings deposits 9,433 2.24 9,752 2.27
Time deposits 46,333 5.37 41,048 5.55
------------- ------------
$ 88,633 $ 78,051
============= ============
</TABLE>
At December 31, 1999, time deposits outstanding in an individual amount of
$ 100,000 or more totaled $ 5,636,000. The maturities of these deposits are
reflected in Table 13.
Table 13 - Maturities of Time Deposits of $100,000 or More
<TABLE>
<CAPTION>
December 31,
1999
---------------
(In Thousands)
<S> <C>
Three months or less $ 2,758
Over three months through six months 448
Over six months through twelve months 832
Over twelve months 1,598
---------------
$ 5,636
===============
</TABLE>
Short-term Borrowings and Long-term Debt
Borrowed funds are utilized when timing differences occur between the
purchase of new assets and the maturity of existing assets. Management also uses
borrowed funds as an asset/liability tool to match the repricing characteristics
of certain earning assets, allowing for core funds to be used for additional
loan volume or security purchases.
24
<PAGE>
Short-term Borrowings and Long-term Debt (Continued)
Table 14 - Borrowed Funds
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
Short-term borrowings $ 10,471 $ 3,423
Long-term debt - 5,000
------------------------------
$ 10,471 $ 8,423
==============================
</TABLE>
The Company maintains a U.S. Treasury tax and loan note option account for
the deposit of withholding taxes, corporate income taxes and certain other
payments to the federal government. Deposits are subject to withdrawal and are
evidenced by an open-ended interest-bearing note. Borrowings under this note
option account were $391,000 and $88,000 at December 31, 1999 and 1998
respectively, with interest payable at a variable rate (4.52% and 4.11% at
December 31, 1999 and 1998, respectively).
The Company has an arrangement with the Federal Home Loan Bank (FHLB) which
allows for borrowings up to a maximum percentage of qualifying assets. At
December 31, 1999, the Bank has a maximum borrowing capacity of $30,530,000.
The Company has a line of credit under the "RepoPlus" Advance program with
the Federal Home Loan Bank which expires April 15, 2000 for borrowings up to
$20,000,000. Borrowings under this line of credit were $10,080,000 and
$3,335,000 at December 31, 1999 and 1998, respectively.
Long-term debt in 1998 is an advance from the Federal Home Loan Bank under
a note totaling $5,000,000 at a fixed rate of interest of 6.02% which matured
in 1999.
Capital Requirements/Ratios
The Company places a significant emphasis on maintaining a strong capital
base. The capital resources of the Bank consist of two major components of
regulatory capital, stockholders' equity and the allowance for loan losses. The
Bank's capital maintained growth during 1999.
Current capital guidelines issued by federal regulatory authorities
require the bank to meet minimum risk-based capital ratios in an effort to make
regulatory capital more responsive to the risk exposure related to a bank's on
and off balance sheet items.
Risk-based capital guidelines redefine the components of capital,
categorize assets into risk classes and include certain off-balance sheet items
in the calculation of capital requirements. The components of risk-based capital
are segregated as Tier I and Tier II capital. Tier I capital is composed of
total stockholders' equity reduced by goodwill and other intangible assets. Tier
II capital is comprised of the allowance for loan losses and any qualifying debt
obligations. Regulators also have adopted minimum requirements of 4% of Tier I
capital and 8% of risk-adjusted assets in total capital.
25
<PAGE>
Capital Requirements/Ratios (Continued)
The Company is also subject to leverage capital requirements. This
requirement compares capital (using the definition of Tier I capital) to balance
sheet assets and is intended to supplement the risk-based capital ratio in
measuring capital adequacy. The guidelines set a minimum leverage ratio of 3%
for institutions that are highly rated in terms of safety and soundness, and
which are not experiencing or anticipating any significant growth. Other
institutions are expected to maintain capital levels of at least 1% or 2% above
the minimum. As of December 31, 1999 the Company had a leverage ratio of 6.54%.
Table 15 - Capital Ratios
<TABLE>
<CAPTION>
December 31,
1999 1998
------------------------------
(In Thousands)
<S> <C> <C>
Tier I, common stockholders' equity $ 7,163 $ 7,058
Tier II, allowable portion of allowance for loan losses 999 720
------------------------------
Risk-based capital $ 8,162 $ 7,778
==============================
Risk adjusted assets, including off-balance-sheet exposures $ 79,886 $ 71,192
==============================
Tier I risk-based capital ratio 8.97% 9.91%
==============================
Total risk-based capital ratio 10.22% 10.93%
==============================
</TABLE>
Note: Unrealized gains or losses on securities available for sale are
excluded from regulatory capital components of risk-based capital and leverage
ratios.
Capital Analysis
During 1999, the Company paid cash dividends to its stockholders amounting
to $ 174,000 compared to $ 167,000 in 1998. On a per share basis, the Company
paid dividends of $ .25 in 1999 compared to $ .24 in 1998.
On June 25, 1998, the Board of Directors declared a two-for-one stock
split in the form of a 100% stock dividend on common stock outstanding, payable
on July 31, 1998 to stockholders of record on July 17, 1998. The stock split
resulted in the issuance of 348,387 additional common shares and all per share
data has been adjusted for the effect of the stock split.
Also, on June 25, 1998, the Company adopted a dividend reinvestment and
stock purchase plan available to stockholders who elect to reinvest their cash
dividends for the purchase of additional shares of the Company's common stock.
Participants may also elect to make voluntary cash payments not to exceed $2,500
each quarter for the purchase of additional shares of the Company's common
stock. The common stock must be purchased in the open market through May 1999.
Subsequent to that date, it may be purchased in the open market or from
authorized but unissued shares, substantially at prevailing market prices. The
Company has reserved 225,000 shares of common stock for possible issuance under
the plan. During 1999, 1,863 shares were purchased through this plan in the
amount of $21,435.
26
<PAGE>
Capital Analysis (Continued)
Stockholders' equity is adjusted for the effect of unrealized gains and
losses, net of tax, on securities classified as available for sale. At December
31, 1999 and 1998, stockholders' equity included $ (107,000) and $ 99,000
respectively, in unrealized (losses)/gains.
The return on average equity at December 31, 1999 was 3.34%, a decrease
from 7.90% at December 31, 1998.
<TABLE>
<CAPTION>
Relationship Between
Significant Financial Ratios
----------------------------
1999 1998
----------------------------
<S> <C> <C>
Return on average equity 3.34% 7.90%
Earnings retained 27.86 69.25
Internal capital growth .93 5.47
Change in average assets 13.97 27.00
Equity to average assets 6.80 7.38
Growth in average equity 5.07 7.64
Dividend payout ratio 72.14 30.75
</TABLE>
Note: Internal capital growth is equal to return on average equity
multiplied by earnings retained.
Interest Rate Sensitivity and Market Risk
The operations of the Company are subject to risk resulting from
interest rate fluctuations to the extent that there is a difference between the
amount of the Company's interest earning assets and the amount of interest
bearing liabilities that are prepaid/withdrawn, mature or reprice in specified
periods.
The principal objective of the Company's asset/liability management
activities is to provide consistently higher levels of net interest income while
maintaining acceptable levels of interest rate and liquidity risk and
facilitating the funding needs of the Company. The Company utilizes an interest
rate sensitivity model as the primary quantitative tool in measuring the amount
of interest rate risk that is present. The traditional maturity "gap" analysis,
which reflects the volume difference between interest rate sensitive assets and
liabilities during a given time period, is reviewed regularly by management. A
positive gap occurs when the amount of interest sensitive assets exceeds
interest sensitive liabilities. This position would contribute positively to net
income in a rising interest rate environment. Conversely, if the balance sheet
has more liabilities repricing than assets, the balance sheet is liability
sensitive or negatively gapped. Management continues to monitor sensitivity in
order to avoid overexposure to changing interest rates.
Another method used by management to review its interest sensitivity
position is through "simulation". In simulation, the Company projects the future
net interest streams in light of the current gap position. Various interest rate
scenarios are used to measure levels of interest income associated with
potential changes in our operating environment. Management cannot measure levels
of interest income associated with potential changes in the Company's operating
environment. Management cannot predict the direction of interest rates or how
the mix of assets and liabilities will change. The use of this information will
help formulate strategies to minimize the unfavorable effect on net interest
income caused by interest rate changes.
27
<PAGE>
Interest Rate Sensitivity and Market Risk (Continued)
The operations of the Company do not subject it to foreign currency
exchange or commodity price risk. Also, the Company does not utilize interest
rate swaps, caps or other hedging transactions.
The Company's overall sensitivity to interest rate risk is low due to
its non-complex balance sheet. The Bank has implemented several strategies to
manage interest rate risk which include selling newly originated residential
mortgages, increasing the volume of variable rate commercial loans and
maintaining a short maturity in the investment portfolio.
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. For securities,
loans and deposits, the table presents principal cash flows and related weighted
average interest rates by maturity dates or repricing frequency. The Company has
no market risk sensitive instruments entered into for trading purposes.
Table 16 - Interest Rate Sensitivity
<TABLE>
<CAPTION>
Over Three Over Six Over One
Months But Months But Year But
Three Months Within Six Within One Within Three Over Three
Or Less Months Year Years Years Total
--------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-bearing deposits with
other banks $ 13 $ - $ - $ - $ - $ 13
Securities (amortized cost):
U.S. treasuries 500 499 1,001 - - 2,000
U.S. Government agencies - - 1,499 8,014 - 9,513
Municipals - 85 - 200 480 765
Corporate obligations - - - 100 297 397
Loans 10,842 1,954 4,243 17,710 52,130 86,879
-------------------------------------------------------------------------------
Total interest-earning assets 11,355 2,538 6,743 26,024 52,907 99,567
-------------------------------------------------------------------------------
Interest-bearing liabilities:
Interest-bearing demand deposits (1) 4,479 - - 20,081 - 24,560
Savings deposits (2) 67 - 93 - 9,008 9,168
Time deposits 12,507 4,706 8,974 17,505 2,742 46,434
Short-term borrowings 11,132 - - - - 11,132
Long-term borrowings - - - - - -
-------------------------------------------------------------------------------
Total interest-bearing liabilities 28,185 4,706 9,067 37,586 11,750 91,294
-------------------------------------------------------------------------------
Interest sensitivity gap $ (16,830) $ (2,168) $ (2,324) $ (11,562) $ 41,157 $ 8,273
===============================================================================
Cumulative sensitivity gap $ (16,830) $ (18,998) $ (21,322) $ (32,884) $ 8,273
=================================================================
</TABLE>
(1) Interest-bearing demand deposits over one year but within three years
include mostly money markets which normally do not reprice on a regular
basis.
(2) Three months or less consist of vacation clubs, over six months but within
one year consist of Christmas clubs and over three years consist of
regular savings which normally do not reprice on a regular basis.
28
<PAGE>
Liquidity
Liquidity management involves meeting the funds flow requirements of
customers who may either be depositors wanting to withdraw funds, or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs. Liquid assets consist of vault cash, securities and maturities of earning
assets.
The Company's principal source of asset liquidity is the securities
portfolio. As disclosed in Note 3 of the financial statements, the carrying
value of securities maturing in less than one year equals $ 3,585,000. Other
sources of funds are principal paydowns and maturities in the loan portfolio.
The loan maturity schedule (Table 5) illustrates the maturities of commercial
loans.
The Company also has sources of liability liquidity which include core
deposits and borrowing capacity at the Federal Home Loan Bank as previously
discussed.
Management believes that the Company's liquidity is sufficient to meet
its anticipated needs.
Effects of Inflation
The majority of assets and liabilities of a financial institution are
monetary in nature, and therefore, differ greatly from most commercial and
industrial companies that have significant investments in fixed assets or
inventories. The precise impact of inflation upon the Company is difficult to
measure. Inflation may affect the borrowing needs of consumers, thereby
impacting the growth rate of the Company's assets. Inflation may also affect the
general level of interest rates, which can have a direct bearing on the Bank.
Management believes the most significant impact on financial results is
the Company's ability to react to changes in interest rates. As discussed
previously, management is attempting to maintain an essentially balanced
position between interest sensitive assets and liabilities in order to protect
against wide interest rate fluctuations.
Financial Services Modernization
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999, federal legislation intended to modernize the
financial services industry by establishing a comprehensive framework to permit
affiliations among commercial banks, insurance companies, securities firms, and
other financial services providers. Generally, the Act:
o Repeals the historical restrictions and eliminates many federal and
state law barriers to affiliations among banks, securities firms,
insurance companies and other financial insurance providers;
o Provides a uniform framework for the functional regulation of the
activities of banks, savings institutions and their holding companies;
o Broadens the activities that may be conducted by national banks,
banking subsidiaries or financial holding companies and their
subsidiaries;
o Provides an enhanced framework for protecting the privacy of consumer
information;
o Adopts a number of provisions related to the
capitalization, membership, corporate governance and other measures
designed to modernize the Federal Home Loan Bank System;
o Modifies the laws governing the implementation of the Community
Reinvestment Act; and
29
<PAGE>
o Address a variety of other legal and regulatory issues affecting both
day to day operations and long term activities of financial
institutions.
Bank holding companies which elect to become financial holding companies
will be permitted to engage in a wider variety of financial activities than
permitted under prior law, particularly with respect to insurance and securities
activities. In addition, in a change from prior law, bank holding companies may
be owned, controlled or acquired by any company engaged in financially related
activities.
Management does not believe that the Act will have a material adverse
affect on the Company's operations in the near term. However, to the extent that
the Act permits banks, securities firms and insurance companies to affiliate,
the financial services industry may experience further consolidation. This could
result in a growing number of larger financial institutions that offer a wider
variety of financial services than the Company currently offers and that can
aggressively compete in the markets the Company currently serves.
30
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Community Independent Bank, Inc.
Bernville, Pennsylvania
We have audited the accompanying consolidated balance sheets of Community
Independent Bank, Inc. and its wholly-owned subsidiary, Bernville Bank, N.A., as
of December 31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Community
Independent Bank, Inc. and its wholly-owned subsidiary, Bernville Bank, N.A., as
of December 31, 1999 and 1998, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ BEARD & COMPANY, INC.
Reading, Pennsylvania
January 21, 2000
31
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
December 31, 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 4,139,228 $ 2,998,485
Interest bearing deposits in other banks 13,238 25,707
--------------------------------
Cash and cash equivalents 4,152,466 3,024,192
Securities available for sale 13,383,658 12,876,464
Mortgage loans held for sale 68,000 1,051,500
Loans receivable, net of allowance for loan losses
1999 $ 1,211,628; 1998 $ 719,788 85,668,141 79,322,201
Bank premises and equipment, net 2,828,800 2,710,743
Accrued interest receivable and other assets 3,434,861 2,736,735
--------------------------------
Total assets $ 109,535,926 $ 101,721,835
================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Non-interest bearing $ 10,434,304 $ 9,551,421
Interest bearing 80,161,897 75,891,372
--------------------------------
Total deposits 90,596,201 85,442,793
Securities sold under agreements to repurchase 661,092 --
Other borrowed funds 10,471,037 3,423,300
Long-term debt -- 5,000,000
Other liabilities 565,694 496,270
--------------------------------
Total liabilities 102,294,024 94,362,363
--------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $ 5.00 per share; authorized and
unissued 1,000,000 shares -- --
Common stock, par value $ 5.00 per share; authorized
5,000,000 shares; issued and outstanding 1999
698,637 shares; 1998 696,774 shares 3,493,185 3,483,870
Surplus 154,268 142,148
Retained earnings 3,701,727 3,634,445
Accumulated other comprehensive income (loss) (107,278) 99,009
--------------------------------
Total stockholders' equity 7,241,902 7,359,472
--------------------------------
Total liabilities and stockholders' equity $ 109,535,926 $ 101,721,835
================================
</TABLE>
See Notes to Consolidated Financial Statements.
32
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Years Ended December 31, 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Loans receivable, including fees $7,164,397 $6,524,913
Securities:
Taxable 698,606 586,566
Tax-exempt 26,551 28,794
Other 63,274 50,057
-------------------------
Total interest income 7,952,828 7,190,330
-------------------------
Interest expense:
Deposits 3,466,401 3,140,848
Other borrowed funds 316,028 153,841
Long-term debt 230,904 301,000
-------------------------
Total interest expense 4,013,333 3,595,689
-------------------------
Net interest income 3,939,495 3,594,641
Provision for loan losses 610,000 240,000
-------------------------
Net interest income after
provision for loan losses 3,329,495 3,354,641
-------------------------
Other income:
Customer service fees 319,968 256,276
Mortgage banking activities 56,678 131,537
Other 322,677 296,639
-------------------------
Total other income 699,323 684,452
-------------------------
Other expenses:
Salaries and employee benefits 1,949,059 1,693,963
Occupancy 377,355 324,666
Equipment 358,327 307,792
Marketing and advertising 91,389 88,769
Loan collection and foreclosed real estate 27,511 89,342
Stationery and supplies 103,431 79,311
Professional fees 72,266 90,258
Other 754,136 601,959
-------------------------
Total other expenses 3,733,474 3,276,060
-------------------------
Income before income taxes 295,344 763,033
Federal income taxes 53,811 219,280
-------------------------
Net income $ 241,533 $ 543,753
=========================
Basic and diluted earnings per share $ 0.35 $ 0.78
=========================
</TABLE>
See Notes to Consolidated Financial Statements.
33
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Accumulated
------------------------------- Other
Number Par Retained Comprehensive
Of Shares Value Surplus Earnings Income (Loss) Total
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 348,287 $ 1,741,435 $ 1,882,808 $ 3,257,894 $ 18,269 $ 6,900,406
-----------
Comprehensive income:
Net income -- -- -- 543,753 -- 543,753
Net change in unrealized gain
(loss) on securities
available for sale,
net of taxes -- -- -- -- 80,740 80,740
-----------
Total comprehensive income 624,493
-----------
Stock options exercised 100 500 1,275 -- -- 1,775
Two-for-one stock split 348,387 1,741,935 (1,741,935) -- -- --
Cash dividends ($ .24 per share) -- -- -- (167,202) -- (167,202)
--------------------------------------------------------------------------------------
Balance, December 31, 1998 696,774 3,483,870 142,148 3,634,445 99,009 7,359,472
-----------
Comprehensive income:
Net income -- -- -- 241,533 -- 241,533
Net change in unrealized gain
(loss) on securities
available for sale,
net of taxes -- -- -- -- (206,287) (206,287)
-----------
Total comprehensive income 35,246
-----------
Shares issued in dividend 1,863 9,315 12,120 -- -- 21,435
reinvestment plan
Cash dividends ($ .25 per share) -- -- -- (174,251) -- (174,251)
--------------------------------------------------------------------------------------
Balance, December 31, 1999 698,637 $ 3,493,185 $ 154,268 $ 3,701,727 $ (107,278) $ 7,241,902
======================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
34
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 241,533 $ 543,753
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 610,000 240,000
Provision for depreciation 305,187 264,097
Loss on disposal of property and equipment 12,634 --
Net gains on sale of loans (56,678) (131,537)
Net amortization of securities premiums and discounts 6,538 6,073
Amortization of mortgage servicing rights 32,458 20,223
Loans originated for sale (2,960,475) (9,560,950)
Proceeds from sale of loans 4,000,653 8,640,987
Increase in accrued interest receivable and other assets (345,509) (94,704)
Increase in other liabilities 69,424 135,565
-------------------------------
Net cash provided by operating activities 1,915,765 63,507
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held to maturity -- 1,000,000
Proceeds from maturities of securities available for sale 3,000,000 2,135,000
Purchase of securities available for sale (3,823,327) (5,370,591)
Net increase in loans (6,995,949) (15,283,134)
Proceeds from sale of property and equipment 750 --
Purchases of bank premises and equipment (436,628) (337,859)
Proceeds from life insurance policies surrendered 208,242 --
Purchase of life insurance (450,000) (315,000)
-------------------------------
Net cash used in investing activities (8,496,912) (18,171,584)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 5,153,408 14,713,725
Net increase in other borrowed funds and securities sold under
agreements to repurchase 7,708,829 2,951,492
Payments on long-term debt (5,000,000) --
Cash dividends (174,251) (167,202)
Proceeds from shares issued in dividend reinvestment plan 21,435 --
Proceeds from common stock options exercised -- 1,775
-------------------------------
Net cash provided by financing activities 7,709,421 17,499,790
-------------------------------
Increase (decrease) in cash and cash equivalents 1,128,274 (608,287)
Cash and cash equivalents:
Beginning 3,024,192 3,632,479
-------------------------------
Ending $ 4,152,466 $ 3,024,192
===============================
Cash payments for:
Interest $ 4,013,816 $ 3,558,642
===============================
Income taxes $ 260,963 $ 250,939
===============================
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES
Nature of operations:
The Bank operates under a national bank charter and provides full banking
services. As a national bank, the Bank is subject to regulation by the
Office of the Comptroller of the Currency and the Federal Deposit Insurance
Corporation. The bank holding company (Parent Company) is subject to
regulation of the Federal Reserve Bank. The area served by the Bank is
principally Berks County, Pennsylvania.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of
Community Independent Bank, Inc. (the Corporation) and its wholly-owned
subsidiary, Bernville Bank, N.A. (the Bank). All significant intercompany
accounts and transactions have been eliminated.
Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation of cash flows:
For purposes of reporting cash flows, cash and cash equivalents includes
cash on hand, amounts due from banks, and interest-bearing demand deposits
in other banks.
Securities:
Securities classified as available for sale are those securities that the
Bank intends to hold for an indefinite period of time but not necessarily
to maturity. Any decision to sell a security classified as available for
sale would be based on various factors, including significant movement in
interest rates, changes in maturity mix of the Bank's assets and
liabilities, liquidity needs, regulatory capital considerations and other
similar factors. Available for sale securities are carried at fair value.
Unrealized gains or losses, net of tax, on available for sale securities
are reported as a net amount in other comprehensive income. Gains and
losses on the sale of available for sale securities are determined using
the specific-identification method. Premiums and discounts are recognized
in interest income using the interest method over the period to maturity.
Bonds, notes and debentures for which the Bank has the positive intent and
ability to hold to maturity are reported at cost, adjusted for premiums and
discounts that are recognized in interest income using the interest method
over the period to maturity.
Management determines the appropriate classification of debt securities at
the time of purchase and re-evaluates such designation as of each balance
sheet date.
Mortgage loans held for sale:
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated fair value in the aggregate. All
sales are made without recourse. Net unrealized losses, if any, are
recognized through a valuation allowance by charges to income.
36
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans receivable:
Loans generally are stated at their outstanding unpaid principal balances
net of an allowance for loan losses and any deferred fees or costs.
Interest income is accrued on the unpaid principal balance. Loan
origination fees net of certain direct origination costs are deferred and
recognized as an adjustment of the yield (interest income) of the related
loans. The Bank is generally amortizing these amounts over the estimated
life of the loan.
A loan is generally considered impaired when it is probable the Bank will
be unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement. The accrual of interest is
discontinued when the contractual payment of principal or interest has
become 90 days past due or management has serious doubts about further
collectibility of principal or interest, even though the loan is currently
performing. A loan may remain on accrual status if it is in the process of
collection and is either guaranteed or well secured. When a loan is placed
on nonaccrual status, unpaid interest credited to income in the current
year is reversed and unpaid interest accrued in prior years is charged
against the allowance for loan losses. Interest received on nonaccrual
loans generally is either applied against principal or reported as interest
income, according to management's judgment as to the collectibility of
principal. Generally, loans are restored to accrual status when the
obligation is brought current, has performed in accordance with the
contractual terms for a reasonable period of time and the ultimate
collectibility of the total contractual principal and interest is no longer
in doubt.
Allowance for loan losses:
The allowance for loan losses is established through provisions for loan
losses charged against income. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any,
are credited to the allowance.
The allowance for loan losses related to impaired loans that are identified
for evaluation is based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. By the time a loan becomes probable of
foreclosure, it has been charged down to fair value, less estimated costs
to sell.
The allowance for loan losses is maintained at a level considered adequate
to provide for losses that can be reasonably anticipated. Management's
periodic evaluation of the adequacy of the allowance is based on the Bank's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, composition of the loan
portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates that
may be susceptible to significant change, including the amounts and timing
of future cash flows expected to be received on impaired loans.
37
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loan servicing:
The cost of mortgage servicing rights is amortized in proportion to and
over the period of estimated net servicing revenues. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate.
Bank premises and equipment:
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation of property and equipment is computed
principally on the straight-line method over the estimated useful lives of
the related assets.
Advertising costs:
The Bank follows the policy of charging the costs of advertising to expense
as incurred.
Income taxes:
Deferred taxes are provided on the liability method whereby deferred tax
assets are recognized for deductible temporary differences and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.
Off-balance sheet financial instruments:
In the ordinary course of business, the Bank has entered into off-balance
sheet financial instruments consisting of commitments to extend credit and
letters of credit. Such financial instruments are recorded in the balance
sheets when they are funded.
Earnings per share:
Basic earnings per share represents income available to common stockholders
divided by the weighted-average number of shares outstanding during the
period. Diluted earnings per share reflects additional common shares that
would have been outstanding if dilutive potential common shares had been
issued as well as any adjustment to income that would result from the
assumed issuance. Potential common shares that may be issued by the
Corporation relate solely to outstanding stock options and are determined
using the treasury stock method. Per share amounts have been adjusted to
give retroactive effect to stock splits declared through December 31, 1998.
38
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1
- --------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Segment reporting:
The Bank acts as an independent community financial services provider, and
offers traditional banking and related services to individual, business and
government customers. Through its branch and automated teller machine
network, the Bank offers a full array of commercial and retail financial
services, including the taking of time, savings and demand deposits; the
making of commercial, consumer and mortgage loans; and the providing of
other financial services.
Management does not separately allocate expenses, including the cost of
funding loan demand, between the commercial and retail operations of the
Bank. As such, discrete financial information is not available and segment
reporting would not be meaningful.
New accounting standard:
The Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities", in June
1998. This Statement was subsequently amended by Statement No. 137, which
delays the effective date. The Bank is required to adopt the Statement on
January 1, 2001. The adoption of the Statement is not expected to have a
significant impact on the financial condition or results of operations of
the Bank.
2
- --------------------------------------------------------------------------------
RESTRICTIONS ON CASH AND DUE FROM BANK BALANCES
The Bank is required to maintain average reserve balances with the Federal
Reserve Bank. The total of those reserve balances was approximately $ 350,000
for December 31, 1999 and $ 400,000 at December 31, 1998.
39
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
3
- --------------------------------------------------------------------------------
SECURITIES
The amortized cost of available for sale securities and their approximate fair
value at December 31 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale securities:
December 31, 1999:
U.S. Treasury securities $ 2,000,065 $ 1,809 $ -- $ 2,001,874
U.S. Government agency obligations 9,512,880 -- (142,827) 9,370,053
Obligations of states and political
subdivisions 764,934 509 (6,101) 759,342
Corporate obligations 396,859 -- (12,970) 383,889
Equity securities 868,500 -- -- 868,500
-------------------------------------------------------------------
$ 13,543,238 $ 2,318 $ (161,898) $ 13,383,658
===================================================================
December 31, 1998:
U.S. Treasury securities $ 4,504,588 $ 63,381 $ -- $ 4,567,969
U.S. Government agency obligations 7,019,921 80,562 (1,283) 7,099,200
Obligations of states and political
subdivisions 454,950 7,355 -- 462,295
Equity securities 747,000 -- -- 747,000
-------------------------------------------------------------------
$ 12,726,449 $ 151,298 $ (1,283) $ 12,876,464
===================================================================
</TABLE>
Equity securities are principally comprised of stock in the Federal Reserve Bank
and Federal Home Loan Bank.
40
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
3
- --------------------------------------------------------------------------------
SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31, 1999, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Available For Sale
-----------------------------------
Amortized Fair
Cost Value
-----------------------------------
<S> <C> <C>
Due in one year or less $ 3,584,585 $ 3,583,095
Due after one year through five years 8,780,200 8,626,534
Due after five years through ten years 206,981 203,891
Due after ten years 102,972 101,638
Equity securities 868,500 868,500
-----------------------------------
$ 13,543,238 $ 13,383,658
===================================
</TABLE>
There were no sales of securities during the years ended December 31, 1999 and
1998.
Securities with a carrying value of $ 8,907,854 and $ 4,055,000 at December 31,
1999 and 1998, respectively, were pledged to secure public deposits and for
other purposes as required or permitted by law.
4
- --------------------------------------------------------------------------------
LOANS RECEIVABLE
Loans receivable are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------------------------
<S> <C> <C>
Commercial $ 32,983,282 $ 27,184,490
Consumer 6,623,183 6,172,544
Mortgage 47,644,323 47,167,224
-------------------------------------
87,250,788 80,524,258
Allowance for loan losses (1,211,628) (719,788)
Net deferred loan fees and costs (371,019) (482,269)
-------------------------------------
$ 85,668,141 $ 79,322,201
=====================================
</TABLE>
41
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
4
- --------------------------------------------------------------------------------
LOANS RECEIVABLE (CONTINUED)
The following table presents changes in the allowance for loan losses:
Years Ended December 31,
1999 1998
-------------------------------
Balance, beginning $ 719,788 $ 540,158
Provision for loan losses 610,000 240,000
Loans charged off (143,613) (68,129)
Recoveries 25,453 7,759
-------------------------------
Balance, ending $ 1,211,628 $ 719,788
===============================
Impaired loans, not requiring an allowance for loan losses, were $0 at
December 31, 1999. Impaired loans requiring an allowance for loan losses were
$2,297,000 at December 31, 1999. At December 31, 1999, the related allowance for
loan losses associated with these loans were $353,000. For the year ended
December 31, 1999, average impaired loans were $64,000. Interest income on
impaired loans of $0 was recognized for cash payments received in 1999. There
were no impaired loans at December 31, 1998.
5
- --------------------------------------------------------------------------------
LOAN SERVICING
The Bank capitalized $ 40,009 and $ 84,962 of mortgage servicing rights for
loans originated and sold in 1999 and 1998, respectively, and amortized $32,458
and $ 20,223 of those rights for the years ended December 31, 1999 and 1998,
respectively.
The amortization of originated mortgage servicing rights is recorded as a
reduction of servicing revenue in other income. Mortgage servicing rights are
included in other assets.
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balance of mortgage loans
serviced for others totaled $ 16,583,511 and $ 14,145,720 at December 31, 1999
and 1998, respectively. Servicing income, net of mortgage servicing rights
amortization, for the years ended December 31, 1999 and 1998 was $ 7,762 and
$ 6,992, respectively.
42
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
6
- --------------------------------------------------------------------------------
BANK PREMISES AND EQUIPMENT
The major classes of bank premises and equipment and the total accumulated
depreciation are as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------------------------
<S> <C> <C>
Land and land improvements $ 262,562 $ 262,562
Bank buildings and leasehold improvements 2,048,387 2,047,972
Bank furniture and equipment 2,340,893 1,978,327
-------------------------------------
4,651,842 4,288,861
Less accumulated depreciation 1,823,042 1,578,118
-------------------------------------
$ 2,828,800 $ 2,710,743
=====================================
</TABLE>
7
- --------------------------------------------------------------------------------
DEPOSITS
The components of deposits at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------------------------
<S> <C> <C>
Demand, non-interest bearing $ 10,434,304 $ 9,551,421
Demand, interest bearing 24,559,817 21,148,971
Savings 9,168,362 9,621,079
Time, $ 100,000 and over 5,636,307 5,493,701
Time, other 40,797,411 39,627,621
-------------------------------------
$ 90,596,201 $ 85,442,793
=====================================
</TABLE>
43
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
7
- --------------------------------------------------------------------------------
DEPOSITS (CONTINUED)
At December 31, 1999, the scheduled maturities of time deposits are as follows:
2000 $ 26,041,718
2001 14,723,000
2002 2,923,000
2003 1,593,000
2004 772,000
Thereafter 381,000
-----------------
$ 46,433,718
=================
8
- --------------------------------------------------------------------------------
OTHER BORROWED FUNDS AND LONG-TERM DEBT
Securities sold under agreements to repurchase generally mature within one day
of the transaction date. Securities with a fair value of $1,502,000 were pledged
as collateral for these agreements. The securities underlying the agreements
were under the Bank's control.
The Bank maintains a U.S. Treasury tax and loan note option account for the
deposit of withholding taxes, corporate income taxes and certain other payments
to the federal government. Deposits are subject to withdrawal and are evidenced
by an open-ended interest-bearing note. Borrowings under this note option
account were $391,037 and $88,300 at December 31, 1999 and 1998, respectively,
with interest payable at a variable rate (4.52% and 4.11% at December 31, 1999
and 1998, respectively).
The Bank has a line of credit under the "RepoPlus" Advance program with the
Federal Home Loan Bank which expires April 15, 2000 for borrowings up to
$20,000,000. Borrowings under this line of credit were $10,080,000 and
$3,335,000 at December 31, 1999 and 1998, respectively.
Long-term debt at December 31, 1998 was an advance from the Federal Home Loan
Bank in the amount of $5,000,000 that matured on October 8, 1999 with an
interest rate of 6.02%.
44
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
9
- --------------------------------------------------------------------------------
REGULATORY MATTERS AND STOCKHOLDERS' EQUITY
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet the minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth below) of
total and Tier I capital (as defined in the regulations) to risk-weighted
assets, and of Tier I capital to average assets. Management believes, as of
December 31, 1999, that the Bank meets all capital adequacy requirements to
which it is subject.
As of December 31, 1999, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented below. The
consolidated capital ratios are not materially different from the Bank's capital
ratios.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
----------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total capital (to risk weighted
assets) $ 8,162,000 10.22% $ 6,391,000 =>8.00% $ 7,989,000 =>10.00%
Tier I capital (to risk weighted
assets) 7,163,000 8.97 3,195,000 =>4.00 4,793,000 => 6.00
Tier I capital (to average assets) 7,163,000 6.54 4,379,000 =>4.00 5,474,000 => 5.00
As of December 31, 1998:
Total capital (to risk weighted
assets) $ 7,778,000 10.93% $ 5,695,000 =>8.00% $ 7,119,000 =>10.00%
Tier I capital (to risk weighted
assets) 7,058,000 9.91 2,848,000 =>4.00 4,272,000 => 6.00
Tier I capital (to average assets) 7,058,000 7.04 4,010,000 =>4.00 5,013,000 => 5.00
</TABLE>
Banking laws and regulations limit the amount of dividends that may be paid and
any dividends declared by the Bank are subject to approval by the Bank's
regulatory agencies. Under current banking laws, the Bank would be limited to
approximately $ 538,000 of dividends in 2000 plus an additional amount equal to
the Bank's net income for 2000, up to the date of any such dividend declaration.
On June 25, 1998, the Board of Directors declared a two-for-one stock split in
the form of a 100% stock dividend on common stock outstanding, payable on
July 31, 1998 to shareholders of record on July 17, 1998. The stock split
resulted in the issuance of 348,387 additional common shares. All per share data
has been adjusted for the effect of the stock split.
45
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
10
- -------------------------------------------------------------------------------
STOCKHOLDER AUTOMATIC DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On June 25, 1998, the Corporation adopted a dividend reinvestment and stock
purchase plan available to stockholders who elect to reinvest their cash
dividends for the purchase of additional shares of the Corporation's common
stock. Participants may also elect to make voluntary cash payments not to exceed
$ 2,500 each quarter for the purchase of additional shares of the Corporation's
common stock. The common stock was required to be purchased in the open market
through May 1999. Subsequent to that date, it may be purchased in the open
market or from authorized but unissued shares, substantially at prevailing
market prices. The Corporation has reserved 225,000 shares of common stock for
possible issuance under the plan. During 1999, 1,863 shares were purchased
through this plan in the amount of $ 21,435.
11
- -------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
The following table sets forth the computations of basic and diluted earnings
per share for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------------------------------
<S> <C> <C>
Net income $ 241,533 $ 543,753
==================================
Weighted average shares outstanding 697,234 696,686
Effect of dilutive securities, stock options 2,129 2,842
----------------------------------
Weighted average shares and assumed conversion 699,363 699,528
==================================
</TABLE>
12
- -------------------------------------------------------------------------------
COMPREHENSIVE INCOME
Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available for sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.
46
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
12
- -------------------------------------------------------------------------------
COMPREHENSIVE INCOME (CONTINUED)
The components of other comprehensive income (loss) and related tax effects are
as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
-------------------------------
<S> <C> <C>
Net unrealized holding (losses) gains on available for sale securities $ (309,595) $ 122,333
Tax effect 103,308 (41,593)
-------------------------------
Net of tax amount $ (206,287) $ 80,740
===============================
</TABLE>
13
- --------------------------------------------------------------------------------
EMPLOYEE BENEFITS
The Bank has a 401(k) Profit Sharing Plan and Trust for its employees. Employees
are permitted to contribute up to 17% of their compensation, but not over the
statutory limit. The profit sharing plan covers employees who meet the
eligibility requirements of having worked 1,000 hours in a plan year and have
attained the age of 21. The amount of matching 401(k) contributions and profit
sharing plan contributions is at the discretion of the Bank's Board of
Directors. The expense related to this plan was $ 28,153 and $ 21,067 in 1999
and 1998, respectively.
The Bank has various deferred compensation plans for certain directors and
officers of the Bank. Under the Plans' provisions, benefits will be payable upon
retirement, death or permanent disability of the participant. At December 31,
1999 and 1998, $148,577 and $76,157 respectively, had been accrued under these
contracts. To fund the benefits under these agreements, the Bank is the owner
and the beneficiary of life insurance policies on the lives of the directors and
officers. The policies had an aggregate cash surrender value of $2,224,779 and
$1,887,123 at December 31, 1999 and 1998, respectively.
47
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
13
- -------------------------------------------------------------------------------
EMPLOYEE BENEFITS (CONTINUED)
The Bank has an Employee Stock Option Plan that covers all officers and key
employees of the Corporation and its subsidiary and is administered by a
committee of the Board of Directors. The Plan covers 50,000 shares of common
stock. The option price for options issued under the Plan must be at least equal
to 100% of the fair market value of the common stock on the date of grant.
Options granted under the Plan vest over a three-year period, commencing one
year after the date of grant, on a cumulative basis. Options expire on the
earlier of ten years after the date of grant, three months from the
participants' termination of employment or one year from the date of the
participants' death or disability.
The Bank has a Non-Employee Directors' Stock Option Plan that covers 20,000
shares of common stock. The Plan covers all directors of the Corporation and its
subsidiary who are not employees. The option price for options issued under the
Plan will be equal to the fair market value of the Corporation's common stock on
the date of grant. On the fifth anniversary date of the initial option grant
date, and every five years thereafter, each non-employee director shall be
granted options to purchase 1,000 shares of common stock. Options are
exercisable one year from the date of grant and expire on the earlier of ten
years after the date of grant, three months from the date the participant ceases
to be a director of the Corporation or three months from the date of the
participants' death or disability.
The Corporation has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee and director stock options. Under
APB 25, because the exercise price of the Bank's stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is required by
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-based Compensation, and has been determined as if the Corporation had
accounted for its stock options under the fair value method of that statement.
The fair values for these options that were granted during 1999 and 1998 were
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions: risk-free interest rate of 6.1% and
4.6%; volatility factor of the expected market price of the Bank's common stock
of 20.67% and 8.2%; expected life of the options of 7 years and a cash dividend
yield of 2.64% and 1.84%.
48
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
13
- -------------------------------------------------------------------------------
EMPLOYEE BENEFITS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Corporation's pro
forma information follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
------------------------------------
<S> <C> <C>
Net income:
As reported $ 241,533 $ 543,753
Pro forma, basic $ 235,870 $ 538,369
Earnings per share:
As reported $ 0.35 $ 0.78
Pro forma, basic $ 0.34 $ 0.77
As reported, diluted $ 0.35 $ 0.78
Pro forma, diluted $ 0.34 $ 0.77
</TABLE>
Stock option transactions under the Plans are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
-------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Options Price Options Price
-------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at the beginning of the year 13,900 $ 10.47 15,800 $ 10.24
Granted 1,000 11.25 1,700 12.13
Exercised - - (200) 8.88
Forfeited (1,300) 10.11 (3,400) 10.56
-------------------------------------------------------
Outstanding at the end of the year 13,600 $ 10.56 13,900 $ 10.47
=======================================================
Exercisable at December 31 10,467 $ 10.18
============================
Weighted-average fair value of options
granted during the year $ 3.38
================
</TABLE>
Options available for grant at December 31, 1999 are 56,200.
The weighted-average remaining contractual life of the above options is
approximately 7.8 years.
49
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
14
- -------------------------------------------------------------------------------
INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
---------------------------------
<S> <C> <C>
Current $ 223,047 $ 245,329
Deferred (169,236) (26,049)
---------------------------------
$ 53,811 $ 219,280
=================================
</TABLE>
Reconciliation of the statutory income tax at a rate of 34% to the income tax
expense included in the consolidated statements of income is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
---------------------------------
<S> <C> <C>
Computed statutory tax expense $ 100,417 $ 259,431
Tax-exempt interest (16,842) (19,055)
Disallowance of interest expense 2,612 3,093
Bank-owned life insurance (32,605) (28,203)
Other 229 4,014
---------------------------------
$ 53,811 $ 219,280
=================================
</TABLE>
Net deferred tax assets consisted of the following components:
<TABLE>
<CAPTION>
December 31,
1999 1998
----------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 382,504 $ 215,279
Unrealized losses on securities available for sale 52,302 -
Deferred compensation 47,597 25,893
----------------------------------
Total deferred tax assets 482,403 241,172
----------------------------------
Deferred tax liabilities:
Bank premises and equipment (114,775) (97,721)
Mortgage servicing rights (43,915) (41,276)
Unrealized gains on securities available for sale - (51,006)
----------------------------------
Total deferred tax liabilities (158,690) (190,003)
----------------------------------
Net deferred tax assets $ 323,713 $ 51,169
==================================
</TABLE>
50
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
15
- -------------------------------------------------------------------------------
LEASE COMMITMENTS AND TOTAL RENTAL EXPENSE
The Bank leases the premises for one branch location and an operations center
under operating lease agreements expiring in various years through October 2017.
Certain lease agreements contain escalation provisions. The Bank also has
options to extend the lease agreements for additional lease terms from five to
thirty years. The Bank is responsible to pay all real estate taxes, insurance,
utilities and maintenance and repairs on the buildings.
Future minimum lease payments by year and in the aggregate, under noncancellable
operating leases with initial or remaining terms of one year or more, consisted
of the following at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 124,735
2001 125,940
2002 127,929
2003 133,961
2004 135,125
Thereafter 1,334,185
------------------
$ 1,981,875
==================
</TABLE>
The total rental expense included in the statements of income for the years
ended December 31, 1999 and 1998 is $ 134,318 and $ 111,446, respectively.
16
- --------------------------------------------------------------------------------
TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
The Bank has had banking transactions in the ordinary course of business with
its executive officers and directors and their related interests on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others. At December 31, 1999 and 1998, these
persons were indebted to the Bank for loans totaling $1,565,000 and $1,476,000,
respectively. During 1999, $349,000 of new loans were made and repayments
totaled $260,000.
51
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
17
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Bank is a party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and letters of
credit. Those instruments involve, to varying degrees, elements of credit risk
in excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and letters
of credit is represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
A summary of the Bank's financial instrument commitments is as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
---------------------------
<S> <C> <C>
Commitments to grant loans $ 3,046,000 $ 1,844,000
Unfunded commitments under lines of credit 7,964,000 5,163,000
Outstanding letters of credit 96,000 755,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Since many
of the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation. Collateral held varies but may include personal or commercial real
estate, accounts receivable, inventory and equipment.
Outstanding letters of credit written are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers.
18
- -------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK
The Bank grants commercial, residential and consumer loans to customers
primarily located in Berks County, Pennsylvania. The concentrations of credit by
type of loan are set forth in Note 4. Although the Bank has a diversified loan
portfolio, its debtors' ability to honor their contracts is influenced by the
region's economy.
52
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
19
- -------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management uses its best judgment in estimating the fair value of the Bank's
financial instruments; however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial instruments, the fair
value estimates herein are not necessarily indicative of the amounts the Bank
could have realized in a sales transaction on the dates indicated. The estimated
fair value amounts have been measured as of their respective year ends, and have
not been reevaluated or updated for purposes of these financial statements
subsequent to those respective dates. As such, the estimated fair values of
these financial instruments subsequent to the respective reporting dates may be
different than the amounts reported at each year-end.
The following information should not be interpreted as an estimate of the fair
value of the entire Bank since a fair value calculation is only provided for a
limited portion of the Bank's assets. Due to a wide range of valuation
techniques and the degree of subjectivity used in making the estimates,
comparisons between the Bank's disclosures and those of other companies may not
be meaningful. The following methods and assumptions were used by the Bank in
estimating its fair value disclosures for financial instruments:
Cash and due from banks and interest bearing deposits in other banks: The
carrying amounts reported approximate those assets' fair value.
Securities:
Fair values of securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are
based on quoted market prices of comparable instruments.
Mortgage loans held for sale:
Fair values are based on quoted market prices of similar loans sold.
Loans receivable:
For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The
fair values for other loans receivable were estimated using discounted
cash flow analysis, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality.
Accrued interest receivable and payable:
The carrying amount of accrued interest receivable and payable
approximate their fair values.
Deposit liabilities:
The fair values disclosed for demand deposits (e.g., interest-bearing
and noninterest-bearing checking, passbook, savings and certain types
of money market accounts) are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts).
Fair values for fixed-rate certificates of deposit are estimated using
a discounted cash flow calculation that applies interest rates
currently being offered on certificates of deposit to a schedule of
aggregated expected monthly maturities on time deposits.
53
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
19
- -------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Other borrowed funds and securities sold under agreements to repurchase:
The current carrying amounts of other borrowed funds approximate their
fair values.
Long-term debt:
The current carrying value of the debt approximates the fair value.
Off-balance sheet instruments:
Off-balance sheet instruments of the Bank consist of letters of credit,
loan commitments and unfunded lines of credit. Fair values for the
Bank's off-balance sheet instruments are based on fees currently
charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties' credit
standing. Any fees charged are immaterial.
A summary of the estimated fair values of the Bank's financial instruments are
as follows:
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-----------------------------------------------------
(In Thousands)
Financial assets:
<S> <C> <C> <C> <C>
Cash and due from banks $ 4,139 4,139 $ 2,998 $ 2,998
Interest-bearing deposits in other banks 13 13 26 26
Securities 13,384 13,384 12,876 12,876
Mortgage loans held for sale 68 68 1,052 1,052
Loans receivable, net 85,668 84,603 79,322 81,830
Accrued interest receivable 570 570 485 485
Financial liabilities:
Deposits 90,596 90,620 85,443 86,288
Other borrowed funds and securities sold under
agreements to repurchase 11,132 11,132 3,423 3,423
Long-term debt - - 5,000 5,000
Accrued interest payable 297 297 298 298
Off-balance sheet financial instruments:
Commitments to extend credit - - - -
Standby letters of credit - - - -
</TABLE>
54
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
20
- -------------------------------------------------------------------------------
COMMUNITY INDEPENDENT BANK, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
<TABLE>
<CAPTION>
Balance Sheets
December 31,
1999 1998
------------------------------------
Assets:
<S> <C> <C>
Cash $ 137,779 $ 173,314
Investment in Bank subsidiary 7,055,595 7,157,000
Other assets 48,528 29,158
------------------------------------
Total assets $ 7,241,902 $ 7,359,472
====================================
Stockholders' equity $ 7,241,902 $ 7,359,472
====================================
</TABLE>
<TABLE>
<CAPTION>
Statements of Income
Years Ended December 31,
1999 1998
------------------------------------
<S> <C> <C>
Dividends from Bank subsidiary $ 174,251 $ 167,202
Other expenses (56,970) (85,761)
Income tax benefits 19,370 29,158
Equity in undistributed earnings of Bank subsidiary 104,882 433,154
------------------------------------
Net income $ 241,533 $ 543,753
====================================
</TABLE>
55
<PAGE>
COMMUNITY INDEPENDENT BANK, INC.
AND ITS WHOLLY-OWNED SUBSIDIARY,
BERNVILLE BANK, N.A.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
20
- -------------------------------------------------------------------------------
COMMUNITY INDEPENDENT BANK, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Statements of Cash Flows
Years Ended December 31,
1999 1998
------------------------------------
Operating activities:
<S> <C> <C>
Net income $ 241,533 $ 543,753
Adjustments to reconcile net income to net cash provided by
operating activities:
Undistributed earnings of Bank subsidiary (104,882) (433,154)
Increase in other assets (19,370) (29,158)
------------------------------------
Net cash provided by operating activities 117,281 81,441
------------------------------------
Financing activities:
Cash dividends (174,251) (167,202)
Proceeds from dividend reinvestment plan 21,435 -
Proceeds from common stock options exercised - 1,775
------------------------------------
Net cash used in financing activities (152,816) (165,427)
------------------------------------
Decrease in cash (35,535) (83,986)
Cash:
Beginning 173,314 257,300
------------------------------------
Ending $ 137,779 $ 173,314
====================================
</TABLE>
56
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this item is incorporated by reference from
the definitive proxy statement to be filed pursuant to Regulation 14A.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from
the definitive proxy statement to be filed pursuant to Regulation 14A.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference from
the definitive proxy statement to be filed pursuant to Regulation 14A.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference from
the definitive proxy statement to be filed pursuant to Regulation 14A.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule
b. Reports on Form 8-K
None
57
<PAGE>
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.
<TABLE>
<CAPTION>
COMMUNITY INDEPENDENT BANK, INC.
(Registrant)
<S> <C>
- ----------------------- -----------------------------------------
Date Frederick P. Krott, Chairman of the Board
(Principal Executive Officer)
- ----------------------- -----------------------------------------
Date Linda L. Strohmenger, Secretary
(Principal Financial Officer)
- ----------------------- -----------------------------------------
Date Karl D. Gerhart, Director
- ----------------------- -----------------------------------------
Date John F. Hampson, Director
- ----------------------- -----------------------------------------
Date Walter J. Potteiger, Director
- ----------------------- -----------------------------------------
Date Deborah K. Ritter, Director
- ----------------------- -----------------------------------------
Date John J. Seitzinger, Director
- ----------------------- -----------------------------------------
Date Arlan J. Werst, Director
- ----------------------- -----------------------------------------
Date Stratton D. Yatron, Director
</TABLE>
58
<PAGE>
ITEM 13(a). EXHIBITS
EXHIBIT 21. SUBSIDIARIES OF THE REGISTRANT
Bernville Bank, N.A.
201 N. Main Street
Bernville, PA 19506
59
<PAGE>
EXHIBIT 23. CONSENT OF BEARD & COMPANY, INC., INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (on Forms S-8 and Form S-3) of Community Independent Bank, Inc. of
our report dated January 21, 2000, with respect to the consolidated financial
statements of Community Independent Bank, Inc. and subsidiary included in this
Annual Report (Form 10-KSB) for the year ended December 31, 1999.
/s/ BEARD & COMPANY, INC.
Reading, Pennsylvania
March 23, 2000
60
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Community Independent Bank, Inc. consolidated balance sheet as of December 31,
1999 and the related consolidated statement of income for the year ended
December 31, 1999 and other financial data included within management's
discussion and analysis of financial condition and results of operations as of
and for the year ended December 31, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,139,228
<INT-BEARING-DEPOSITS> 13,238
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,383,658
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 85,668,141
<ALLOWANCE> 1,211,628
<TOTAL-ASSETS> 109,535,926
<DEPOSITS> 90,596,201
<SHORT-TERM> 11,132,129
<LIABILITIES-OTHER> 565,694
<LONG-TERM> 0
0
0
<COMMON> 3,493,185
<OTHER-SE> 3,748,717
<TOTAL-LIABILITIES-AND-EQUITY> 109,535,926
<INTEREST-LOAN> 7,164,397
<INTEREST-INVEST> 725,157
<INTEREST-OTHER> 63,274
<INTEREST-TOTAL> 7,952,828
<INTEREST-DEPOSIT> 3,466,401
<INTEREST-EXPENSE> 4,013,333
<INTEREST-INCOME-NET> 3,939,495
<LOAN-LOSSES> 610,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,733,474
<INCOME-PRETAX> 295,344
<INCOME-PRE-EXTRAORDINARY> 295,344
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,533
<EPS-BASIC> .35
<EPS-DILUTED> .35
<YIELD-ACTUAL> 4.03
<LOANS-NON> 2,450,000
<LOANS-PAST> 584,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,525,000
<ALLOWANCE-OPEN> 719,788
<CHARGE-OFFS> 143,613
<RECOVERIES> 25,453
<ALLOWANCE-CLOSE> 1,211,628
<ALLOWANCE-DOMESTIC> 1,211,628
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
