SECURITIES AND EXCHANGE COMMISSION 
          			  Washington, D.C.  20549 
				                  Form 10-K      
	       ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF 
		          THE SECURITIES EXCHANGE Act OF 1934 
		      
For the fiscal year ended December 31, 1995    Commission file number 0-15786   


             			   COMMUNITY BANKS, INC. 
	   (Exact name of registrant as specified in its charter) 
	   

       Pennsylvania                           23-2251762              
  (State or other jurisdiction of            (I.R.S. Employer 
  incorporation or organization)             Identification No.)      
  
   150 Market Street, Millersburg, PA         17061                 
(Address of principal executive offices)     (Zip Code) 


Registrant's telephone number, including area code   (717) 692-4781            

Securities registered pursuant to Section 12(b) of the Act:   NONE    

Securities registered pursuant to Section 12(g) of the Act:    


                                   					Name of each exchange  
Title of each class                     on which registered      

Common Stock, par value $5 per share    NASDAQ National Market System 
                                  					(effective February 1, 1996: 
				                                   	NASDAQ Small-Cap Market)               
					
Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by section 13 or 15 (d) of the Securities Exchange Act 
of 1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. 

                                   				      Yes  X         No       
				      
As of March 1, 1996, the aggregate market value (based on recent selling 
prices) of the voting stock of the registrant held by its nonaffiliates
(2,109,300 shares) was $55,369,125 

Indicate the number of shares outstanding of each registrant's classes of 
common stock, as of the latest practical date. 

    2,609,947 shares of common stock outstanding on March 1, 1996 
    
                		 DOCUMENTS INCORPORATED BY REFERENCE 
		  
   Exhibit 13 contains portions of the Annual Report to Stockholders 
   incorporated by reference into Parts I, II, and III. 
   
Exhibit index is located on page 18. This document contains 20 pages. 

Indicate by check mark if disclosure of delinquent filers pursuant to item 
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in part III of this Form 10-K or any 
amendment to this Form 10-K. [  ] 
						 

                                					PART I 

Item 1.  Business: 

     Community Banks, Inc. (Bank) is a bank holding company whose banking 
subsidiary is Community Banks, N.A. (CBNA) and whose non-banking subsidiaries 
are Community Banks Investments, Inc. (CBI) and Community Banks Life Insurance 
Company, Inc. (CBLIC). 

     The Bank conducts a full service commercial banking business and provides 
trust services in northern Dauphin County, Northumberland County, western
Schuylkill County, and southern Luzerene County. The Bank currently has 
eighteen offices. There are 66 offices of commercial banks and savings and 
loan associations within its market area with which the Bank competes. 
Deposits of the Bank represent approximately 10% of the total deposits in the
market area. The Bank has seven offices in Dauphin County, two offices in 
Northumberland County, six offices in Schuylkill County, and three offices in 
Luzerne County. On January 12, 1996, Community Banks, Inc. completed its 
merger of the Citizens National Bank of Ashland (Citizens). Citizens has three 
banking offices which are located in Ashland, Gordon, and Lavelle, 
Pennsylvania. This transaction was accounted for as a pooling of interests. 

     Like other depository institutions, the Bank has been subjected to 
competition from brokerage firms, money market funds, consumer finance and 
credit card companies and other companies providing financial services and 
credit to consumers. As a result of federal legislation, regulatory 
restrictions previously imposed on the Bank with respect to establishing 
money market fund accounts have been eliminated and the Bank is now better 
able to compete with other financial institutions in its service area with 
respect to interest rates paid on time and savings deposits, service charges 
on deposit accounts and interest rates charged on loans. 

     During 1986 the Bank formed CBLIC to provide credit life insurance to its 
consumer credit borrowers. Total premiums earned were $423,000 for the year
ended December 31, 1995.  During 1985 the Bank formed CBI to make investments 
primarily in equity securities of other banks. Total assets of CBI at December 
31, 1995 were $2,895,000. 

     The Bank has approximately 199 full and part-time employees and considers 
its employee relations to be satisfactory. 

     Community Banks, Inc. is registered as a bank holding company with the 
Board of Governors of the Federal Reserve System in accordance with the 
requirements of the Bank Holding Company Act of 1956. It is subject to 
regulation by the Federal Reserve Board and the Comptroller of the Currency. 

     In 1989, the Federal Reserve Board issued final risk-based capital 
guidelines for bank holding companies which were phased in through December 
31, 1992. The intent of regulatory capital guidelines is to measure capital 
adequacy based upon the credit risk of various assets and off-balance sheet 
items. Risk categories, weighted at 0%, 20%, 50% and 100%, are specifically 
identified. The sum of the results of each such category is then related to  
the adjusted capital account of the Company. A minimum required capital ratio 
at December 31, 1995, was 8 percent. The Bank's December 31, 1995 ratio 
approximated 17%. Subsequently, in August 1990 the board announced approval of 
capital to total assets (leverage) guidelines. This minimum leverage ratio was 
set at 4% and would apply only to those banking organizations receiving a
regulatory composite 1 rating. Most banking organizations will be required to 
maintain a leverage ratio ranging from 1 to 2 percentage points above the 
minimum standard. The Bank's leverage ratio at December 31, 1995, approximated 
10.6%. Risk-based capital requirements replace previous capital guidelines 
which established minimum primary and total capital requirements. 

	The following summarizes the Bank's capital adequacy position: 

                                       						   Required              
			                       Bank               Regulatory Capital       
  (in thousands)     December 31, 1995       December 31, 1995      
  
Risk-based capital    $37,888     17.2%       $17,675     8.0%       
Leverage ratio                      
(tier 1 capital)       33,838     10.6%        12,815     4.0%         


					    -2- 

     Statistical Data: 

     Pages 19 through 21 of the Community Banks, Inc. Annual report to 
stockholders dated December 31, 1995 contain information concerning: 

     Financial Highlights 
     
     Average Balances, Effective Interest Differential, and Interest Yields 
          	for the three years ended December 31, 1995. 
	
     Rate/Volume Analysis for the two years ended December 31, 1995. 
     
     Appendix A attached to Part I contains information concerning:   
     
     Return on Equity and Assets for the five years ended December 31, 1995. 
     
     Amortized cost and Estimated Market Values of Investment Securities as 
	           of December 31, 1995, 1994, and 1993.  
	
     Maturity Distribution of Securities as of December 31, 1995 (Market 
           	Value).       
	
     Loan Account Composition as of December 31, 1995, 1994, 1993, 1992, and 
	           1991. 

     Maturities and Sensitivity to Changes in Interest Rates for Commercial, 
           	Financial, and Agricultural Loans as of December 31, 1995. 

     Nonperforming Loans as of December 31, 1995, 1994, 1993, 1992, and 1991. 
     
     Loan Loss Experience for the five years ended December 31, 1995. 
     
     Loans Charged Off and Recovered for the five years ended December 31, 
           	1995. 
	
     Allowance for Loan Losses as of December 31, 1995, 1994, 1993, 1992, and 
	           1991. 
	
     Maturity Distribution of Time Deposits over $100,000 as of December 31, 
	           1995.      
	
     Interest Rate Sensitivity as of December 31, 1995. 
     

					    -3- 
      

     Item 2.  Properties: 

     
     The Bank owns no real property except through its subsidiary bank, CBNA 
which owns the following buildings:  150 Market Street, Millersburg, 
Pennsylvania (its corporate headquarters); 13-23 South Market Street,
Elizabethville, Pennsylvania; 3679 Peters Mountain Road, Halifax, Pennsylvania; 
906 N. River Road, Halifax, Pennsylvania; 800 Peters Mountain Road, Dauphin,
Pennsylvania; Main and Market Streets, Lykens, Pennsylvania; Route 209, Porter
Township, Schuylkill County, Pennsylvania; 29 E. Main Street, Tremont, 
Schuylkill County, Pennsylvania; Second and Carroll Streets, St. Clair, 
Schuylkill County, Pennsylvania; R.D. 3, Mill Creek Manor, Pottsville, 
Schuylkill County, Pennsylvania; 300 East Independence Street, Shamokin, 
Northumberland County, Pennsylvania; Route 61, R.D. 1, Orwigsburg, Schuylkill 
County, Pennsylvania; One South Arch Street, Milton, Northumberland County, 
Pennsylvania; and 4 West Broad Street, Hazleton, Luzerne County, Pennsylvania. 
In addition thereto, CBNA leases an office at Main Street, Pillow, 
Pennsylvania, pursuant to a lease which, with renewal options, will extend to 
the year 2008.  Also, the Bank leases offices at Route 93, Conyngham, Luzerne 
County, Pennsylvania; 77 Airport Road, Hazleton, Luzerne County, Pennsylvania; 
6700 Derry Street, Rutherford, Dauphin County, Pennsylvania; and 702 West Main 
Street, Valley View, Schuylkill County, Pennsylvania.  From time to time,
the subsidiary bank also acquires real estate by virtue of foreclosure 
proceedings, which real estate is disposed of in the usual and ordinary course 
of business as expeditiously as is prudently possible. 

     All the buildings used by the Bank are free-standing and are used 
exclusively for banking purposes with the exception of offices and retail 
space rented at the St. Clair and Milton locations. 


Item 3.  Legal Proceedings: 

     There are no material pending legal actions, other than routine 
litigation incidental to the business of the Bank, to which the Bank is a 
party. 


Item 4.  Submission of Matters to a Vote of Security Holders: 

     No matters were submitted to a vote of security holders during the fourth 
quarter of 1995. 
						   

					     -4-      
 
								
                                                       								APPENDIX A   
      
<TABLE>
<CAPTION>                                                                


RETURN ON EQUITY AND ASSETS 
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992, and 1991       
                           				       1995         1994         1993         1992        1991                   
<S>                                  <C>          <C>          <C>          <C>         <C>                     
Return on average equity              13.10%       13.63%       13.85%       13.61%      10.81%                        

Return on average assets               1.41%        1.40%        1.41%        1.36%       1.05%                     

Average equity to average assets      10.76%       10.23%       10.16%       10.01%       9.70%                         

Dividend payout ratio                 36.68%       34.24%       32.10%       30.88%      35.08%                           

</TABLE>


					     -5- 


								
                                                       								APPENDIX A 
							                                                       	Continued 
<TABLE>
<CAPTION>                                                                


AMORTIZED COST AND ESTIMATED VALUES OF INVESTMENT 
SECURITIES 
(dollars in thousands) 
AT DECEMBER 31, 1995, 1994, and 1993 

						                                                1995                     1994                     1993           
							                                      Estimated                Estimated                Estimated 
					                                        Amortized     Market     Amortized     Market     Amortized     Market  
                                          						Cost       Value         Cost       Value         Cost       Value   
<S>                                         <C>         <C>          <C>          <C>         <C>         <C>              
Mortgage backed U.S. Government agencies     $ 37,601    $ 37,825     $ 43,926     $41,900     $ 58,764    $ 59,444       
U.S. Treasury and U.S. Government agencies     14,732      14,842       18,807      17,832        4,192       4,312     
Obligations of states and political sub- 
   divisions                                   26,379      27,048       33,185      32,733       32,216      33,805        
Other securities                                6,757       7,824        6,387       6,784        6,204       7,218     
   Total                                     $ 85,469    $ 87,539     $102,305     $99,249     $101,376    $104,779     
   
</TABLE>
							 
<TABLE>
<CAPTION>

COMMUNITY BANKS, INC. and SUBSIDIARIES 
MATURITY DISTRIBUTION OF SECURITIES (Market Value) 
(dollars in thousands) 
as of December 31, 1995 
					

                                           						   One            Five                                             Weighted 
				                                  Within      Through        Through        After                 Average       Average    
				                                 One Year   Five Years     Ten Years    Ten Years     Total      Maturity      Yield<F1> (a)    
<S>                                  <C>          <C>           <C>          <C>         <C>        <C>            <C>   
U.S. Government and agencies          $  110       $31,449       $10,398      $10,710     $52,667    7 yr.  3 mos.   6.84%     
Obligations of states and political    
   subdivisions                        1,956        13,697        11,143          252      27,048    5 yr.  3 mos.   8.16%     
Other                                  6,764         1,060           ---          ---       7,824    1 yr. 11 mos.   5.76%  

    Total                             $8,830       $46,206       $21,541      $10,962     $87,539    6 yr.  2 mos.   7.15% 
     
Percentage of total                   10.1%        52.8%         24.6%        12.5%       100.0%           
     
Weighted average yield <F1>           6.72%        6.60%         8.36%        7.43%        7.15%   

<FN>
<F1> Weighted average yields were computed on a tax equivalent basis using a 
federal income tax rate of 34%. 
</FN>
The Bank monitors investment performance and valuation on an ongoing basis to 
evaluate investment quality. An investment which has experienced a decline in 
market value considered to be other than temporary is written down to its net 
realizable value and the amount of the write down is accounted for as a 
realized loss. 
</TABLE>
					     -6-                                                         
					     
					     
                                                     								APPENDIX A 
								                                                     Continued 
<TABLE>
<CAPTION>                                                                
LOAN ACCOUNT COMPOSITION            
(dollars in thousands) 
as of December 31

									                                    1995            1994             1993            1992              1991       
                             									  Amount  Percent Amount  Percent   Amount Percent  Amount  Percent  Amount  Percent 
<S>                                   <C>       <C>    <C>       <C>    <C>       <C>    <C>       <C>    <C>       <C>          
Commercial, financial and agricultural  $ 37,774  17.5%  $ 31,227  16.4%  $ 26,990  16.2%  $ 20,818  13.2%  $ 21,625  13.5%
Real estate-construction                   3,283   1.5      3,354   1.8      1,573    .9      1,796   1.1      1,916   1.2
Real estate-mortgage                     112,190  51.9    103,851  54.4     89,116  53.2     84,389  53.3     81,245  51.0
Personal-installment                      56,793  26.3     46,342  24.3     43,193  25.8     43,774  27.6     45,911  28.8
Other                                      6,012   2.8      6,018   3.1      6,549   3.9      7,572   4.8      8,741   5.5
					 216,052 100.0%   190,792 100.0%   167,421 100.0%   158,349 100.0%   159,438 100.0%

Less:   
   Unearned discount                    (11,067)          (8,522)          (7,389)          (7,708)          (7,860)
   Reserve for loan losses               (2,280)          (2,069)          (1,837)          (1,589)          (1,467)
					$202,705         $180,201         $158,195         $149,052         $150,111
				 
</TABLE>
					   
The Corporation's loan activity is principally with customers located within 
the local market area. The Corporation continues to maintain a diversified 
loan portfolio and has no significant loan concentration in any economic 
sector. Increased loan demand in 1995 resulted in increases in commercial, 
financial, and agricultural; real estate; and personal installment loan 
balances of 21%, 8%, and 23%, respectively. Commercial, financial and 
agricultural loans represented 17.5% of total loans at December 31, 1995 and 
consist principally of commercial lending secured by financial assets of 
businesses including account receivables, inventories and equipment, and, in 
most cases, include liens on real estate. Real estate construction and 
mortgage loans are primarily 1 to 4 family residential loans secured by 
residential properties within the bank's market area. Personal-installment 
loans comprised 26.3% of total loans at December 31, 1995 and consist 
principally of secured loans for items such as automobiles, property 
improvement, household and other consumer goods. The Corporation continues 
to sell fixed rate mortgages in the secondary market to avoid associated 
interest rate risk. Historically, relative credit risk of commercial, 
financial, and agricultural loans has generally been greater than that of 
other types of loans.   

MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST 
RATES FOR COMMERCIAL, FINANCIAL AND AGRICULTURAL AND REAL ESTATE - 
CONSTRUCTION LOANS 
(dollars in thousands) 
as of December 31, 1995    

                                     						 Maturity Distribution 

                                   One Year      One to      Over Five 
				                               Or Less      Five Years     Years     Total 

Commercial, Financial and  
   agricultural                    $15,209      $17,114       $5,451   $37,774  
Real estate-construction             3,283          ---          ---     3,283
                            				   $18,492      $17,114       $5,451   $41,057
   
				   
      
Interest Sensitivity 

                             				   Variable        Fixed        Total   

Due in one year or less             $15,484        $3,008       $18,492       
Due after one year                   22,148           417        22,565         

                            				    $37,632        $3,425       $41,057 

				    -7- 
				    
				    

                                                      								APPENDIX A 
							                                                      	Continued         
<TABLE>
<CAPTION>
								

NONPERFORMING LOANS<F1>   
(dollars in thousands)        
as of December 31  

 
	                                  				      1995         1994          1993         1992          1991      
<S>                                        <C>          <C>           <C>          <C>           <C>                       
Loans past due 90 days or more:                     
Commercial, financial and agricultural      $  120       $  152        $    9       $  196        $  331 
Mortgages                                      197          114            87          544           361        

Personal installment                           145           59            99          121           226 
Other                                            0            1             9           10             4    
 .                                  					       462          326           204          871           922 
					       
Loans renegotiated with the borrowers         NONE         NONE          NONE         NONE          NONE  

Loans on which accrual of interest has 
 been discontinued: 
Commercial, financial and agricultural         415          327            50           64           158 
Mortgages                                      934          475           809          539           169 
Other                                           99           30            59           77           102 
 .                                  					     1,448          832           918          680           429 
					     
Other real estate owned                        302          338           366          145           631  

Total                                       $2,212       $1,496        $1,488       $1,696        $1,982 

<FN>
<F1> The determination to discontinue the accrual of interest on nonperforming 
loans is made on the individual case basis. Such factors as the character and 
size of the loan, quality of the collateral and the historical 
creditworthiness of the borrower and/or guarantors are considered by 
management in assessing the collectibility of such amounts. 

The approximate amount that would have been accrued on those loans for which 
interest was discontinued in 1995 was $108,000. Interest income from these 
loans would have approximated $77,000 in 1994.  

The change in nonperforming loans is primarily a result of the impact of 
economic conditions upon the loan portfolio. The economic outlook remains 
uncertain. If the economy in the Bank's trading area improves this could have 
a positive impact on delinquency trends and collectibility of loans. However, 
the commercial real estate market in the Bank's trading area remains stagnant. 
The ability of borrowers to liquidate collateral is dependent upon the demand 
for commercial real estate projects and a buyer's ability to finance 
commercial real estate projects.     

</FN>
</TABLE>
					     -8- 

                                                        								APPENDIX A 
						                                                        		Continued 
<TABLE>
<CAPTION>
								
LOAN LOSS EXPERIENCE 

(dollars in thousands) 

For the years ended December 31, 1995, 1994, 1993, 1992, and 1991 

 .                                        						 1995        1994        1993        1992        1991            
<S>                                          <C>         <C>          <C>         <C>         <C>           
Loans at year-end, net of unearned income     $204,985    $182,270     $160,032    $150,641    $151,578       

Average loans balance <F1>                    $196,138    $170,945     $159,976    $152,049    $151,900       

Balance, allowance for loan losses, 
      January 1                               $  2,069    $  1,837     $  1,589    $  1,467    $  1,307          
      
Net charge-offs <F2>                              (501)       (230)        (454)       (561)       (577)          

Provision for loan losses                          712         462          702         683         737           


Balance, allowance for loan losses,           
     December 31 <F2>                         $  2,280    $  2,069     $  1,837    $  1,589    $  1,467          
     
Net charge-offs to loans at year end              .24%        .13%         .28%        .37%        .38%         

Net charge-offs to average loans <F1>             .26         .13          .28         .37         .38             

Balance of allowance for loan losses         
     to loans at year end                        1.11        1.14         1.15        1.05         .97           

<FN>
<F1> Averages are a combination of monthly and daily averages. 

<F2> For detail, see Schedule of Loans Charged Off and Recovered. 
</FN>
</TABLE>

The allowance for loans losses is based upon management's continuing 
evaluation of the loan portfolio. A review as to loan quality, current macro-
economic conditions and delinquency status is performed at least on a 
quarterly basis. The provision for loan losses is adjusted quarterly based 
upon current review. The table on page 10 presents an allocation by loan
categories of the allowance for loan losses at December 31 for the last five
years. In retrospect, the specific allocation in any particular category 
may prove excessive or inadequate and consequently may be reallocated in the 
future to reflect the then current condition. Accordingly, the entire 
allowance is available to absorb losses in any category. 

As discussed in the Corporation's Annual Report, the Corporation adopted SFAS 
114, as amended by SFAS 118, on January 1, 1995. The adoption of SFAS 114 did
not result in any additional provision for loan losses. 

The provision for loan losses totalled $712,000 for the year ended December 
31, 1995 compared to $462,000, $702,000, $683,000, and $737,000 for the years
ended December 31, 1994, 1993, 1992, and 1991, respectively. The relationship 
of the allowance for loan losses to loans at year end approximated 1.11% 
compared to ratios of .97% to 1.15% for the previous four years.  In reviewing 
the adequacy of the allowance for loan losses, management considered the 
relationship of nonaccrual loans, other real estate owned, and accruing loans 
contractually past due 90 days or more to total assets. This relationship
approximated .69%, .49%, .52%, .62%, and .80%, at year-end 1995, 1994, 1993, 
1992, and 1991, respectively.   


					     -9-      
					     
 .                                                      								APPENDIX A, 
 .                                                      								Continued 

<TABLE>
<CAPTION>
								
LOANS CHARGED OFF AND RECOVERED 
(dollars in thousands) 
for the years ended December 31, 1995, 1994, 1993, 1992, and 1991 


 .                                         						    1995          1994         1993        1992        1991                        
<S>                                               <C>           <C>          <C>         <C>         <C>                  
Loans charged off: 
   Commercial, financial and agricultural            ---           ---          ---        $ 63        $113                      
   Real estate-mortgage                             $105          $ 82         $149         181           6                       
   Personal installment                              561           396          472         432         541                     
   Other                                              78            99           66          59          34           
Total                                                744           577          687         735         694           

Loans recovered:                                                
   Commercial, financial and agricultural            ---           ---          ---           6           4                    
   Real estate-mortgage                               29            83           77           4          --                      
   Personal installment                              199           231          142         154         112                      
   Other                                              15            33           14          10           1                   
      Total                                          243           347          233         174         117                    
 .      	 Net charge-offs                            $501          $230         $454        $561        $577                   
	 
</TABLE>

<TABLE>
<CAPTION>

ALLOCATION OF 
ALLOWANCE FOR LOAN LOSSES <F1> 
(dollars in thousands) 
as of December 31 

 .                                         						       1995        1994         1993            1992        1991                    
<S>                                                 <C>          <C>          <C>            <C>         <C>           
Loans: 
   Commercial, financial and agricultural            $  315       $  399       $   500        $  601      $  562                 
   Real estate-construction                              --            1           ---            16          15                 
   Real estate-mortgage                                 611          311           225           477         386                  
   Installment                                          566          527           489           405         405                  
   Unallocated                                          788          831           623            90          99               
Balance                                              $2,280       $2,069        $1,837        $1,589      $1,467               

<FN>
<F1> See Schedule "Loan Account Composition" for the percent of loan 
classification to total loans. 
</FN>
</TABLE>

MATURITY DISTRIBUTION OF TIME 
DEPOSITS OF $100,000 OR MORE 
(dollars in thousands) 
as of December 31, 1995 

Remaining to Maturity: 
   Less than three months                     $ 1,580 
   Three months to six months                   1,937 
   Six months to twelve months                  2,350 
   More than twelve months                      4,621 
 .                                  					      $10,488 


					     -10- 


 .                                                      								APPENDIX A 
 .                                                       							Continued 
								
INTEREST RATE SENSITIVITY 

The excess of interest-earning assets over interest-bearing liabilities which 
are expected to mature or reprice within a given period is commonly referred 
to as the "GAP" for that period. For an institution with a negative GAP, the 
amount of income earned on its assets fluctuates less than the cost of its 
liabilities in response to changes in the prevailing rates of interest during 
the period.  Accordingly, in a period of decreasing interest rates, 
institutions with a negative GAP will experience a smaller decrease in the 
yield on their assets than in the cost of their liabilities. Conversely, in a 
period of rising interest rates, institutions with a negative GAP face a 
smaller increase in the yield on their assets than in the cost of their
liabilities. A decreasing interest rate environment is favorable to 
institutions with a negative GAP because more of their liabilities than their 
assets adjust during the period and, accordingly, the decrease in the cost of 
their liabilities is greater than the decrease in the yield on their assets. 

The negative GAP between the Bank's interest-earning assets and interest- 
bearing liabilities maturing or repricing within one year approximated 0.6% of 
total assets at December 31, 1995. 

Significant maturity/repricing assumptions include the presentation of all 
savings and NOW accounts as being 100% interest rate sensitive.  Equity 
securities are reflected in the shortest time interval. Assumed paydowns on
mortgage-backed securities and loans have also been included in all time 
intervals. 

The following table sets forth the scheduled repricing or maturity of the 
Bank's interest-earning assets and interest-bearing liabilities at
December 31, 1995. 

<TABLE>
<CAPTION>

Interest Rate Sensitivity                                  
At December 31, 1995                   1-90       90-180      180-365     1 year     Total 
Dollars in thousands                   days        days         days     or more           
<S>                                <C>       <C>          <C>         <C>        <C>       
Assets 
Interest-bearing deposits in  
 other banks                        $   334     $  100          ---         ---   $    434 
Investment securities                 4,771        757     $  3,302    $ 78,709     87,539   
Federal funds sold                      ---        ---          ---         ---        ---    
Loans, net of unearned income<F1>    65,485     86,935       12,584      39,981    204,985     
Loans held for sale                   2,233        ---          ---         ---      2,233 
Total                               $72,823    $87,792      $15,886    $118,690   $295,191 

Liabilities 
Savings                             111,818        ---          ---         ---   $111,818    
Time                                 24,308     17,797       17,505      66,967    126,577 
Time in denominations of 
 $100,000 or more                     1,580      1,937        2,350       4,621     10,488 
Short-term borrowings                 1,016        ---          ---         ---      1,016 
Long-term debt                          ---        ---          ---       7,000      7,000  
Total                              $138,722    $19,734      $19,855     $78,588   $256,899 

Interest Sensitivity Gap 
Periodic                           $(65,899)   $68,058      $(3,969)     $40,102   
Cumulative                                       2,159       (1,810)      38,292 

<FN>
<F1>Does not include nonaccrual loans.
</FN> 
</TABLE>
					     -11- 


					     PART II 
					     
Item 5.  Market for Registrant's Common Stock and 
	 Related Stockholder Matters: 

	 Incorporated by reference is the information appearing under the 
heading "Market for the Holding Company's Common Stock and Related Securities 
Holder Matters" on page 3 of the Annual Report to Stockholders for the year
ended December 31, 1995 (hereafter referred to as the "Annual Report"). 

Item 6.  Selected Financial Data: 

	 Incorporated by reference is the information appearing under the 
heading "Financial Highlights" on page 19 of the Annual Report. 

Item 7.  Management's Discussion and Analysis of Financial 
	 Condition and Results of Operations: 
	 
	 Incorporated by reference is the information appearing under the 
headings "Rate/Volume Analysis"; "Average Balances, Effective Interest 
Differential and Interest Yields"; and "Management's Discussion of Financial
Condition and Results of Operations" on pages 20 through 24 of the Annual 
Report. 

Item 8.  Financial Statements and Supplementary Data: 

	 The consolidated financial statements, together with the report 
thereon of Coopers & Lybrand L.L.P. dated January 13, 1996, are incorporated 
by reference to pages 6 through 19 of the Annual Report. 

Item 9.  Disagreements on Accounting and Financial Disclosures: 

	 None. 
	 



					     -12-             
					     

 .                    					    PART III 
					    
Item 10.  Directors and Executive Officers of the Registrant: 

	  The following table sets forth the name and age of each director of 
Community Banks, Inc. as well as the director's business experience, including 
occupation for the past 5 years, the period during which he has served as a 
director of the Bank, or its wholly-owned subsidiary, Community Banks, N.A. 
(Formerly Upper Dauphin National Bank), and the number and percentage of
outstanding shares of Common Stock of the Bank beneficially owned by said 
directors as of December 31, 1995. 

 .                                                     								    Percentage 
 .              	    Business Experience              Amount and      of 
 .              	    Including Principal              Nature of    Outstanding  
 .              	    Occupation for the    Director   Beneficial   Common Stock  
Name and Age         Past Five Years      Since (1)  Ownership(2)     Owned     

Thomas L. Miller       Chairman of Bank        1966      20,973 (12)   1.03% 
    Age 63 
    
Kenneth L. Deibler     Self-Employed           1966      19,663 (3)     .97% 
    Age 73                Insurance Broker 
			  Elizabethville, PA 
			  
Leon E. Kocher         Chairman of the Board,  1963      15,705         .77% 
    Age 83                Kocher Enterprise, Inc. 
			  Millersburg, PA 
			  
Ernest L. Lowe         President of Bank       1990      11,127 (11)    .55% 
    Age 59  

Robert W. Rissinger    Sec./Treasurer          1968     137,020 (4)    6.75% 
    Age 69                Alvord Polk Tool Co.                  (5)            
			  (cutting tools)                   
			  Engle Rissinger Auto Group 
			  Millersburg, PA                   
			  
Allen Shaffer          Attorney-at-Law         1961      24,613 (9)    1.21% 
    Age 70                Millersburg and 
			  Harrisburg, PA 
			  
William C. Troutman    President,              1968      84,065 (6)    4.14% 
    Age 80                The A. W. Troutman Co. 
			  (automobile dealership) 
			  Millersburg, PA          
			  
James A. Ulsh          Attorney-at-Law         1977       8,839         .44% 
    Age 49                Mette, Evans & 
			  Woodside 
			  Harrisburg, PA 
			  
Samuel E. Cooper       Superintendent,         1991       1,067         .05% 
    Age 62                Warrior Run 
			  School District  
			  Turbotville, PA 
			  

					     -13-    
					     

 .								                                                         Percentage 
 .             		     Business Experience              Amount and      of 
 .             		     Including Principal              Nature of   Outstanding 
 .             		     Occupation for the    Director   Beneficial  Common Stock 
Name and Age           Past Five Years     Since (1)  Ownership(2)   Owned     

Ronald E. Boyer        President,              1981      11,449(7)     .56% 
    Age 58                Alvord-Polk Tool Co. 
			  (manufacturing of 
			  cutting tools) 
			  Millersburg, PA 

Peter DeSoto           President,              1981      23,479       1.16% 
    Age 56                Metal Industries, Inc. 
			  (manufacturing of metal 
			  products) 
			  Elizabethville, PA     
			  
Thomas W. Long         President,              1981      12,521 (8)    .62% 
    Age 66                Millersburg Hardware  
			  Millersburg, PA 
			  
Donald L. Miller       President, Miller Bros. 1981      50,797       2.50% 
    Age 66                Dairy 
			  Millersburg, PA 
			  
Ray N. Leidich         Dentist                 1985      38,948(10)   1.92% 
    Age 67                Tremont, PA 


(1)  Includes service as a director of CBNA (formerly Upper Dauphin National 
Bank), a wholly-owned subsidiary of the bank, prior to 1983 and service as a 
director of the bank after 1983. 

(2)  The securities "beneficially owned" by an individual are determined in 
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they may
include securities owned by or for, among others, the wife and/or children of 
the individual and any other relative who has the same home as such individual, 
as well as other securities as to which the individual has or shares voting or 
investment power or has the right to acquire under outstanding stock options 
within 60 days after December 31, 1995. Beneficial ownership may be disclaimed 
as to certain of the securities. 

(3)  Includes 1,497 shares owned by Mr. Deibler's grandchildren. 

(4)  Includes 3,363 shares owned by Alvord-Polk Tool Co., Inc. the stock of 
which is held 50% by Robert Rissinger and 50% by Ronald E. Boyer. 

(5)  Includes 7,493 shares owned by Engle Ford, Inc., 372 shares owned by Mr. 
Rissinger's spouse, Shirley Rissinger, and 4,133 shares owned by Engle Ford, 
Inc. Profit Sharing Plan in which Mr. Rissinger is Co-Trustee. 

(6)  Includes 18,703 shares owned by Mr. Troutman's spouse, Dorothy Troutman 
and 5,295 shares owned by W.C. Troutman Co.         

(7)  Includes 3,363 shares owned by Alvord-Polk Tool Co., Inc., the stock of 
which is held 50% by Robert W. Rissinger and 50% by Ronald E. Boyer, and 134 
shares owned by Mr. Boyer's wife, Judith Boyer. 

(8)  Includes 7,416 shares owned by the Trust of Mr. Long's mother, Leah Long. 

(9)  Includes 4,198 shares owned by Mr. Shaffer's Pension Plan. 

					     -14- 
					     

(10)  Includes 19,474 shares owned by Dr. Leidich's wife, Dolores Leidich. 

(11)  Includes 99 shares owned by Mr. Lowe's wife, Barbara and 62 shares owned 
by Mr. Lowe's children and incentive stock options to acquire 9,999 shares. 

(12)  Includes incentive stock options to acquire 17,299 shares. 

(13)  Includes incentive stock options to acquire 5,880 shares. 

(14)  Includes incentive stock options to acquire 3,160 shares and 101 shares 
registered to Mr. Lawley for his minor children. 

(15)  Includes incentive stock options to acquire 1,440 shares.    


Compliance with Section 16(a) of Securities Exchange Act 

	 In 1995, to the knowledge of CBI, all  Executive Officers and 
directors timely filed all reports with the Securities Exchange Commission,
except for Terry L. Burrows, who filed a Form 4 in an untimely manner.   

	 None of the directors or nominee directors are directors of other 
companies with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934. 


Executive Officers: 

	 The following table sets forth the executive officers of Community 
Banks, Inc., their ages, their positions with Community Banks, Inc. and the
beneficial ownership (as determined in accordance with the rules and 
regulations of the Securities and Exchange Commission) of Common Stock of the 
Bank by each of such persons as of December 31, 1995. 


 .                    			    Amount and                             Percentage  
 .             		       Principal Occupation            Nature of       of 
 .             		       for the Past Five               Beneficial  Outstanding 
Name and Age                   Years           Term(1) Ownership(2)Common Stock 

Thomas L. Miller    Chairman & Chief Executive  1966    20,973 (12)  1.03% 
   Age 63              Officer 

Ernest L. Lowe      President,                  1985    11,127 (11)   .55% 
   Age 59              Chief Operating Officer 
   
David E. Hawley     Executive Vice President,   1975     6,002 (13)   .30% 
   Age 57                 Corporate Property Officer   
   
Robert W. Lawley    Executive Vice President,   1980     3,291 (14)   .16% 
   Age 41                 Chief Lending Officer 

Terry L. Burrows    Executive Vice President,   1977     7,024 (15)   .35% 
   Age 47                 Chief Financial Officer 


(1)  Initial year employed in this capacity. 

					     -15-   

The following is all shares beneficially owned by all directors and executive 
officers of the Bank as a group: 


Amount and Nature 
of Beneficial  
Ownership 
							      
 .                                     								Percent
		   Title of Class     Direct     Indirect   of Class 
		       
			  Common          366,465    110,118     23.48% 
			  

Item 11.  Executive Compensation: 

	  Information regarding executive compensation is omitted from this 
report as the holding company has filed a definitive proxy statement for its 
annual meeting of shareholders to be held April 16, 1996; and the information
included therein with respect to this item is incorporated herein by reference. 


Pension Plan: 

	  The Bank maintains a pension plan for its employees. An employee 
becomes a participant in the pension plan on January 1 or July 1 after 
completion of one year of service (12 continuous months) and attainment of the 
age 21 years. The cost of the pension is actuarially determined and paid by 
the Bank. The amount of monthly pension is equal to 1.15% of average monthly 
pay up to $650, plus .60% of average monthly pay in excess of $650, multiplied 
by the number of years of service completed by an employee. Average  


					     -16- 

monthly pay is based upon the 5 consecutive plan years of highest pay 
preceding retirement. The maximum amount of annual compensation used in 
determining retirement benefits is $150,000. A participant is eligible for 
early retirement after attainment of the age of 60 years and the completion 
of 5 years of service. The early retirement benefit is the actuarial 
equivalent of the pension accrued to the date of early retirement. Thomas 
L. Miller and Ernest L. Lowe have been credited with 37 and 11 years of 
service,  respectively, under the pension plan as of December 31, 1995. 

	  The amounts shown on the following table assume an annual retirement 
benefit for an employee who chose a straight-line annuity and who is presently 
50 years old and who will retire at the age of 65 years. 

<TABLE>
<CAPTION>
Remuneration 
				      
Years of 
Service   $35,000  $55,000  $75,000  $95,000   $115,000  $135,000   $150,000   $175,000   $195,000   $225,000             
<S>     <C>      <C>      <C>      <C>        <C>       <C>        <C>        <C>        <C>        <C>                
15       $ 8,486  $13,736  $18,986  $24,236    $29,486   $34,736    $38,763    $38,763    $38,763    $38,673  
20       $11,314  $18,314  $25,314  $32,314    $39,314   $46,316    $51,564    $51,564    $51,564    $51,564 
25       $14,143  $22,893  $31,643  $40,393    $49,143   $57,893    $64,455    $64,455    $64,455    $64,455 
30       $16,971  $27,471  $37,971  $48,471    $58,971   $69,471    $77,346    $77,346    $77,346    $77,346 
35       $19,800  $32,050  $44,300  $56,550    $68,800   $81,050    $90,237    $90,237    $90,237    $90,237 
40       $22,138  $35,778  $49,418  $63,058    $76,698   $90,338   $100,568   $100,568   $100,568   $100,568 
</TABLE>
Directors' Compensation: 

	  Each director of CBI is paid a quarterly fee of $600.00. In 
addition, each outside director receives a fee of $200.00 for attendance at 
the regular quarterly meetings of the Board of Directors of CBI. Each director 
who is not an executive officer also receives $150 for attendance at each 
committee meeting of CBI. 


Item 12.  Security Ownership of Certain Beneficial 
	  Owners and Management: 
	  
	  Refer to Item 10 on pages 13 through 16. 
	  
Item 13.  Certain Relationships and Related Transactions: 

	 (a)  Transactions with Management and Others 
	 
	 Incorporated by reference is the information appearing in Note 12 
(Related Parties) of Notes to Consolidated Financial Statements on page 15 of 
the Annual Report. 

	 (b)  Certain Business Relationships 

	 Allen Shaffer, a director of the Bank, is an attorney practicing in 
Harrisburg and Millersburg, Pennsylvania, who has been retained in the last 
two fiscal years by the Bank and who the Bank proposes to retain in the 
current fiscal year. James A. Ulsh, a director of the Bank, is a shareholder/ 
employee of the law firm of Mette, Evans & Woodside, Harrisburg, Pennsylvania
which the Bank has retained in the last two fiscal years and proposes to 
retain in the current fiscal year.  Thomas J. Carlyon, a director of CBNA, is 
a partner in the law firm of Carlyon & McNelis, Hazleton, Pennsylvania, which 
CBI has retained in the last fiscal year and proposes to retain in the current 
fiscal year. 

	 All loans to directors and their business affiliates, executive 
officers and their immediate families were made by the subsidiary bank in the 
ordinary course of business, at the subsidiary bank's normal credit terms, 
including interest rates and collateralization prevailing at the time for 
comparable transactions with other non-related persons, and do not represent 
more than a normal risk of collection. 



					     -17-        



						  PART IV 


Item 14.  Exhibits, Financial Statements Schedules and 
	  Reports on Form 8-K: 
	  
 .                                						      Reference (page)  
 .                                         							       Annual 
 .                                   					      Form     Report to 
 .                                   					      10-K    Shareholders 
						      
(a) (1)   Consolidated Financial Statements 
	  Report of Independent Public 
	     Accountants                               --          19      
	     
	  Balance Sheets as of December 31, 1995      
	     and 1994                                  --           6   
	     
	  Statements of Income for each of the three 
	     years ended December 31, 1995             --           7   
	     
	  Statements of Changes in Stockholders' 
	     Equity for each of the three years ended 
	     December 31, 1995                         --           8  
	     
	  Statements of Cash Flows for each of the 
	     three years ended December 31, 1995       --           8     
	     
	  Notes to Financial Statements                --         9-18   
	  

All other schedules are omitted since the required information is not 
applicable or is not present in amounts sufficient to require submission of
the schedule. 

(3)   Exhibits 

      (3)  Articles of Incorporation and By-Laws.  Incorporated Registration 
by reference to the Proxy Statements dated April 14, 1987 and April 12, 1988 
and Amendment 2 to Form S-2 dated May 13, 1987.  

      (13) Portions of the Annual Report to Security Holders incorporated by 
reference within this document is filed as part of this report. 

      (21) Subsidiaries of the Registrant (see Item 1, pages 2 and 3). 

      
(b)  The registrant did not file on Form 8-K during the Fourth quarter of the 
Fiscal year ended December 31, 1995. 



					     -18- 


			      CONSENT OF INDEPENDENT ACCOUNTANTS 
			      
We consent to the incorporation by reference in the registration statements of 
Community Banks, Inc. on Form S-8 (File No. 0-15786 and File No. 33-24908) of 
our report, dated January 13, 1996 on our audits of the consolidated financial 
statements of Community Banks, Inc. as of December 31, 1995 and 1994, and for
each of the years ended December 31, 1995, 1994, and 1993, which report is 
incorporated by reference in this Annual Report on Form 10-K. 

 .                                					      /S/ Coopers & Lybrand, L.L.P. 
						  
One South Market Square 
Harrisburg, Pennsylvania 
March 11, 1996  


					      -19- 


 .                                    Signatures
     
	       Pursuant to the requirements of Section 13 or 15 (d) of the
     Securities Exchange Act of 1934, the Registrant has duly caused this report
     to be signed on its behalf by the undersigned, thereunto duly authorized.
			      
				                             Community Banks, Inc.
										
			                                   By:/S/  Thomas L. Miller
				                                         (Thomas L. Miller)  
				                                              Chairman
			                                       Chief Executive Officer
				                                            and Director
     
     Date:  March 6, 1996
     
	       Pursuant to the requirements of the Securities Exchange Act of
     1934, this report has been signed below by the following persons on behalf
     of the registrant and in the capacities and on the dates indicated.
     
	    Signature                Title                      Date
       
     /S/  Terry L. Burrows      Ex. Vice President and         3/6/96
	 (Terry L. Burrows)     Principal Financial Officer
     
     /S/ Samuel E. Cooper       Director                       3/6/96
	(Samuel E. Cooper)
     
     /S/  Kenneth L. Deibler    Director                       3/6/96
	 (Kenneth L. Deibler)
     
     /S/    Peter Desoto        Director                       3/6/96
	   (Peter DeSoto)
     
     /S/   Ray N. Leidich       Director                       3/6/96
	  (Ray N. Leidich)
     
     /S/  Ernest L. Lowe        Director                       3/6/96
	 (Ernest L. Lowe)
       
     /S/  Allen Shaffer      _  Director                       3/6/96
	 (Allen Shaffer)
     
     /S/  James A. Ulsh      _  Director                       3/6/96
	 (James A. Ulsh)
     
     
					-20-