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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2003 Commission File Number 0-15040
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PennRock Financial Services Corp.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2400021
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1060 Main St.
Blue Ball, Pennsylvania 17506
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(Address of principal executive offices) (Zip code)
(717) 354-4541
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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 May 9, 2003
------------------------------ --------------------------------
Common Stock ($2.50 par value) 6,923,231 Shares
PENNROCK FINANCIAL SERVICES CORP.
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FORM 10-Q
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For the Quarter Ended March 31, 2003
Contents
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - March 31, 2003, December 31, 2002 and
March 31, 2002.
Consolidated statements of income - Three months ended March 31, 2003
and 2002.
Consolidated statements of comprehensive income - Three months ended
March 31, 2003 and 2002.
Consolidated statements of cash flows - Three months ended March 31,
2003 and 2002.
Notes to consolidated financial statements - March 31, 2003.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
SIGNATURES
CERTIFICATIONS
PART I. FINANCIAL INFORMATION
For the Quarter Ended March 31, 2003
Item 1. Financial Statements
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31, March 31,
(Amounts in thousands except 2003 2002 2002
share and per share data) ------------ ----------- -------------
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 27,255 $ 23,092 $ 20,633
Short-term investments 3,978 9,226 3,954
Mortgages held for sale 3,652 7,147 1,019
Securities available for sale 299,972 304,814 302,989
Loans:
Loans, net of unearned income 610,398 602,840 569,841
Allowance for loan losses (7,221) (7,075) (7,568)
---------- ---------- ---------
Net loans 603,177 595,765 562,273
Bank premises and equipment 16,214 16,256 14,697
Accrued interest receivable 3,197 3,282 4,511
Bank owned life insurance 26,780 26,491 25,544
Other assets 26,300 22,516 24,323
---------- ---------- ---------
Total assets $1,010,525 $1,008,589 $959,943
========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $125,867 $ 121,598 $111,725
Interest bearing 605,093 621,664 587,005
---------- --------- ---------
Total deposits 730,960 743,262 698,730
Short-term borrowings 52,890 40,363 50,515
Long-term debt 127,000 127,000 121,000
Accrued interest payable 2,359 2,465 2,743
Other liabilities 9,131 8,521 7,584
---------- ---------- ---------
Total liabilities 922,340 921,611 880,572
Stockholders' Equity:
Common stock, par value $2.50 per
share; authorized - 20,000,000
shares; issued - 7,017,716 shares 17,544 17,544 15,952
Surplus 33,745 33,745 16,445
Accumulated other comprehensive
loss, net of tax (4,373) (3,377) (6,432)
Retained earnings 44,125 41,926 54,794
Treasury stock at cost (109,311,
108,379 and 70,072 shares) (2,856) (2,860) (1,388)
---------- ---------- ---------
Total stockholders' equity 88,185 86,978 79,371
---------- ---------- ---------
Total liabilities and
stockholders' equity $1,010,525 $1,008,589 $959,943
========== ========== =========
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
(Amounts in thousands except share March 31,
and per share data) ------------------
2003 2002
------ ------
Interest income:
Interest and fees on loans $10,341 $10,668
Securities:
Taxable 2,644 3,290
Tax-exempt 215 646
Other 156 82
------- -------
Total interest income 13,356 14,686
Interest expense:
Deposits 2,906 4,026
Short-term borrowings 126 294
Long-term debt 1,781 1,804
------- -------
Total interest expense 4,813 6,124
------- -------
Net interest income 8,543 8,562
Provision for loan losses 450 444
------- -------
8,093 8,118
Non-interest income:
Service charges on deposit
accounts 739 676
Other service charges and fees 71 69
Fiduciary activities 392 388
Investment management and benefit
plan administration fees 879 654
Security gains (losses), net 251 (119)
Mortgage banking 260 73
Increase in cash surrender value of
bank owned life insurance 302 308
Other 431 406
------- -------
Total non-interest income 3,325 2,455
------- -------
Non-interest expenses:
Salaries and benefits 4,448 3,970
Occupancy, net 510 382
Equipment depreciation and service 341 372
Other 1,784 1,799
------- -------
Total non-interest expense 7,083 6,523
------- -------
Income before income taxes 4,335 4,050
Income taxes 739 704
------- -------
Net Income $3,596 $3,346
======= =======
Per share information:
Basic earnings $ .52 $ .48
Diluted earnings .51 .47
Cash dividends .20 .19
Weighted average shares outstanding 6,909,897 6,960,679
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended
(Amounts in thousands) March 31,
------------------
2003 2002
------ ------
Net income $3,596 $3,346
Other comprehensive loss, net of tax:
Unrealized gains (losses) on
securities available for sale:
Loss arising during the period,
net of tax benefit of $449,000
and $693,000 (833) (1,346)
Reclassification adjustment for
gains (losses) included in net
income, net of (tax) benefit of
($88,000) and $40,000 (163) 79
------- -------
Other comprehensive loss (996) (1,267)
------- -------
Comprehensive income $2,600 $2,079
======= =======
PENNROCK FINANCIAL SERVICES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31,
(Amounts in thousands) -----------------------
2003 2002
--------- ---------
Net cash provided by operations $ 7,462 $ 2,672
Investing activities:
Proceeds from sales of securities available
for sale 36,169 18,550
Purchases of securities available for sale (69,612) (36,740)
Maturities of securities available for sale 37,499 16,610
Net increase in loans (9,078) (11,610)
Purchases of premises and equipment (1,357) (609)
-------- --------
Net cash used in investing activities (7,379) (13,799)
Financing activities:
Net increase in non-interest bearing deposits 4,270 3,196
Net increase (decrease) in interest bearing
deposits (16,571) 31,841
Increase (decrease) in short-term borrowings 12,526 (26,239)
Issuance of treasury stock 498 528
Acquisition of treasury stock (508) (313)
Cash dividends (1,382) (1,327)
-------- --------
Net cash provided by (used in)
financing activities (1,168) 7,686
-------- --------
Decrease in cash and cash equivalents (1,085) (3,441)
Cash and cash equivalents,
beginning of year 32,318 28,029
-------- --------
Cash and cash equivalents, end of period $31,233 $24,588
======== ========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2003
NOTE 1. BASIS OF PRESENTATION
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.
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 accounting principles generally
accepted in the United States of America for complete financial statements.
Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003.
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 2002 Annual Report to shareholders.
NOTE 2. BUSINESS
PennRock is a bank holding company incorporated in 1986 under the laws of
Pennsylvania. Blue Ball National Bank ("the Bank"), The National Advisory
Group, Inc. ("National") and Pension Consulting Services, Inc. ("PCS") are
wholly owned subsidiaries of PennRock. The Bank 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 and other
insurance products. National, established in 1984, is the parent company of
four corporations: National Actuarial Consultants, Ltd. which provides
consulting, actuarial and administrative services to retirement and employee
benefit plans; National Financial Advisors, Inc. which offers investment,
advisory and asset management services to retirement plan sponsors and
participants, and serves as an investment advisor to the Dresher Family of
Funds; NFA Brokerage Services, Inc. which is a mutual-funds-only broker-
dealer; and National Shareholder Services, Inc. which provides transfer
agency services for the Dresher Family of Funds. The Dresher Family of Funds
is an open-end diversified management investment company (mutual fund) that
consists of three portfolios: The Dresher Comprehensive Growth Fund, The
Dresher Classic Retirement Fund and The Dresher Income Fund.
NOTE 3. 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 $50.1 million and commitments to extend credit totaled $122.0 million at
March 31, 2003. Management does not anticipate any significant loss as a
result of these transactions.
NOTE 4. STOCK DIVIDEND
All share and per share amounts in the accompanying financial statements have
been restated for a 10% stock dividend paid on August 13, 2002.
NOTE 5. STOCK-BASED EMPLOYEE COMPENSATON
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB Statement
No. 123." This statement amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for a voluntary
change from the intrinsic value method to the fair value method of accounting
for stock-based employee compensation. In addition, this statement amends
the disclosure requirements of SFAS No. 123 to require prominent disclosures
in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the
method on reported results.
SFAS No. 148 has also amended APB Opinion 28, "Interim Financial Reporting"
to require that public companies provide a tabular presentation similar to
that called for in annual statements in condensed quarterly statements if,
for any period presented, the intrinsic value method is used. PennRock
adopted the provisions of SFAS No. 148 in December 2002 but will continue
to account for stock-based employee compensation under the intrinsic value
method in accordance with APB 25.
The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model. There were no options granted
during the three months ended March 31, 2003 and 2002. Therefore,
there was no stock-based employee compensation expense incurred.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This section presents management's discussion and analysis of the financial
condition and results of operations of PennRock Financial Services Corp. and
its subsidiaries. This discussion should be read in conjunction with the
financial statements which appear elsewhere in this report.
Forward Looking Statements
In this report, we may 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.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total assets of PennRock increased $1.9 million or 0.2% since the end of 2002
and by $50.6 million or 5.3% over March 31, 2002. Securities available for
sale decreased $4.8 million from year end 2002 and by $3.0 from the first
quarter of last year. Loans grew $7.6 million from year-end 2002 and by
$40.6 million from last year. Deposits decreased $12.3 million from year end
2002 and increased by $32.2 million from last year while borrowed funds
increased $12.5 million from year-end and by $8.4 million from last year.
Net income for the quarter was $3.6 million or $.52 per share compared with
$3.3 million or $.48 per share for the first quarter of 2002, an increase of
$250,000 or 7.5%. Interest income declined by $1.3 million from the first
quarter of 2002, which was offset by a decline in funding costs as interest
expense also dropped $1.3 million. Non-interest income grew $870,000. Non-
interest expenses increased $560,000. The return on average assets was 1.46%
for the first quarter of 2003 compared with 1.42% in 2002. The return on
average equity was 16.44% this quarter and 17.03% last year.
Dividends declared for the quarter totaled $1.4 million or $.20 per share.
This represented 38.4% of net income. Dividends declared during the first
quarter of last year were $1.3 million or $.19 per share.
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 35% in 2003 and 34% in 2002.
Table 1 presents net interest income on a fully taxable equivalent basis for
the first quarters of 2003 and 2002. For the first quarter of 2003, net
interest income on a fully taxable equivalent basis totaled $9.0 million, a
decrease of $125,000 or 1.4% from $9.1 million earned for the same period of
2002.
TABLE 1 - NET INTEREST INCOME
Three Months Ended
(Amounts in thousands) March 31,
-------------------
2003 2002
------- -------
Total interest income $13,356 $14,686
Total interest expense 4,813 6,124
------- -------
Net interest income 8,543 8,562
Tax equivalent adjustment 451 557
------- -------
Net interest income
(fully taxable equivalent) $ 8,994 $ 9,119
======= =======
Table 2 presents the average balances, taxable equivalent interest income and
expense and rates for PennRock's assets and liabilities for the three months
ended March 31, 2003 and 2002. For the first quarter of 2003 compared with
the first quarter of 2002, interest income decreased as a result of a decline
in the yield on earning assets which decreased from 7.09% last year to
6.15%. Interest expense also decreased due a decline in the cost of funds
which decreased from 3.26% last year to 2.50% this year. Both the net
interest margin and interest rate spread decreased during the first quarter
of 2003 compared with last year.
TABLE 2 - AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE
Three Months Ended March 31,
(Amounts in thousands) ---------------------------------------------------
2003 2002
------------------------- ------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- ------
ASSETS
Interest earning assets
Short-term investments $ 4,111 $ 16 1.58% $ 2,293 $ 15 2.65%
Mortgages held for sale 8,666 140 6.55% 3,378 67 8.04%
Securities available for sale 294,047 3,273 4.51% 304,597 4,458 5.94%
Loans:
Mortgage 347,444 6,387 7.46% 323,786 4,464 8.10%
Commercial 168,445 2,518 6.06% 157,196 2,623 6.77%
Consumer 88,494 1,473 6.75% 80,508 1,616 8.14%
-------- ------- -------- -------
Total loans 604,363 10,378 6.98% 561,490 10,703 7.73%
-------- ------- -------- -------
Total earning assets 911,187 13,807 6.15% 871,758 15,243 7.09%
Other assets 85,586 ------- 80,377 -------
-------- --------
$996,773 $952,135
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing deposits:
Demand $216,050 654 1.23% $206,884 1,083 2.12%
Savings 82,466 203 1.00% 65,934 238 1.46%
Time 312,733 2,049 2.66% 294,624 2,705 3.72%
-------- ------- -------- -------
Total interest bearing deposits 611,249 2,906 1.93% 567,442 4,026 2.88%
Short-term borrowings 43,475 126 1.18% 72,297 294 1.65%
Long-term debt 127,000 1,781 5.69% 121,000 1,804 6.05%
-------- ------- -------- -------
Total interest bearing liabilities 781,724 4,813 2.50% 760,739 6,124 3.26%
Non-interest bearing deposits 115,946 ------- 102,715 -------
Other liabilities 10,392 9,013
Stockholders' equity 88,711 79,668
-------- -------
Total liabilities and stockholders'
equity $996,773 $952,135
======== ========
Net interest income $ 8,994 $ 9,119
======= =======
Interest rate spread 3.65% 3.83%
====== ======
Net interest margin 4.00% 4.24%
====== ======
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The provision for loan losses charged to earnings was $450,000 for the first
quarter of 2003 and $444,000 in 2002. Net credit losses totaled $304,000
for the first quarter of 2003 and $138,000 for the first quarter of 2002.
We review the adequacy of the allowance in light of past loan loss
experience, current market conditions, size and characteristics of the loan
portfolio, volume of non-performing and delinquent loans and other relevant
information.
TABLE 3 - ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
Three Months Ended
(Amounts in thousands) March 31,
-------------------
2003 2002
-------- --------
Balance, beginning of period $7,075 $7,262
Provision charged to operating expense 450 444
Total loans charged off (313) (166)
Total recoveries 9 28
------- -------
Net (charge-offs) recoveries (304) (138)
------- -------
Balance, end of period $7,221 $7,568
======= =======
Total loans:
Average $605,566 $564,745
Period-end 610,398 569,841
Ratios:
Net charge-offs to
average loans (annualized) 0.20% 0.10%
Allowance for loan losses to
period-end loans 1.18% 1.33%
NON-PERFORMING ASSETS
Table 4 reflects PennRock's non-performing assets at March 31, 2003, December
31, 2002 and March 31, 2002. PennRock's policy is to discontinue the accrual
of interest on loans for which the principal or interest is past due 90 days
or more unless the loan is well secured and corrective action has begun or
the loan is in the process of collection. When a loan is placed on non-
accrual status, any unpaid interest is charged against income. Other real
estate owned represents property acquired through foreclosure.
TABLE 4 - NON-PERFORMING ASSETS
March 31, December 31, March 31,
(Amounts in thousands) 2003 2002 2002
---------- --------- -----------
Non-accrual loans $1,287 $1,206 $4,386
Loans accruing but 90 days past due
as to principal or interest 427 1,276 490
---------- --------- ----------
Total non-performing loans 1,714 2,479 4,876
Other real estate owned 188 188 208
--------- --------- ---------
Total non-performing assets $1,902 $2,667 $5,084
========= ========= =========
Ratios:
Non-accrual loans to total loans 0.28% 0.41% 0.86%
Non-performing assets to total loans
and other real estate owned 0.31% 0.44% 0.89%
Allowance for loan losses to
non-accrual loans 421.30% 285.40% 155.21%
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 decreased $12.3 million or 1.7% since year end and increased
by $32.2 million or 4.6% from last year. Total borrowed funds increased
$12.5 million since year end and by $8.4 million from last year. Borrowed
funds represented 218% of tier one capital at the end of the first quarter of
2003, 209% of tier one capital at year end 2002 and 200% at the end of the
first quarter last year. Management's policy is to limit borrowed funds to
no more than 250% of tier one capital.
Table 5 reflects the changes in the major classifications of deposits and
borrowings.
TABLE 5 - DEPOSITS AND BORROWINGS BY MAJOR CLASSIFICATION
(Amounts in thousands)
March 31, December 31, March 31,
2003 2002 2002
------------- ------------ -------------
Non-interest bearing deposits $125,867 $121,598 $111,725
NOW accounts 44,108 44,429 42,621
Money market deposit accounts 171,739 176,967 174,131
Savings accounts 85,075 79,884 69,084
--------- --------- ---------
Total non-maturity deposits 426,789 422,878 397,561
Time deposits under $100,000 283,004 278,323 285,179
--------- --------- ---------
Total core deposits 709,793 701,201 682,740
Time deposits of $100,000 or more 21,167 42,061 15,990
--------- --------- ---------
Total deposits 730,960 743,262 698,730
Short-term borrowings 52,890 40,363 50,515
Long-term debt 127,000 127,000 121,000
--------- --------- ---------
Total deposits and borrowings $910,850 $910,625 $870,245
========= ========= =========
CAPITAL RESOURCES:
Total stockholders' equity increased $8.8 million or 11.1% from March 31,
2002 and by $1.2 million or 1.4% since year-end 2002. 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 income, net of tax. This portfolio had net
unrealized losses for all periods presented.
Table 6 shows PennRock's capital resources at March 31, 2003 and at December
31 and March 31, 2002. PennRock and its subsidiary bank exceed all minimum
capital guidelines.
TABLE 6 - CAPITAL RESOURCES
March 31, December 31, March 31,
2003 2002 2002
------------- ------------ -------------
Leverage ratio:
Total capital to total assets 9.10% 8.64% 9.04%
Tier 1 capital to total assets 8.36% 7.92% 8.24%
Risk-based capital ratios:
Tier 1 capital to risk weighted
assets 10.79% 10.61% 11.95%
Total capital to risk weighted
assets 11.76% 11.57% 10.89%
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss from adverse changes in market prices and
rates. Our primary market risk arises from interest-rate risk. We acquire
interest earning assets (loans and securities) and fund them with interest-
bearing liabilities (deposits and borrowings). These financial instruments
have varying degrees of sensitivity to changes in market interest rates. The
disparity of sensitivity between these financial assets and liabilities
creates interest rate risk. We believe there have been no material changes
in the levels of interest rate risk exposure since year-end 2002. Further
information on interest rate risk can be found under the caption
"Quantitative and Qualitative Disclosures About Market Risk" on pages 36-39
in PennRock's 2002 Annual Report on Form 10-K.
Item 4. Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures.
An evaluation of the effectiveness of the design and operation of PennRock's
disclosure controls and procedures (as defined in Section 13(a)-14(c) of the
Securities and Exchange Act of 1934) was carried out by PennRock, within 90
days prior to the filing date of this report, under the supervision and with
the participation of PennRock's management, including the Chief Executive
Officer and Chief Financial Officer. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that PennRock's
disclosure controls and procedures have been designed and are being operated
in a manner that provides reasonable assurance that the information required
to be disclosed by PennRock in reports filed under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. A controls system, no matter
how well designed and operated, cannot provide absolute assurance that the
objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.
b. Changes in internal control.
Subsequent to the date of the most recent evaluation of PennRock's internal
controls, there were no significant changes in PennRock's internal controls
or in other factors that could significantly affect the internal controls,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
PART II. OTHER INFORMATION
---------------------------
For the Quarter ended March 31, 2003
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following list of exhibits required by Item 601 of
Regulation S-K are filed herewith or incorporated by reference.
(b) Reports on Form 8-K
From January 1, 2003 to the date of this Report, PennRock filed three
Current Reports on Form 8-K.
A current report on Form 8-K dated January 16, 2003 was filed with the
Securities and Exchange Commission under Item 7 _ "Financial Statements
and Exhibits" and disclosed that on January 16, 2003, PennRock had issued
a press release announcing its earnings for the fourth quarter and year
ended December 31, 2002.
A current report on Form 8-K dated March 11, 2003 was filed with the
Securities and Exchange Commission under Item 5 _ "Other Events" and
disclosed that on March 11, 2003, PennRock had issued a press release
announcing the declaration of the first quarter dividend for 2002.
A current report on Form 8-K dated April 16, 2003 was filed with the
Securities and Exchange Commission under Item 7 _ "Financial Statements
and Exhibits" and disclosed that on April 16, 2003, PennRock had issued a
press release announcing its earnings for the first quarter of 2003.
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: May 9, 2003 By: /s/Melvin Pankuch
- ----------------------- -----------------------------------------------
Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Date: May 9, 2003 By: /s/George B. Crisp
- ------------------------ -----------------------------------------------
George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
CERTIFICATIONS
Certification of Chief Executive Officer:
I, Melvin Pankuch, Executive Vice President and Chief Executive Officer,
certify that:
1. I have reviewed this quarterly report on Form 10-Q of PennRock Financial
Services Corp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 9, 2003 By: /s/ Melvin Pankuch
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Melvin Pankuch
Executive Vice President and
Chief Executive Officer
Certification of Chief Financial Officer:
I, George B. Crisp, Vice President and Treasurer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of PennRock Financial
Services Corp;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: May 9, 2003 By: /s/ George B. Crisp
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George B. Crisp
Vice President and Treasurer
(Principal Financial and Accounting Officer)
Exhibit Index
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Exhibit Number Description
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(3)(a) Articles of Incorporation of PennRock, incorporated by
reference to Exhibit 3(a) of PennRock's Annual Report on
Form 10-K for the year ended December 31, 2000.
(3)(b) Bylaws of PennRock, incorporated by reference to Exhibit
99 of PennRock's Current Report on Form 8-K dated
November 13, 2001.
(10)(a) Omnibus Stock Plan, incorporated by reference to Exhibit
4.1 to PennRock's Registration Statement Number 33-53022
of Form S-8 dated October 8, 1992.
(10)(b) Executive Incentive Compensation Plan, incorporated by
reference to Exhibit 10(b) of PennRock's Annual Report
on Form 10-K for the year ended December 31,
2000.
(10)(c) Melvin Pankuch Deferred Compensation Agreement Plan,
incorporated by reference to Exhibit 10(c) of PennRock's
Annual Report on Form 10-K for the year ended December
31, 2000.
(10)(d) Melvin Pankuch Employment Agreement, incorporated by
reference to Exhibit 10(d) of PennRock's Annual Report
on Form 10-K for the year ended December 31,
2000.
(10)(e) Employment Agreement with Certain Executive Officers,
incorporated by reference to Exhibit 10(e) of PennRock's
Annual Report on Form 10-K for the year ended December
31, 2000.
(10)(f) Stock Incentive Plan of 2002 incorporated by reference
to Exhibit 10(f) of PennRock's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002.
(10)(g) Joseph C. Spada Deferred Compensation Plan Trust
Declaration.
(99)(a) Certification of Chief Executive Officer and Chief
Financial Officer adopted pursuant to 18 U.S.C. Section
350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.