PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
PENNROCK FINANCIAL SERVICES CORP.
(Name of Registrant as Specified in its Charter)
_________________________________________________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_________________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
5) Total fee paid:
_________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________
3) Filing Party:
________________________________________________
4) Date Filed:
________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
TO THE SHAREHOLDERS OF PENNROCK FINANCIAL SERVICES CORP.:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its
directors, the regular Annual Meeting of the shareholders of
PENNROCK FINANCIAL SERVICES CORP., will be held on Tuesday,
April 28, 1998 at 10:00 a.m. at Yoder's Restaurant, 14 South
Tower Road, New Holland, Pennsylvania for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. To elect the three
nominees listed in the accompanying Proxy
Statement.
2. OTHER BUSINESS. To consider such other business
as may properly be brought before the meeting and
any adjournments thereof.
Only those shareholders of record at the close of business
on March 20, 1998, shall be entitled to notice of and to vote at
the meeting.
It is requested that you promptly execute the enclosed proxy
and return it in the enclosed postpaid envelope. You are
cordially invited to attend the meeting. Your proxy is
revocable and may be withdrawn if you elect to attend the
meeting and wish to vote in person.
A copy of the Annual Report of PennRock Financial Services
Corp. is enclosed.
BY ORDER OF THE BOARD OF DIRECTORS
GLENN H. WEAVER
President
Enclosures
April 3, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. PLEASE PROMPTLY DATE, SIGN AND RETURN YOUR PROXY IN THE
ENVELOPE WHICH ACCOMPANIES THIS PROXY STATEMENT.
<PAGE>
PROXY STATEMENT
= = = = = = = = = = = = = = = = = = = =
Dated and to be Mailed April 3, 1998
= = = = = = = = = = = = = = = = = = = =
PENNROCK FINANCIAL SERVICES CORP.
1060 MAIN STREET
P.O. BOX 580
BLUE BALL, PENNSYLVANIA 17506
(717) 354-4541
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 1998
TABLE OF CONTENTS
PAGE
GENERAL...................................................... 1
Introduction............................................ 1
Date, Time and Place of Meeting......................... 1
Shareholders Entitled to Vote........................... 1
Purpose of Meeting...................................... 1
Solicitation of Proxies................................. 1
Revocability and Voting of Proxies...................... 1
Voting of Shares and Principal Holders Thereof.......... 2
Shareholder Proposals................................... 2
Recommendations of the Board of Directors............... 3
INFORMATION CONCERNING ELECTION OF DIRECTORS................. 3
General Information..................................... 3
Information About Nomminees, Continuing Directors and
Executive Offiers.................................. 4
Meetings and Committees of the Board of Directors....... 6
Compensation of Directors............................... 6
Executive Officers of PennRock Financial Services Corp.. 7
Executive Compensation and Related Matters.............. 8
Transactions with Directors and Executive Officers...... 15
Compliance with Section 16(a) of the Exchange Act....... 16
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............. 16
ADDITIONAL INFORMATION....................................... 16
OTHER MATTERS........................................... 16
<PAGE>
GENERAL
Introduction
On July 31, 1986, Blue Ball National Bank became a wholly-
owned subsidiary of PennRock Financial Services Corp., a
Pennsylvania business corporation organized for the purpose of
becoming a bank holding company. As of that date, the
shareholders of Blue Ball National Bank became shareholders of
PennRock Financial Services Corp. The meeting to which this
Proxy Statement relates will be the twelfth Annual Meeting of the
shareholders of PennRock Financial Services Corp.
Date, Time and Place of Meeting
The regular Annual Meeting of the shareholders of PennRock
Financial Services Corp. will be held on Tuesday, April 28, 1998,
at 10:00 a.m. at Yoder's Restaurant, 14 South Tower Road, New
Holland, Pennsylvania.
Shareholders Entitled to Vote
Shareholders of record at the close of business on March 20,
1998, shall be entitled to vote at the meeting.
Purpose of Meeting
The shareholders will be asked to consider the following
matters at the meeting: (i) to elect three directors, and
(ii) to consider and vote upon such other business as may be
properly brought before the meeting and any adjournments thereof.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the
solicitation of proxies, in the accompanying form, by the Board
of Directors of PennRock Financial Services Corp. for use at the
Annual Meeting of shareholders to be held at 10:00 a.m. on
Tuesday, April 28, 1998, and any adjournments thereof.
The expense of soliciting proxies will be borne by PennRock
Financial Services Corp. In addition to the use of the mails,
directors, officers and employees of PennRock Financial Services
Corp. and Blue Ball National Bank may, without additional
compensation, solicit proxies personally or by telephone.
Revocability and Voting of Proxies
The execution and return of the enclosed proxy will not
affect a shareholder's right to attend the meeting and to vote in
person. Any proxy given pursuant to this solicitation may be
revoked by delivering written notice of revocation to Glenn H.
Weaver, President of PennRock Financial Services Corp., at any
time before the proxy is voted at the meeting. Unless revoked,
any proxy given pursuant to this solicitation will be voted at
the meeting in accordance with the instructions thereon of the
shareholder giving the proxy. In the absence of instructions,
all proxies will be voted FOR the election of the three nominees
identified in this Proxy Statement. Although the Board of
Directors knows of no other business to be presented, in the
event that any other matters are brought before the meeting, any
proxy given pursuant to this solicitation will be voted in
accordance with the recommendations of the management of PennRock
Financial Services Corp.
Shares held for the account of shareholders who participate
in the Dividend Reinvestment Plan will be voted in accordance
with the instructions of each shareholder as set forth in his
proxy. If a shareholder who participates in the Dividend
Reinvestment Plan does not return a proxy, the shares held for
his account by the Plan Agent will not be voted.
Voting of Shares and Principal Holders Thereof
At the close of business on February 13, 1998, PennRock
Financial Services Corp. had outstanding 6,074,013 shares of
$2.50 par value common stock. There is no other class of stock
authorized or outstanding. As of such date, 107,724 shares of
PennRock Financial Services Corp. common stock were held by the
Trust Department of Blue Ball National Bank as sole fiduciary
(representing approximately 1.77 percent of such shares
outstanding) and will be voted FOR the election of the three
nominees identified in this Proxy Statement.
A majority of the outstanding common stock present in person
or by proxy constitutes a quorum for the conduct of business.
Each share is entitled to one vote on all matters submitted to a
vote of the shareholders. A majority of the votes cast at a
meeting at which a quorum is present is required in order to
approve any matter submitted to a vote of the shareholders,
unless a greater vote is required by law or under the Articles of
Incorporation or Bylaws. In the case of the election of
directors, the candidates receiving the highest number of votes
cast, up to the number of directors to be elected, shall be
elected to the Board of Directors. Abstentions and broker non-
votes will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, but
will not be treated as votes cast.
To the knowledge of PennRock Financial Services Corp., no
person owned of record or beneficially on the record date more
than five percent of the outstanding common stock of PennRock
Financial Services Corp.
Shareholder Proposals
Shareholder proposals intended to be presented at the 1999
Annual Meeting must be received at the executive offices of
PennRock Financial Services Corp. at 1060 Main Street, Blue Ball,
Pennsylvania not later than December 8, 1998 in order to be
included in the proxy statement and proxy form to be prepared by
PennRock Financial Services Corp. in connection with that
meeting.
Recommendations of the Board of Directors
The Board of Directors recommends that the shareholders vote
FOR the election of the three nominees identified in this Proxy
Statement.
INFORMATION CONCERNING ELECTION OF DIRECTORS
General Information
The Bylaws of PennRock Financial Services Corp. provide that
the Board of Directors shall consist of not less than two nor
more than 25 persons and that the directors shall be classified
with respect to the time they shall severally hold office by
dividing them into three classes, each consisting as nearly as
possible of one-third of the number of the whole Board of
Directors. The Bylaws further provide that the directors of each
class shall be elected for a term of three years.
At each annual meeting the successors to the class of
directors whose term shall expire that year shall be elected to
hold office for a term of three years, so that the term of office
of one class of directors shall expire in each year. The number
of directors shall be determined by the Board of Directors. Any
shareholder who owns not less than 100 shares of the stock of
PennRock Financial Services Corp. is eligible to be elected to
the Board of Directors.
A majority of the Board of Directors may increase the number
of directors between meetings of the shareholders. Any vacancy
occurring in the Board of Directors, whether due to an increase
in the number of directors, resignation, retirement, death or any
other reason, may be filled by appointment by the remaining
directors. Any director who is appointed to fill a vacancy shall
hold office until his successor is duly elected by the
shareholders at the next Annual Meeting or at a special meeting
called for that purpose.
The Board of Directors has fixed the number of directors at
ten. Of these ten directors, there are three directors whose
terms of office will expire at the 1998 Annual Meeting and seven
continuing directors whose terms of office will expire at the
1999 or 2000 Annual Meeting. The Board of Directors proposes to
nominate the following persons for election to the Board of
Directors at the 1998 Annual Meeting for the term specified
below:
Class B
For a Term of
Three Years
Elton Horning
Glenn H. Weaver
Irving E. Bressler
In the event that any of the foregoing nominees is unable to
accept nomination or election, any proxy given pursuant to this
solicitation will be voted in favor of such other persons as the
management of PennRock Financial Services Corp. may recommend.
However, the Board of Directors has no reason to believe that any
of its nominees will be unable to accept nomination or to serve
as a director, if elected.
Section 2.3 of Article II of the Bylaws of PennRock
Financial Services Corp. requires that nominations, other than
those made by or in behalf of the existing management of PennRock
Financial Services Corp., must be made in writing and must be
delivered or mailed to the Chairman of the Board of PennRock
Financial Services Corp. not less than 14 days nor more than
50 days prior to the date of the Annual Meeting. The chairman of
the meeting is required to determine whether nominations have
been made in accordance with the requirements of the Bylaws and,
if he determines that a nomination is defective, the nomination
and any votes cast for the nominee shall be disregarded.
Information About Nominees, Continuing Directors and Executive
Officers
Information concerning the three persons to be nominated for
election to the Board of Directors of PennRock Financial Services
Corp. at the 1998 Annual Meeting and concerning the seven
continuing directors is set forth below. The following table
also includes information concerning shares of PennRock Financial
Services Corp. common stock owned beneficially by executive
officers who are named in the Summary Compensation Table
appearing elsewhere herein and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
Shares of Pennrock
Financial Services
Corp. Common Stock
Beneficially Owned
Director as of February 13, Percent Principal Occupation for the Past
Name and Age Since(1) 1998(2)(3) of Class 5 Years and Other Directorships(4)
<S> <C> <C> <C> <C>
CLASS A (TERM EXPIRES IN 2000) - CONTINUING DIRECTORS
Norman Hahn (61) 1976 130,074 2.14% Chairman of the Board and Chief
Executive Officer, Conestoga Wood
Specialties, Inc. (manufacturer of wood
products)
Robert L. Spotts (67) 1985 16,559 * Retired. Formerly President, Martin
Limestone, Inc. (quarry)
Dale M. Weaver (59) 1977 117,335 1.93% President, New Holland Custom Woodwork,
Ltd. (church furniture and millwork)
Melvin Pankuch (58) 1988 5,857 * Executive Vice President and Chief
Executive Officer, PennRock Financial
Services Corp. and President and Chief
Executive Officer, Blue Ball National
Bank
CLASS B (TERM EXPIRES IN 1998) - NOMINEES
Elton Horning (66) 1989 29,119 * Auctioneer, Owner of Elton Horning Farm
Agency and Partner of Horning Farm
Agency (real estate agency)
Glenn H. Weaver (63) 1985 101,689 1.67% President, PennRock Financial Services
Corp.; Partner R & G Associates (real
estate investment); formerly President,
Weaver & Witwer, Inc. (plumbing,
heating, air conditioning, electrical
contractors)
Irving E. Bressler (47) 1997 500 * President, Bressler Auto Specialties,
d/b/a Autospa of Wyomissing Hills (car
wash and auto detailing)
CLASS C (TERM EXPIRES IN 1999) - CONTINUING DIRECTORS
Aaron S. Kurtz (59) 1980 7,337 * President, Ludwig Office Furniture,
Inc. (office furniture)
Robert K. Weaver (49) 1975 15,259 * Partner, Wentz, Weaver & Kling, LLP
(law firm)
Lewis M. Good (39) 1991 3,569 * Owner, Original Good's Potato Chips
(food products)
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
George B. Crisp 370 *
Joseph C. Spada 1,202 *
Michael H. Peuler 779 *
All Directors and
Executive Officers as
a group (13 persons) 429,649 7.07%
</TABLE>
* Less than one percent of the total number of shares of
common stock outstanding.
Footnotes
1 Includes service as a director of Blue Ball National Bank,
predecessor to PennRock Financial Services Corp.
2 Beneficial ownership of shares of the common stock of
PennRock Financial Services Corp. is determined in
accordance with Securities and Exchange Commission Rule
13d-3(d)(1), which provides that a person shall be deemed to
own any stock with respect to which he, directly or
indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares:
(i) voting power, which includes the power to vote or to
direct the voting of the stock, or (ii) investment power,
which includes the power to dispose or direct the
disposition of the stock.
3 Each person named in this table has sole voting and
investment power with respect to the shares listed above,
except that voting and investment power with respect to a
total of 64,974 shares is shared with spouses, children or
other family members. The shares shown above include a
total of 99,830 shares which are held by spouses, children
or other family members or by trusts or estates with respect
to which a director or executive officer serves as trustee
or executor, beneficial ownership of which is in each case
disclaimed. Also included in the shares shown above are a
total of 500 shares which may be acquired pursuant to the
exercise of stock options which are currently vested or
which will vest within 60 days, which shares are treated as
issued and outstanding for purposes of determining ownership
percentage.
4 No nominee or continuing director is a director of any other
company which has one or more classes of securities
registered with the Securities and Exchange Commission
pursuant to Section 12 or which is required to file periodic
reports with the Securities and Exchange Commission pursuant
to Section 15(d) of the Securities Exchange Act of 1934.
Meetings and Committees of the Board of Directors
The Board of Directors of PennRock Financial Services Corp.
does not have a standing Audit Committee, Nominating Committee,
or Compensation Committee.
Blue Ball National Bank has a standing Audit Committee.
Since Blue Ball National Bank is presently the only subsidiary of
PennRock Financial Services Corp., the Audit Committee of Blue
Ball National Bank has been acting on behalf of PennRock
Financial Services Corp. and will continue to do so until
PennRock Financial Services Corp. committees are appointed.
Members of the Audit Committee of Blue Ball National Bank
during 1997 were Robert L. Spotts, Chairman, and Lewis M. Good,
Norman Hahn, and Elton Horning. The principal duties of the Audit
Committee are to obtain and review such internal and external
financial information as may be necessary in order to assure that
the audit coverage is appropriate and that satisfactory internal
reporting procedures are maintained. The Audit Committee met
four times during 1997.
The Board of Directors met 26 times during 1997. All
directors attended 75% or more of the aggregate number of
meetings of the Board of Directors and of the various committees
of the Board of Directors on which they served.
Compensation of Directors
The directors of PennRock Financial Services Corp. do not
receive any additional compensation for their services as such,
beyond the compensation paid to them as directors of Blue Ball
National Bank. Each member of the Board of Directors of Blue
Ball National Bank, other than the Chairman of the Board, is paid
an annual fee of $1,700 for his services as a director, a fee of
$310 for each regular meeting of the Board of Directors which he
attends, and $130 for each meeting of a committee of the Board of
Directors which he attends. In addition to the regular
directors' compensation, the Secretary of the Board of Directors
also receives an additional fee of $4,900. The Chairman of the
Board of Directors receives an annual fee of $12,000 and a fee of
$130 for each committee meeting of the Board of Directors which
he attends. No directors' fees are paid to any director who is
also a full-time salaried officer of Blue Ball National Bank or
PennRock Financial Services Corp.
Executive Officers of PennRock Financial Services Corp.
The following persons are the executive officers of PennRock
Financial Services Corp.:
Name Age Office Held and Term of Office
Norman Hahn 61 Chairman of the Board of PennRock
Financial Services Corp. since 1991;
Chairman of Blue Ball National Bank
since 1990.
Glenn H. Weaver 63 President of PennRock Financial
Services Corp. since 1989.
Robert K. Weaver 49 Secretary of the Board of PennRock
Financial Services Corp. since 1986;
Secretary of Blue Ball National Bank
since 1977.
Melvin Pankuch 58 Executive Vice President and Chief
Executive Officer of PennRock Financial
Services Corp. since 1989; President
and Chief Executive Officer of Blue
Ball National Bank since 1988.
George B. Crisp 50 Vice President and Treasurer of
PennRock Financial Services Corp. since
1989; Senior Vice President Operations
of Blue Ball National Bank since 1993,
formerly Vice President and Chief
Financial Officer of Blue Ball National
Bank.
Joseph C. Spada 47 Senior Vice President Banking
Sales/Service of Blue Ball National
Bank since 1993.
Michael H. Peuler 47 Senior Vice President Trust Sales/
Service of Blue Ball National Bank
since 1995.
Executive Compensation and Related Matters
Summary of Cash and Certain Other Compensation
The following table provides certain summary information
concerning compensation paid or accrued by PennRock Financial
Services Corp. and Blue Ball National Bank to the chief executive
officer of PennRock Financial Services Corp. and to each of the
other most highly compensated executive officers of PennRock
Financial Services Corp. whose combined salary and bonus
compensation exceeded $100,000 for the year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Name and Annual Restricted Underlying All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs(1) Payouts sation(2)
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Melvin Pankuch, 1997 $245,000 $14,210 None None 2,000 None $18,933
Executive Vice
President and 1996 225,000 11,588 None None 1,000 None 15,745
Chief Executive
Officer 1995 210,000 9,713 None None 1,000 None 13,725
George B. Crisp, 1997 116,943 6,783 5,000 None 1,000 None 15,191
Vice President
and Treasurer 1996 112,445 6,893 None None None None 12,509
1995 110,240 5,099 None None None None 10,911
Joseph C. Spada, 1997 118,089 6,850 None None 1,000 None 14,743
Senior Vice
President, Blue 1996 113,547 5,848 None None None None 12,506
Ball National
Bank 1995 110,240 5,099 None None None None 10,911
Michael H. Peuler, 1997 109,200 6,334 None None 1,000 None 13,624
Senior Vice
President, Blue 1996 104,000 5,356 None None None None 11,447
Ball National
Bank 1995 100,000 4,625 None None None None 9,181
</TABLE>
Footnotes
1. Adjusted to reflect stock splits since date of grant.
2. Consists of contributions to the Profit Sharing Plan
maintained by Blue Ball National Bank.
<PAGE>
Stock Options Granted in 1997
The following table sets forth certain information relating
to stock options granted during 1997 to the executive officers
named in the Summary Compensation Table appearing above. No
stock appreciation rights ("SAR's") were granted in 1997.
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
Individual Grants
Number of Potential Realizable
Shares Percent of Total Value at Assumed
Underlying Options/SARs Annual Rates of
Options/SARs Granted to Employees Exercise or Stock Price
Granted in 1996(1) in Fiscal Year Base Price(2) Expiration Appreciation for
Name (#) (%) ($/Share) Date Option Term(3)
5% 10%
($) ($)
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch 2,000 35% $16.69 3-10-07 $20,993 $50,199
George B. Crisp 1,000 17% 16.63 3-24-07 10,459 26,504
Joseph C. Spada 1,000 17% 16.63 3-24-07 10,459 26,504
Michael H. Peuler 1,000 17% 16.63 3-24-07 10,459 26,504
</TABLE>
NOTES
1 Represents the grant of an incentive stock option on March
11, 1997 in the case of Mr. Pankuch and on March 25, 1997 in
the case of each of Messrs. Crisp, Spada and Peuler pursuant
to the terms of the Omnibus Stock Plan. Each option vests
and becomes exercisable one-half after the expiration of
three years from the date of grant and the balance after the
expiration of five years from the date of grant. Each
option expires, to the extent not previously exercised, upon
termination of employment for reasons other than retirement,
disability or death.
2 Exercise price in each case is equal to 100% of fair market
value on the date of grant.
3 The dollar amounts set forth in these columns are based upon
assumed annual appreciation rates of 5% and 10% as required
under applicable Securities and Exchange Commission
regulations and are not intended to indicate the possible
future price appreciation, if any, of PennRock Financial
Services Corp. common stock. No gain will be realized by
the option holder in the absence of an increase in the
market price of PennRock Financial Services Corp. common
stock, which will benefit all shareholders.
Stock Option Exercises and 1997 Year-End Values
The following table sets forth with respect to the executive
officers named in the Summary Compensation Table appearing above
certain information relating to the exercise of stock options
during 1997 and relating to the number and value of unexercised
stock options and SAR's held as of December 31, 1997. No SAR's
were either granted or exercised in 1997 and none were
outstanding on December 31, 1997.
1997 OPTION EXERCISE AND YEAR-END VALUES
<TABLE>
<CAPTION>
Value Realized
Market Value Value of Unexercised
Shares at Exercise, Number of In-The-Money
Acquired Less Exercise Unexercised Options/SARs Options/Sars at
Name on Exercise Price) at Fiscal Year-End Fiscal Year-End 12-31-97
(#) ($) (#) ($)
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch None N/A 750 5,875 $1,890 $16,571
George B. Crisp None N/A None 1,000 N/A 2,810
Joseph C. Spada None N/A None 1,000 N/A 2,810
Michael H. Peuler None N/A None 1,000 N/A 2,810
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Board of Directors of PennRock Financial Services Corp.
has no standing Compensation Committee. Instead, decisions
relating to the compensation of executive officers of PennRock
Financial Services Corp. are generally made by the Board of
Directors as a whole, except that Melvin Pankuch, who is a member
of the Board of Directors and Executive Vice President and Chief
Executive Officer, does not participate in deliberations relating
to his compensation. Mr. Pankuch is the only director who is
also an employee; Glenn H. Weaver, a former employee, is not now
an employee, but serves as President of PennRock Financial
Services Corp. Robert K. Weaver is a member of the law firm of
Wentz, Weaver & Kling, LLP, which has for many years served as
general counsel to PennRock Financial Services Corp. and Blue
Ball National Bank and is expected to continue to do so in the
future.
There were no compensation committee "interlocks" during
1997, which in general terms means that no executive officer or
director of PennRock Financial Services Corp. served as a
director or member of the Compensation Committee of another
entity, one of whose executive officers served as a director of
PennRock Financial Services Corp.
The following report is submitted by the Board of Directors
(exclusive of Mr. Pankuch) and addresses the compensation
policies of PennRock Financial Services Corp. for 1997 as
applicable to executive officers generally and to Mr. Pankuch,
the chief executive officer.
Board Report on Executive Compensation
The Board of Directors is responsible for establishing an
appropriate compensation policy applicable to the executive
officers of PennRock Financial Services Corp. and for overseeing
the administration of that policy. The overall objective of the
Board's policy is to provide competitive levels of compensation
that integrate pay with annual and long term performance goals,
reward above average performance, recognize individual initiative
and achievements and assist PennRock Financial Services Corp. in
attracting, motivating and retaining capable senior executive
officers. The Board's policy provides for competitive base
salary compensation which reflects individual performance and for
annual performance incentive compensation opportunities earned
through the achievement of financial performance and other goals
established by the Board and management. In addition, the Board
intends in the future to place greater emphasis upon longer term
stock-based incentive opportunities through the implementation of
the Omnibus Stock Plan, which was approved by the shareholders at
the 1992 Annual Meeting. The Board is of the view that stock
ownership by senior executive officers and stock-based incentive
compensation arrangements are beneficial in aligning the
interests of management and shareholders in the overall
enhancement of profitability and shareholder value. The Board
believes for this reason that it may in the future rely more
heavily upon stock-based incentive compensation arrangements in
designing the compensation packages of the executive officers of
PennRock Financial Services Corp.
In designing and administering the individual elements of
its executive compensation policy, the Board of Directors strives
to balance short term and long term incentive objectives and to
employ prudent judgement in establishing performance criteria,
evaluating performance and in determining the amount of overall
compensation. What follows is a discussion of each of the
elements of the Board's compensation policy, together with a
summary of decisions made by the Board in 1997 with respect to
the compensation of Mr. Pankuch.
The Omnibus Budget Reconciliation Act of 1993 (the "Act")
imposes certain limitations on the deductibility for federal
income tax purposes of annual compensation in excess of $1
Million payable to certain officers of PennRock Financial
Services Corp. Because the Board of Directors does not
anticipate that the annual compensation of any officer will
exceed $1 Million, it does not intend to modify the compensation
policy of PennRock Financial Services Corp. in response to the
provisions of the Act.
Base Salary
The base salary component of an executive officer's
compensation is determined annually by the Board of Directors by
reference to salary surveys and other data and is adjusted as
necessary to be competitive with average salaries paid to
executive officers at other banks and bank holding companies of
equivalent size and characteristics. The actual salary paid to
an executive officer is determined through an annual performance
appraisal, which evaluates performance by reference to the
following factors: supervisory and management performance,
marketing and sales plan performance, internal cooperation,
reporting and communication, customer and public relations,
strategic and business plan development and achievement, and
profit planning and budgeting. The Board also considers the
financial goals that were set at the beginning of the year by the
Board and management and relates them to year-end results. Some
of these goals are growth in assets, growth in deposits,
percentage increase in net income for the year, growth in loans,
return on equity and return on assets.
Bonus Compensation Plan
The Bonus Compensation Plan is an annual incentive program
for all employees, including executive officers and other key
management employees. The purpose of the Plan is to provide a
direct financial incentive in the form of an annual bonus which
is related to return on equity. Bonuses under the Bonus
Compensation Plan are paid partly in cash and partly in the form
of a contribution to an employee's account under the Blue Ball
National Bank Profit Sharing Plan.
<PAGE>
Executive Incentive Compensation Plan
The Executive Incentive Compensation Plan is a compensation
plan under which key officers (vice presidents and above) of
PennRock Financial Services Corp. and Blue Ball National Bank are
eligible to receive bonuses equal to a percentage of salary. The
Plan was adopted by the Board of Directors in 1994. The amount
of bonus, if any, awarded under the Plan is determined on the
basis of an objective two-part formula. The first part of the
formula is based upon return on equity relative to peer group
bank holding company performance. (The peer group used for this
purpose consists of the approximately 209 bank holding companies
comprising Peer Group No. 4 as published by the Federal Reserve
Board in its annual Bank Holding Company Performance Report.)
The second part of the formula is based upon year-to-year
comparative growth in PennRock Financial Services Corp. net
income. A bonus earned under the Plan in respect of current year
performance is paid in the spring of the following year. Bonuses
are payable 70% in cash and 30% in shares of PennRock Financial
Services Corp. common stock valued at fair market value.
Omnibus Stock Plan
The Omnibus Stock Plan, which was approved by the
shareholders at the 1992 Annual Meeting, is a long-term incentive
plan for senior executives of PennRock Financial Services Corp.
The objectives sought to be achieved by the grant of awards under
the Omnibus Stock Plan are to align executive and shareholder
long-term interests by creating a strong and direct link between
overall executive compensation and shareholder return and to
enable senior officers to develop and maintain a significant,
long-term stock ownership position in PennRock Financial Services
Corp. common stock. Awards may be granted under the Omnibus
Stock Plan in the form of non-qualified stock options, incentive
stock options, stock appreciation rights, performance shares,
performance units and restricted stock. In March of 1997,
Messrs. Pankuch, Crisp, Spada and Peuler were each granted
incentive stock options to purchase shares of PennRock Financial
Services Corp. common stock as described in the Option/SAR Grants
in 1997 Table appearing above.
Compensation of Chief Executive Officer
Mr. Pankuch's compensation is determined in accordance with
the compensation policy of the Board of Directors described above
and he is eligible to participate in the compensation plans
described above. The general approach adopted by the Board of
Directors in determining Mr. Pankuch's annual compensation is to
seek to be competitive with other bank holding companies of
equivalent size and characteristics, but to have a significant
percentage of his total compensation based upon the achievement
of short-term and long-term performance goals. This approach
provides a strong incentive to achieve or surpass the goals
established by the Board of Directors, while simultaneously
providing an element of stability in Mr. Pankuch's compensation.
Mr. Pankuch's base salary during 1996 was $225,000 and was
set by the Board of Directors at $245,000 for 1997 (an increase
of approximately 9%), based upon the factors discussed above and
upon an evaluation conducted by the Board of Directors.
Mr. Pankuch received a bonus of $33,143 under the Bonus
Compensation Plan in 1997, which is reflected in the Summary
Compensation Table set forth above. The amount of this bonus was
determined by the Board of Directors in accordance with the terms
of the Bonus Compensation Plan. Specifically, $14,210 was paid
in cash and $18,933 was contributed to Mr. Pankuch's account in
the Blue Ball National Bank Profit Sharing Plan. No bonus is
payable to Mr. Pankuch in 1998 in respect of 1997 performance
under the Executive Incentive Compensation Plan because PennRock
Financial Services Corp. did not achieve its targeted rate of
return on equity in 1997.
The foregoing report is furnished by Norman Hahn, Chairman
of the Board and by Messrs. Irving E. Bressler, Elton Horning,
Lewis M. Good, Aaron S. Kurtz, Robert L. Spotts, Dale M. Weaver,
Glenn H. Weaver and Robert K. Weaver.
Stock Performance Graph
The Securities and Exchange Commission requires that a
publicly held company include in its proxy statement a graph
comparing five year cumulative total shareholder returns
(assuming the reinvestment of dividends) with a broad market
index and with a published industry or line-of-business index or
an index of peer group companies. The graph appearing below
illustrates the five year cumulative return to a shareholder of
PennRock Financial Services Corp. as compared to the S&P 500
Index and to a peer group of ten other comparable banks and bank
holding companies, in each case weighted by market capitalization
and assuming an initial investment of $100.00 on December 31,
1992 and the reinvestment of all dividends over the periods
indicated.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG PENNROCK FINANCIAL SERVICES CORP.,
S & P 500 INDEX, AND PEER GROUP INDEX
<TABLE>
<CAPTION>
December 31 December 31 December 31 December 31 December 31 December 31
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
PennRock $100.00 $146.97 $216.92 $154.86 $153.88 $193.08
S&P 500 $100.00 $110.02 $111.51 $153.26 $188.36 $251.12
Peer Group $100.00 $142.51 $160.40 $182.91 $206.81 $298.87
</TABLE>
PEER GROUP SPECIFICATIONS
1. Total assets of $260 to $810 million.
2. Market capitalization of at least $60 million.
3. Headquartered in Pennsylvania.
Institution Headquarters
ACNB Corporation Gettysburg
CNB Financial Corporation Clearfield
Citizens & Northern Corporation Wellsboro
Drovers Bancshares York
First West Chester Corporation West Chester
Franklin Financial Services Corporation Chambersburg
Hanover Bancorp, Inc. Hanover
Penn Security Bank and Trust Company Scranton
PennRock Financial Services Corp. Blue Ball
Penns Woods Bancorp, Inc. Jersey Shore
Sterling Financial Corporation Lancaster
Transactions with Directors and Executive Officers
Some of the directors and executive officers of PennRock
Financial Services Corp. and Blue Ball National Bank and the
companies with which they are associated were customers of and
had banking transactions with Blue Ball National Bank in the
ordinary course of the Bank's business during 1997.
All loans and commitments to loan made to such persons and
to the companies with which they are associated were made on
substantially the same terms, including interest rates,
collateral and repayment terms, as those prevailing at the time
for comparable transactions with other persons and did not
involve more than a normal risk of collectibility or present
other unfavorable features. It is anticipated that the Bank will
enter into similar transactions in the future.
As a matter of policy and as an employee benefit, Blue Ball
National Bank makes available home mortgage loans and other loans
on a nondiscriminatory basis to all employees at interest rates
below those prevailing for comparable transactions with other
persons. The amount of these loans is not considered material
and it is anticipated that the Bank will continue its present
policy. Loans at preferential rates are not, however, extended
to any executive officer or director of PennRock Financial
Services Corp. or Blue Ball National Bank.
Robert K. Weaver, Secretary of PennRock Financial Services
Corp., is a member of the law firm of Wentz, Weaver & Kling, LLP,
New Holland, Pennsylvania. Wentz, Weaver & Kling, LLP has for
many years served as general counsel to PennRock Financial
Services Corp. and Blue Ball National Bank and is expected to
continue to do so in the future.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires that the directors and certain officers of PennRock
Financial Services Corp. file with the Securities and Exchange
Commission reports of ownership and changes in ownership with
respect to shares of PennRock Financial Services Corp. common
stock beneficially owned by them. Based solely upon its review
of copies of such reports furnished to it and written
representations made by its directors and those officers who are
subject to such reporting requirements, PennRock Financial
Services Corp. believes that during the calendar year ended
December 31, 1997, all filing requirements applicable to its
directors and officers were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 1997, PennRock Financial
Services Corp. engaged Simon Lever and Co., independent
certified public accountants, to certify its financial statements
and those of Blue Ball National Bank. It is anticipated that
Simon Lever and Co. will be similarly engaged in 1998.
Representatives of Simon Lever and Co. are expected to be present
at the shareholder meeting with the opportunity to make a
statement if they desire to do so and to be available to respond
to appropriate questions.
ADDITIONAL INFORMATION
A copy of the Annual Report of PennRock Financial Services
Corp. for the year ended December 31, 1997 on Form 10-K as filed
with the Securities and Exchange Commission is available without
charge to shareholders, depositors and other interested persons
upon request from Glenn H. Weaver, President, PennRock Financial
Services Corp., 1060 Main Street, P.O. Box 580, Blue Ball,
Pennsylvania 17506.
OTHER MATTERS
The Board of Directors of PennRock Financial Services Corp.
knows of no other matters other than those discussed in this
Proxy Statement which will be presented at the 1998 Annual
Meeting. However, if any other matters are properly brought
before the meeting, any proxy given pursuant to this solicitation
will be voted in accordance with the recommendations of the
management of PennRock Financial Services Corp.
BY ORDER OF THE BOARD OF DIRECTORS
GLENN H. WEAVER
President
Blue Ball, Pennsylvania
April 3, 1998
<PAGE>
APPENDIX
PENNROCK FINANCIAL SERVICES CORP.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 28, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Susan E. Ewell, Raymond
Newswanger and Edgar H. Martin, or any one of them, as proxies,
with full power of substitution, to vote as directed below all of
the shares of PennRock Financial Services Corp. common stock held
of record on March 20, 1998, by the undersigned and by the Plan
Agent for the account of the undersigned under the Dividend
Reinvestment Plan, at the Annual Meeting of Shareholders to be
held on Tuesday, April 28, 1998, at 10:00 a.m. and at any
adjournment thereof, with all of the powers the undersigned would
possess if personally present.
1. ELECTION OF THREE DIRECTORS FOR A TERM OF THREE YEARS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote for
below (except as marked all nominees listed below
to the contrary below)
Elton Horning Glenn H. Weaver Irving E. Bressler
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name)
It is important that your shares be represented at the
meeting. Please sign, date and return this proxy as promptly as
possible, whether or not you plan to attend the meeting. This
proxy is revocable at any time before it is exercised and may be
withdrawn if you elect to attend the meeting and wish to vote in
person.
(To be signed on reverse side)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED HEREIN.
This proxy also confers authority as to any other business
which may be brought before the meeting or any adjournment
thereof. The Board of Directors at present knows of no other
business to be brought before the meeting, but if any other
business is presented at the meeting, the shares represented by
this proxy will be voted in accordance with the recommendations
of the management of PennRock Financial Services Corp.
The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Shareholders and Proxy Statement dated April 3,
1998 and hereby revokes all proxies heretofore given.
Dated:_______________________, 1998
___________________________________
Signature
___________________________________
Signature
IMPORTANT: Please sign exactly as
your name or names appear hereon.
Joint owners should each sign. If
you sign as agent or in any other
representative capacity, please
state the capacity in which you
sign.
