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, 2000 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 August 4, 2000
------------------------------ --------------------------------
Common Stock ($2.50 par value) 5,993,130 Shares
<PAGE> 2
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
--------------------------------------------------
FORM 10-Q
---------
For the Quarter Ended June 30, 2000
Contents
--------
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
Consolidated balance sheets -June 30, 2000,
December 31, 1999 and June 30, 1999.
Consolidated statements of income - Three months and six months ended
June 30, 2000 and 1999.
Consolidated statements of comprehensive income - Three months and
six months ended June 30, 2000 and 1999.
Consolidated statements of cash flows - Six months ended
June 30, 2000 and 1999.
Notes to consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
----------
<PAGE> 3
PART I. FINANCIAL INFORMATION
For the Quarter Ended June 30, 2000
Item 1. Financial Statements
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31, June 30,
(Amounts in thousands) 2000 1999 1999
------------ ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 21,395 $ 26,455 $ 16,731
Short-term investments 3,591 2,406 871
Mortgages held for sale 103 295 4,266
Securities available for sale 326,699 309,462 287,356
Loans:
Loans, net of unearned income 480,335 460,065 431,616
Allowance for loan losses (5,938) (5,514) (5,136)
--------- --------- ---------
Net loans 474,397 454,551 426,480
Bank premises and equipment 13,618 13,294 13,472
Accrued interest receivable 6,315 5,878 5,090
Bank owned life insurance 15,822 15,435 15,051
Other assets 19,982 14,690 11,644
--------- --------- ---------
Total assets $881,922 $842,446 $780,961
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 89,663 $ 87,524 $ 85,412
Interest bearing 546,456 543,891 498,976
--------- --------- ---------
Total deposits 636,119 631,415 584,388
Short-term borrowings 79,560 53,207 33,384
Long-term debt 91,000 90,000 90,000
Accrued interest payable 4,767 3,599 2,793
Other liabilities 6,926 4,992 6,614
--------- --------- ---------
Total liabilities 818,372 783,213 717,179
Stockholders' Equity:
Common stock, par value $2.50 per share;
authorized - 20,000,000 shares;
issued - 6,077,614 of which
92,431, 135,847, and 96,834
shares are held as treasury
stock, respectively 15,194 15,194 15,194
Surplus 11,114 11,114 11,114
Accumulated other comprehensive
loss, net of tax (10,168) (10,616) (3,696)
Retained earnings 49,655 46,609 43,367
Less treasury stock, at cost (2,245) (3,068) (2,197)
--------- --------- ---------
Total stockholders' equity 63,550 59,233 63,782
--------- --------- ---------
Total liabilities and
stockholders' equity $881,922 $842,446 $780,961
========= ========= =========
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
-------------------- ---------------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $10,415 $8,937 $20,285 $17,467
Securities:
Taxable 4,026 2,877 7,872 5,346
Tax-exempt 1,520 1,645 2,977 2,731
Mortgages held for sale 7 93 13 161
Other 27 75 56 155
------- ------- ------- -------
Total interest income 15,995 13,130 31,203 25,860
Interest expense:
Deposits 6,437 5,040 12,638 10,019
Short-term borrowings 1,362 188 2,272 359
Long-term debt 1,231 1,276 2,420 2,539
------- ------- ------- -------
Total interest expense 9,030 6,504 17,330 12,917
------- ------- ------- -------
Net interest income 6,965 6,626 13,873 12,943
Provision for loan losses 373 224 744 446
------- ------- ------- -------
Net interest income after
provision for loan losses 6,592 6,402 13,129 12,497
Other income:
Service charges on deposit
accounts 392 382 782 759
Other service charges and fees 73 68 135 127
Fiduciary activities 368 282 741 597
Security gains, net 172 484 474 977
Mortgage banking 87 41 172 234
Other 553 333 985 520
------- ------- ------- -------
Total other income 1,645 1,590 3,289 3,214
------- ------- ------- -------
Net interest and other income 8,237 7,992 16,418 15,711
------- ------- ------- -------
Non-interest expenses:
Salaries and benefits 3,081 2,714 6,133 5,360
Occupancy, net 337 318 668 613
Equipment expenses 304 335 614 653
Other 1,356 1,169 2,560 2,145
------- ------- ------- -------
Total non-interest expense 5,078 4,536 9,975 8,771
------- ------- ------- -------
Income before income taxes 3,159 3,456 6,443 6,940
Income taxes 614 622 1,150 1,400
------- ------- ------- -------
Net Income $2,545 $2,834 $5,293 $5,540
======= ======= ======= =======
Earnings per share $ .43 $ .47 $ .88 $ .92
======= ======= ======= =======
Weighted average shares
outstanding 5,964,822 6,003,689 5,964,822 6,003,689
========= ========= ========= =========
</TABLE>
Basic earnings per share and diluted earnings per share are the same for
all periods presented.
<PAGE> 5
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
------------------ -------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $2,545 $2,834 $5,293 $5,540
Other comprehensive income (loss),
net of tax:
Unrealized gains on securities
available for sale:
Gain (loss) arising during the
period, net of tax (496) (4,640) 761 (5,653)
Reclassification adjustment
for gains included in net
income, net of tax (113) (319) (313) (645)
------- ------- ------- -------
Other comprehensive income (loss) (609) (4,959) 448 (6,298)
------- ------- ------- -------
Comprehensive income (loss) $1,936 ($2,125) $5,741 ($ 758)
======= ======= ======= =======
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
(Amounts in thousands) -----------------------
2000 1999
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operations $ 2,550 ($ 8,045)
Investing activities:
Proceeds from sales of securities available
for sale 12,209 60,912
Purchases of securities available for sale (31,020) (119,980)
Maturities of securities available for sale 3,242 37,662
Net increase in loans (20,590) (24,037)
Purchases of premises and equipment (899) (698)
-------- --------
Net cash used in investing activities (37,058) (46,141)
Financing activities:
Net increase (decrease) in non-interest
bearing deposits 2,138 (2,649)
Net increase in interest bearing deposits 2,565 36,990
Net increase in short-term borrowings 26,353 19,605
Increase (decrease) in long-term debt 1,000 (700)
Issuance of treasury stock 753 795
Acquisition of treasury stock (145) (1,369)
Cash dividends (2,031) (1,797)
-------- --------
Net cash provided by financing activities 30,633 50,875
-------- --------
Decrease in cash and cash equivalents (3,875) (3,311)
Cash and cash equivalents,
beginning of year 28,861 20,913
-------- --------
Cash and cash equivalents, end of period $24,986 $17,602
======== ========
</TABLE>
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2000
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) is a wholly owned subsidiary of PennRock which
provides a broad range of banking, trust and other financial services to
consumers, small businesses and corporations in south-central and
southeastern Pennsylvania. PennRock Insurance Group Inc., a wholly owned
subsidiary of the Bank, began operations in the first quarter of 1999 to
offer and sell annuity products.
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, 2000 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000.
The accounting policies of PennRock Financial Services Corp. and
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 1999 Annual Report to shareholders.
<PAGE> 8
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 $31.5 million and commitments to extend credit totaled
$219.9 million at June 30, 2000. Management does not anticipate any
significant loss as a result of these transactions.
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.
(PennRock or the Company) and subsidiaries, Blue Ball National Bank (the
Bank) and its insurance subsidiary, PennRock Insurance Group Inc. (the
Insurance Group). This discussion should be read in conjunction with the
financial statements which appear elsewhere in this report.
FORWARD LOOKING STATEMENTS
In this report, we have included certain forward looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for forward
looking statements. In order to comply with the terms of the safe harbor,
we must inform you that a variety of factors could cause the Company's
actual results and experiences to differ materially from the anticipated
results or other expectations expressed in these forward looking statements.
Our ability to predict the results or the effect of future plans and
strategies is inherently uncertain. Factors that could affect future
results include changes in market interest rates, local and national
economic trends and conditions, competition for products and services,
changes in customer preferences, legislative and regulatory changes,
delinquency rates on loans, changes in accounting principles, policies or
guidelines, or the failure of major customers, vendors or suppliers. You
should consider these factors in evaluating any forward looking statements
and not place undue reliance on such statements. We are not obligated to
publicly update any forward looking statements we may make in this report
to reflect the impact of subsequent events.
<PAGE> 9
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total assets of PennRock increased $39.5 million or 4.7% since the end of
1999 and by $101.0 million or 12.9% over June 30, 1999. The increases in
assets were reflected by increases in securities available for sale and
loans outstanding. This growth was funded through increases in interest
bearing deposits and short-term borrowings.
Net income for the current quarter was $2.5 million or $.43 per share
compared with $2.8 million or $.47 per share for the second quarter of 1999,
a decrease of $289,000 or 10.2%. Dividends paid in the second quarter of
2000 totaled $1.0 million or $.17 per share and $897,000 or $.15 per share
for the second quarter of 1999.
For the first six months of 2000, net income totaled $5.3 million or $.88
per share compared with $5.5 million or $.92 per share for the first six
months of 1999. Net interest income increased $930,000 from the first six
months of 1999 while non-interest income excluding security gains increased
$578,000 and non-interest expenses increased $1.2 million. Dividends of
$2.0 million or $.34 per share were paid in the first half of 2000 compared
with $1.8 million or $.30 per share in 1999. The dividend payout ratio was
38% in 2000 and 32% in 1999.
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%.
Table 1 presents net interest income on a fully taxable equivalent basis for
the second quarter and first six months of 2000 and 1999. For the second
quarter of 2000, net interest income on a fully taxable equivalent basis
totaled $7.7 million, an increase of $513,000 or 7.1% from $7.2 million
earned for the same period of 1999. For the first six months of 2000, net
interest income on a fully taxable equivalent basis totaled $15.4 million,
an increase of $1.0 million or 7.3% from $14.3 million earned for the first
six months of 1999.
<PAGE> 10
<TABLE>
<CAPTION>
TABLE 1 - NET INTEREST INCOME
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $15,995 $13,130 $31,203 $25,861
Total interest expense 9,030 6,503 17,329 12,917
------- ------- -------- --------
Net interest income 6,965 6,627 13,874 12,944
Tax equivalent adjustment 757 582 1,487 1,373
------- ------- -------- --------
Net interest income
(fully taxable equivalent) $ 7,722 $ 7,209 $15,361 $14,317
======= ======= ======== ========
</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, 2000 and 1999. For the second quarter and
first six months of 2000, net interest income increased due to increases
in volumes while the interest spread and margin decreased over the
comparable period last year.
<PAGE> 11
<TABLE>
<CAPTION>
TABLE 2 - AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE
Three Months Ended June 30,
(Amounts in thousands) ---------------------------------------------------
2000 1999
-------------------------- ------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Short-term investments $ 1,513 $ 27 7.16% $ 6,079 $ 75 4.95%
Mortgages held for sale 153 7 18.35% 5,529 94 6.82%
Securities available for sale 327,659 6,245 7.64% 274,080 4,547 6.65%
Loans:
Mortgage 269,758 5,523 8.21% 238,742 5,033 8.46%
Commercial 128,039 3,154 9.88% 106,598 2,290 8.62%
Consumer 82,519 1,795 8.72% 75,737 1,673 8.86%
-------- ------- -------- -------
Total loans 480,316 10,472 8.74% 421,077 8,996 8.57%
-------- ------- -------- -------
Total earning assets 809,641 16,751 8.30% 706,765 13,712 7.78%
Other assets 65,696 ------- 46,647 -------
-------- --------
$875,337 $753,412
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $142,823 1,317 3.70% $136,950 1,169 3.42%
Savings 56,356 277 1.97% 59,039 301 2.04%
Time 345,934 4,843 5.62% 287,651 3,569 4.98%
-------- ------- -------- -------
Total interest bearing deposits 545,113 6,437 4.74% 483,640 5,039 4.18%
Short-term borrowings 87,972 1,362 6.21% 17,287 188 4.36%
Long-term debt 80,209 1,231 6.16% 90,000 1,276 5.69%
-------- ------- -------- -------
713,294 9,030 5.08% 590,927 6,503 4.41%
Non-interest bearing deposits 89,076 ------- 84,971 -------
Other liabilities 9,639 9,392
Stockholders' equity 63,328 68,122
-------- -------
Total liabilities and stockholders'
equity $875,337 $753,412
======== ========
Net interest income $ 7,721 $ 7,209
======= =======
Interest rate spread 3.22% 3.37%
====== ======
Net interest margin 3.83% 4.09%
====== ======
<PAGE> 12
<CAPTION>
Six Months Ended June 30,
(Amounts in thousands) ---------------------------------------------------
2000 1999
-------------------------- ------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets
Short-term investments $ 1,892 $ 56 5.94% $ 6,221 $ 155 5.02%
Mortgages held for sale 192 13 13.58% 4,643 161 6.99%
Securities available for sale 320,857 12,217 7.64% 272,608 9,333 6.90%
Loans:
Mortgage 270,420 11,056 8.20% 236,733 9,838 8.38%
Commercial 123,030 5,802 9.46% 104,630 4,451 8.58%
Consumer 81,054 3,545 8.77% 74,459 3,295 8.92%
-------- ------- -------- -------
Total loans 474,504 20,403 8.62% 415,822 17,584 8.53%
-------- ------- -------- -------
Total earning assets 797,445 32,690 8.22% 699,294 27,234 7.85%
Other assets 63,541 ------- 44,701 -------
-------- --------
$860,986 $743,995
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $146,556 2,719 3.72% $132,151 2,215 3.38%
Savings 56,800 557 1.97% 58,400 617 2.13%
Time 342,812 9,362 5.48% 287,354 7,187 5.04%
-------- ------- -------- -------
Total interest bearing deposits 546,168 12,638 4.64% 477,905 10,019 4.23%
Short-term borrowings 76,097 2,272 5.99% 16,314 359 4.44%
Long-term debt 81,533 2,419 5.95% 90,073 2,539 5.68%
-------- ------- -------- -------
703,798 17,329 4.94% 584,292 12,917 4.46%
Non-interest bearing deposits 86,493 ------- 82,281 -------
Other liabilities 8,831 9,424
Stockholders' equity 61,986 67,998
-------- --------
Total liabilities and stockholders'
equity $860,986 $743,995
======== ========
Net interest income $15,361 $14,317
======= =======
Interest rate spread 3.28% 3.40%
====== ======
Net interest margin 3.86% 4.13%
====== ======
</TABLE>
<PAGE> 13
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $373,000 for the second
quarter of 2000 compared with $224,000 for the second quarter of last year.
The provision for the first six months of 2000 was $744,000 compared with
$446,000 for 1999. 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 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 2000 and 1999.
<TABLE>
<CAPTION>
TABLE 3 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Three Months Ended Six Months Ended
(Amounts in thousands) June 30, June 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, beginning of period $5,778 $5,045 $5,514 $4,897
Provision charged to operating expense 373 224 744 446
Total loans charged off (299) (142) (414) (246)
Total recoveries 86 9 94 39
------- ------- ------- -------
Net charge-offs (213) (133) (320) (207)
------- ------- ------- -------
Balance, end of period $5,938 $5,136 $5,938 $5,136
======= ======= ======= =======
Total loans:
Average $480,316 $421,077 $474,504 $415,822
Period-end 480,315 431,616 480,315 431,616
Ratios:
Net charge-offs to
average loans (annualized) .18% .13% .13% .10%
Allowance for loan losses to
period-end loans 1.24% 1.19% 1.24% 1.19%
</TABLE>
<PAGE> 14
NON-PERFORMING ASSETS
Table 4 reflects PennRock's non-performing assets at June 30, 2000, December
31, 1999 and June 30, 1999. 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>
<CAPTION>
TABLE 4 - NON-PERFORMING ASSETS
June 30, December 31, June 30,
(Amounts in thousands) 2000 1999 1999
---------- --------- -----------
<S> <C> <C> <C>
Non-accrual loans $5,241 $1,114 $1,336
Loans accruing but 90 days past due
as to principal or interest 1,596 853 1,485
---------- --------- ----------
Total non-performing loans 6,837 1,967 2,821
Other real estate owned 108 162 109
--------- --------- ---------
Total non-performing assets $6,945 $2,129 $2,930
========= ========= =========
Ratios:
Non-accrual loans to total loans 1.09% 0.43% 0.68%
Non-accrual loans to total loans and
other real estate owned 1.45% 0.46% 0.68%
Allowance for loan losses to
non-performing loans 86.85% 280.33% 175.29%
</TABLE>
The increase in non-accrual loans from December 31, 1999 to June 30, 2000 is
the result of the reclassification of the loans outstanding to one commercial
borrower that declared bankruptcy during the second quarter of this year. We
expect to receive a substantial repayment of these balances in the third
quarter of 2000.
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 on 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> 15
Total deposits increased $4.7 million or .7% since year end and by $51.7
million or 8.9% from last year. Total borrowed funds increased $27.3 million
since year end and by $47.2 million from last year. 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 2000 with year-end and the
second quarter of 1999.
<TABLE>
<CAPTION>
TABLE 5 - DEPOSITS AND BORROWINGS BY MAJOR CLASSIFICATION
(Amounts in thousands)
June 30, December 31, June 30,
2000 1999 1999
----------- ------------ -----------
<S> <C> <C> <C>
Non-interest bearing $ 89,663 $ 87,524 $ 85,402
NOW accounts 35,934 38,418 36,094
Money market deposit accounts 102,682 117,603 107,828
Savings accounts 56,297 57,545 59,552
Time deposits under $100,000 313,634 283,309 256,917
--------- --------- ---------
Total core deposits 598,210 584,399 545,803
Time deposits of $100,000 or more 37,909 47,016 38,585
--------- --------- ---------
Total deposits 636,119 631,415 584,388
Short-term borrowings 79,560 53,207 33,384
Long-term debt 91,000 90,000 90,000
--------- --------- ---------
Total deposits and borrowings $806,679 $774,622 $707,772
========= ========= =========
</TABLE>
CAPITAL RESOURCES
Total stockholders' equity decreased $232,000 or .4% from June 30, 1999 and
increased $4.3 million or 7.3% since year-end 1999. Stockholders' equity is
impacted by changes in the unrealized market gains and losses of the
securities available for sale portfolio, net of deferred taxes and is shown
on the consolidated balance sheets as a component of stockholders' equity as
accumulated other comprehensive loss, net of tax. This portfolio had net
unrealized losses in each period presented.
On June 27, 2000, 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. As of June 30, 2000, the Company held 92,431 shares with
a cost basis of $2.2 million as treasury stock.
<PAGE> 16
Table 6 shows PennRock's capital resources at June 30, 2000 and at December
31 and June 30, 1999. PennRock and its subsidiary bank exceed all minimum
capital guidelines.
<TABLE>
<CAPTION>
TABLE 6 - CAPITAL RESOURCES
June 30, December 31, June 30,
2000 1999 1999
---------- ----------- ----------
<S> <C> <C> <C>
Leverage ratio:
Total capital to total
average assets 9.03% 9.01% 9.75%
Tier 1 capital to total
average assets 8.35% 8.33% 9.05%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 11.90% 11.84% 12.40%
Total capital to risk weighted
assets 12.86% 12.80% 13.37%
</TABLE>
<PAGE> 17
PART II. OTHER INFORMATION
---------------------------
For the Quarter ended June 30, 2000
Item 1. Legal Proceedings
Various legal actions or proceedings are pending involving PennRock or its
subsidiaries. Management believes that the aggregate liability or loss, if
any, will not be material.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders (the "Meeting") of PennRock Financial
Services Corp. was held on April 25, 2000. Notice of the Meeting was mailed
to shareholders on or about April 1, 2000, 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 were no solicitations 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
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 4,021,491 50,466 4,071,957
Robert L. Spotts 4,014,418 57,539 4,071,957
Dale M. Weaver 4,020,633 51,324 4,071,957
Melvin Pankuch 4,018,107 53,850 4,071,957
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule regarding unaudited interim financial
information of PennRock for the six months ended June 30, 2000.
(b) Reports on Form 8-K
A current report on Form 8-K dated June 27, 2000 was filed with the
Securities and Exchange Commission on or about June 30, 2000. The
report was filed under Item 5 - "Other Events" and disclosed that the
Company had authorized the repurchase of up to 200,000 shares of its
common stock to be held as treasury shares for use with future stock
dividends and splits, employee benefit plans, executive compensation
plans and issuance under the Dividend Reinvestment Plan.
There were no other reports on Form 8-K filed for the three months ended
June 30, 2000.
<PAGE> 18
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 10, 2000 By: /s/Melvin Pankuch
----------------------- -----------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: August 10, 2000 By: /s/George B. Crisp
------------------------ -----------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
