PRFS Pennrock Finl Svcs Corp (MM)

PennRock Announces First Quarter Earnings BLUE BALL, Pa., April 19 /PRNewswire-FirstCall/ -- PennRock Financial Services Corp. (NASDAQ:PRFS), parent company of Blue Ball National Bank, PennRock Financial Advisors, N.A. and PennRock Insurance Group, Inc. reports net income for the first quarter of 2005 of $3.7 million or $.47 diluted earnings per share, as compared with $4.1 million or $.53 diluted earnings per share for the first quarter of 2004. Assets totaled $1.2 billion as of March 31, 2005, an increase of $108.3 million or 10% from $1.1 billion from March 31, 2004. Total loans grew $114.6 million or 16%. Loan growth was funded by an increase in deposits of $37.2 million, an increase in borrowed funds of $66.3 million and a decrease in securities available for sale of $22.7 million. "Our significant increase in loans should have a positive impact on future earnings," said Melvin Pankuch, Executive Vice President and Chief Executive Officer of PennRock. "We are working diligently to successfully complete the affiliation with CommunityBanks, Inc., while simultaneously continuing our existing operations. The combined organization will present new opportunities and benefits to the shareholders and customers." Total non-performing loans increased from $571,000 as of March 31, 2004 to $2.6 million as of March 31, 2005. This increase is the result of one large commercial real estate loan being placed on non-accrual status in the first quarter of 2005. The ratio of non-performing loans to total loans increased from .15% last year to .30% this year. PennRock recorded no provision for loan losses in the first quarter of 2005 compared with $398,000 in the first quarter of 2004. Interest income increased $2.0 million from $13.3 million in the first quarter of 2004 to $15.3 million in 2005, while interest expenses increased $1.4, from $4.3 million to $5.7 million. The net interest margin, which is the ratio of net interest income to average interest earning assets, was 3.60% in the first quarter of 2005, a decline of 16 basis points from 3.76% in 2004. Non-interest income, excluding gains and losses on investment securities, decreased from $3.4 million for the first quarter of 2004 to $2.7 million in 2005. Most of the decline was due to a decrease in financial services revenue and income from mortgage banking activities. Non-interest expenses increased $420,000 or 6% from the first quarter of 2004. This increase is attributable to increases in salaries and benefits and Sarbanes-Oxley Section 404 compliance. Employee benefit insurance costs were $82,000 higher in the first quarter of 2005 compared with the first quarter of 2004 while audit related costs were $187,000 higher. In November 2004, PennRock and CommunityBanks, Inc. (Community) announced their intention to combine organizations and operate under Community's charter. Consummation is expected for mid-year 2005, after which the combined organization will represent the 8th largest financial institution headquartered in Pennsylvania, with over $3 billion in consolidated assets. The combined franchise will included 69 banking offices in 11 counties throughout Pennsylvania and upper Maryland, and will have a dramatic presence in the Harrisburg, Lancaster, Berks and York regions. The merger has received approval from various banking regulators and is in the process of meeting the necessary requirements and approvals from shareholders of both organizations. PennRock Financial Services Corp., headquartered in Blue Ball, PA is a bank holding company with $1.2 billion in consolidated assets. PennRock is the parent company of Blue Ball National Bank, PennRock Financial Advisors, N.A., and PennRock Insurance Group, Inc. Blue Ball National Bank provides a broad range of banking services to consumers, small businesses and corporations through 19 offices in south-central and southeastern Pennsylvania. PennRock Financial Advisors, N.A. offers asset management, corporate retirement plan administration, third party administration, and investment management & trust services to clients in southeastern Pennsylvania, New Jersey and Delaware. PennRock Insurance Group, Inc. sells annuities and life insurance products. To learn more about PennRock and its subsidiaries, visit http://www.pennrock.com/. This press release contains "forward-looking statements" concerning future events. 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 PennRock Financial Services Corp., Blue Ball National Bank, and other affiliated companies' 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 result or the effect of future plans and strategies is inherently uncertain. Actual results could differ materially due to market conditions, increased competition, legislative or regulatory changes, acquisition related synergies and integration issues, and other risks and uncertainties as discussed in reports we have filed with the SEC. We caution you not to place undue reliance on these forward-looking statements. We are under no obligation to publicly revise or update these statements. PennRock Financial Services Corp. Consolidated Balance Sheets In thousands, except share and per share data March 31, ASSETS 2005 2004 Cash and due from banks 25,372 $23,037 Short-term investments 5,807 4,629 Mortgages held for sale 2,862 3,520 Securities available for sale (at fair value) 268,800 291,494 Loans 824,288 709,648 Allowance for loan losses (9,008) (8,949) Net loans 815,280 700,699 Premises and equipment 17,104 16,386 Accrued interest receivable 3,578 3,033 Bank owned life insurance 28,751 27,856 Other assets 39,385 28,031 Total assets $1,206,939 $1,098,685 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Non-interest bearing $154,965 $146,484 Interest bearing 691,194 662,456 Total deposits 846,159 808,940 Short-term borrowings 114,206 72,916 Long-term debt 127,000 102,000 Accrued interest payable 3,125 2,339 Other liabilities 10,889 11,517 Total liabilities 1,101,379 997,712 Stockholders' Equity: Common stock, par value $2.50 per share; authorized 20,000 shares; issued - 7,718,543 shares 19,296 19,296 Surplus 54,798 53,677 Accumulated other comprehensive loss, net of tax (3,549) (918) Retained earnings 35,160 30,740 Treasury stock at cost (17,723 and 81,255 shares) (145) (1,822) Total stockholders' equity 105,560 100,973 Total liabilities and stockholders' equity $1,206,939 $1,098,685 PennRock Financial Services Corp. Consolidated Statements of Income In thousands except share and per share data: For the Three Months Ended March 31, 2005 2004 Interest income: Interest and fees on loans $12,422 $10,566 Securities available for sale 2,801 2,741 Other 63 28 Total interest income 15,286 13,335 Interest expense: Deposits 3,480 2,803 Short-term borrowings 919 286 Long-term debt 1,328 1,223 Total interest expense 5,727 4,312 Net interest income 9,559 9,023 Provision for loan losses 398 Non-interest income: Service charges on deposit accounts 799 808 Other service charges 106 92 Financial services 1,058 1,379 Gains (losses) on sales of securities 240 640 Mortgage banking 118 243 Increase in surrender value of bank owned life insurance 226 261 Other 417 627 Total non-interest income 2,964 4,050 Non-interest expense: Salaries and benefits 4,953 4,861 Occupancy, net 591 496 Equipment depreciation and service 342 220 Other 1,994 1,883 Total non-interest expense 7,880 7,460 Income before income taxes 4,643 5,215 Income taxes 958 1,096 Net income $3,685 $4,119 Per share information: Basic earnings $0.48 $0.54 Diluted earnings 0.47 0.53 Cash dividends 0.22 0.20 Weighted average number of shares outstanding: Basic 7,693,545 7,640,416 Diluted 7,778,940 7,755,301 PennRock Financial Services Corp. Selected Consolidated Financial Information In thousands except share and per share data For the Three Months Ended March 31, 2005 2004 Performance data: Return on average assets 1.24% 1.49% Return on average equity 14.32% 16.56% Yield on interest earning assets 5.69% 5.45% Cost of interest bearing liabilities 2.48% 2.02% Net interest margin 3.60% 3.76% Interest rate spread 3.22% 3.44% Efficiency ratio 60.23% 56.84% As of March 31, 2005 2004 Equity data: Book value per share $13.71 $13.22 Market value per share 34.92 28.40 Total equity to average assets 8.97% 8.94% Tier 1 capital to risk-weighted assets 10.57% 10.97% Total capital to risk-weighted assets 11.55% 12.07% Asset quality: Non-accrual loans $2,395 $819 Loans accruing but 90 days past due as to principal or interest 88 217 Total non-performing loans 2,483 1,036 Other real estate owned 69 12 Total non-performing assets $2,552 $1,048 Non-performing loans to total loans 0.30% 0.15% Allowance for loan losses to non-performing loans 362.79% 863.80% Allowance for loan losses: Balance, beginning of year $9,007 $8,643 Provision charged to expense 398 Total loans charged off (68) (107) Recoveries 68 15 Balance, end of quarter $9,007 $8,949 Allowance for loan losses to period-end loans 1.09% 1.26% DATASOURCE: PennRock Financial Services Corp. CONTACT: Shannan Guthrie, PennRock Financial Services Corp., +1-717-354-3612 or Web site: http://www.pennrock.com/

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