UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

PENNROCK FINANCIAL SERVICES CORP.

Registrant’s telephone number, including area code (717) 354-4541

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 period that the registrant was required to file such reports) and (2), has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes þ No o

As of April 29, 2005, there were 7,700,820 shares of Common Stock, Par Value $2.50 Per Share, outstanding.

PennRock Financial Services Corp. and Subsidiaries

TABLE OF CONTENTS

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PennRock Financial Services Corp. and Subsidiaries

PART I. FINANCIAL INFORMATION
For the Quarter Ended March 31, 2005

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

Amounts in thousands except share and per share data

See accompanying condensed notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

In thousands, except share and per share data

See accompanying condensed notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Amounts in thousands

See accompanying condensed notes to consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Amounts in thousands

See accompanying condensed notes to consolidated financial statements.

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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2004

NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT 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.

The information contained in the financial statements is unaudited. In the opinion of management, all material adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of interim periods have been made. These unaudited interim statements are presented in accordance with the requirements of Form 10-Q, 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, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. These condensed notes should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in PennRock’s Annual Report on Form 10-K for the year ended December 31, 2004.

Earnings per share (“EPS”):

Basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS is calculated by dividing net income by the weighted-average number of shares outstanding during the period plus additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued consist of outstanding stock options and are determined by using the treasury stock method. Adjustments to net income and the weighted average number of shares of common stock are made only when such adjustments dilute earnings per share. For the three months ending March 31, 2005 and 2004, there were no options that were antidilutive.

Net income in thousands

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Stock based employee compensation:

Pro forma information regarding net income and earnings per share has been determined as if we had accounted for all stock-based compensation under the fair value method of SFAS 123.

Amounts in thousands except per share data

No options were granted for the three months ended March 31, 2005 or 2004.

SFAS 123R

In December 2004, the Financial Accounting Standards Board (“the FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123R which was a revision of SFAS No. 123, “Accounting for Stock Based Compensation.” SFAS 123R addresses the accounting for share-based payment transactions in which a company receives employee services in exchange for equity instruments of the company. Among other things, SFAS 123R eliminates the ability to account for stock-based compensation using APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the date of the grant. For PennRock, SFAS No. 123R would be effective for options granted after January 1, 2006.

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”), Pension Consulting Services, Inc. (“PCS”) and 1906 Founders, Inc. 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. (“PIGI”) and PennRock Financial Advisors, NA. (“PFA”) are wholly owned subsidiaries of the Bank. On April 1, 2004, the net assets of National and each of its subsidiaries and the net assets of PCS as well as all operations of these companies were transferred to PFA. At the same time, the operations of the Bank’s Financial Services Division, including trust operations, were transferred to PFA. All employees of National and PCS became employees of the Bank and are contracted to PFA. The purpose of the reorganization is to promote operating efficiencies and the cross-selling of services among the various corporations. PFA is a limited purpose bank. PIGI began operations in the first quarter of 1999 to offer and sell annuity and other insurance products. 1906 Founders, Inc. owns and manages certain investment securities.

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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 and liability for assets held in a fiduciary capacity, which arise in the normal course of business. Commitments under outstanding letters of credit amounted to $40.1 million and commitments to extend credit totaled $179.9 million at March 31, 2005. Management does not anticipate any significant loss as a result of these transactions. Substantially all of the unused commitments to extend credit are at variable rates or will be provided at the prevailing fixed rate when the loans are originated or the lines are used.

A PennRock non-bank subsidiary has been named as a defendant in a binding, nonappealable arbitration proceeding in which the claimants seek to recover damages of approximately $4.6 million. The subsidiary is vigorously defending against these claims and is strongly contesting the amount of recoverable damages, if any. Any award against the subsidiary would be subject to offsets and insurance coverage aggregating approximately $1.0 million and PennRock believes that it has valid claims for indemnity and contribution against various third parties. PennRock is unable to determine at the present time whether a loss may be incurred relative to this matter, or, if a loss is incurred, the extent thereof net of insurance, offsets and amounts recoverable from third parties.

PennRock and its subsidiaries, from time to time, are involved as plaintiff or defendant in various legal actions arising in the normal course of their businesses. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is the opinion of management that no other proceedings exist, either individually or in the aggregate, which, if determined adversely to PennRock, would have a material effect on PennRock’s consolidated financial condition, results of operations or cash flows.

NOTE 4. SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of securities available for sale as of March 31, 2005 and December 31, 2004 are as follows:

Amounts in thousands

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Amounts in thousands

The amortized cost and estimated fair value of debt securities as of March 31, 2005 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Amounts in thousands

NOTE 5. LOANS

The loan portfolio, net of unearned income and deferred loan fees is as follows:

In thousands

Included in the loan portfolio are loans on which PennRock has ceased the accrual of interest. Such loans amounted to $2.4 million as of March 31, 2005 and $277,000 as of December 31, 2004. Also included in the loan portfolio are loans which are still accruing but are 90 days past due as to principal or interest. Such loans amounted to $88,000 as of March 31, 2005 and $225,000 as of December 31, 2004.

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NOTE 6. LONG-TERM DEBT

On February 17, 2005, PennRock obtained two fixed rate advances from the Federal Home Loan Bank. One advance was for $10 million bearing interest at 3.95% and maturing on February 19, 2008. The other advance was for $15 million bearing interest at 4.08% and maturing on February 17, 2009. The proceeds from these advances was used to fund loan growth and pay-down short-term borrowings.

NOTE 7. PENDING MERGER

On November 16, 2004, PennRock announced that it had signed a definitive agreement pursuant to which PennRock will combine with Community Banks, Inc. (“Community”) under Community’s charter. Under the terms of the agreement, each PennRock shareholder will receive 1.4 shares of Community in exchange for each share of PennRock common stock. At the time of the announcement, the value of the transaction was approximately $326 million. Following consummation, the joint franchise will include 69 banking offices in central and south-central Pennsylvania and northern Maryland. The merger is subject to regulatory approval and the separate approvals of the shareholders of both PennRock and Community.

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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 addition to historical information, this Report on Form 10-Q includes certain “forward-looking statements,” as defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, based on current management expectations. PennRock’s actual results could differ materially from those management expectations. Such forward-looking statements include statements regarding our intentions, beliefs or current expectations as well as the assumptions on which such statements are based. Also included in such forward-looking statements are statements regarding PennRock’s proposed merger with Community Banks, Inc. (“Community”). Stockholders and potential stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. Words such as “expect,” “feel,” “believe,” “will,” “may,” “anticipate,” “plan,” “estimate,” “intend,” “should,” and similar expressions or the negative thereof are intended to identify forward looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, cost of funds, demand for loan products, demand for financial services, competition, changes in the quality or composition of PennRock’s loan and investment portfolios, changes in accounting principles, policies or guidelines and other economic, competitive, governmental and technological factors affecting PennRock’s operations, markets, products services and fees. In addition, the benefits from the proposed merger with Community may not be fully realized due to, among other things, the business of PennRock and Community may not be combined successfully, or such combination may take longer to accomplish than expected, the growth opportunities and cost savings from the merger of PennRock and Community may not be fully realized or may take longer to realize than expected, operating cost and business disruption following the completion of the merger, including adverse effects on relationships with employees, may be greater than expected, governmental approvals of the merger may not be obtained, or adverse regulatory conditions may be imposed in connection with governmental approvals of the merger. PennRock undertakes no obligation to update or revise any forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

CRITICAL ACCOUNTING POLICIES

PennRock’s financial position and results of operations are impacted by management’s application of accounting policies involving judgments made to arrive at the carrying value of certain assets. In implementing its policies, management must make estimates and assumptions about the effect of matters that are inherently less than certain. Actual results could differ significantly from these estimates which could materially affect the amounts of our assets, liabilities, income and expenses. A variety of estimates impact the carrying value of the loan portfolio, including the amount of the allowance for loan losses, the placement of loans on non-accrual status. For a more detailed discussion on critical accounting policies, see “Critical Accounting Policies” in PennRock’s Annual Report on Form 10-K for the year ended December 31, 2004.

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Total assets of PennRock increased $31.9 million or 2.7% from year-end 2004. Loans grew $53.4 million, securities available for sale decreased $33.8 million, deposits increased $17.4 million while borrowed funds increased $13.7 million.

For the first three months of 2005, net income totaled $3.7 million or $.48 per share compared with $4.1 million or $.54 per share for the first three months of 2004, a decrease of $434,000 or 10.5%. Net interest income increased $536,000, non-interest income excluding security gains and losses decreased $686,000 and non-interest expenses increased $420,000. Dividends of $1.7 million or $.22 per share were paid in the first three months of 2005 compared with $1.5 million or $.20 per share in 2004. The dividend payout ratio was 46% in 2005 and 37% in 2004.

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 that would have been paid if this income were taxable at the statutory rate of 35%.

Table 1 presents net interest income on a fully taxable equivalent basis for the first quarter of 2005 and 2004. For the first quarter of 2005, net interest income on a fully taxable equivalent basis totaled $9.9 million, an increase of $298,000 or 3.1% from $9.6 million earned for the same period of 2004.

TABLE 1. – NET INTEREST INCOME

Amounts in thousands

The amount of non-taxable interest earned determines the size of tax equivalent adjustment necessary to convert net interest income into fully taxable equivalent net interest income. The sources of non-taxable interest income for PennRock are from interest earned on municipal bonds, dividends from Fannie Mae and Federal Home Loan Mortgage Corporation (“FHLMC”) preferred stock and from loans which qualify for tax-exempt status. The dividends earned on Fannie Mae and FHLMC preferred stock are 70% tax-free.

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, 2005 and 2004.

Net interest income earned in the first quarter of 2005 increased from the first quarter of last year as the yield on earning assets increased which was partially offset by an increase in funding costs. Both net interest spread and net interest margin declined from last year.

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TABLE 2 – AVERAGE BALANCES, RATES, AND INTEREST INCOME AND EXPENSE
(Taxable equivalent basis)

Amounts in thousands

Although the Federal Reserve raised interest rate 50 percentage points in the first quarter of 2005 and 175 basis points from a year ago, the yield on earning assets only increased 24 basis points. Yields earned on securities available for sale decreased from 4.25% to 4.09% while yields on loans increased from 6.00% to 6.32%. The yield on new loans originated in the first quarter of 2005 was 6.02% compared with 5.30% in the first quarter last year. New loans originated in the first quarter of 2005 totaled $112 million compared with $65 million in the first quarter last year. Fees on loans recognized in the first quarter of 2005 were $481,000 and $345,000 last year. The amount of loan fees earned is included in the calculation of loan yields.

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The rate paid on interest bearing deposits increased from 1.72% in the first quarter of 2004 to 2.08% in the first quarter of 2005. The rate paid on short-term borrowings increased from 1.12% to 2.59% while the rate paid on long-term debt decreased from 4.81% to 4.73%.

The interest rate spread declined from 3.44% to 3.22%, while the net interest margin declined from 3.76% to 3.60% during the first quarter.

Changes in interest rates as well as changes in average balances (or volumes) of earning assets and paying liabilities have an impact on the amount of net interest income earned and the net interest margins realized by PennRock from year-to-year. By isolating the effect that changes in rates have on net interest income from the effect of changes in volume, we can analyze the degree that each influences the change in net interest income and net interest margins. Table 3 analyzes the changes in the volume and rate components of net interest income.

TABLE 3 – VOLUME AND RATE ANALYSIS OF CHANGES IN INTEREST INCOME
(Taxable equivalent basis)

Amounts in thousands

The average balance of interest-earning assets in the first quarter of 2005 grew $90 million over the first quarter of 2004 while the average yield increased 24 basis points. The volume increase generated $1.4 million of additional interest income while the increase in yield produced an additional $352,000. For the first quarter of 2005, total interest income, measured on a taxable equivalent basis, increased by $1.7 million over the first quarter of 2004.

The average balance of interest bearing liabilities in the first quarter of 2005 grew $81 million over the first quarter of 2004 while the rate paid increased 46 basis points. The volume increase caused interest expense to increase $359,000 and the increase in the rate paid increased interest expense $1.1 million. Total interest expense for the first quarter of 2005 increased $1.4 million over the first quarter of 2004.

For the first quarter of 2005 over the first quarter of 2004, net interest income increased $1.0 million due to volume increases and declined $704,000 due to changes in rates. Total net interest income increased $298,000.

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NON-INTEREST INCOME

Table 4 indicates changes in the major categories of non-interest income for the three months ended March 31, 2005 and 2004. PennRock generates non-interest income in connection with fees charged on deposits and other products, asset management and trust services, retirement plan administration fees, sales of securities through the implementation of management’s asset/liability policy, increases in the cash surrender value of bank-owned life insurance, sale and servicing of mortgage loans, and merchant, ATM and debit card fees.

TABLE 4 – NON-INTEREST INCOME

In thousands

Total non-interest income decreased $1.1 million or 27% in the first quarter of 2005 from the first quarter of 2004. The largest decrease was a drop of $400,000 in realized gains on sale of securities. Financial services fees decreased $321,000 from the first quarter of last year primarily due to a decline in assets under management by PFA. The decrease in income from mortgage banking reflects a reduction in volume of mortgage refinancing activity from 2004. The decrease in earnings on the bank owned life insurance reflects a decrease in yield of the underlying securities.

NON-INTEREST EXPENSE

Table 5 indicates changes in the major categories of non-interest expense for the three months ended March 31, 2005 and 2004.

TABLE 5 – NON-INTEREST EXPENSE

In thousands

Total non-interest expense for the first quarter of 2005 increased $420,000 or 6% over the first quarter of 2004. This increase is attributable in part to employee benefit insurance costs which increased $121,000 and audit fees which increased $187,000. All other non-interest expenses increased by $112,000 or 2% from the first quarter of last year. Included in the other non-interest expense category are legal, consulting and other professional

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fees, supplies, liability insurance, fees for outsourced services and shares tax expense. The number of full-time equivalent employees decreased from 343 at March 31, 2004 to 340 at March 31, 2005.

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PROVISION AND ALLOWANCE FOR LOAN LOSSES

There was no provision for loan losses charged to earnings in the first quarter of 2005 compared with $398,000 for the first quarter of last year. 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 is examined in light of past loan loss experience, current economic conditions, volume of non-performing and delinquent loans and other relevant factors. For a more detailed discussion of PennRock’s methodology for determining the adequacy of the allowance, see “Allowance for Loan Losses” on page 24 of PennRock’s Annual Report on Form 10-K for the year ended December 31, 2004. Table 6 provides an analysis of the changes in the Allowance for Loan Losses for the three months ended March 31, 2005 and 2004.

TABLE 6 – ANALYSIS OF ALLOWANCE FOR LOAN LOSSES

Amounts in thousands

NON-PERFORMING ASSETS

Table 7 reflects PennRock’s non-performing assets at March 31, 2005 and December 31, 2004. 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.

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TABLE 7 – NON-PERFORMING ASSETS

Amounts in thousands

Total non-performing loans increased $2.0 million from year-end due to the addition of one large commercial real estate loan which was placed on non-accrual status. The proportion of non-performing loans to total loans increased from 0.06% at year-end to 0.30% as of March 31, 2005. The coverage ratio of the allowance for loan losses to non-performing loans decreased from 1794% at year-end 2004 to 363% as of March 31, 2005. Loans charged off in the first quarter of 2005 equaled the amount of loan recoveries during the quarter. Net charge-offs in the first quarter of 2004 totaled $92,000. Although non-accrual loans increased during the quarter, we still believe the allowance is adequate to cover probable losses in the portfolio and as a result, did not record any provision for loan losses in the first quarter of 2005. We will begin adding to the allowance when the adequacy of the allowance indicates it is necessary to do so. The allowance is increased through the provision for loan losses which is charged against income.

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 (“the FHLB”) 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 less than $100,000).

Total deposits increased $17.4 million or 2% from year-end 2004. Non-maturity deposits increased $2.9 million from year-end and time deposits under $100,000 increased by $10.7 million. Short-term borrowed funds declined by $11.3 million and long-term debt increased $25.0 million.

Table 8 reflects the changes in the major classifications of deposits and borrowed funds by comparing the balances at the end of the first quarter of 2005 with year-end 2004.

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TABLE 8 – DEPOSITS AND BORROWED FUNDS BY MAJOR CLASSIFICAIONS

Amounts in thousands

CAPITAL RESOURCES

Total stockholders’ equity increased $2.1 million or 2% since year end 2004. Stockholders’ equity is impacted by changes in the unrealized 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. The net unrealized loss increased by $541,000 from year-end 2004. The net unrealized gains and losses of the securities available for sale portfolio are excluded from computations of regulatory ratios.

Table 9 shows PennRock’s capital resources as of March 31, 2005 and at December 31, 2004. PennRock and its subsidiary bank exceed all minimum capital guidelines.

TABLE 9 – CAPITAL RESOURCES

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 and non-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 2004. Further information on interest rate risk can be found under the caption “Quantitative and Qualitative Disclosures About Market Risk” on pages 30 to 32 in PennRock’s 2004 Annual Report on Form 10-K.

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ITEM 4. 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, as of period end 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. Subsequent to the date of the most recent evaluation of PennRock’s internal controls, PennRock implemented the following corrective action with regard to an identified material weakness. During the first quarter of 2005, the Company implemented a policy which requires management, prior to engaging in an unusual or complex transaction, to seek outside counsel, legal and accounting as appropriate, on the proper method of recording the transaction.

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PART II. OTHER INFORMATION
For the Quarter ended March 31, 2005

ITEM 1. LEGAL PROCEEDINGS

A PennRock non-bank subsidiary has been named as a defendant in a binding, nonappealable arbitration proceeding in which the claimants seek to recover damages of approximately $4.6 million. The subsidiary is vigorously defending against these claims and is strongly contesting the amount of recoverable damages, if any. Any award against the subsidiary would be subject to offsets and insurance coverage aggregating approximately $1.0 million and PennRock believes that it has valid claims for indemnity and contribution against various third parties. PennRock is unable to determine at the present time whether a loss may be incurred relative to this matter, or, if a loss is incurred, the extent thereof net of insurance, offsets and amounts recoverable from third parties.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 23, 2004, the Board of Directors authorized the repurchase of up to 300,000 shares of its common stock to be used for future stock dividends and splits, employee benefit plans and other appropriate corporate purposes. There were no share repurchases in the first quarter of 2005. As of March 31, 2005, there were 230,078 shares that could yet be purchased under this plan.

ITEM 3. DEFALULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(a) Exhibits.

31.1	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	Rule 13a-14(a) Certification of Chief Financial Officer.
32	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

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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.

EXHIBIT INDEX

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