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 September 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 November 1, 2000
------------------------------ --------------------------------
Common Stock ($2.50 par value) 5,942,740 Shares
<PAGE> 2
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
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FORM 10-Q
---------
For the Quarter Ended September 30, 2000
Contents
--------
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
Consolidated balance sheets -September 30, 2000,
December 31, 1999 and September 30, 1999.
Consolidated statements of income _ Three months and nine months ended
September 30, 2000 and 1999.
Consolidated statements of comprehensive income _ Three months and
nine months ended September 30, 2000 and 1999.
Consolidated statements of cash flows - Nine months ended
September 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
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<PAGE> 3
PART I. FINANCIAL INFORMATION
For the Quarter Ended September 30, 2000
Item 1. Financial Statements
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31, September 30,
(Amounts in thousands) 2000 1999 1999
------------ ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 19,937 $ 26,455 $ 23,631
Short-term investments 4,805 2,406 2,345
Mortgages held for sale 151 295 414
Securities available for sale 326,460 309,462 309,207
Loans:
Loans, net of unearned income 489,578 460,065 439,766
Allowance for loan losses (5,176) (5,514) (5,310)
--------- --------- ---------
Net loans 484,402 454,551 434,456
Bank premises and equipment 13,250 13,294 13,399
Accrued interest receivable 6,310 5,878 5,541
Bank owned life insurance 16,018 15,435 15,242
Other assets 20,372 14,690 11,912
--------- --------- ---------
Total assets $891,975 $842,446 $816,147
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 87,690 $ 87,524 $ 85,885
Interest bearing 580,382 543,891 521,080
--------- --------- ---------
Total deposits 668,072 631,415 606,965
Short-term borrowings 53,518 53,207 51,089
Long-term debt 91,000 90,000 90,000
Accrued interest payable 4,767 3,599 3,550
Other liabilities 8,057 4,992 4,320
--------- --------- ---------
Total liabilities 825,414 783,213 755,924
Stockholders' Equity:
Common stock, par value $2.50 per share;
authorized - 20,000,000 shares;
issued - 6,077,614 of which
142,566, 135,847, and 146,176
shares are held as treasury
stock, respectively 15,194 15,194 15,194
Surplus 11,109 11,114 11,114
Accumulated other comprehensive
loss, net of tax (7,693) (10,616) (7,806)
Retained earnings 50,830 46,609 45,018
Less treasury stock, at cost (2,879) (3,068) (3,297)
--------- --------- ---------
Total stockholders' equity 66,561 59,233 60,223
--------- --------- ---------
Total liabilities and
stockholders' equity $891,975 $842,446 $816,147
========= ========= =========
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
(Amounts in thousands) September 30, September 30,
-------------------- ------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $10,591 $9,223 $30,876 $26,690
Securities:
Taxable 3,971 3,667 11,843 9,013
Tax-exempt 1,518 1,152 4,495 3,883
Other 162 51 231 367
------- ------- ------- -------
Total interest income 16,242 14,093 47,445 39,953
Interest expense:
Deposits 7,395 5,567 20,033 15,586
Borrowed funds 2,339 1,742 7,030 4,640
------- ------- ------- -------
Total interest expense 9,734 7,309 27,063 20,226
------- ------- ------- -------
Net interest income 6,508 6,784 20,382 19,727
Provision for loan losses 377 277 1,121 723
------- ------- ------- -------
Net interest income after
provision for loan losses 6,131 6,507 19,261 19,004
Other income:
Service charges on deposit
accounts 413 434 1,195 1,193
Other service charges and fees 77 65 212 192
Fiduciary activities 322 299 1,063 896
Security gains, net 179 186 653 1,163
Mortgage banking 81 (51) 253 183
Other 502 403 1,487 923
------- ------- ------- -------
Total other income 1,574 1,336 4,863 4,550
------- ------- ------- -------
Non-interest expenses:
Salaries and benefits 3,016 2,836 9,149 8,196
Occupancy, net 338 327 1,006 940
Equipment expenses 305 264 919 917
Other 1,386 1,217 3,946 3,362
------- ------- ------- -------
Total non-interest expense 5,045 4,644 15,021 13,415
------- ------- ------- -------
Income before income taxes 2,660 3,199 9,103 10,139
Income taxes 404 644 1,554 2,044
------- ------- ------- -------
Net Income $2,256 $2,555 $7,549 $8,095
======= ======= ======= =======
Earnings per share $ 0.38 $ 0.43 $ 1.26 $ 1.35
======= ======= ======= =======
Weighted average shares
outstanding 5,970,559 5,988,347 5,970,559 5,988,347
========= ========= ========= =========
</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 Nine Months Ended
(Amounts in thousands) September 30, September 30,
------------------ -----------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $2,256 $2,555 $ 7,549 $ 8,095
Other comprehensive income,
net of tax:
Unrealized gains on securities
available for sale:
Gain (loss) arising during the
period, net of tax 2,593 (4,047) 3,354 (10,013)
Reclassification adjustment
for gains included in net
income, net of tax (118) (63) (431) (395)
------- ------- ------- -------
Other comprehensive income (loss) 2,475 (4,110) 2,923 (10,408)
------- ------- ------- -------
Comprehensive income (loss) $4,731 ($1,555) $10,472 ($ 2,313)
======= ======= ======= =======
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
(Amounts in thousands) -------------------------
2000 1999
--------- ----------
<S> <C> <C>
Net cash provided by (used in) operations $ 4,285 ($ 1,380)
Investing activities:
Proceeds from sales of securities available
for sale 30,547 64,870
Purchases of securities available for sale (46,503) (153,234)
Maturities of securities available for sale 4,804 38,855
Net increase in loans (30,972) (32,290)
Purchases of premises and equipment (1,102) (913)
-------- --------
Net cash used in investing activities (43,226) (82,712)
Financing activities:
Net increase (decrease) in non-interest
bearing deposits 166 (2,176)
Net increase in interest bearing deposits 36,490 59,095
Net increase in short-term borrowings 311 37,309
Increase (decrease) in long-term debt 1,000 (700)
Issuance of treasury stock 1,132 1,129
Acquisition of treasury stock (1,238) (2,816)
Cash dividends (3,039) (2,687)
-------- --------
Net cash provided by financing activities 34,822 89,154
-------- --------
Decrease in cash and cash equivalents (4,119) 5,062
Cash and cash equivalents,
beginning of year 28,861 20,913
-------- --------
Cash and cash equivalents, end of period $24,742 $25,975
======== ========
</TABLE>
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 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 nine
months ended September 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.
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 $32.6 million and commitments to extend credit totaled $114.0 million as
of September 30, 2000. Management does not anticipate any significant loss
as a result of these transactions.
<PAGE> 8
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 $49.5 million or 5.9% since the end of
1999 and by $75.8 million or 9.3% over September 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.
Net income for the current quarter was $2.3 million or $.38 per share
compared with $2.6 million or $.43 per share for the third quarter of 1999, a
decrease of $299,000 or 11.7%. Dividends paid in the third quarter of 2000
totaled $1.0 million or $.17 per share and $891,000 or $.15 per share for the
third quarter of 1999.
For the first nine months of 2000, net income totaled $7.5 million or $1.26
per share compared with $8.1 million or $1.35 per share for the first nine
months of 1999. Net interest income increased $655,000 from the first nine
months of 1999 while non-interest income excluding security gains increased
$823,000 and non-interest expenses increased $1.6 million. Dividends of $3.0
million or $.51 per share were paid in the first nine months of 2000 compared
with $2.7 million or $.45 per share in 1999. The dividend payout ratio was
40% in 2000 and 33% 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 third quarter and first nine months of 2000 and 1999. For the third
quarter of 2000, net interest income on a fully taxable equivalent basis
totaled $7.2 million, an decrease of $130,000 or 1.8% from $7.4 million
earned for the same period of 1999. For the first nine months of 2000, net
interest income on a fully taxable equivalent basis totaled $22.6 million, an
increase of $914,000 or 4.2% from $21.7 million earned for the first nine
months of 1999.
<PAGE> 10
<TABLE>
<CAPTION>
TABLE 1 - NET INTEREST INCOME
Three Months Ended Nine Months Ended
(Amounts in thousands) September 30, September 30,
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total interest income $16,242 $14,092 $47,445 $39,953
Total interest expense 9,734 7,309 27,063 20,226
------- ------- -------- --------
Net interest income 6,508 6,783 20,382 19,727
Tax equivalent adjustment 736 591 2,224 1,965
------- ------- -------- --------
Net interest income
(fully taxable equivalent) $ 7,244 $ 7,374 $22,606 $21,692
======= ======= ======== ========
</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
nine months ended September 30, 2000 and 1999. Net interest income for the
third quarter and first nine months of 2000 benefited from increases in
volumes of earning assets. However, both the interest spread and margin
decreased from the comparable period last year as funding costs increased
faster than yields on securities and loans.
<PAGE> 11
<TABLE>
<CAPTION>
TABLE 2 - AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE
Three Months Ended September 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 $ 9,846 $ 155 6.25% $ 776 $ 16 8.18%
Mortgages held for sale 177 7 15.69% 1,395 35 9.95%
Securities available for sale 334,588 6,187 7.34% 308,696 5,349 6.87%
Loans:
Mortgage 270,521 5,674 8.32% 254,393 5,255 8.20%
Commercial 129,669 3,056 9.35% 104,323 2,320 8.82%
Consumer 84,538 1,899 8.91% 77,278 1,708 8.77%
-------- ------- -------- -------
Total loans 484,728 10,629 8.70% 435,994 9,283 8.45%
-------- ------- -------- -------
Total earning assets 829,339 16,978 8.12% 746,861 14,683 7.80%
Other assets 53,110 ------- 53,270 -------
-------- --------
$882,449 $800,131
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $133,294 1,259 3.75% $150,494 1,407 3.71%
Savings 54,241 269 1.97% 59,096 294 1.97%
Time 389,648 5,867 5.97% 305,977 3,866 5.01%
-------- ------- -------- -------
Total interest bearing deposits 577,183 7,395 5.08% 515,567 5,567 4.28%
Short-term borrowings 50,518 798 6.27% 36,501 451 4.90%
Long-term debt 91,000 1,541 6.72% 90,000 1,291 5.69%
-------- ------- -------- -------
Total interest bearing liabilities 718,701 9,734 5.37% 642,068 7,309 4.52%
Non-interest bearing deposits 88,163 ------- 84,539 -------
Other liabilities 11,193 9,333
Stockholders' equity 64,412 64,191
-------- -------
Total liabilities and stockholders'
equity $882,449 $800,131
======== ========
Net interest income $ 7,244 $ 7,374
======= =======
Interest rate spread 2.75% 3.28%
====== ======
Net interest margin 3.47% 3.92%
====== ======
<PAGE> 12
<CAPTION>
Nine Months Ended September 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 $ 4,563 $ 211 6.16% $ 3,549 $ 171 6.44%
Mortgages held for sale 187 20 14.25% 4,304 196 6.09%
Securities available for sale 335,617 18,406 7.31% 284,770 14,682 6.89%
Loans:
Mortgage 270,454 16,731 8.24% 242,685 15,093 8.32%
Commercial 125,259 8,858 9.42% 104,431 6,772 8.67%
Consumer 82,224 5,443 8.82% 75,409 5,004 8.87%
-------- ------- -------- -------
Total loans 477,937 31,032 8.65% 422,525 26,869 8.50%
-------- ------- -------- -------
Total earning assets 818,304 46,669 8.09% 715,148 41,918 7.84%
Other assets 49,889 ------- 47,634 -------
-------- --------
$868,193 $762,782
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $142,103 3,978 3.73% $138,332 3,621 3.50%
Savings 55,941 827 1.97% 58,635 911 2.08%
Time 358,538 15,228 5.66% 293,630 11,054 5.03%
-------- ------- -------- -------
Total interest bearing deposits 556,582 20,033 4.79% 490,597 15,586 4.25%
Short-term borrowings 67,509 3,070 6.06% 23,117 810 4.68%
Long-term debt 84,712 3,960 6.23% 90,049 3,830 5.69%
-------- ------- -------- -------
708,803 27,063 5.09% 603,763 20,226 4.48%
Non-interest bearing deposits 87,054 ------- 83,042 -------
Other liabilities 9,616 9,262
Stockholders' equity 62,720 66,715
-------- --------
Total liabilities and stockholders'
equity $868,193 $762,782
======== ========
Net interest income $22,606 $21,692
======= =======
Interest rate spread 3.00% 3.36%
====== ======
Net interest margin 3.68% 4.06%
====== ======
</TABLE>
<PAGE> 13
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $377,000 for the third
quarter of 2000 compared with $277,000 for the third quarter of last year.
The provision for the first nine months of 2000 was $1.1 million compared
with $723,000 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 third
quarter and first nine months of 2000 and 1999.
<TABLE>
<CAPTION>
TABLE 3 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Three Months Ended Nine Months Ended
(Amounts in thousands) September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance, beginning of period $ 5,938 $ 5,136 $ 5,514 $ 4,897
Provision charged to operating expense 381 277 1,125 723
Total loans charged off (1,190) (128) (1,603) (374)
Total recoveries 47 25 140 64
-------- -------- -------- --------
Net charge-offs (1,143) (103) (1,463) (310)
-------- -------- -------- --------
Balance, end of period $ 5,176 $ 5,310 $ 5,176 $ 5,310
======== ======== ======== ========
Total loans:
Average $484,728 $435,994 $477,937 $422,525
Period-end 489,402 439,766 489,402 439,766
Ratios:
Net charge-offs to
average loans (annualized) 0.94% 0.09% .41% 0.10%
Allowance for loan losses to
period-end loans 1.06% 1.20% 1.06% 1.20%
</TABLE>
<PAGE> 14
NON-PERFORMING ASSETS
Table 4 reflects PennRock's non-performing assets at September 30, 2000,
December 31, 1999 and September 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
September 30, December 31, September 30,
(Amounts in thousands) 2000 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Non-accrual loans $4,807 $1,114 $1,208
Loans accruing but 90 days past due
as to principal or interest 778 853 93
--------- --------- ----------
Total non-performing loans 5,585 1,967 1,301
Other real estate owned 156 162 238
--------- --------- ---------
Total non-performing assets $5,741 $2,129 $1,539
========= ========= =========
Ratios:
Non-performing loans to total loans 1.14% 0.43% 0.30%
Non-performing loans to total loans
and other real estate owned 1.14% 0.46% 0.30%
Allowance for loan losses to
non-performing loans 92.68% 280.33% 408.15%
</TABLE>
The increase in non-accrual loans from December 31, 1999 to September 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. The Bank is evaluating various courses of action to attempt to
resolve this issue.
<PAGE> 15
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).
Total deposits increased $36.7 million or 5.8% since year end and by $61.1
million or 10.1% from last year. Total borrowed funds increased $1.3 million
since year end and by $3.4 million from last year. Table 5 reflects the
changes in the major classifications of deposits and borrowed funds by
comparing the balances at the end of the third quarter of 2000 with year-end
and the third quarter of 1999.
<TABLE>
<CAPTION>
TABLE 5 - DEPOSITS AND BORROWED FUNDS BY MAJOR CLASSIFICATION
(Amounts in thousands)
September 30, December 31, September 30,
2000 1999 1999
------------- ------------ -------------
<S> <C> <C> <C>
Non-interest bearing $ 87,690 $ 87,524 $ 85,885
NOW accounts 33,555 38,418 36,100
Money market deposit accounts 95,017 117,603 117,454
Savings accounts 53,178 57,545 57,782
Time deposits under $100,000 350,653 283,309 270,286
--------- --------- ---------
Total core deposits 620,093 584,399 567,507
Time deposits of $100,000 or more 47,979 47,016 39,458
--------- --------- ---------
Total deposits 668,072 631,415 606,965
Short-term borrowings 53,518 53,207 51,089
Long-term debt 91,000 90,000 90,000
--------- --------- ---------
Total deposits and borrowed funds $812,590 $774,622 $748,054
========= ========= =========
</TABLE>
<PAGE> 16
CAPITAL RESOURCES
Total stockholders' equity increased $6.3 million or 10.5% from September 30,
1999 and increased $7.3 million or 12.4% 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. The net unrealized loss
declined by $113,000 from September 30, 1999, and by $2.9 million from year-
end 1999. The net unrealized gains and losses of the securities available
for sale portfolio are excluded from computations of regulatory ratios.
Table 6 shows PennRock's capital resources at September 30, 2000 and at
December 31 and September 30, 1999. PennRock and its subsidiary bank exceed
all minimum capital guidelines.
<TABLE>
<CAPTION>
TABLE 6 - CAPITAL RESOURCES
September 30, December 31, September 30,
2000 1999 1999
------------- ----------- -------------
<S> <C> <C> <C>
Leverage ratio:
Total capital to total
average assets 8.87% 9.01% 9.08%
Tier 1 capital to total
average assets 8.29% 8.33% 8.42%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 11.66% 11.84% 12.06%
Total capital to risk weighted
assets 12.49% 12.80% 13.02%
</TABLE>
<PAGE> 17
PART II. OTHER INFORMATION
---------------------------
For the Quarter ended September 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
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule regarding unaudited interim financial
information of PennRock for the nine months ended September 30,
2000.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended
September 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: November 10, 2000 By: /s/ Melvin Pankuch
----------------------- ------------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: November 10, 2000 By: /s/ George B. Crisp
------------------------ ------------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
