ITEM 1. BUSINESS
GENERAL Drovers Bancshares Corporation ("Drovers") was organized on October 27, 1982, under the Pennsylvania Business Corporation Law and holds all the stock of The Drovers & Mechanics Bank ("Drovers Bank"). The Management of The Drovers & Mechanics Bank formed Drovers Bancshares Corporation for greater flexibility in providing a wider variety of banking services and in engaging in nonbanking activities permitted under the Bank Holding Company Act of 1956, as amended.
The Drovers & Mechanics Bank is a wholly-owned subsidiary of Drovers. Drovers Bank is chartered pursuant to the laws of the Commonwealth of Pennsylvania and is subject to the supervision of the Banking Department of the Commonwealth and the Federal Deposit Insurance Corporation. Drovers Bank was organized in 1883 as a national bank and became a state-chartered non-member bank of the Federal Reserve System on February 14, 1979. Drovers Bank has two wholly-owned subsidiaries: 96 South George Street, Inc. and Drovers Investment Company. 96 South's primary asset is an office building attached to Drovers Bank's Main Office which houses our corporate headquarters. Drovers Investment Company's assets consist of investment securities, primarily municipal bonds.
Drovers also wholly owns two other subsidiaries: Drovers Realty Company and Drovers Capital Trust I. Drovers Realty Company has various real estate holdings, including ground and building leases. It rents the real estate to Drovers Bank for use as branch offices. Drovers Capital Trust I owns junior subordinated deferrable debentures due from Drovers. The debentures are the sole asset of the Trust. The Trust issued $7,500,000 of preferred securities to investors secured by the debentures. For additional information on the Trust, see Note 13 on page 29 of the Drovers Corporation 1999 Annual Report.
Drovers Bank offers a wide variety of banking and trust services to individuals and commercial customers in its service area. Personal banking services include checking accounts, savings and time accounts, certificates of deposit, personal and mortgage loans, home improvement loans, safe deposit services, estate planning and administration, personal trust management and discount brokerage services. Commercial banking services are provided to businesses, nonprofit organizations and local municipalities. These services include checking accounts, savings and time accounts, financing activities and corporate trust services in the areas of pension, profit sharing and employee benefit plans. Investment services and trust recently launched the Oak Tree Investment Group which provides enhanced investment management, financial planning and brokerage services.
On December 31, 1999, Drovers Bank employed 231 full-time equivalents throughout its branch offices. The Main Office is located at 30 South George Street, York, Pennsylvania. A Research and Administrative Services Center and nine branches are located in the surrounding suburbs of York City. In addition, there are seven out-of-town offices located in Dillsburg, Shrewsbury, Emigsville, Hellam, York Haven, Dover and Red Lion, Pennsylvania. On November 8, 1999, a full-service bank office opened in Dillsburg, Pennsylvania. Drovers Bank opened its first loan production office in the first quarter of 1999 in Mechanicsburg, Pennsylvania. We opened an office in Frederick, Maryland in August 1999. The Frederick Office was initially a loan production office. On February 21, 2000, the Frederick Office began accepting deposits from business customers. Negotiations continue to purchase land in Newberrytown, Pennsylvania to establish a new branch office. During 2000, we plan to relocate the Memory Lane Branch and to expand the Research and Administrative Services Center. Drovers Bank also has eleven remote automated teller machines. Locations include the York Fairgrounds, York College of Pennsylvania, and nine inside convenience stores.
Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
GENERAL, CONTINUED
In December 1993, Drovers Bank purchased the office building attached to our Main Office. The five-story complex, known as 96 South George, provides for future growth and enables Drovers to maintain its headquarters in downtown York. The accounting, corporate banking, and executive offices are located on the fifth floor of 96 South George.
Drovers Bank is a limited partner in five ventures that own and operate apartment buildings. The apartments provide low-income housing to qualified families. The investments are accounted for under the equity method of accounting. The combined carrying values of the investments at December 31, 1999 and 1998 were $5,554,000 and $5,385,000, respectively.
SUPERVISION AND REGULATION
Bank Holding Company Regulation
Drovers is registered as a bank holding company and is subject to the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve") under the Bank Holding Company Act of 1956, as amended ("BHCA"). Bank holding companies are required to file periodic reports with and are subject to examination by the Federal Reserve. The Federal Reserve has issued regulations under the BHCA that require a bank holding company to serve as a source of financial and managerial strength to its subsidiary banks. As a result, the Federal Reserve, pursuant to such regulations, may require Drovers to stand ready to use its resources to provide adequate capital funds to Drovers Bank during periods of financial stress or adversity.
Under the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become "undercapitalized" as defined by regulations) with the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency, up to specified limits.
Under the BHCA, the Federal Reserve has the authority to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve's determination that such activity or control constitutes a serious risk to the financial soundness and stability of any bank subsidiary of the bank holding company.
The BHCA prohibits Drovers from acquiring direct or indirect control of more than 5% of the outstanding shares of any class of voting stock or substantially all of the assets of any bank or merging or consolidating with another bank holding company without prior approval of the Federal Reserve. Such a transaction would also require approval of the Pennsylvania Department of Banking. Pennsylvania law permits Pennsylvania bank holding companies to control an unlimited number of banks.
Additionally, the BHCA prohibits Drovers from engaging in or from acquiring ownership or control of more than 5% of the outstanding shares of any class of voting stock of any company engaged in a nonbanking business unless such business is determined by the Federal Reserve to be so closely related to banking as to be a proper incident thereto. The Federal Reserve can differentiate between nonbanking activities that are initiated by a bank holding company or subsidiary and activities that are acquired as a going concern. The BHCA does not place territorial restrictions on the activities of such nonbanking-related activities. Drovers and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services.
Federal Reserve approval may be required before Drovers or its nonbank subsidiaries may begin to engage in any new activity and before acquiring a business. Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
Dividend Restrictions
Drovers is a legal entity separate and distinct from Drovers Bank and the Drovers' nonbank subsidiaries. Drovers' revenues (on a parent company only basis) result almost entirely from dividends received from its subsidiaries. The right of Drovers and consequently the right of creditors and shareholders of Drovers, to participate in any distribution of the assets or earnings of any subsidiary through the payment of such dividends or otherwise is necessarily subject to the prior claims of creditors of the subsidiary (including depositors, in the case of Drovers Bank), except to the extent that claims of Drovers in its capacity as a creditor may be recognized.
Federal and state laws regulate the payment of dividends by Drovers' subsidiaries. See "Supervision and Regulation - Regulation of Drovers Bank" herein.
Further, it is the policy of the Federal Reserve that bank holding companies should pay dividends only out of current earnings. Federal banking regulators also have the authority to prohibit banks and bank holding companies from paying a dividend if they should deem such payment to be an unsafe or unsound practice.
Capital Adequacy
Bank holding companies are required to comply with the Federal Reserve's risk- based capital guidelines. The required minimum ratio of total capital to risk-weighted assets (including certain off-balance sheet activities, such as standby letters of credit) is 8%. At least half (4%) of the total capital is required to be "Tier 1 Capital," consisting principally of common shareholders' equity, noncumulative perpetual preferred stock, a limited amount of cumulative perpetual preferred stock, and minority interests in the equity accounts of consolidated subsidiaries, less certain intangible assets. 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 Reserve requires a bank holding company to maintain a minimum "leverage ratio." This requires a minimum level of Tier 1 capital (as determined under the risk-based capital rules) to average total consolidated assets of 3% for those bank holding companies that have the highest regulatory examination ratings and are not contemplating or experiencing significant growth or expansion. All other bank holding companies are expected to maintain a ratio of at least 1% to 2% above the stated minimum. Further, the Federal Reserve has indicated that it will consider a "tangible Tier 1 capital leverage ratio" deducting all intangibles and other indications of capital strength in evaluating proposals for expansion or new activities. The Federal Reserve has not advised us that we should apply any specific minimum leverage ratio.
Pursuant to FDICIA, the federal banking agencies have specified, by regulation, the levels at which an insured institution is considered "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," or "critically undercapitalized." Under these regulations, an institution is considered "well capitalized" if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage ratio of 5% or greater, and is not subject to any order or written directive to meet and maintain a specific capital level. Drovers and the Drovers Bank, at December 31, 1999, qualify as "well capitalized" under these regulatory standards.
Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
FDIC Insurance
Drovers Bank is subject to FDIC deposit insurance assessments. The FDIC has adopted a risk-related premium assessment system for both the Bank Insurance Fund ("BIF") for banks and the Savings Association Insurance fund ("SAIF") for savings associations. Under this system, FDIC insurance premiums are assessed based on capital and supervisory measures.
Under the risk-related premium assessment system, the FDIC, on a semiannual basis, assigns 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 corresponding to the FDIC's judgment of its strength based on supervisory evaluations, including examination reports, statistical analysis, and other information relevant to gauging the risk posed by the institution. Only institutions with a total risk-based capital to risk-adjusted assets ratio of 10% or greater, a Tier 1 capital to risk-adjusted assets ratio of 6% or greater, and a Tier 1 leverage ratio of 5% or greater, are assigned to the well-capitalized group.
On September 30, 1996, the President of the United States signed into law the Deposit Insurance Funds Act of 1996 to recapitalize the Savings Association Insurance Fund ("SAIF") administered by the Federal Deposit Insurance Corporation ("FDIC")and to provide for repayment of the FICO (Financial Institution Collateral Obligation) bonds issued by the United States Treasury Department. The FDIC levied a one-time special assessment of SAIF deposits equal to 65.7 cents per $100 of the SAIF-accessible deposit base as of March 31, 1995. During 1997, 1998 and 1999, the Bank Insurance Fund ("BIF") will pay $322 million of FICO debt service, and SAIF will pay $458 million. During 1997, 1998 and 1999, the average regular annual deposit insurance assessment is estimated to be about 1.29 cents per $100 of deposits for BIF deposits and 6.44 cents per $100 of deposits for SAIF deposits. Individual institution's assessments will continue to vary according to their capital and management ratings. As always, the FDIC will be able to raise the assessments as necessary to maintain the funds at their target capital ratios provided by law. After 1999, BIF and SAIF will share the FICO cost equally. Under current estimates, BIF and SAIF assessment bases would each be assessed at the rate of approximately 2.43 cents per $100 of deposits. The FICO bonds will mature in 2018-2019, ending the interest payment obligation.
Regulation of Drovers Bank
The operations of Drovers Bank are subject to federal and state statues applicable to banks chartered under the banking laws of the Commonwealth of Pennsylvania that are not members of the Federal Reserve System and to banks whose deposits are insured by the FDIC.
The FDIC, which has primary supervisory authority over Drovers Bank, regularly examines banks in such areas as reserves, loans, investments, management practices, and other aspects of operations. These examinations are designed for the protection of Drovers Bank's depositors rather than Drovers' shareholders. Drovers Bank must furnish annual and quarterly reports to the FDIC, which has the authority under the Financial Institutions Supervisory Act to prevent a state non-member bank from engaging in an unsafe or unsound practice in conducting its business.
Federal and state banking laws and regulations govern, among other things, the scope of a bank's business, the investments a bank may take, the reserves against deposits a bank must maintain, the types and terms of loans a bank may make and the collateral it may take, the activities of a bank with respect to mergers and consolidations, and the establishment of branches. Pennsylvania law permits statewide branching.
Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
Regulation of Drovers Bank, Continued
Recently, Pennsylvania enacted a law to permit state-chartered financial institutions to sell insurance. This follows a United States Supreme Court decision in favor of nationwide insurance sales by banks and which also bars states from blocking insurance sales by national banks in towns with populations of no more than 5,000. Consequently, state-chartered banks, such as Drovers Bank, are allowed to sell insurance in Pennsylvania and are not limited by the town of 5,000 restriction applicable to national banks. The Office of the Comptroller of the Currency has issued guidelines for national banks to sell insurance. Drovers Bank has been licensed as an insurance agency within the State of Pennsylvania. We presently sell fixed and variable rate annuity products and are evaluating our options regarding the sale of additional insurance products.
Under the Federal Deposit Insurance Act, as amended, Drovers Bank is required to obtain the prior approval of the FDIC for the payment of dividends if the total of all dividends declared by the Bank in one year would exceed the Drovers Bank's net profits (as defined and interpreted by regulation) for the current year plus its retained net profits (as defined and interpreted by regulation)for the two preceding years, less any required transfers to surplus. In addition, Drovers Bank may only pay dividends to the extent that its retained net profits (including the portion transferred to surplus) exceed statutory bad debts (as defined by regulation). Under FDICIA, any depository institution, including Drovers Bank, is prohibited from paying any dividends, making other distributions or paying any management fees if, after such payment, it would fail to satisfy its minimum capital requirements.
A subsidiary bank of a bank holding company, such as Drovers Bank, is subject to certain restrictions imposed by the Federal Reserve Act on any extensions of credit to the bank holding company or its subsidiaries, on investments in the stock or other securities of the bank holding company or its subsidiaries, and on taking such stock or securities as collateral for loans. The Federal Reserve Act and Federal Reserve regulations also place certain limitations and reporting requirements on extensions of credit by a bank to the principal shareholders of its parent holding company, among others, and to related interests of such principal shareholders. In addition, such legislation and regulations may affect the terms upon which any person becoming a principal shareholder of a holding company may obtain credit from banks with which the subsidiary bank maintains a correspondent relationship.
Drovers Bank, and the banking industry in general, are affected by the monetary and fiscal policies of government agencies, including the Federal Reserve. Through open market securities transactions and changes in its discount rate and reserve requirements, the Board of Governors of the Federal Reserve exerts considerable influence over the cost and unavailability of funds for lending and investment.
In regards to the Year 2000 issue, we did not have any disruptions of our business as a result of the date change to January 1, 2000. For additional information see Management's Discussion and Analysis of Financial Condition and Results of Operations, Year 2000 Issue, on page 43 of the Corporation's 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
COMPETITION
The financial services industry in Drovers Bank's service area is extremely competitive. Competitors within its service area include multi-bank holding companies, with resources substantially greater than ours. Many competitor financial institutions have legal lending limits substantially higher than Drovers Bank's legal lending limit. In addition, we compete with savings banks, savings and loan associations, credit unions, money market and other mutual funds, mortgage companies, leasing companies, finance companies, and other financial services companies that offer products and services similar to those offered by Drovers Bank on competitive terms.
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 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.
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, except 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. 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 set forth in Federal Reserve Board regulation Y.
Bank holding companies that do qualify as a financial holding company may engage in activities that are of a financial nature or incidental thereto. This will include activities such as securities and insurance underwriting which are not permitted non-banking activities under Regulation Y. 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.
INTERSTATE BANKING LEGISLATION
In September 1994, the Riegle-Neal Interstate Banking and Branching Efficiency Act (the "Interstate Banking Act") was enacted. The Interstate Banking Act facilitates the interstate expansion and consolidation of banking organizations (i) by permitting bank holding companies that are adequately capitalized and adequately managed, beginning September 29, 1995, to acquire banks located in states outside their home states regardless of whether such acquisitions are authorized under the law of the host state; (ii) by permitting the interstate merger of banks after June 1, 1997, subject to the right of individual states to "opt in" or "opt out" of this authority before that date; (iii) by permitting banks to establish new branches on an interstate basis provided that such action is specifically authorized by the law of the host state; (iv) by permitting, beginning September 29, 1995, a bank to engage in certain agency relationships (i.e., to receive deposits, renew time deposits, close loans (but not including loan approvals or disbursements), service loans, and receive payments on loans and other obligations) as agent for any bank or thrift affiliate, whether the affiliate
Drovers Bancshares Corporation and Subsidiaries ITEM 1. BUSINESS
INTERSTATE BANKING LEGISLATION, Continued
is located in the same state or a different state then the agent bank; and (v) by permitting foreign banks to establish, with approval of the regulators in the United States, branches outside their "home" states to the same extent that national or state banks located in the home state would be authorized to do so. One effect of this legislation will be to permit Drovers to acquire banks and bank holding companies located in any state and to permit qualified banking organizations located in any state to acquire banks and bank holding companies located in Pennsylvania, irrespective of state law.
Since 1995, the Pennsylvania Banking Code has authorized full interstate banking and branching under Pennsylvania law. Specifically, the legislation (i) eliminates the "reciprocity" requirement previously applicable to interstate commercial bank acquisitions by bank holding companies, (ii) authorized interstate bank mergers and reciprocal interstate branching into Pennsylvania by interstate banks, and (iii) permits Pennsylvania institutions to branch into other states with the prior approval of the Pennsylvania Department of Banking.
Overall, this federal and state legislation has, as was predicted, had the effect of increasing consolidation and competition and promoting geographic diversification in the banking industry.
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 written evaluation of an institution's CRA performance and requires public disclosure of an institution's CRA rating. Drovers Bank received a "satisfactory" rating in its last CRA examination conducted by the FDIC.
PROPOSED LEGISLATION AND REGULATIONS
From time to time, various federal and state legislation is proposed that could result in additional regulation of, and restriction on, the business of Drovers and Drovers Bank, or otherwise change the business environment.
We cannot predict whether any of this legislation, if enacted, will have a material effect on the business of Drovers.
Drovers Bancshares Corporation and Subsidiaries ITEM 2.
ITEM 2. PROPERTIES
Drovers and its Subsidiaries own in fee simple unencumbered the following land and buildings:
Main Office Emigsville Office 30 S George Street 2123 N George Street York, PA 17401 Emigsville, PA 17318
Research & Administrative Westgate Office Services Center 1500 Kenneth Road 915 Indian Rock Dam Road York, PA 17404 York, PA 17403
Richland Avenue Office Memory Lane Office 905 Indian Rock Dam Road 200 Memory Lane York, PA 17403 York, PA 17402
York Haven Office Dillsburg Office Landvale Street 3 Tristan Drive York Haven, PA 17370 Dillsburg, PA 17019
Drovers Bank is the sole occupant of all land and buildings listed above.
The following property is pledged as collateral for a mortgage loan secured to purchase the property:
96 South George Office Building 96 South George Street York, PA 17401
The five-story office building adjacent to the Main Office provides for future growth and enables Drovers to maintain headquarters in downtown York. The accounting, corporate banking, and executive offices are located on the fifth floor of the office building.
The following branch offices are leased:
Queensgate Office Queensgate Shopping Center York, PA 17403 $1,750 per month rental; lease expires October 1, 2000.
Dover Office Dover Square, adjacent to Shipley Stores, Inc. 1 South Main Street Dover, PA 17315 $4,800 per month rental; lease expires November 9, 2006, and is renewable for three five-year options.
South York Plaza Office 275 Pauline Drive in the Giant Food Store York, PA 17402 $2,917 per month rental; lease expires August 31, 2000, and is renewable for one five-year option.
Drovers Bancshares Corporation and Subsidiaries ITEM 2. PROPERTIES
Cape Horn Office 3140 Cape Horn Road Red Lion, PA 17356 $2,625 per month land rental; lease expires February 29, 2012, and is renewable for six five-year options. The building is owned by Drovers.
West Manchester Office 1750 Loucks Road in the Giant Food Store York, PA 17404 $2,917 per month rental; lease expires February 29, 2004, and is renewable for one five-year option.
York Marketplace Office 2415 East Market Street in the Giant Food Store York, PA 17402 $2,917 per month rental; lease expires April 30, 2004, and is renewable for one five-year option.
Penvale Office 3183 Susquehanna Trail North York, PA 17402 $7,000 per month rental; lease expires November 2, 2007, with a rent increase of $500.00 to $7,500.00 per month in the sixth year. The lease is renewable for three five-year options.
Shrewsbury Office 611 Shrewsbury Commons Avenue Shrewsbury, PA 17361 $4,167 per month land rental; lease expires November 30, 2017, with rent increases each year. The land lease is renewable for four five-year options. The building is owned by Drovers.
Hellam Office 599 W. Market Street Hellam, PA 17406 $3,500 per month land rental; lease expires August 31, 2008. The lease is renewable for three five-year options and contains a purchase option. The building is owned by Drovers.
Mt. Rose Avenue Office 1095 Mt. Rose Avenue York, PA 17403 $20,000 per year land rental; lease expires December 31, 2000. Additionally, leased equipment with an annual lease amount of $44,921 is required to be paid by Drovers Bank. This transaction has been classified as a capitalized lease.
Loan Production Office Rossmoyne Business Center 4930 Ritter Road, Suite 103 Mechanicsburg, PA 17055 $1,075 per month rental; lease expires February 29, 2004, with rent increases each year.
Drovers Bancshares Corporation and Subsidiaries ITEM 2. PROPERTIES
Frederick Office The Patrick Center 30 W. Patrick Street Suite 430 Frederick, MD 21701 $2,202 per month rental; lease expires August 14, 2002, with rent increases each year, and is renewable for three one-year options.
Memory Lane Land Lease York Marketplace Memory Lane York, PA 17402 $1,000 per month land rental increasing during the buildout period to a maximum of $3,000 per month. After the branch office opens, the lease will start at $3,750 per month. The ease expires February 28, 2028, with rent increases each year, and is renewable for two five-year options.
Although the facilities currently owned or leased by Drovers are sufficient for its operations, Drovers may obtain additional space as required.
Upon successful negotiation to purchase land, construction of a new office in Newberrytown, Pennsylvania will begin. We are planning to relocate the Memory Lane branch during 2000. Simultaneously with the opening of the new Memory Lane branch, we plan to sell the existing branch and to close the Mt. Rose branch. The Mt. Rose branch's existing customer base will be consolidated with one of the three existing branches which are located within one mile of the existing Mt. Rose branch. Additionally, we expect to expand the Research and Administrative Service Center and to exercise the purchase option on the Hellam lease. All construction costs related to these projects will be funded from operations.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INVESTMENT PORTFOLIO
The following table sets forth the carrying amount of investment securities at the dates indicated:
(In thousands) 1999 1998 1997 U.S. Government ............. $ 2,996 $ 6,559 $ 10,519 U.S. Agencies ............... 133,351 106,927 126,769 Municipal ................... 36,757 24,686 24,414 Corporate ................... 16,250 4,666 486 Total debt securities ....... 189,354 142,838 162,188 Equity securities ........... 23,583 18,781 17,111 Total investment securities . $212,937 $161,619 $179,299
The following table sets forth the contractual maturities of debt securities classified as held-to-maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER (In thousands) OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. $ 0 $1,491 $ 0 $ 0 $ 1,491 U.S. Agencies .... 499 155 400 4,244 5,298 Municipal ........ 1,266 1,438 11,863 0 14,567 Total ............ $1,765 $3,084 $12,263 $4,244 $21,356
The following table depicts the average weighted yields of the held-to- maturity investments by maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. 0.00% 6.65% 0.00% 0.00% 6.65% U.S. Agencies .... 4.93% 9.57% 9.07% 6.86% 6.92% Municipal ........ 8.41% 8.33% 5.19% 0.00% 5.78% Total ............ 7.42% 7.58% 5.32% 6.86% 6.12%
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INVESTMENT PORTFOLIO (continued)
The following table sets forth the contractual maturities of debt securities classified as available-for-sale at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER (In thousands) OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. $ 505 $1,001 $ 0 $ 0 $ 1,506 U.S. Agencies .... 0 8,777 14,325 104,950 128,052 Municipal ........ 0 0 4,566 17,624 22,190 Other ............ 0 0 495 15,755 16,250 Total ............ $ 505 $9,778 $19,386 $138,329 $167,998
The following table depicts the average weighted yields of the available-for- sale investments by maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. 4.61% 6.00% 0.00% 0.00% 5.54% U.S. Agencies .... 0.00% 6.80% 6.86% 6.71% 6.73% Municipal ........ 0.00% 0.00% 5.20% 5.03% 5.06% Other ............ 0.00% 0.00% 6.22% 7.85% 7.80% Total ............ 4.61% 6.72% 6.45% 6.63% 6.61%
The average yields are computed by dividing annual interest income, including the accretion of discounts and amortization of premiums, by the amortized cost of securities at December 31, 1999. The yield on Municipal investments has not been restated on a fully tax equivalent basis.
For additional information see Note 6 on pages 24-25 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LOAN DATA
Loans are comprised of the following: YEAR ENDED DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Domestic loans: Commercial, financial and industrial ................ $119,942 $117,620 $ 80,588 $ 72,776 $ 66,798 Real estate: Construction ............. 18,846 13,523 12,105 8,908 5,910 Mortgage ................. 291,084 227,914 188,775 167,751 141,565 Consumer ................... 32,555 34,132 35,280 37,150 45,548 Leasing and other (net) .... 816 173 245 26 9 Total domestic loans ......... 463,243 393,362 316,993 286,611 259,830 Foreign loans ................ 0 0 0 0 0 Total domestic and foreign loans ............... 463,243 393,362 316,993 286,611 259,830 Unearned income .............. -3,042 -3,253 -3,320 -3,494 -4,425 Loans net of unearned ........ 460,201 390,109 313,673 283,117 255,405 Reserve for loan losses ...... -3,908 -3,912 -3,304 -3,130 -2,937 Net loans .................... $456,293 $386,197 $310,369 $279,987 $252,468
For additional information see Note 7 on page 26-27 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MATURITIES AND RATE SENSITIVITY OF THE LOAN PORTFOLIO (EXCLUDING CONSUMER AND RESIDENTIAL REAL ESTATE LOANS)
The following table shows the amounts of loans (excluding consumer, residential real estate and other loans) outstanding as of December 31, 1999 which, based on remaining scheduled repayments of principal, are due in the periods indicated:
AFTER REMAINING MATURITIES ONE YR ONE TO OVER (In thousands) OR LESS FIVE YRS FIVE YRS TOTAL Domestic loans: Commercial, financial and industrial . $81,279 $26,847 $11,816 $119,942 Real estate construction ............. 12,014 4,068 2,764 18,846 Foreign loans .......................... 0 0 0 0 Total .................................. $93,293 $30,915 $14,580 $138,788
Rate sensitivity: Predetermined rate ................... $ 3,666 $25,068 $ 12,508 $ 41,242 Floating or adjustable rate .......... 89,627 5,847 2,072 97,546 Total .................................. $93,293 $30,915 $ 14,580 $138,788
Drovers Bank has no set rollover policy. Many of our loans are made on a short-term basis with full intention of renewal at time of maturity. All loans, however, are reviewed on a continual basis for creditworthiness. Should a loan become questionable or approach problem loan status, it then undergoes a formal review process by all appropriate levels of authority. For additional information on the loan review process, see Provision for Loan Losses on pages 39-40 of the Drovers Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NONACCRUAL, RESTRUCTURED LOANS AND NONPERFORMING ASSETS
The following table shows loans on nonaccrual status or loans which have been restructured for the past five years:
PRINCIPAL AMOUNT AT YEAR END DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Domestic: Nonaccrual loans ................. $5,336 $1,435 $740 $ 615 $ 934 90 days past due still accruing .. 33 7 33 0 9 Restructured loans ............... 1,283 1,203 0 1,139 791 Foreign: Nonaccrual loans ................. 0 0 0 0 0 90 days past due still accruing .. 0 0 0 0 0 Restructured loans ............... 0 0 0 0 0 Total .............................. $6,652 $2,645 $773 $1,754 $1,734
Nonaccrual loans as a percentage of loans at December 31, 1999 and 1998 were 1.16% and 0.37%, respectively. Nonaccrual loans at December 31, 1999 include $4,185,000 of loans secured by trade receivables. Interest on restructured loans in compliance with modified terms is recognized under the accrual method of accounting.
Drovers held $5,468,000 of impaired loans at December 31, 1999. The recorded allowance for impaired loans was $754,000. Two loans secured by trade receivables were classified as impaired during September when possible credit problems became known. The same two loans were classified as nonaccrual during the fourth quarter after they became 90 days past due on payments. During the fourth quarter, a charge-off of $1,000,000 was taken on one of these loans when updated loss estimates were received.
The following table presents the changes in the balance of other real estate over the past five years:
(In thousands) 1999 1998 1997 1996 1995 Balance at beginning of year ....... $ 148 $ 154 $ 803 $ 195 $ 0 Assets acquired by foreclosure or repossession ................... 318 277 211 822 300 Dispositions ....................... -368 -252 -827 -203 -106 Other (net) ........................ -13 -31 -33 -11 1 Balance at end of year ............. $ 85 $ 148 $ 154 $ 803 $ 195
Other real estate consists of assets which have been repossessed or acquired through workout situations on defaulted loans.
For additional information on nonperforming assets see Note 1 on pages 21-22, and Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANALYSIS OF RESERVE FOR LOAN LOSSES
YEARS ENDED DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Balance, January 1, ............... $3,912 $3,304 $3,130 $2,937 $2,638 Provision for loan losses ......... 1,727 1,266 386 645 501 Charge-offs: Commercial, financial and industrial ................. 1,536 522 0 25 31 Real estate - construction ...... 0 0 0 0 0 Real estate - mortgage .......... 14 0 0 215 45 Consumer ........................ 311 235 327 369 257 Total charge-offs ................. 1,861 757 327 609 333 Recoveries: Commercial, financial and industrial ................. 48 0 32 6 11 Real estate - construction ...... 0 0 0 0 0 Real estate - mortgage .......... 0 0 15 36 0 Consumer ........................ 82 99 68 115 120 Total recoveries .................. 130 99 115 157 131 Net charge-offs ................... 1,731 658 212 452 202 Balance, December 31, ............. $3,908 $3,912 $3,304 $3,130 $2,937 Ratio of net charge-offs to average loans outstanding ................ 0.41% 0.19% 0.07% 0.17% 0.08%
We manage the risk characteristics of our loan portfolio through various Control processes. Risk is further controlled through the application of lending procedures such as the holding of adequate collateral, contractual guarantees, and compensating balances.
We also consider the amount of recent and expected charge-offs, the loan portfolio mix and changes in the economy when determining the provision for loan losses. We believe these procedures provide adequate assurance against losses and the level of the Reserve for Loan Losses is sufficient to meet any present or potential risks.
For additional information see Note 1 on pages 21-22, Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ALLOCATION OF RESERVE FOR LOAN LOSSES
The following table presents the amount of the reserve allocated to each of the loan categories and the percentage of total loans for the past five years:
YEARS ENDED DECEMBER 31, 1999 1998 1997 Percent Percent Percent Of Loans Of Loans of Loans Reserve To Total Reserve To Total Reserve to Total (In thousands) Amount Loans Amount Loans Amount Loans Commercial, financial and industrial ...... $2,248 26.1% $2,644 30.2% $ 977 25.7% Real Estate: Construction ........ 24 4.1% 19 3.5% 44 3.9% Mortgage ............ 584 63.1% 382 58.3% 338 60.0% Consumer .............. 154 6.5% 128 8.0% 131 10.3% Leasing and other ..... 0 0.2% 0 0.0% 0 0.1% Unallocated ........... 898 n/a 739 n/a 1,814 n/a Total ................. $3,908 100.0% $3,912 100.0% $3,304 100.0%
YEARS ENDED DECEMBER 31, 1996 1995 Percent Percent Of Loans of Loans Reserve To Total Reserve to Total (In thousands) Amount Loans Amount Loans Commercial, financial and industrial ...... $ 657 25.7% $ 515 26.2% Real Estate: Construction ........ 46 3.1% 16 2.3% Mortgage ............ 321 59.1% 327 55.3% Consumer .............. 123 12.1% 140 16.2% Leasing and other ..... 0 0.0% 0 0.0% Unallocated ........... 1,983 n/a 1,939 n/a Total ................. $3,130 100.0% $2,937 100.0%
For additional information see Note 1 on pages 21-22, Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DEPOSIT STRUCTURE
Maturities of time deposits of $100,000 or more outstanding at December 31, are summarized as follows:
(In thousands) 1999 1998 1997 Three months or less ............... $ 5,870 $ 5,983 $ 4,675 Over three months to six months .... 6,101 4,423 1,598 Over six months to twelve months ... 8,985 9,175 5,811 Over twelve months ................. 11,128 7,456 8,340 Total .............................. $32,084 $27,037 $20,424
SHORT-TERM BORROWINGS
Short-term borrowings are borrowed funds generally with an original maturity of one year or less. Securities sold under repurchase agreements and federal funds purchased mature in one day. Other short-term borrowings have a maturity of greater than one day.
(In thousands) 1999 1998 1997 Federal funds purchased and securities sold under repurchase agreements Balance at year-end $25,238 $23,325 $31,360 Average amount outstanding $30,837 $23,820 $24,548 Maximum amount outstanding at any month-end $58,413 $36,831 $44,342 Average interest rate for the year 5.18% 5.17% 5.25% Average interest rate on year-end balance 5.18% 4.63% 6.16%
Other short-term borrowings Balance at year-end $30,000 $ 0 $ 0 Average amount outstanding $ 82 $ 4,597 $ 1,112 Maximum amount outstanding at any month-end $30,000 $13,000 $ 6,000 Average interest rate for the year 4.59% 5.65% 5.71% Average interest rate on year-end balance 4.53% 0.00% 0.00%
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA
Unaudited (In thousands, FIRST SECOND THIRD FOURTH except per share data) QUARTER QUARTER QUARTER QUARTER TOTAL Net interest income ...... $5,185 $5,462 $5,666 $5,963 $22,276 Provision for loan losses 363 488 213 663 1,727 Total noninterest income . 1,432 1,292 1,230 1,395 5,349 Total noninterest expense and income taxes ....... 4,442 4,390 4,758 4,707 18,297 Net income ............... $1,812 $1,876 $1,925 $1,988 $ 7,601 PER SHARE DATA Net income ............... $ 0.39 $ 0.40 $ 0.41 $ 0.42 $ 1.62 Net income, assuming dilution ...... $ 0.38 $ 0.40 $ 0.41 $ 0.41 $ 1.60
(In thousands, FIRST SECOND THIRD FOURTH except per share data) QUARTER QUARTER QUARTER QUARTER TOTAL Net interest income ...... $4,690 $4,735 $4,888 $4,942 $19,255 Provision for loan losses 239 229 179 619 1,266 Total noninterest income . 1,330 1,387 1,289 1,402 5,408 Total noninterest expense and income taxes ....... 4,173 4,253 4,308 3,853 16,587 Net income ............... $1,608 $1,640 $1,690 $1,872 $ 6,810 PER SHARE DATA Net income ............... $ 0.34 $ 0.35 $ 0.36 $ 0.41 $ 1.46 Net income, assuming dilution ...... $ 0.34 $ 0.35 $ 0.36 $ 0.38 $ 1.43
Data adjusted to reflect a 5% stock dividend issued in 1999 and a three-for-two stock split issued in 1998.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INTEREST DIFFERENTIAL
December 31, 1999 1998 (In thousands) VOLUME RATE TOTAL VOLUME RATE TOTAL INTEREST INCOME Increase (decrease) in: Money market investments and Interest-bearing deposits with banks ...................... $ -11 $ -1 $ -12 $ -38 $ 9 $ -29 Federal funds sold ............... 0 0 0 0 0 0 Total money market investments ... -11 -1 -12 -38 9 -29 Investment securities Taxable investment securities ... 529 115 644 -130 -426 -556 Equity securities ............... 155 47 202 290 -24 266 Tax-exempt investment securities 272 -35 237 71 -24 47 Total investment securities ...... 956 127 1,083 231 -474 -243 Total loans ...................... 5,459 -959 4,500 5,318 -322 4,996 Total interest income ............ 6,404 -833 5,571 5,511 -787 4,724
INTEREST EXPENSE Increase (decrease) in: Interest-bearing deposits Demand .......................... 64 -92 -28 41 -21 20 Savings ......................... 447 -215 232 668 111 779 Time ............................ 1,481 -766 715 1,031 -100 931 Total interest-bearing deposits .. 1,992 -1,073 919 1,740 -10 1,730 Borrowed funds Short-term borrowings ........... 132 -23 109 143 -5 138 Long-term borrowings ............ 1,419 -97 1,322 731 -117 614 Total borrowed funds ............. 1,551 -120 1,431 874 -122 752 Corporation-obligated mandatory redeemable capital securities of subsidiary trust 200 0 200 0 0 0 Total interest expense ........... 3,743 -1,193 2,550 2,614 -132 2,482 Increase in interest differential $2,661 $ 360 $3,021 $2,897 $-655 $2,242
The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in cash.
For additional information see Note 1 on pages 21-22 and Average Balances and Rates on page 46 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The principal executive officers of Drovers and its principal subsidiary, Drovers Bank, as of January 1, 2000, are as follows:
Name: A. Richard Pugh Age: 59 Position and Office: Chairman of the Board, President, and Chief Executive Officer of Drovers and Drovers Bank. Mr. Pugh joined the organization in 1988, he was appointed President in 1990 and C.E.O. in 1994. He has extensive and diversified experience in bank management.
Name: Michael J. Groft Age: 44 Position and Office: Executive Vice President of Drovers and Executive Vice President and Senior Lending Officer of Drovers Bank. Mr. Groft joined the organization in March 1978. He has served in various executive management positions since 1988.
Name: Debra A. Goodling Age: 41 Position and Office: Executive Vice President and Treasurer of Drovers and Executive Vice President, Treasurer and Chief Financial Officer of Drovers Bank. Ms. Goodling joined the organization in February 1977. She has served in various executive management positions since 1989.
Name: Michael E. Kochenour Age: 47 Position and Office: Executive Vice President and Senior Investment Services and Trust Officer of Drovers and Drovers Bank. Mr. Kochenour joined the organization in August 1999 as Senior Vice President and Senior Trust Officer. Prior to joining the organization, Mr. Kochenour served in numerous management and senior leadership roles in the Banking industry for over 28 years.
Name: Shawn A. Stine Age: 44 Position and Office: Executive Vice President and Senior Corporate Banking Officer of Drovers Bank. Mr. Stine joined the organization in August 1991 in the position of Vice President and Senior Corporate Banking Officer.
Name: John D. Blecher Age: 38 Position and Office: Senior Vice President, Secretary and Assistant Treasurer of Drovers and Senior Vice President, Secretary and Controller of Drovers Bank. Mr. Blecher joined the organization in February 1987. He has served as Controller since 1989.
Additional information required for this item is contained on pages 5-17 of the Definitive Proxy Statement dated March 27, 2000.
Drovers Bancshares Corporation and Subsidiaries PART IV. SIGNATURES
Pursuant to the requirements of Section 13 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.
DROVERS BANCSHARES CORPORATION Date __March 22, 2000_____ (Registrant)
By /s/ A. Richard Pugh___________________ A. Richard Pugh, Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ L. Doyle Ankrum______________ /s/ Robert L. Myers, Jr._________ L. Doyle Ankrum, Director Robert L. Myers, Jr., Director
/s/ J. Samuel Gregory ___________ /s/ Harlowe R. Prindle___________ J. Samuel Gregory, Director Harlowe R. Prindle, Director
/s/ Daniel E. Hess_______________ /s/ Basil A. Shorb, III__________ Daniel E. Hess, Director Basil A. Shorb, III, Director
/s/ George W. Hodges_____________ /s/ Gary A. Stewart______________ George W. Hodges, Director Gary A. Stewart, Director
/s/ Herbert D. Lavetan __________ _________________________________ Herbert D. Lavetan, Director Robert H. Stewart, Jr., Director
_________________________________ /s/ Delaine A. Toerper___________ Richard M. Linder, Director Delaine A. Toerper, Director
/s/ David C. McIntosh ___________ /s/ James S. Wisotzkey __________ David C. McIntosh, Director James S. Wisotzkey, Director
_________________________________ Frank Motter, Director
/s/ Debra A. Goodling____________ /s/ John D. Blecher_______________ Debra A. Goodling, Executive Vice John D. Blecher, Senior Vice President, President and Treasurer Secretary and Assistant Treasurer Principal Financial Officer Principal Accounting Officer
EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
The following are the subsidiaries of the Drovers Bancshares Corporation:
Subsidiary State of Incorporation or Organization
The Drovers & Mechanics Bank Pennsylvania 30 South George Street York, PA 17401
Drovers Realty Corporation Pennsylvania 30 South George Street York, PA 17401
Drovers Capital Trust I Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
The following are the subsidiaries of The Drovers & Mechanics Bank:
Subsidiary State of Incorporation or Organization
96 South George Street, Inc. Pennsylvania 96 South George Street York, PA 17401
Drovers Investment Company Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
EXHIBIT 23 DROVERS BANCSHARES CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statements on Form S-3 File Number 333-69963 and Form S-8 File Numbers 333-30023, 033-92682, 333-8249 and 033-92672 of Drovers Bancshares Corporation and Subsidiaries of our report dated January 20, 2000, relating to the consolidated statements of condition of Drovers Bancshares Corporation and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999 which report appears in the December 31, 1999 annual report on Form 10-K of Drovers Bancshares Corporation and Subsidiaries.
/S/ Stambaugh Ness P.C.
York, Pennsylvania
March 23, 2000
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INVESTMENT PORTFOLIO
The following table sets forth the carrying amount of investment securities at the dates indicated:
(In thousands) 1999 1998 1997 U.S. Government ............. $ 2,996 $ 6,559 $ 10,519 U.S. Agencies ............... 133,351 106,927 126,769 Municipal ................... 36,757 24,686 24,414 Corporate ................... 16,250 4,666 486 Total debt securities ....... 189,354 142,838 162,188 Equity securities ........... 23,583 18,781 17,111 Total investment securities . $212,937 $161,619 $179,299
The following table sets forth the contractual maturities of debt securities classified as held-to-maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER (In thousands) OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. $ 0 $1,491 $ 0 $ 0 $ 1,491 U.S. Agencies .... 499 155 400 4,244 5,298 Municipal ........ 1,266 1,438 11,863 0 14,567 Total ............ $1,765 $3,084 $12,263 $4,244 $21,356
The following table depicts the average weighted yields of the held-to- maturity investments by maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. 0.00% 6.65% 0.00% 0.00% 6.65% U.S. Agencies .... 4.93% 9.57% 9.07% 6.86% 6.92% Municipal ........ 8.41% 8.33% 5.19% 0.00% 5.78% Total ............ 7.42% 7.58% 5.32% 6.86% 6.12%
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INVESTMENT PORTFOLIO (continued)
The following table sets forth the contractual maturities of debt securities classified as available-for-sale at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER (In thousands) OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. $ 505 $1,001 $ 0 $ 0 $ 1,506 U.S. Agencies .... 0 8,777 14,325 104,950 128,052 Municipal ........ 0 0 4,566 17,624 22,190 Other ............ 0 0 495 15,755 16,250 Total ............ $ 505 $9,778 $19,386 $138,329 $167,998
The following table depicts the average weighted yields of the available-for- sale investments by maturity at December 31, 1999:
AFTER AFTER ONE YR ONE TO FIVE TO OVER OR LESS FIVE YRS TEN YRS TEN YRS TOTAL U.S. Government .. 4.61% 6.00% 0.00% 0.00% 5.54% U.S. Agencies .... 0.00% 6.80% 6.86% 6.71% 6.73% Municipal ........ 0.00% 0.00% 5.20% 5.03% 5.06% Other ............ 0.00% 0.00% 6.22% 7.85% 7.80% Total ............ 4.61% 6.72% 6.45% 6.63% 6.61%
The average yields are computed by dividing annual interest income, including the accretion of discounts and amortization of premiums, by the amortized cost of securities at December 31, 1999. The yield on Municipal investments has not been restated on a fully tax equivalent basis.
For additional information see Note 6 on pages 24-25 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LOAN DATA
Loans are comprised of the following: YEAR ENDED DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Domestic loans: Commercial, financial and industrial ................ $119,942 $117,620 $ 80,588 $ 72,776 $ 66,798 Real estate: Construction ............. 18,846 13,523 12,105 8,908 5,910 Mortgage ................. 291,084 227,914 188,775 167,751 141,565 Consumer ................... 32,555 34,132 35,280 37,150 45,548 Leasing and other (net) .... 816 173 245 26 9 Total domestic loans ......... 463,243 393,362 316,993 286,611 259,830 Foreign loans ................ 0 0 0 0 0 Total domestic and foreign loans ............... 463,243 393,362 316,993 286,611 259,830 Unearned income .............. -3,042 -3,253 -3,320 -3,494 -4,425 Loans net of unearned ........ 460,201 390,109 313,673 283,117 255,405 Reserve for loan losses ...... -3,908 -3,912 -3,304 -3,130 -2,937 Net loans .................... $456,293 $386,197 $310,369 $279,987 $252,468
For additional information see Note 7 on page 26-27 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MATURITIES AND RATE SENSITIVITY OF THE LOAN PORTFOLIO (EXCLUDING CONSUMER AND RESIDENTIAL REAL ESTATE LOANS)
The following table shows the amounts of loans (excluding consumer, residential real estate and other loans) outstanding as of December 31, 1999 which, based on remaining scheduled repayments of principal, are due in the periods indicated:
AFTER REMAINING MATURITIES ONE YR ONE TO OVER (In thousands) OR LESS FIVE YRS FIVE YRS TOTAL Domestic loans: Commercial, financial and industrial . $81,279 $26,847 $11,816 $119,942 Real estate construction ............. 12,014 4,068 2,764 18,846 Foreign loans .......................... 0 0 0 0 Total .................................. $93,293 $30,915 $14,580 $138,788
Rate sensitivity: Predetermined rate ................... $ 3,666 $25,068 $ 12,508 $ 41,242 Floating or adjustable rate .......... 89,627 5,847 2,072 97,546 Total .................................. $93,293 $30,915 $ 14,580 $138,788
Drovers Bank has no set rollover policy. Many of our loans are made on a short-term basis with full intention of renewal at time of maturity. All loans, however, are reviewed on a continual basis for creditworthiness. Should a loan become questionable or approach problem loan status, it then undergoes a formal review process by all appropriate levels of authority. For additional information on the loan review process, see Provision for Loan Losses on pages 39-40 of the Drovers Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NONACCRUAL, RESTRUCTURED LOANS AND NONPERFORMING ASSETS
The following table shows loans on nonaccrual status or loans which have been restructured for the past five years:
PRINCIPAL AMOUNT AT YEAR END DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Domestic: Nonaccrual loans ................. $5,336 $1,435 $740 $ 615 $ 934 90 days past due still accruing .. 33 7 33 0 9 Restructured loans ............... 1,283 1,203 0 1,139 791 Foreign: Nonaccrual loans ................. 0 0 0 0 0 90 days past due still accruing .. 0 0 0 0 0 Restructured loans ............... 0 0 0 0 0 Total .............................. $6,652 $2,645 $773 $1,754 $1,734
Nonaccrual loans as a percentage of loans at December 31, 1999 and 1998 were 1.16% and 0.37%, respectively. Nonaccrual loans at December 31, 1999 include $4,185,000 of loans secured by trade receivables. Interest on restructured loans in compliance with modified terms is recognized under the accrual method of accounting.
Drovers held $5,468,000 of impaired loans at December 31, 1999. The recorded allowance for impaired loans was $754,000. Two loans secured by trade receivables were classified as impaired during September when possible credit problems became known. The same two loans were classified as nonaccrual during the fourth quarter after they became 90 days past due on payments. During the fourth quarter, a charge-off of $1,000,000 was taken on one of these loans when updated loss estimates were received.
The following table presents the changes in the balance of other real estate over the past five years:
(In thousands) 1999 1998 1997 1996 1995 Balance at beginning of year ....... $ 148 $ 154 $ 803 $ 195 $ 0 Assets acquired by foreclosure or repossession ................... 318 277 211 822 300 Dispositions ....................... -368 -252 -827 -203 -106 Other (net) ........................ -13 -31 -33 -11 1 Balance at end of year ............. $ 85 $ 148 $ 154 $ 803 $ 195
Other real estate consists of assets which have been repossessed or acquired through workout situations on defaulted loans.
For additional information on nonperforming assets see Note 1 on pages 21-22, and Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANALYSIS OF RESERVE FOR LOAN LOSSES
YEARS ENDED DECEMBER 31, (In thousands) 1999 1998 1997 1996 1995 Balance, January 1, ............... $3,912 $3,304 $3,130 $2,937 $2,638 Provision for loan losses ......... 1,727 1,266 386 645 501 Charge-offs: Commercial, financial and industrial ................. 1,536 522 0 25 31 Real estate - construction ...... 0 0 0 0 0 Real estate - mortgage .......... 14 0 0 215 45 Consumer ........................ 311 235 327 369 257 Total charge-offs ................. 1,861 757 327 609 333 Recoveries: Commercial, financial and industrial ................. 48 0 32 6 11 Real estate - construction ...... 0 0 0 0 0 Real estate - mortgage .......... 0 0 15 36 0 Consumer ........................ 82 99 68 115 120 Total recoveries .................. 130 99 115 157 131 Net charge-offs ................... 1,731 658 212 452 202 Balance, December 31, ............. $3,908 $3,912 $3,304 $3,130 $2,937 Ratio of net charge-offs to average loans outstanding ................ 0.41% 0.19% 0.07% 0.17% 0.08%
We manage the risk characteristics of our loan portfolio through various Control processes. Risk is further controlled through the application of lending procedures such as the holding of adequate collateral, contractual guarantees, and compensating balances.
We also consider the amount of recent and expected charge-offs, the loan portfolio mix and changes in the economy when determining the provision for loan losses. We believe these procedures provide adequate assurance against losses and the level of the Reserve for Loan Losses is sufficient to meet any present or potential risks.
For additional information see Note 1 on pages 21-22, Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ALLOCATION OF RESERVE FOR LOAN LOSSES
The following table presents the amount of the reserve allocated to each of the loan categories and the percentage of total loans for the past five years:
YEARS ENDED DECEMBER 31, 1999 1998 1997 Percent Percent Percent Of Loans Of Loans of Loans Reserve To Total Reserve To Total Reserve to Total (In thousands) Amount Loans Amount Loans Amount Loans Commercial, financial and industrial ...... $2,248 26.1% $2,644 30.2% $ 977 25.7% Real Estate: Construction ........ 24 4.1% 19 3.5% 44 3.9% Mortgage ............ 584 63.1% 382 58.3% 338 60.0% Consumer .............. 154 6.5% 128 8.0% 131 10.3% Leasing and other ..... 0 0.2% 0 0.0% 0 0.1% Unallocated ........... 898 n/a 739 n/a 1,814 n/a Total ................. $3,908 100.0% $3,912 100.0% $3,304 100.0%
YEARS ENDED DECEMBER 31, 1996 1995 Percent Percent Of Loans of Loans Reserve To Total Reserve to Total (In thousands) Amount Loans Amount Loans Commercial, financial and industrial ...... $ 657 25.7% $ 515 26.2% Real Estate: Construction ........ 46 3.1% 16 2.3% Mortgage ............ 321 59.1% 327 55.3% Consumer .............. 123 12.1% 140 16.2% Leasing and other ..... 0 0.0% 0 0.0% Unallocated ........... 1,983 n/a 1,939 n/a Total ................. $3,130 100.0% $2,937 100.0%
For additional information see Note 1 on pages 21-22, Note 7 on pages 26-27 and the Provision for Loan Losses on pages 39-40 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DEPOSIT STRUCTURE
Maturities of time deposits of $100,000 or more outstanding at December 31, are summarized as follows:
(In thousands) 1999 1998 1997 Three months or less ............... $ 5,870 $ 5,983 $ 4,675 Over three months to six months .... 6,101 4,423 1,598 Over six months to twelve months ... 8,985 9,175 5,811 Over twelve months ................. 11,128 7,456 8,340 Total .............................. $32,084 $27,037 $20,424
SHORT-TERM BORROWINGS
Short-term borrowings are borrowed funds generally with an original maturity of one year or less. Securities sold under repurchase agreements and federal funds purchased mature in one day. Other short-term borrowings have a maturity of greater than one day.
(In thousands) 1999 1998 1997 Federal funds purchased and securities sold under repurchase agreements Balance at year-end $25,238 $23,325 $31,360 Average amount outstanding $30,837 $23,820 $24,548 Maximum amount outstanding at any month-end $58,413 $36,831 $44,342 Average interest rate for the year 5.18% 5.17% 5.25% Average interest rate on year-end balance 5.18% 4.63% 6.16%
Other short-term borrowings Balance at year-end $30,000 $ 0 $ 0 Average amount outstanding $ 82 $ 4,597 $ 1,112 Maximum amount outstanding at any month-end $30,000 $13,000 $ 6,000 Average interest rate for the year 4.59% 5.65% 5.71% Average interest rate on year-end balance 4.53% 0.00% 0.00%
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
QUARTERLY FINANCIAL DATA
Unaudited (In thousands, FIRST SECOND THIRD FOURTH except per share data) QUARTER QUARTER QUARTER QUARTER TOTAL Net interest income ...... $5,185 $5,462 $5,666 $5,963 $22,276 Provision for loan losses 363 488 213 663 1,727 Total noninterest income . 1,432 1,292 1,230 1,395 5,349 Total noninterest expense and income taxes ....... 4,442 4,390 4,758 4,707 18,297 Net income ............... $1,812 $1,876 $1,925 $1,988 $ 7,601 PER SHARE DATA Net income ............... $ 0.39 $ 0.40 $ 0.41 $ 0.42 $ 1.62 Net income, assuming dilution ...... $ 0.38 $ 0.40 $ 0.41 $ 0.41 $ 1.60
(In thousands, FIRST SECOND THIRD FOURTH except per share data) QUARTER QUARTER QUARTER QUARTER TOTAL Net interest income ...... $4,690 $4,735 $4,888 $4,942 $19,255 Provision for loan losses 239 229 179 619 1,266 Total noninterest income . 1,330 1,387 1,289 1,402 5,408 Total noninterest expense and income taxes ....... 4,173 4,253 4,308 3,853 16,587 Net income ............... $1,608 $1,640 $1,690 $1,872 $ 6,810 PER SHARE DATA Net income ............... $ 0.34 $ 0.35 $ 0.36 $ 0.41 $ 1.46 Net income, assuming dilution ...... $ 0.34 $ 0.35 $ 0.36 $ 0.38 $ 1.43
Data adjusted to reflect a 5% stock dividend issued in 1999 and a three-for-two stock split issued in 1998.
Drovers Bancshares Corporation and Subsidiaries ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INTEREST DIFFERENTIAL
December 31, 1999 1998 (In thousands) VOLUME RATE TOTAL VOLUME RATE TOTAL INTEREST INCOME Increase (decrease) in: Money market investments and Interest-bearing deposits with banks ...................... $ -11 $ -1 $ -12 $ -38 $ 9 $ -29 Federal funds sold ............... 0 0 0 0 0 0 Total money market investments ... -11 -1 -12 -38 9 -29 Investment securities Taxable investment securities ... 529 115 644 -130 -426 -556 Equity securities ............... 155 47 202 290 -24 266 Tax-exempt investment securities 272 -35 237 71 -24 47 Total investment securities ...... 956 127 1,083 231 -474 -243 Total loans ...................... 5,459 -959 4,500 5,318 -322 4,996 Total interest income ............ 6,404 -833 5,571 5,511 -787 4,724
INTEREST EXPENSE Increase (decrease) in: Interest-bearing deposits Demand .......................... 64 -92 -28 41 -21 20 Savings ......................... 447 -215 232 668 111 779 Time ............................ 1,481 -766 715 1,031 -100 931 Total interest-bearing deposits .. 1,992 -1,073 919 1,740 -10 1,730 Borrowed funds Short-term borrowings ........... 132 -23 109 143 -5 138 Long-term borrowings ............ 1,419 -97 1,322 731 -117 614 Total borrowed funds ............. 1,551 -120 1,431 874 -122 752 Corporation-obligated mandatory redeemable capital securities of subsidiary trust 200 0 200 0 0 0 Total interest expense ........... 3,743 -1,193 2,550 2,614 -132 2,482 Increase in interest differential $2,661 $ 360 $3,021 $2,897 $-655 $2,242
The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in cash.
For additional information see Note 1 on pages 21-22 and Average Balances and Rates on page 46 of the Drovers Bancshares Corporation 1999 Annual Report.
Drovers Bancshares Corporation and Subsidiaries ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The principal executive officers of Drovers and its principal subsidiary, Drovers Bank, as of January 1, 2000, are as follows:
Name: A. Richard Pugh Age: 59 Position and Office: Chairman of the Board, President, and Chief Executive Officer of Drovers and Drovers Bank. Mr. Pugh joined the organization in 1988, he was appointed President in 1990 and C.E.O. in 1994. He has extensive and diversified experience in bank management.
Name: Michael J. Groft Age: 44 Position and Office: Executive Vice President of Drovers and Executive Vice President and Senior Lending Officer of Drovers Bank. Mr. Groft joined the organization in March 1978. He has served in various executive management positions since 1988.
Name: Debra A. Goodling Age: 41 Position and Office: Executive Vice President and Treasurer of Drovers and Executive Vice President, Treasurer and Chief Financial Officer of Drovers Bank. Ms. Goodling joined the organization in February 1977. She has served in various executive management positions since 1989.
Name: Michael E. Kochenour Age: 47 Position and Office: Executive Vice President and Senior Investment Services and Trust Officer of Drovers and Drovers Bank. Mr. Kochenour joined the organization in August 1999 as Senior Vice President and Senior Trust Officer. Prior to joining the organization, Mr. Kochenour served in numerous management and senior leadership roles in the Banking industry for over 28 years.
Name: Shawn A. Stine Age: 44 Position and Office: Executive Vice President and Senior Corporate Banking Officer of Drovers Bank. Mr. Stine joined the organization in August 1991 in the position of Vice President and Senior Corporate Banking Officer.
Name: John D. Blecher Age: 38 Position and Office: Senior Vice President, Secretary and Assistant Treasurer of Drovers and Senior Vice President, Secretary and Controller of Drovers Bank. Mr. Blecher joined the organization in February 1987. He has served as Controller since 1989.
Additional information required for this item is contained on pages 5-17 of the Definitive Proxy Statement dated March 27, 2000.
Drovers Bancshares Corporation and Subsidiaries PART IV. SIGNATURES
Pursuant to the requirements of Section 13 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.
DROVERS BANCSHARES CORPORATION Date __March 22, 2000_____ (Registrant)
By /s/ A. Richard Pugh___________________ A. Richard Pugh, Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ L. Doyle Ankrum______________ /s/ Robert L. Myers, Jr._________ L. Doyle Ankrum, Director Robert L. Myers, Jr., Director
/s/ J. Samuel Gregory ___________ /s/ Harlowe R. Prindle___________ J. Samuel Gregory, Director Harlowe R. Prindle, Director
/s/ Daniel E. Hess_______________ /s/ Basil A. Shorb, III__________ Daniel E. Hess, Director Basil A. Shorb, III, Director
/s/ George W. Hodges_____________ /s/ Gary A. Stewart______________ George W. Hodges, Director Gary A. Stewart, Director
/s/ Herbert D. Lavetan __________ _________________________________ Herbert D. Lavetan, Director Robert H. Stewart, Jr., Director
_________________________________ /s/ Delaine A. Toerper___________ Richard M. Linder, Director Delaine A. Toerper, Director
/s/ David C. McIntosh ___________ /s/ James S. Wisotzkey __________ David C. McIntosh, Director James S. Wisotzkey, Director
_________________________________ Frank Motter, Director
/s/ Debra A. Goodling____________ /s/ John D. Blecher_______________ Debra A. Goodling, Executive Vice John D. Blecher, Senior Vice President, President and Treasurer Secretary and Assistant Treasurer Principal Financial Officer Principal Accounting Officer
EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
The following are the subsidiaries of the Drovers Bancshares Corporation:
Subsidiary State of Incorporation or Organization
The Drovers & Mechanics Bank Pennsylvania 30 South George Street York, PA 17401
Drovers Realty Corporation Pennsylvania 30 South George Street York, PA 17401
Drovers Capital Trust I Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
The following are the subsidiaries of The Drovers & Mechanics Bank:
Subsidiary State of Incorporation or Organization
96 South George Street, Inc. Pennsylvania 96 South George Street York, PA 17401
Drovers Investment Company Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
EXHIBIT 23 DROVERS BANCSHARES CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statements on Form S-3 File Number 333-69963 and Form S-8 File Numbers 333-30023, 033-92682, 333-8249 and 033-92672 of Drovers Bancshares Corporation and Subsidiaries of our report dated January 20, 2000, relating to the consolidated statements of condition of Drovers Bancshares Corporation and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999 which report appears in the December 31, 1999 annual report on Form 10-K of Drovers Bancshares Corporation and Subsidiaries.
/S/ Stambaugh Ness P.C.
York, Pennsylvania
March 23, 2000
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The principal executive officers of Drovers and its principal subsidiary, Drovers Bank, as of January 1, 2000, are as follows:
Name: A. Richard Pugh Age: 59 Position and Office: Chairman of the Board, President, and Chief Executive Officer of Drovers and Drovers Bank. Mr. Pugh joined the organization in 1988, he was appointed President in 1990 and C.E.O. in 1994. He has extensive and diversified experience in bank management.
Name: Michael J. Groft Age: 44 Position and Office: Executive Vice President of Drovers and Executive Vice President and Senior Lending Officer of Drovers Bank. Mr. Groft joined the organization in March 1978. He has served in various executive management positions since 1988.
Name: Debra A. Goodling Age: 41 Position and Office: Executive Vice President and Treasurer of Drovers and Executive Vice President, Treasurer and Chief Financial Officer of Drovers Bank. Ms. Goodling joined the organization in February 1977. She has served in various executive management positions since 1989.
Name: Michael E. Kochenour Age: 47 Position and Office: Executive Vice President and Senior Investment Services and Trust Officer of Drovers and Drovers Bank. Mr. Kochenour joined the organization in August 1999 as Senior Vice President and Senior Trust Officer. Prior to joining the organization, Mr. Kochenour served in numerous management and senior leadership roles in the Banking industry for over 28 years.
Name: Shawn A. Stine Age: 44 Position and Office: Executive Vice President and Senior Corporate Banking Officer of Drovers Bank. Mr. Stine joined the organization in August 1991 in the position of Vice President and Senior Corporate Banking Officer.
Name: John D. Blecher Age: 38 Position and Office: Senior Vice President, Secretary and Assistant Treasurer of Drovers and Senior Vice President, Secretary and Controller of Drovers Bank. Mr. Blecher joined the organization in February 1987. He has served as Controller since 1989.
Additional information required for this item is contained on pages 5-17 of the Definitive Proxy Statement dated March 27, 2000.
Drovers Bancshares Corporation and Subsidiaries PART IV. SIGNATURES
Pursuant to the requirements of Section 13 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.
DROVERS BANCSHARES CORPORATION Date __March 22, 2000_____ (Registrant)
By /s/ A. Richard Pugh___________________ A. Richard Pugh, Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
/s/ L. Doyle Ankrum______________ /s/ Robert L. Myers, Jr._________ L. Doyle Ankrum, Director Robert L. Myers, Jr., Director
/s/ J. Samuel Gregory ___________ /s/ Harlowe R. Prindle___________ J. Samuel Gregory, Director Harlowe R. Prindle, Director
/s/ Daniel E. Hess_______________ /s/ Basil A. Shorb, III__________ Daniel E. Hess, Director Basil A. Shorb, III, Director
/s/ George W. Hodges_____________ /s/ Gary A. Stewart______________ George W. Hodges, Director Gary A. Stewart, Director
/s/ Herbert D. Lavetan __________ _________________________________ Herbert D. Lavetan, Director Robert H. Stewart, Jr., Director
_________________________________ /s/ Delaine A. Toerper___________ Richard M. Linder, Director Delaine A. Toerper, Director
/s/ David C. McIntosh ___________ /s/ James S. Wisotzkey __________ David C. McIntosh, Director James S. Wisotzkey, Director
_________________________________ Frank Motter, Director
/s/ Debra A. Goodling____________ /s/ John D. Blecher_______________ Debra A. Goodling, Executive Vice John D. Blecher, Senior Vice President, President and Treasurer Secretary and Assistant Treasurer Principal Financial Officer Principal Accounting Officer
EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT
The following are the subsidiaries of the Drovers Bancshares Corporation:
Subsidiary State of Incorporation or Organization
The Drovers & Mechanics Bank Pennsylvania 30 South George Street York, PA 17401
Drovers Realty Corporation Pennsylvania 30 South George Street York, PA 17401
Drovers Capital Trust I Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
The following are the subsidiaries of The Drovers & Mechanics Bank:
Subsidiary State of Incorporation or Organization
96 South George Street, Inc. Pennsylvania 96 South George Street York, PA 17401
Drovers Investment Company Delaware 103 Foulk Road, Suite 202 Wilmington, Delaware 19803
EXHIBIT 23 DROVERS BANCSHARES CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Registration Statements on Form S-3 File Number 333-69963 and Form S-8 File Numbers 333-30023, 033-92682, 333-8249 and 033-92672 of Drovers Bancshares Corporation and Subsidiaries of our report dated January 20, 2000, relating to the consolidated statements of condition of Drovers Bancshares Corporation and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 1999 which report appears in the December 31, 1999 annual report on Form 10-K of Drovers Bancshares Corporation and Subsidiaries.
/S/ Stambaugh Ness P.C.
York, Pennsylvania
March 23, 2000