HARRISBURG, PA-Community Banks Inc. signed an agreement to acquire PennRock Financial Services Corp. in an all-stock transaction valued at approximately $326 million. This will make locally based Community Banks the eighth largest bank holding company headquartered in Pennsylvania and the operator of 67 banking offices in 11 counties throughout Central Pennsylvania from the Pocono region to the north and the Pennsylvania/Maryland border to the south. One branch is across the border in Maryland.

There is no market overlap and both companies’ branches are in high-growth areas. Of chief significance, says Eddie L. Dunklebarger, Community Banks’ president and CEO, is the combined companies’ “significant presence in the golden triangle of Harrisburg, Lancaster and York, PA.”

Blue Ball-based PennRock operates 17 offices–10 in Lancaster County, five in Berks and two in Chester. Three more are scheduled to open within the next seven months. All will continue to operate as Blue Ball National Bank, which will become a separate division under Community Banks’ charter.

Community Banks currently operates 50 branches and has nearly $2 billion in assets. PennRock has nearly $1.1 billion in assets. Six members of PennRock’s board will join Community Banks’ board, taking the total number of directors to 15. Earlier this year, Melvin Pankuch, PennRock’s EVP and CEO, announced his intention to retire at the end of 2005 and will remain with the company as vice chairman “to ensure a smooth transition,” he said during a conference call without putting a timeframe on his departure. The merger is expected to close in the second quarter of next year.

Under the agreement PennRock shareholders will receive 1.4 shares of Community Banks’ stock, which represents a price of approximately $41.85-per-share, in exchange for each share of PennRock stock. Community Banks trades under CMTY on the Nasdaq, and PennRock trades as PRFS on the same exchange.

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