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:
________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1999
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 27, 1999 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 19, 1999, shall be entitled to notice of and to vote at
the meeting.
Please mark, date and sign the enclosed proxy and return it
in the enclosed postpaid envelope as promptly as possible. 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 1, 1999
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 1, 1999
= = = = = = = = = = = = = = = = = = = =
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 27, 1999
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................................... 3
Recommendations of the Board of Directors............... 3
INFORMATION CONCERNING ELECTION OF DIRECTORS................. 3
General Information..................................... 3
Information About Nominees, Continuing Directors and
Executive Officers...................................... 4
Meetings and Committees of the Board of Directors....... 6
Compensation of Directors............................... 7
Executive Officers of PennRock Financial Services Corp.. 7
Executive Compensation and Related Matters.............. 8
Transactions with Directors and Executive Officers...... 16
Compliance with Section 16(a) of the Exchange Act....... 16
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............. 17
ADDITIONAL INFORMATION....................................... 17
OTHER MATTERS................................................ 17
<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 27, 1999,
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 19,
1999, 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 27, 1999, 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,
<PAGE 1> 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. The enclosed
proxy confers upon the persons named as proxies therein
discretionary authority to vote the shares represented thereby on
all matters that may come before the meeting in addition to the
scheduled items of business, including unscheduled shareholder
proposals and matters incident to the conduct of the meeting.
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 12, 1999, PennRock
Financial Services Corp. had outstanding 6,006,845 shares of
$2.50 par value common stock. There is no other class of stock
authorized or outstanding. As of such date, 132,257 shares of
PennRock Financial Services Corp. common stock were held by the
Trust Department of Blue Ball National Bank as sole fiduciary
(representing approximately 2.20 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.
<PAGE 2>
Shareholder Proposals
Pursuant to Rule 14a-8 promulgated by the Securities and
Exchange Commission (the "SEC"), shareholder proposals intended
to be presented at the 2000 Annual Meeting must be received at
the executive offices of PennRock Financial Services Corp. not
later than December 11, 1999 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. A shareholder
proposal which does not satisfy the notice and other requirements
of SEC Rule 14a-8 is not required to be included in the proxy
statement and proxy form of PennRock Financial Services Corp.,
but may be presented at the 2000 Annual Meeting if the proposal
is received by PennRock Financial Services Corp. not later than
February 16, 2000; provided, however, that the Chairman of the
Annual Meeting may in his discretion rule any such proposal out
of order for the reason that the inability of the shareholders to
express an opinion through the proxy solicitation process would
render any vote on the matter meaningless as an expression of
shareholder sentiment. All shareholder proposals should be sent
to: PennRock Financial Services Corp., Attention: President,
1060 Main Street, P.O. Box 580, Blue Ball, Pennsylvania 17506.
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
<PAGE 3> 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 1999 Annual Meeting and seven
continuing directors whose terms of office will expire at the
2000 or 2001 Annual Meeting. The Board of Directors proposes to
nominate the following persons for election to the Board of
Directors at the 1999 Annual Meeting for the term specified
below:
Class C
For a Term of
Three Years
Aaron S. Kurtz
Robert K. Weaver
Lewis M. Good
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 1999 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 in this Proxy Statement and by all directors
and executive officers as a group. <PAGE 4>
<TABLE>
<CAPTION>
Shares of PennRock
Financial Services Corp.
Common Stock
Director Beneficially Owned as ofPercent ofPrincipal Occupation for the
Name and Age Since(1) February 12, 1999(2)(3)Class Past 5 Years and Other Directorships(4)
<S> <C> <C> <C> <C>
CLASS A (TERM EXPIRES IN 2000) - CONTINUING DIRECTORS
Norman Hahn (62) 1976 133,38 22.22% Chairman of the Board and Chief Executive
Officer, Conestoga Wood Specialties, Inc.
(manufacturer of wood products)
Robert L. Spotts (68)1985 16,977 * Retired. Formerly President, Martin
Limestone, Inc. (quarry)
Dale M. Weaver (60)1977 117,727 1.96% President, New Holland Custom Woodwork,
Ltd. (church furniture and millwork)
Melvin Pankuch (59)1988 6,840 * Executive Vice President and Chief
Executive Officer, PennRock Financial
Services Corp. and President and Chief
Executive Officer, Blue Ball National Bank
<CAPTION>
CLASS B (TERM EXPIRES IN 2001) - CONTINUING DIRECTORS
<S> <C> <C> <C> <C>
Elton Horning (67) 1989 29,843 * Auctioneer, Owner of Elton Horning Farm
Agency and Partner of Horning Farm Agency
(real estate agency)
Glenn H. Weaver (64)1985 101,689 1.69% 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 (48)1997 500 * President, Bressler Auto Specialties, d/b/a
Autospa of Wyomissing Hills (car wash and
auto detailing)
<CAPTION>
CLASS C (TERM EXPIRES IN 1999) - NOMINEES
<S> <C> <C> <C> <C>
Aaron S. Kurtz (60)1980 7,503 * President, Ludwig Office Furniture, Inc.
(office furniture)
Robert K. Weaver (50)1975 15,243 * Partner, Wentz, Weaver & Kling, LLP (law
firm)
Lewis M. Good (40) 1991 3,658 * Owner, Original Good's Potato Chips (food
products)
<CAPTION>
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
<S> <C> <C> <C> <C>
George B. Crisp 424 *
Joseph C. Spada 1,278 *
Michael H. Peuler 831 *
All Directors and
Executive Officers as
a group (13 persons) 435,895 7.26%
</TABLE>
* Less than one percent of the total number of shares of
common stock outstanding.
<PAGE 5>
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 74,016 shares is shared with spouses, children or
other family members. The shares shown above include a
total of 101,282 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 750 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 1998 were Robert L. Spotts, Chairman, and Irving E.
Bressler, Lewis M. Good, Norman Hahn, and Elton Horning. The
<PAGE 6> 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 1998
The Board of Directors met 28 times during 1998. 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 62 Chairman of the Board of PennRock
Financial Services Corp. since
1991; Chairman of Blue Ball
National Bank since 1990.
Glenn H. Weaver 64 President of PennRock Financial
Services Corp. since 1989.
Robert K. Weaver 50 Secretary of the Board of PennRock
Financial Services Corp. since
1986; Secretary of Blue Ball
National Bank since 1977.
<PAGE 7>
Melvin Pankuch 59 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 51 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 48 Senior Vice President-Sales of Blue
Ball National Bank since 1993.
Michael H. Peuler 48 Senior Vice President-Trust
Services 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 $100,000 for the year ended December 31,
1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities
Annual RestrictedUnderlying All Other
Compen-Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation Awards SARs(1) Payouts sation(2)
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Melvin Pankuch,1998 $249,900$14,651(3)None None 2,000 None $18,720
Executive Vice
President and1997 245,000 14,210 None None 2,000 None 18,933
Chief Executive
Officer 1996 225,000 11,588 None None 1,000 None 15,745
George B. Crisp, 1998 122,790 7,061(3)None None 1,000 None 15,140 <PAGE 8>
Vice President
and Treasurer 1997 116,943 6,783 5,000 None 1,000 None 15,191
1996 112,445 6,893 None None None None 12,509
Joseph C. Spada, 1998 125,175 7,198(3)None None None None 15,743
Senior Vice
President, Blue1997 118,089 6,850 None None 1,000 None 14,743
Ball National
Bank 1996 113,547 5,848 None None None None 12,506
Michael H. Peuler,1998 120,000 6,901(3)None None 1,000 None 14,750
Senior Vice
President, Blue1997 109,200 6,334 None None 1,000 None 13,624
Ball National
Bank 1996 104,000 5,356 None None None None 11,447
</TABLE>
Footnotes
(1) Adjusted to reflect stock splits since date of grant.
(2) Consists of the non-cash component of bonus awarded under
the Bonus Compensation Plan in the form of a contribution
to the Profit Sharing Plan maintained by Blue Ball
National Bank.
(3) Consists of cash component of bonus awarded under the
Bonus Compensation Plan. Because the necessary peer group
performance data is not yet publicly available, it is not
possible to determine at this time whether (or the extent
to which) a bonus under the Executive Incentive
Compensation Plan will be payable to the named executive
officers in 1999 in respect of 1998 financial performance.
PAGE 9
<PAGE>
Stock Options Granted in 1998
The following table sets forth certain information
relating to stock options granted during 1998 to the executive
officers named in the Summary Compensation Table appearing above.
No stock appreciation rights ("SAR's") were granted in 1998.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1998
Individual Grants
Number of Percent of Total Potential
Shares Options/SAR's Realizable Value at
Underlying Granted to Employees Exercise or Expiration Assumed Annual
Options/SAR's in Fiscal Year Base Price(2)Date Rates of Stock Price
Name Granted in 1998(1) Appreciation for
(#) (%) ($/Share) Option Term(3)
5% 10%
($) ($)
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch 2,000 50% $26.00 8-11-08 $32,703 $82,875
George B. Crisp 1,000 25% $26.00 8-24-08 $16,351 $41,437
Michael H. Peuler 1,000 25% $26.00 8-24-08 $16,351 $41,437
</TABLE>
NOTES
(1) Represents the grant of an incentive stock option on
August 11, 1998 in the case of Mr. Pankuch and on August 24,
1998 in the case of each of Messrs. Crisp and Peuler
pursuant to the terms of the Omnibus Stock Plan. Each
option vests and becomes exercisable one-half after the
expiration of three years from the date of grant and the
balance after the expiration of five years from the date of
grant. Each option expires, to the extent not previously
exercised, upon termination of employment for reasons other
than retirement, disability or death.
(2) Exercise price in each case is equal to 100% of fair market
value on the date of grant.
(3) The dollar amounts set forth in these columns are based upon
assumed annual appreciation rates of 5% and 10% as required
under applicable Securities and Exchange Commission
regulations and are not intended to indicate the possible
future price appreciation, if any, of PennRock Financial
Services Corp. common stock. No gain will be realized by
the option holder in the absence of an increase in the
market price of PennRock Financial Services Corp. common
stock, which will benefit all shareholders.
<PAGE 10>
Stock Option Exercises and 1998 Year-End Values
The following table sets forth with respect to the executive
officers named in the Summary Compensation Table certain
information relating to the exercise of stock options during 1998
and relating to the number and value of unexercised stock options
and SAR's held as of December 31, 1998. No SAR's were either
granted or exercised in 1998 and none were outstanding on
December 31, 1998.
1998 OPTION EXERCISE AND YEAR-END VALUES
<TABLE>
<CAPTION>
Shares Acquired Value Realized Value of Unexercised
Name on Exercise (Market Value Number of In-The-Money
at Exercise, Unexercised Options/SARs at
Less Exercise Options/SARs at Fiscal Year-End
Price) Fiscal Year-End 12-31-98
(#) ($) (#) ($)
________________________________________________________ExercisableUnexercisableExercisableUnexercisable
<S> <C> <C> <C> <C> <C> <C>
Melvin Pankuch 2,375 $10,631 None 6,250 N/A $25,305
George B. Crisp None N/A None 2,000 N/A 7,370
Joseph C. Spada None N/A None 1,000 N/A 7,370
Michael H. PeulerNone N/A None 2,000 N/A 7,370
</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
1998, 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 1998 as
applicable to executive officers generally and to Mr. Pankuch,
the chief executive officer. <PAGE 11>
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 1998 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
<PAGE 12> 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.
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 190 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
<PAGE 13> 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
August of 1998, Messrs. Pankuch, Crisp 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 1998 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 1997 was $245,000 and was
set by the Board of Directors at $249,900 for 1998 (an increase
of approximately 2%), based upon the factors discussed above and
upon an evaluation conducted by the Board of Directors.
Mr. Pankuch received a bonus of $33,371 under the Bonus
Compensation Plan in 1998 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, $14,651 was paid
in cash and $18,720 was contributed to Mr. Pankuch's account in
the Blue Ball National Bank Profit Sharing Plan. Because the
necessary peer group performance data is not yet publicly
available, it is not possible to determine at this time whether
(or the extent to which) a bonus under the Executive Incentive
Compensation Plan will be payable to Mr. Pankuch in 1999 in
respect of 1998 performance.
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.
<PAGE 14>
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,
1993 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
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
PennRock $100.00 $147.41 $105.14 $104.58 $131.29 $160.77
S&P 500 $100.00 $ 99.26 $139.31 $171.21 $228.26 $293.36
Peer Group $100.00 $112.82 $128.00 $144.75 $207.94 $271.59
</TABLE>
PEER GROUP SPECIFICATIONS
1. Total assets of $310 to $884 million.
2. Market capitalization of at least $66 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
Penseco Financial Services Corp. 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
<PAGE 15> 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 1998.
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, 1998, all filing requirements applicable to its
directors and officers were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
For the year ended December 31, 1998, 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 1999.
Representatives of Simon Lever and Co. are expected to be present
at the shareholder meeting with the opportunity to make a
<PAGE 16> 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, 1998 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 1999 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 1, 1999
PAGE 17
<PAGE>
APPENDIX
PENNROCK FINANCIAL SERVICES CORP.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Susan E. Ewell, Jean M. Good
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 19, 1999, 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 27,
1999, 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 below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
Aaron S. Kurtz Robert K. Weaver Lewis M. Good
(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 18
<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 1,
1999 and hereby revokes all proxies heretofore given.
Dated:______________________________,1999
________________________________________
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. <PAGE 19>
