<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1995 Commission file number 0-15040
PennRock Financial Services Corp.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2400021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1060 Main St.
Blue Ball, Pennsylvania 17506
(Address of principal executive offices) (Zip code)
(717) 354-4541
Registrant's telephone number, including area code
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 periods 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding at April 30, 1995
Common Stock ($2.50 par value) 6,043,946 Shares
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INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - March 31, 1995,
December 31, 1994 and March 31, 1994.
Condensed consolidated statements of income - Three months ended
March 31, 1995 and 1994.
Condensed consolidated statements of cash flows - Three months
ended March 31, 1995 and 1994.
Notes to condensed consolidated financial statements - March 31, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings - None
Item 2. Change in securities - None
Item 3. Defaults on senior securities - None
Item 4. Submissions of matters to a vote of security holders - None
Item 5. Other information - None
Item 6. Exhibits and reports on Form 8-K - Attached
SIGNATURES
<PAGE> 3
Part I. FINANCIAL INFORMATION
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31 December 31, March 31,
1995 1994 1994
---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $17,540 $14,400 $16,274
Money market investments 176 75 107
Mortgages held for sale 359 1,242 5,227
Investment securities:
Available for sale 184,451 191,887 180,577
Held to maturity 22,460 16,096 6,055
Loans:
Loans, net of unearned income 270,727 239,928 208,058
Allowance for loan losses (3,577) (3,482) (3,549)
--------- --------- ---------
Net loans 267,150 236,446 204,509
Bank premises and equipment 8,731 6,811 4,564
Accrued interest receivable 3,194 2,926 2,262
Other assets 9,336 10,209 7,100
--------- --------- ---------
Total assets $513,397 $480,092 $426,675
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $52,692 $50,405 $44,902
Interest bearing 349,298 292,028 304,638
--------- --------- ---------
Total deposits 401,990 342,433 349,540
Short-term borrowings 53,256 82,077 18,045
Long-term debt 9,000 10,500 10,500
Accrued interest payable 2,025 1,817 1,246
Other liabilities 3,993 3,362 3,581
--------- --------- ---------
Total liabilities 470,264 440,189 382,912
Stockholders' Equity:
Common stock, par value $2.50 per share;
authorized -10,000,000 shares; issued
and outstanding - 6,025,709,
6,006,040, and 3,954,712 shares 15,064 15,015 9,887
Surplus 10,204 9,774 13,484
Unrealized security gains (losses) (4,003) (6,038) 1,628
Retained earnings 21,868 21,152 18,764
--------- --------- ---------
Total stockholders' equity 43,133 39,903 43,763
--------- --------- ---------
Total liabilities and
stockholders' equity $513,397 $480,092 $426,675
========= ========= =========
</TABLE>
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PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1995 1994
--------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans $5,808 $4,374
Investment securities:
Available for sale 2,893 2,393
Held to maturity 351 47
Mortgages held for sale 39 86
Other 2 3
--------- ---------
Total interest income 9,093 6,903
Interest expense:
Deposits 3,349 2,392
Short-term borrowings 1,053 212
Long-term debt 159 113
--------- ---------
Total interest expense 4,561 2,717
--------- ---------
Net interest income 4,532 4,186
Provision for loan losses 89 116
--------- ---------
4,443 4,070
Other income:
Trust commissions and fees 159 131
Service charges and fees 246 237
Investment security gains 87 532
Discount on sale of mortgage loans (16) (12)
Other 186 197
--------- ---------
Total other income 662 1,085
--------- ---------
Net interest and other income 5,105 5,155
--------- ---------
Other expenses:
Salaries and wages 1,474 1,308
Employee benefits 366 386
Occupancy, net 229 234
Equipment depreciation and service 214 178
Other 1,033 933
--------- ---------
Total other expense 3,316 3,039
--------- ---------
Income before income taxes 1,789 2,116
Income taxes 470 430
--------- ---------
Net income $1,319 $1,686
========= =========
</TABLE>
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PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash from operations $ 766 $ 5,111
Investing activities:
Proceeds from sales of investment securities 7,459 14,148
Purchases of investment securities (5,726) (32,745)
Maturities and paydowns of
investment securities 1,367 14,736
Net (increase) decrease in loans (27,603) 295
Purchases of premises and equipment (2,134) (99)
--------- ---------
Net cash used by investing activities (26,637) (3,645)
Financing activities:
Net increase in demand, NOW, money
market and savings deposits 5,160 1,245
Net increase in time deposits 54,396 6,664
Increase (decrease) in short-term borrowings(28,821) (10,687)
Increase (decrease) in long-term debt (1,500) 4,000
Issuance of stock 478 481
Cash dividends (602) (554)
--------- ---------
Net cash provided by financing
activities 29,111 3,167
--------- ---------
Increase (decrease) in cash and cash
equivalents 3,240
Cash and cash equivalents, beginning
of year 14,476 12,476
--------- ---------
Cash and cash equivalents, end of year $ 17,716 $13,365
========= =========
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1995
NOTE A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three months ended March 31, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Corporation's annual report on Form 10-K
for the year ended December 31, 1994.
NOTE B. ACCOUNTING POLICIES
The accounting policies of PennRock Financial Services Corp. and Subsidiary,
as applied in the consolidated interim financial statements presented, are
substantially the same as those followed on an annual basis as presented in
the 1994 Annual Report to shareholders except that, as of January 1, 1995,
the Corporation adopted the Financial Accounting Standards Board's Statement
No. 114, "Accounting by Creditors for Impairment of a Loan" and Statement No.
118 which amends SFAS 114. The statements generally require impaired loans
to be measured on the present value of expected future cash flows discounted
at the loan's effective interest rate, or at the loan's observable market
price or the fair value of the collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will be
unable to collect all contractual principal and interest payments due in
accordance with the terms of the loan agreement.
NOTE C. COMMITMENTS AND CONTINGENT LIABILITIES
The financial statements do not reflect various commitments and contingent
liabilities, such as commitments to extend credit, letters of credit,
guarantees, and liability for assets held in Trust, which arise in the normal
course of business. Commitments under outstanding letters of credit amounted
to $7,721,643 at March 31, 1995. Management does not anticipate any
significant loss as a result of these transactions.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Total assets of the Corporation increased by $33.3 million or 6.9% for the
quarter and increased by $86.7 million or 20.3% over March 31, 1994. For the
quarter, the increase in assets was primarily reflected in increases in
mortgage and commercial loans. Total investment securities declined
approximately $1 million for the quarter but increased $20 million or 10.9%
from the first quarter of last year.
Net income for the current quarter was $1,319,129 or $.22 per share compared
with $1,686,243 or $.28 per share for the first quarter of 1994. Net
interest income increased $277,540 or 6.5% from the first quarter of 1994 due
to volume increases offset by narrower spreads, while other income excluding
security and mortgage gains and losses increased $24,897 or 4.4% and other
expenses decreased $276,816 or 9.1%.
<PAGE> 7
Dividends declared for the quarter totaled $602,571 or $.10 per share. This
represented 45.7% of net income. Dividends declared during the fourth
quarter of 1994 were $600,604 or $.10 per share and $553,660 or $.093 per
share for the first quarter of last year. All per share data have been
adjusted for a 3-for-2 stock split paid in the fourth quarter of 1994.
LIQUIDITY:
The purpose of liquidity management is to ensure that there are sufficient
cash flows available to meet a variety of needs. These include financial
commitments such as satisfying the credit needs of our borrowers and
withdrawals by our depositors, the ability to capitalize in investment and
business opportunities as they occur, and the funding of the Corporation's
own operations. Liquidity is provided by maturities and sales of investment
securities, loan payments and maturities, liquidating money market
investments such as federal funds sold, and the Corporation's dividend
reinvestment plan. Liquidity is also provided by short-term lines of credit
with various correspondents and fixed and variable rate advances from the
Federal Home Loan Bank of Pittsburgh and other correspondent banks. However,
the Corporation's primary source of liquidity lies in the Corporation's
ability to renew, replace and expand its base of core deposits (consisting of
demand, NOW, money market, savings, and time deposits of less than $100,000).
Total deposits increased $52.4 million or 15.0% since March 31, 1994. Short-
term borrowings increased $35.2 million or 195.1% since last year while long-
term advances decreased $1.5 million or 14.3%. Table 1 reflects the changes
in the major classifications of deposits and borrowings by comparing the
balances at the end of the first quarter of 1995 with year-end and the first
quarter of 1994.
<PAGE> 8
TABLE 1 - DEPOSITS AND BORROWINGS BY MAJOR CLASSIFICATION
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
--------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Non-interest bearing $ 52,691 $ 50,405 $ 44,902
NOW accounts 39,101 39,038 39,859
Money market deposit accounts 25,745 20,152 26,202
Savings accounts 63,463 66,246 69,135
Time deposits under $100,000 200,349 149,785 148,881
--------- --------- ---------
Total core deposits 381,349 325,626 328,979
Time deposits of $100,000 or more 20,641 16,807 20,561
--------- --------- ---------
Total deposits 401,990 $342,433 $349,540
Short-term borrowings 53,256 82,077 18,045
Long-term debt 9,000 10,500 10,500
--------- --------- ---------
Total deposits and borrowings $464,246 $435,010 $378,085
========= ========= =========
</TABLE>
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CAPITAL RESOURCES:
Total stockholders' equity declined $630,385 or 1.4% from March 31, 1994 and
increased $3.2 million or 8.1% since year-end 1994. The increase in
stockholders' equity since year-end is partially enhanced by a decrease in
the unrealized loss, net of deferred tax effect, of the Company's available
for sale investment portfolio.
Table 2 shows the Corporation's and the Bank's capital resources at March 31,
1995 and at December 31 and March 31, 1994. The Corporation and the Bank
exceed all minimum capital guidelines.
TABLE 2 - CAPITAL RESOURCES
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1995 1994 1994
--------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
PennRock Financial Services Corp.:
Leverage ratio:
Total capital to total assets 9.10% 9.04% 11.13%
Tier 1 capital to total assets 8.40% 8.31% 10.30%
Risk-based capital ratios:
Tier 1 capital to risk weighted assets 14.90% 16.22%
16.81%
Total capital to risk weighted assets16.06% 17.45% 18.06%
Blue Ball National Bank:
Leverage ratio:
Total capital to total assets 8.77% 8.70% 10.63%
Tier 1 capital to total assets 8.07% 7.97% 9.79%
Risk-based capital ratios:
Tier 1 capital to risk weighted assets 14.38% 15.66%
16.06%
Total capital to risk weighted assets15.54% 16.90% 17.31%
</TABLE>
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
ITEM 1 LEGAL PROCEEDINGS
Not applicable
ITEM 2 CHANGE IN SECURITIES
Not applicable
ITEM 3 DEFAULTS ON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6.
(a) EXHIBITS
Not applicable
(b) REPORTS ON FORM 8-K
Form 8-K dated January 27, 1995: In connection with a press release
relating to the acquisition of three branch offices from PNC Bank, N.A.
<PAGE> 11
SIGNATURES
Pursuant to the requirements 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.
PennRock Financial Services Corp.
(Registrant)
Date: May 2, 1995 By: /s/Melvin Pankuch
- -------------------------- -----------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: May 2, 1995 By: /s/George B. Crisp
- -------------------------- -----------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Condensed
Consolidated Balance Sheet at March 31, 1995 (Unaudited) and the Condensed
Consolidated Statement of Income for the Three Months Ended March
31, 1995 (Unaudited) and is qualified in its entirity by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 17,540
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 176
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 184,451
<INVESTMENTS-CARRYING> 22,460
<INVESTMENTS-MARKET> 22,324
<LOANS> 270,727
<ALLOWANCE> 3,577
<TOTAL-ASSETS> 513,397
<DEPOSITS> 401,990
<SHORT-TERM> 53,256
<LIABILITIES-OTHER> 6,018
<LONG-TERM> 9,000
<COMMON> 15,064
0
0
<OTHER-SE> 28,069
<TOTAL-LIABILITIES-AND-EQUITY> 513,397
<INTEREST-LOAN> 5,808
<INTEREST-INVEST> 3,244
<INTEREST-OTHER> 41
<INTEREST-TOTAL> 9,093
<INTEREST-DEPOSIT> 3,349
<INTEREST-EXPENSE> 4,561
<INTEREST-INCOME-NET> 4,532
<LOAN-LOSSES> 89
<SECURITIES-GAINS> 87
<EXPENSE-OTHER> 3,316
<INCOME-PRETAX> 1,789
<INCOME-PRE-EXTRAORDINARY> 1,319
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,319
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
<YIELD-ACTUAL> 8.02
<LOANS-NON> 583
<LOANS-PAST> 389
<LOANS-TROUBLED> 468
<LOANS-PROBLEM> 5,444
<ALLOWANCE-OPEN> 3,482
<CHARGE-OFFS> 13
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 3,577
<ALLOWANCE-DOMESTIC> 3,577
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
