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, 1997 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 30, 1997
------------------------------ --------------------------------
Common Stock ($2.50 par value) 6,064,822 Shares
<PAGE> 1
PENNROCK FINANCIAL SERVICES CORP.
---------------------------------
FORM 10-Q
---------
For the Quarter Ended June 30, 1997
Contents
--------
PART I. FINANCIAL INFORMATION
- -----------------------------
Item 1. Financial Statements
Consolidated balance sheets - June 30, 1997,
December 31, 1996 and June 30, 1996.
Consolidated statements of income - Six months ended
June 30, 1997 and 1996.
Consolidated statements of cash flows - Six months
ended June 30, 1997 and 1996.
Notes to condensed consolidated financial statements - June 30, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
- --------------------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
- ----------
<PAGE> 2
Part I
For the Quarter Ended June 30, 1997
Item 1. Financial Statements
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31, June 30,
(Amounts in thousands) 1997 1996 1996
----------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 20,263 $ 16,405 $ 17,432
Short-term investments 27,739 1,244 879
Mortgages held for sale 27,075 5,690 1,929
Securities available for sale 162,211 186,026 192,012
Loans:
Loans, net of unearned income 355,198 319,354 317,478
Allowance for loan losses (4,076) (4,049) (3,806)
--------- --------- ---------
Net loans 351,122 315,305 313,672
Bank premises and equipment 11,429 10,662 9,000
Accrued interest receivable 3,574 3,333 3,431
Other assets 9,937 8,938 12,257
--------- --------- ---------
Total assets $613,350 $547,603 $550,612
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 66,618 $ 65,537 $ 59,643
Interest bearing 407,802 385,930 364,602
--------- --------- ---------
Total deposits 474,420 451,467 424,245
Short-term borrowings 10,425 22,106 58,524
Long-term debt 62,000 14,000 9,000
Accrued interest payable 3,200 2,758 2,625
Other liabilities 6,254 3,543 6,298
--------- --------- ---------
Total liabilities 556,299 493,874 500,612
Stockholders' Equity:
Common stock, par value $2.50
per share; authorized - 20,000,000
shares; issued - 6,077,299 of which
12,617, 39,880 and 12,333 shares
are held as treasury stock,
respectively 15,193 15,193 15,193
Surplus 11,107 11,153 11,153
Unrealized gains (losses) on
securities available for sale,
net of deferred taxes (297) (816) (2,642)
Retained earnings 31,287 28,939 26,887
--------- --------- ---------
57,290 54,469 50,591
Less treasury stock, at cost (239) (740) (671)
--------- --------- ---------
Total stockholders' equity 57,051 53,729 49,920
--------- --------- ---------
Total liabilities and
stockholders' equity $613,350 $547,603 $550,612
========= ========= =========
</TABLE>
<PAGE> 3
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
-------------------- ---------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $8,029 $7,153 $15,492 $14,052
Securities:
Taxable 2,038 2,451 4,147 4,775
Tax-exempt 1,094 664 1,992 1,252
Mortgages held for sale 280 61 411 147
Other 31 10 47 18
------- ------- ------- -------
Total interest income 11,472 10,339 22,089 20,244
Interest expense:
Deposits 4,237 3,782 8,330 7,674
Short-term borrowings 744 963 1,162 1,654
Long-term debt 595 134 791 270
------- ------- ------- -------
Total interest expense 5,576 4,879 10,283 9,598
------- ------- ------- -------
Net interest income 5,896 5,460 11,806 10,646
Provision for loan losses 44 149 74 298
------- ------- ------- -------
5,852 5,311 11,732 10,348
Other income:
Service charges on deposit
accounts 352 271 680 522
Other service charges and fees 18 97 32 163
Fiduciary activities 206 182 405 348
Security gains, net 551 86 547 501
Mortgage banking 873 122 1,320 143
Other 96 15 245 (1)
------- ------- ------- -------
Total other income 2,096 733 3,233 1,676
------- ------- ------- -------
Net interest and other income 7,948 6,084 14,965 12,024
------- ------- ------- -------
Other expenses:
Salaries and benefits 3,092 2,333 5,681 4,352
Occupancy, net 484 304 895 616
Equipment depreciation and service 353 322 648 598
Other 1,488 987 2,727 2,042
------- ------- ------- -------
Total other expense 5,417 3,946 9,951 7,608
------- ------- ------- -------
Income before income taxes 2,531 2,138 5,014 4,416
Income taxes 602 432 1,180 1,051
------- ------- ------- -------
Net income $1,929 $1,706 $3,834 $3,365
======= ======= ======= =======
Earnings per share $ .32 $ .28 $ .63 $ .55
Cash dividends per share $ .12 $ .11 $ .24 $ .22
</TABLE>
<PAGE> 4
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(Amounts in thousands) -----------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash from (used in) operations ($ 15,974) $ 4,555
Investing activities:
Proceeds from sales of securities available
for sale 68,705 36,119
Purchases of securities available for sale (49,933) (42,219)
Maturities of securities available for sale 6,494 5,343
Net increase in loans (35,891) (19,606)
Purchases of premises and equipment (1,288) (363)
-------- --------
Net cash used in investing activities (11,913) (20,726)
Financing activities:
Net increase in non-interest bearing deposits 1,080 1,868
Net increase in interest bearing deposits 21,872 4,448
Net increase (decrease) in short-term
borrowings (11,680) 11,048
Increase in long-term debt 48,000
Issuance of common and treasury stock 693 295
Acquisition of treasury stock (272) (671)
Cash dividends (1,454) (1,333)
-------- --------
Net cash provided by financing activities 58,239 15,655
-------- --------
Increase (decrease) in cash and
cash equivalents 30,352 (516)
Cash and cash equivalents,
beginning of year 17,649 18,827
-------- --------
Cash and cash equivalents, end of period $48,001 $18,311
======== ========
</TABLE>
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE 1. ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of
PennRock Financial Services Corp. and its subsidiaries. All material
intercompany balances and transactions have been eliminated in consolidation.
PennRock Financial Services Corp. (PennRock or the Company) is a bank holding
company incorporated under the laws of Pennsylvania in 1986. Blue Ball
National Bank (the Bank), a wholly owned subsidiary of PennRock, provides a
broad rang of banking, trust and other financial services to consumers, small
businesses and corporations in south-central and southeastern Pennsylvania.
The Bank's mortgage banking subsidiary, Atlantic Regional Mortgage Corporation
(ARMCO) originates and sells residential first-mortgage loans of various types
in the Maryland, Delaware, Pennsylvania, Washington D.C., Virginia, North
Carolina and South Carolina markets.
The information contained in the financial statements is unaudited. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of the results of
interim periods have been made. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. Operating results for the six
months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997.
The accounting policies of PennRock Financial Services Corp. and its
subsidiaries, as applied in the consolidated interim financial statements
presented, are substantially the same as those followed on an annual basis
as presented in the 1996 Annual Report to shareholders except that, as of
January 1, 1997, PennRock adopted Statement of Financial Accounting
Standard No. 125 (SFAS 125), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" issued by the Financial
Accounting Standards Board in June 1996, as discussed in Note 3 of Form 10-Q
filed for the first quarter of 1997. For further information on PennRock's
accounting policies, refer to the consolidated financial statements and
footnotes thereto included in PennRock's annual report on Form 10-K for the
year ended December 31, 1996.
NOTE 2. 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 $10.3 million at June 30, 1997. Management does not anticipate any
significant loss as a result of these transactions.
<PAGE> 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This section presents management's discussion and analysis of the financial
condition and results of operations of PennRock Financial Services Corp. and
subsidiaries. This discussion should be read in conjunction with the
financial statements which appear elsewhere in this report.
Total assets of PennRock increased $65.7 million or 12.0% since the end of
1996 and by $63.7 million or 11.4% over June 30, 1996. The increases in
assets were primarily reflected in increases in loans outstanding as loans
increased $35.8 million or 11.2% for the year-to-date and by $37.7 million
or 11.9% since last year. Mortgages held for sale and short-term investments
(primarily federal funds sold) also recorded large increases. Total
securities (measured on an amortized cost basis) decreased $24.6 million or
13.1% since year-end and by $32.4 million or 16.6% from June 30 last year.
Deposits grew $23.0 million or 5.1% since year end and by $50.2 million or
11.8% from last year. Total borrowed funds, consisting of short-term
borrowings and long-term debt, increased $36.1 million since the end of 1996
and by $4.9 million or 7.6% from June 30, 1996. Stockholders' equity
increased $3.3 million or 6.2% and $7.1 or 14.3% over year end and last year
respectively.
Net income for the current quarter was $1.9 million or $.32 per share
compared with $1.7 million or $.28 per share for the second quarter of 1996,
an increase of $223,000 or 13.1%. Net interest income increased $436,000
from the second quarter of 1996 due to volume increases and wider spreads,
while other income excluding security gains increased $898,000 and other
expenses increased $1,471,000.
Dividends declared for the quarter totaled $729,000 or $.12 per share. This
represented 37.8% of net income. Dividends declared during the second
quarter of last year were $664,000 or $.11 per share.
Net income for the first six months of 1997 was $3.8 million or $.63 per
share compared with $3.4 million or $.55 per share for the first six months
of 1996, an increase of $469,000 or 13.9%. Net interest income increased
$1.8 million from the first six months of 1996 while other income excluding
security gains increased $1.5 million and other expenses increased $2.3
million.
Dividends declared for the first six months of 1997 totaled $1.5 million or
$.24 per share compared with $1.3 million or $.22 per share paid for the same
period in 1997. This represented 37.9% of net income in 1997.
NET INTEREST INCOME
Net interest income is the product of the volume of average earning assets
and the average rates earned on them, less the volume of average interest
bearing liabilities and the average rates paid on them. The amount of net
interest income is affected by changes in interest rates, volumes and the mix
of earning assets and paying liabilities. For analytical purposes, net
interest income is adjusted to a taxable equivalent basis. This adjustment
allows for a more accurate comparison among taxable and tax-exempt assets by
increasing tax-exempt income by an amount equivalent to the federal income
tax which would have been paid if this income were taxable at the statutory
rate of 34%.
<PAGE> 8
Table 1 presents net interest income on a fully taxable equivalent basis for
the second quarter and first six months of 1997 and 1996. For the second
quarter of 1997, net interest income on a fully taxable equivalent basis
totaled $6.3 million, an increase of $516,000 or 9.0% from $5.80 million
earned for the same period of 1996. For the first six months of 1997, net
interest income on a fully taxable equivalent basis totaled $12.7 million, an
increase of $1.4 million or 12.7% from $11.2 million earned for the first six
months of 1996.
TABLE 1 - NET INTEREST INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $11,472 $10,339 $22,080 $20,244
Total interest expense 5,576 4,879 10,283 9,598
------- ------- -------- --------
Net interest income 5,896 5,460 11,806 10,646
Tax equivalent adjustment 378 298 851 587
------- ------- -------- --------
Net interest income
(fully taxable equivalent) $ 6,274 $5,758 $12,657 $11,233
======= ======= ======== ========
</TABLE>
Table 2 presents the average balances, taxable equivalent interest income and
expense and rates for PennRock's assets and liabilities for the three and six
months ended June 30, 1997 and 1996. The interest rate spread and net
interest for the second quarter of 1997 are substantially the same as the
second quarter of 1996. Increases in earning asset balances and higher
yields on earning assets were offset by higher balances and rates on interest
bearing liabilities. The tax-equivalent yield on earning assets increased
24 basis points while the rate on interest-bearing liabilities increased 25
basis points. The net interest margin remained the same at 4.42%.
For the first six months of 1997 compared with the first six months of 1996,
the yield on earning assets increased 27 basis points while the rate on
interest-bearing liabilities increased only 2 basis points so that the
interest rate spread increased 25 basis points. The net interest margin
increased 26 basis points.
<PAGE> 9
TABLE 2 - AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE
<TABLE>
<CAPTION>
Three Months Ended June 30,
(Amounts in thousands) -------------------------------------------------
1997 1996
------------------------- -----------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Money market investments $ 2,496 $ 31 4.98% $ 908 $ 10 4.42%
Mortgages held for sale 13,585 280 8.27% 3,197 61 7.65%
Securities available for sale 206,848 3,570 6.92% 205,005 3,439 6.73%
Loans:
Mortgage 192,067 4,433 9.26% 171,589 3,828 8.95%
Commercial 93,802 2,213 9.46% 87,866 2,053 9.37%
Consumer 60,673 1,414 9.35% 53,452 1,246 9.35%
-------- ------- -------- -------
Total loans 346,542 8,059 9.33% 312,907 7,127 9.14%
-------- ------- -------- -------
Total earning assets 569,471 11,940 8.41% 522,017 10,637 8.17%
Other assets 38,685 ------- 34,120 -------
-------- --------
$608,156 $556,137
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $ 69,363 430 2.49% $ 69,896 438 2.51%
Savings 59,032 326 2.22% 61,059 334 2.19%
Time 259,194 3,571 5.53% 228,293 3,009 5.29%
-------- ------- -------- -------
Total interest bearing deposits 387,589 4,327 4.48% 359,248 3,781 4.22%
Short-term borrowings 49,340 744 6.05% 69,466 963 5.56%
Long-term debt 44,143 595 5.41% 9,000 135 6.02%
-------- ------- -------- -------
481,072 5,666 4.72% 437,714 4,879 4.47%
Non-interest bearing deposits 64,676 ------- 58,457 -------
Other liabilities 8,144 7,925
Stockholders' equity 54,264 52,041
-------- --------
Total liabilities and stockholders'
equity $608,156 $556,137
======== ========
Net interest income $ 6,274 $ 5,758
======= =======
Interest rate spread 3.69% 3.70%
===== =====
Net interest margin 4.42% 4.42%
===== =====
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Six Months Ended June 30,
(Amounts in thousands) -------------------------------------------------
1997 1996
------------------------- -----------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Money market investments $ 1,906 $ 47 4.95% $ 609 $ 18 5.93%
Mortgages held for sale 9,173 411 8.99% 3,350 148 8.86%
Securities available for sale 200,406 6,936 6.94% 201,186 6,604 6.58%
Loans:
Mortgage 185,055 8,525 9.24% 168,439 7,729 9.20%
Commercial 90,301 4,261 9.46% 87,867 3,864 8.82%
Consumer 59,250 2,760 9.34% 51,186 2,468 9.67%
-------- ------- -------- -------
Total loans 334,606 15,546 9.32% 307,492 14,061 9.17%
-------- ------- -------- -------
Total earning assets 546,091 22,940 8.42% 512,637 20,831 8.15%
Other assets 36,577 ------- 32,319 -------
-------- --------
$582,668 $544,956
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $ 71,151 870 2.45% $ 70,429 887 2.53%
Savings 59,189 650 2.20% 60,892 667 2.20%
Time 256,487 6,810 5.32% 229,057 6,119 5.36%
-------- ------- -------- -------
Total interest bearing deposits 386,827 8,330 4.32% 360,378 7,673 4.27%
Short-term borrowings 41,397 1,162 5.63% 60,000 1,654 5.53%
Long-term debt 29,608 791 5.36% 9,000 271 6.04%
-------- ------- -------- -------
457,832 10,283 4.50% 429,378 9,598 4.48%
Non-interest bearing deposits 63,097 ------- 56,117 -------
Other liabilities 7,318 7,201
Stockholders' equity 54,421 52,260
-------- --------
Total liabilities and stockholders'
equity $582,668 $544,956
======== ========
Net interest income $12,657 $11,233
======= =======
Interest rate spread 3.92% 3.67%
===== =====
Net interest margin 4.65% 4.39%
===== =====
</TABLE>
<PAGE> 11
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $44,000 for the second
quarter of 1997 compared with $149,000 for the second quarter of last year.
The provision for the first six months of 1997 was $74,000 compared with
$298,000 for 1996. The provision is based on management's estimate of the
amount needed to maintain an adequate allowance for loan losses. The
adequacy of the allowance will continue to be examined in light of past loan
loss experience, current economic conditions, volume of non-performing and
delinquent loans and other relevant factors. The allowance is established at
a level considered by management to be adequate to absorb potential future
losses contained in the portfolio and is monitored on a continuous basis with
independent formal reviews conducted semiannually. The allowance is
increased by provisions charged to expense and decreased by net charge-offs.
Table 3 reflects an analysis of the allowance for loan losses for the second
quarter and first six months of 1997 and 1996.
TABLE 3 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, beginning of period $4,147 $3,693 $4,049 $3,661
Provision charged to operating expense 44 149 74 298
Total loans charged off (97) (69) (148) (188)
Total recoveries 30 33 149 35
------- ------- ------- -------
Net (charge-offs) recoveries (67) (36) 1 (153)
------- ------- ------- -------
Balance, end of period $4,124 $3,806 $4,124 $3,806
======= ======= ======= =======
Total loans:
Average $346,542 $312,907 $334,606 $307,492
Period-end 355,198 317,478 355,198 317,478
Ratios:
Net charge-offs to
average loans (annualized) .08% .05% .00% .10%
Allowance for loan losses to
period-end loans 1.16% 1.20% 1.16% 1.20%
</TABLE>
<PAGE> 12
NON-PERFORMING ASSETS
Table 4 reflects PennRock's non-performing assets at June 30, 1997, December
31, 1996 and June 30, 1996. PennRock's policy is to discontinue the accrual
of interest on loans for which the principal or interest is past due 90 days
or more unless the loan is well secured and corrective action has begun or
the loan is in the process of collection. When a loan is placed on non-
accrual status, any unpaid interest is charged against income. Other real
estate owned represents property acquired through foreclosure.
TABLE 4 - NON-PERFORMING ASSETS
<TABLE>
<CAPTION>
June 30, December 31, June 30,
(Amounts in thousands) 1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Non-accrual loans $338 $ 795 $ 825
Loans accruing but 90 days past due
as to principal or interest 157 311 150
--------- --------- ---------
Total non-performing loans 495 1,106 975
Other real estate owned 139 187 325
--------- --------- ---------
Total non-performing assets $634 $1,293 $1,300
========= ========= =========
Ratios:
Non-performing loans to total loans 0.14% 0.35% 0.31%
Non-performing assets to total loans
and other real estate owned 0.18% 0.40% 0.41%
Allowance for loan losses to
non-performing loans 833.13% 366.09% 390.36%
</TABLE>
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 PennRock's own
operations. Liquidity is provided by maturities and sales of investment
securities, loan payments and maturities and liquidating money market
investments such as federal funds sold. 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, PennRock's primary source of liquidity lies in
PennRock'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> 13
Table 5 reflects the changes in the major classifications of deposits and
borrowings by comparing the balances at the end of the second quarter of 1997
with year-end and the second quarter of 1996.
TABLE 5 - DEPOSITS AND BORROWINGS BY MAJOR CLASSIFICATION
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
------------- ------------ ------------
<S> <C> <C> <C>
Non-interest bearing $ 66,618 $ 65,537 $ 5+,643
NOW accounts 37,017 41,209 37,190
Money market deposit accounts 32,707 34,125 32,603
Savings accounts 59,532 59,977 61,692
Time deposits under $100,000 245,790 224,071 211,065
--------- --------- ---------
Total core deposits 441,664 424,919 402,193
Time deposits of $100,000 or more 32,756 26,548 22,052
--------- --------- ---------
Total deposits 474,420 451,467 424,245
Short-term borrowings 10,425 22,106 58,524
Long-term debt 62,000 14,000 9,000
--------- --------- ---------
Total deposits and borrowings $546,845 $487,573 $491,769
========= ========= =========
</TABLE>
CAPITAL RESOURCES:
Total stockholders' equity increased $7.1 million or 14.3% from June 30, 1996
and $3.3 million or 6.2% since year-end 1996. Stockholders' equity is
impacted by changes in the unrealized market gains and losses of the
securities available for sale portfolio, net of deferred taxes. This
portfolio had net unrealized losses for all periods presented.
On June 24, 1997, the Company announced that the Board of Directors had
authorized the purchase of up to 200,000 shares of its outstanding common
stock. The shares are to be used for general corporate purposes including
employee benefit and executive compensation plans or for the dividend
reinvestment plan. This is an extension of a open market repurchase program
which was originally announced in 1995. Since the program began, PennRock
has repurchased 128,583 shares of which 12,617 are held as treasury shares as
of June 30, 1997.
<PAGE> 14
Table 6 shows PennRock's capital resources at June 30, 1997 and at December
31 and June 30, 1996. PennRock and its subsidiary bank exceed all minimum
capital guidelines.
TABLE 6 - CAPITAL RESOURCES
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1997 1996 1996
------------- ------------ -------------
<S> <C> <C> <C>
Leverage ratio:
Total capital to total assets 9.96% 9.96% 10.00%
Tier 1 capital to total assets 9.28% 9.80% 9.32%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 14.01% 14.95% 15.34%
Total capital to risk weighted
assets 15.02% 16.08% 16.47%
</TABLE>
<PAGE> 15
PART II. OTHER INFORMATION
---------------------------
For the Quarter ended June 30, 1997
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Shareholders (the "Meeting") of PennRock Financial
Services Corp. was held on April 22, 1997. Notice of the Meeting was mailed
to shareholders on or about March 28, 1997, together with proxy materials
prepared in accordance with Section 14(a) of the Securities Exchange Act of
1934, as amended, and the regulation promulgated thereunder.
The Meeting was held for the purpose of electing four Class A directors to
hold office for three years from the date of the 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:
<TABLE>
<CAPTION>
Votes Abstentions and
Nominee Votes for Withheld Broker Nonvotes
------------------ ------------ ------------ ---------------
<S> <C> <C> <C>
Norman Hahn 3,812,780 20,250 3,833,032
Robert L. Spotts 3,812,780 20,250 3,833,032
Dale M. Weaver 3,812,780 20,250 3,833,032
Melvin Pankuch 3,801,264 31,766 3,833,032
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule regarding unaudited interim financial
information of PennRock for the quarter ended June 30, 1997.
(b) Reports on Form 8-K
A current report on Form 8-K dated June 24, 1997, was filed with the
Securities Exchange Commission on or about June 27, 1997. The report
was filed under Item 5 - "Other Events" and disclosed that the Board of
Directors of PennRock has authorized the repurchase on the open market
of up to 200,000 shares of the Company's $2.50 par value common stock.
There were no other reports on Form 8-K filed for the three months ended
June 30, 1997.
<PAGE> 16
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 12, 1997 By: /s/ Melvin Pankuch
- ----------------------- -----------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: August 12, 1997 By: /s/ George B. Crisp
- ------------------------ -----------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
<PAGE> 17
</TABLE>
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<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 20,263
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 27,739
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 162,211
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 382,273
<ALLOWANCE> 4,076
<TOTAL-ASSETS> 613,350
<DEPOSITS> 474,420
<SHORT-TERM> 10,425
<LIABILITIES-OTHER> 9,454
<LONG-TERM> 62,000
0
0
<COMMON> 15,193
<OTHER-SE> 41,858
<TOTAL-LIABILITIES-AND-EQUITY> 613,350
<INTEREST-LOAN> 15,903
<INTEREST-INVEST> 6,139
<INTEREST-OTHER> 47
<INTEREST-TOTAL> 22,089
<INTEREST-DEPOSIT> 8,330
<INTEREST-EXPENSE> 10,283
<INTEREST-INCOME-NET> 11,806
<LOAN-LOSSES> 74
<SECURITIES-GAINS> 547
<EXPENSE-OTHER> 9,951
<INCOME-PRETAX> 5,014
<INCOME-PRE-EXTRAORDINARY> 5,014
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,834
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<YIELD-ACTUAL> 4.65
<LOANS-NON> 338
<LOANS-PAST> 157
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 7,264
<ALLOWANCE-OPEN> 4,049
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<ALLOWANCE-CLOSE> 4,124
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