<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 June 30, 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 July 31, 1995
Common Stock ($2.50 par value) 6,062,991 Shares
<PAGE> 2
INDEX
REGISTRANT COMPANY AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - June 30, 1995,
December 31, 1994 and June 30, 1994.
Condensed consolidated statements of income - Six months ended
June 30, 1995 and 1994.
Condensed consolidated statements of cash flows - Six months
ended June 30, 1995 and 1994.
Notes to condensed consolidated financial statements - June 30, 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 - Election of
Directors Attached
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
<TABLE>
<CAPTION>
June 30 December 31, June 30,
(Amounts in thousands) 1995 1994 1994
(unaudited) (unaudited)
<S> <C> <C> <C>
Assets:
Cash and due from banks $ 15,697 $ 14,400 $ 16,198
Money market investments 1,179 75 72
Mortgages held for sale 1,374 1,242 661
Investment securities:
Available for sale 181,668 191,887 178,220
Held to maturity 21,179 16,096 8,069
Loans:
Loans, net of unearned income 281,557 239,928 222,727
Allowance for loan losses (3,602) (3,482) (3,691)
--------- --------- ---------
Net loans 277,955 236,446 219,036
Bank premises and equipment 8,856 6,811 4,854
Accrued interest receivable 3,055 2,926 2,401
Other assets 8,204 10,209 9,769
--------- --------- ---------
Total assets $519,167 $480,092 $439,280
========= ========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 55,231 $ 50,405 $ 50,300
Interest bearing 364,114 292,028 297,035
--------- --------- ---------
Total deposits 419,345 342,433 347,335
Short-term borrowings 36,161 82,077 35,920
Long-term debt 9,000 10,500 10,500
Accrued interest payable 2,657 1,817 1,280
Other liabilities 4,294 3,362 5,299
--------- --------- ---------
Total liabilities 471,457 440,189 400,334
Stockholders' Equity:
Common stock, par value $2.50 per share;
authorized - 10,000,000 shares; issued
and outstanding - 6,044,412,
6,006,040, and 3,969,623 15,111 15,015 9,924
Surplus 10,577 9,774 13,841
Unrealized security gains (losses) (831) (6,038) (4,596)
Retained earnings 22,853 21,152 19,777
--------- --------- ---------
Total stockholders' equity 47,710 39,903 38,946
--------- --------- ---------
Total liabilities and
stockholders' equity $519,167 $480,092 $439,280
========= ========= =========
</TABLE>
<PAGE> 4
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
-------------------- --------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $6,406 $4,455 $12,214 $8,898
Investment securities:
Available for sale 2,781 2,471 5,673 4,589
Held to maturity 351 311 703 633
Mortgages held for sale 59 79 98 165
Other 17 2 18 5
------- ------- ------- -------
Total interest income 9,613 7,318 18,706 14,290
Interest expense:
Deposits 4,138 2,456 7,487 4,848
Short-term borrowings 703 272 1,756 485
Long-term debt 178 134 337 247
------- ------- ------- -------
Total interest expense 5,019 2,862 9,580 5,580
------- ------- ------- -------
Net interest income 4,594 4,456 9,126 8,710
Provision for loan losses 90 117 178 233
------- ------- ------- -------
4,504 4,339 8,948 8,477
Other income:
Trust commissions and fees 135 140 294 271
Service charges and fees 265 251 511 488
Investment security gains 186 485 273 1,017
Gain (loss) on sale of mtg loans 12 (117) (4) (198)
Other 202 198 388 395
------- ------- ------- -------
Total other income 801 957 1,462 1,973
------- ------- ------- -------
Net interest and other income 5,305 5,296 10,410 10,450
------- ------- ------- -------
Other expenses:
Salaries and benefits 1,783 1,755 3,623 3,448
Occupancy, net 245 210 473 443
Equipment deprec. and service 259 189 473 367
Other 1,062 1,021 2,094 1,954
------- ------- ------- -------
Total other expense 3,348 3,174 6,663 6,212
------- ------- ------- -------
Income before income taxes 1,957 2,122 3,747 4,238
Income taxes 368 553 839 983
------- ------- ------- -------
Net income $1,589 $1,569 $ 2,908 $ 3,255
======= ======= ======= =======
</TABLE>
<PAGE> 5
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Amounts in thousands) ------------------------
1995 1994
--------- ---------
<S> <C> <C>
Cash from operations $ 4,126 $ 13,291
Investing activities:
Proceeds from sales of investment securities 29,742 23,239
Purchases of investment securities (22,482) (60,355)
Maturities and paydowns of
investment securities 5,953 24,551
Net (increase) in loans (41,687) (14,349)
Purchases of premises and equipment (2,438) (530)
--------- ---------
Net cash used by investing activities (30,912) (27,444)
Financing activities:
Net increase in demand, NOW, money
market and savings deposits 8,696 3,193
Net increase in time deposits 68,215 2,509
Increase (decrease) in short-term borrowings(45,916) 7,187
Increase (decrease) in long-term debt (1,500) 4,000
Issuance of stock 899 875
Cash dividends (1,207) (1,109)
--------- ---------
Net cash provided by financing
activities 29,187 16,655
--------- ---------
Increase in cash and cash equivalents 2,401 2,502
Cash and cash equivalents, beginning
of year 14,476 13,767
--------- ---------
Cash and cash equivalents, end of period $16,877 $16,269
========= =========
</TABLE>
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 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 six months ended June 30, 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 $9.0 million at June 30, 1995. Management does not anticipate any
significant loss as a result of these transactions.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Total assets of the Corporation increased by $39.1 million or 8.1% for the
first half of the year and increased by $79.9 million or 18.2% over June 30,
1994. The increases in assets were primarily reflected in increases in loans
outstanding as loans increased $41.6 million or 17.4% for the year-to-date
and by $58.8 million or 26.4% since last year. Total investment securities
(measured on an amortized cost basis) declined approximately $13 million for
since year-end but increased $10.9 million or 5.6% from June 30 last year.
Net income for the current quarter was $1,588,619 or $.26 per share compared
with $1,569,132 or $.26 per share for the second quarter of 1994. Net
interest income increased $137,470 from the second quarter of 1994 due to
volume increases offset by narrower spreads, while other income excluding
security and mortgage gains and losses increased $13,959 and other expenses
increased $174,468.
Net income for the year-to-date was $2,907,748 or $.48 per share compared
with $3,255,375 or $.55 per share for the first half of 1994. Net interest
income increased $415,010 from the first half of 1994, while other income
excluding security and mortgage gains and losses increased $38,856 and other
expenses increased $451,284. Investment security gains totaled $1,016,805
for the first half of 1994 and $273,163 for the first half of 1995, a decline
of $743,642.
Dividends declared for the quarter totaled $604,441 or $.10 per share. This
represented 38.0% of net income. Dividends declared during the first quarter
were $602,441 or $.10 per share and $555,747 or $.093 per share for the
second 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).
<PAGE> 8
Total deposits increased $76.9 million or 22.5% since year end and $72.0
million or 20.7% from last year. Total borrowings declined $47.4 million
since year end and by $1.3 million from last year. Table 1 reflects the
changes in the major classifications of deposits and borrowings by comparing
the balances at the end of the second quarter of 1995 with year-end and the
second quarter of 1994.
TABLE 1 - DEPOSITS AND BORROWINGS BY MAJOR CLASSIFICATION
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
--------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
Non-interest bearing $ 55,231 $ 50,405 $ 50,300
NOW accounts 37,880 39,038 38,843
Money market deposit accounts 27,983 20,152 22,528
Savings accounts 63,444 66,246 70,377
Time deposits under $100,000 213,870 149,785 146,983
--------- --------- ---------
Total core deposits 398,408 325,626 329,031
Time deposits of $100,000 or more 20,937 16,807 18,304
--------- --------- ---------
Total deposits 419,345 342,433 347,335
Short-term borrowings 36,161 82,077 35,920
Long-term debt 9,000 10,500 10,500
--------- --------- ---------
Total deposits and borrowings $464,506 $435,010 $393,755
========= ========= =========
<PAGE> 9
CAPITAL RESOURCES:
Total stockholders' equity increased $8.8 million or 22.5% from June 30, 1994
and increased $7.8 million or 19.6% since year-end 1994. The increase in
stockholders' equity since year-end and from last year was enhanced by a
decrease in the unrealized loss, net of deferred tax effect, of the
Corporation's available for sale investment portfolio.
Table 2 shows the Corporation's and the Bank's capital resources at June 30,
1995 and at December 31 and June 30, 1994. The Corporation and the Bank
exceed all minimum capital guidelines.
TABLE 2 - CAPITAL RESOURCES
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1995 1994 1994
--------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C>
PennRock Financial Services Corp.:
Leverage ratio:
Total capital to total assets 9.88% 9.04% 9.71%
Tier 1 capital to total assets 9.19% 8.31% 8.87%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 14.55% 16.22% 15.17%
Total capital to risk weighted
assets 15.65% 17.45% 16.42%
Blue Ball National Bank:
Leverage ratio:
Total capital to total assets 9.55% 8.70% 9.29%
Tier 1 capital to total assets 8.85% 7.97% 8.45%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 14.02% 15.66% 14.46%
Total capital to risk weighted
assets 15.13% 16.90% 15.72%
<PAGE> 10
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
The 1995 Annual Meeting of Shareholders (the "Meeting") of PennRock Financial
Services Corp. was held on April 25, 1995. Notice of the Meeting was mailed
to shareholders on or about April 1, 1995, together with proxy materials
prepared in accordance with Section 14(a) of the Securities Exchange Act of
1934, as amended, and the regulations promulgated thereunder.
The Meeting was held for the purpose of electing three Class B directors to
hold office for three years from the date of election and until their
successors are elected and have qualified.
There was no solicitation in opposition to the nominees of the Board of
Directors for the election to the Board. All nominees of the Board of
Directors were elected. The number of votes cast for or withheld, as well as
the number of abstentions and broker nonvotes for each of the nominees for
election to the Board of Directors, were as follows:
Votes Abstentions and
Nominee Votes for Withheld Broker Nonvotes
- -------------- ---------- ---------- ---------------
Elton Horning 4,413,318 22,972 1,589,419
Fred Musselman 4,416,209 20,081 1,589,419
Glenn H. Weaver 4,415,782 20,507 1,589,419
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6.
(a) EXHIBITS
Not applicable
(b) REPORTS ON FORM 8-K
Form 8-K dated June 27, 1995: In connection with a press release of
PennRock Financial Services Corp. relating to the authorization of an open
market stock repurchase program of up to 200,000 shares of the
Corporation's shares.
<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: August 4, 1995 By: /s/Melvin Pankuch
- -------------------------- -----------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: August 4, 1995 By: /s/George B. Crisp
- -------------------------- -----------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at June 30, 1995
(unaudited) and the Condensed Consolidated Statement of Income for the Six
Months Ended June 30, 1995 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 15697
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1374
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 182847
<INVESTMENTS-CARRYING> 21179
<INVESTMENTS-MARKET> 21396
<LOANS> 281557
<ALLOWANCE> 3602
<TOTAL-ASSETS> 519167
<DEPOSITS> 419345
<SHORT-TERM> 36161
<LIABILITIES-OTHER> 4294
<LONG-TERM> 9000
<COMMON> 15111
0
0
<OTHER-SE> 32599
<TOTAL-LIABILITIES-AND-EQUITY> 519167
<INTEREST-LOAN> 12214
<INTEREST-INVEST> 6473
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 18706
<INTEREST-DEPOSIT> 7488
<INTEREST-EXPENSE> 9580
<INTEREST-INCOME-NET> 9126
<LOAN-LOSSES> 178
<SECURITIES-GAINS> 273
<EXPENSE-OTHER> 6664
<INCOME-PRETAX> 3746
<INCOME-PRE-EXTRAORDINARY> 2908
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2908
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
<YIELD-ACTUAL> 8.22
<LOANS-NON> 552
<LOANS-PAST> 534
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 6775
<ALLOWANCE-OPEN> 3482
<CHARGE-OFFS> 92
<RECOVERIES> 33
<ALLOWANCE-CLOSE> 3602
<ALLOWANCE-DOMESTIC> 3602
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
