Exhibit 99.1
NEWS RELEASE
| | | | | | |
| CONTACT: | | Patrick Scanlon, Senior Vice President, Finance Division Head Penseco Financial Services Corporation (570) 346-7741 |
| |
| FOR RELEASE: | | 12:00 P.M. Eastern Time: October 31, 2012 |
Penseco Financial Services Corporation Reports Earnings as of September 30, 2012
SCRANTON, PA, October 31, 2012 — Penseco Financial Services Corporation (OTC Bulletin Board: PFNS) (the “Company”), the Scranton, Pennsylvania based financial holding company of Penn Security Bank & Trust Company, reported net income for the three months ended September 30, 2012 of $2,552,000, or $0.78 per basic and diluted weighted average share, compared with $2,774,000, or $0.85 per basic and diluted weighted average share, from the year ago period, a decrease of $222,000, or 8.0%. Pre-provision net interest income decreased $96,000, or 1.2%. Net interest income, after provision for loan and lease losses, decreased $122,000, or 1.6%, during the 2012 period, due to a decrease in interest income of $619,000, or 6.3%, and an increased provision for loan and lease losses of $26,000, or 5.8%, offset by reduced interest expense of $523,000, or 29.3%, from lower funding costs. The decrease in interest income was primarily attributable to investment and loan cash flows being reinvested at historically low yields, including excess reserve deposits held at the Federal Reserve Bank of Philadelphia. Non-interest income decreased $450,000, or 12.6%, largely due to decreased merchant transaction income due to lower volume and decreased net realized gains on securities, offset by higher net gains on the sale of other real estate owned property. Non-interest expenses decreased $182,000, or 2.4%, due mostly to lower merchant transaction expenses and premises and equipment expenses, offset by higher Pennsylvania shares tax expenses and FDIC insurance expenses.
The Company reported net income for the nine months ended September 30, 2012 of $7,881,000, or $2.41, per basic and diluted weighted average share, compared with $8,062,000, or $2.46, per basic and diluted weighted average share from the year ago period, a decrease of $181,000, or 2.2%. Pre-provision net interest income decreased $19,000, or 0.1%. Net interest income, after provision for loan and lease losses, increased $917,000, or 4.1%, during the 2012 period, due to a reduction in interest expense of $1,454,000, or 25.9%, from lower funding costs and a $936,000, or 54.6%, decrease in the provision for loan and lease losses, offset by a decrease in interest income of $1,473,000, or 4.9%. The decrease in interest income was primarily attributable to investment and loan cash flows being reinvested at historically low yields, including excess reserve deposits held at the Federal Reserve Bank of Philadelphia.
Net income from core operations increased $149,000, or 1.9%, for the nine months ended September 30, 2012 to $7,881,000, compared to $7,732,000 for the same period in 2011. Net income from core operations is a non-GAAP measure of net income. The Company defines its core operations to exclude the reversal, in the three months ended in March 31, 2011, of a contingent liability recorded in connection with the 2009 acquisition of Old Forge Bank (the “Merger”). Net income from core operations is a non-GAAP measure of net income. A reconciliation of the net income from core operations and disclosure of the non-GAAP adjusted return on average assets, adjusted return on average equity and adjusted dividend payout ratio derived from that measure are described in the Reconciliation of Non-GAAP Financial Measures included in this press release.
Non-Interest Income
Total non-interest income decreased $450,000, or 12.6%, to $3,121,000 for the three months ended September 30, 2012, compared with $3,571,000 for the same period in 2011. This decrease was primarily attributable to a decrease of $323,000 in merchant transaction income due to lower volume and a decrease of $156,000 in net realized gains on securities. These decreases were offset by a $112,000 increase in other operating income resulting from increases in the gains on the sale of mortgage loans and, to a lesser extent, increases in brokerage fee income and bank-owned life insurance income.
Total non-interest income decreased $1,280,000, or 12.9%, to $8,650,000 for the nine months ended September 30, 2012, compared with $9,930,000 for the same period in 2011. This decrease was attributable to a decrease of $402,000 in other operating income due to income recorded in connection with the reversal of a contingent liability of $500,000 during the quarter ended March 31, 2011, as well as a $398,000 decrease in merchant transaction income due to lower volume, a $320,000 decrease in net realized gains on securities, a $115,000 decrease in service charges on deposit accounts due to decreased overdraft activity and a $102,000 decrease in trust department income due to lower estate fees.
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Non-Interest Expenses
Total non-interest expenses decreased $182,000, or 2.4%, to $7,340,000 for the three months ended September 30, 2012 compared with $7,522,000 for the same period in 2011. Premises and equipment expense decreased $209,000, due primarily to lower occupancy and depreciation expense. Merchant transaction expenses decreased $244,000, due to lower volume. These decreases in total non-interest expenses were partially offset by an increase in other operating expenses of $222,000, resulting from increased Pennsylvania shares tax expense and other real estate owned expenses and increased FDIC insurance assessments of $99,000.
Total non-interest expenses decreased $32,000, or 0.1%, to $21,941,000 for the nine months ended September 30, 2012 compared with $21,973,000 for the same period in 2011. Premises and equipment expense decreased $484,000, due primarily to lower occupancy and depreciation expense. Merchant transaction expenses decreased $416,000, due to lower volume. FDIC insurance assessments decreased $93,000. These decreases in total non-interest expenses were offset by an increase in other operating expenses of $710,000, resulting from increased Pennsylvania shares tax expense and other real estate owned expenses and an increase in salaries and employee benefits of $251,000, primarily attributable to merit-based increases, mortgage banking commissions and supplemental retirement plan expenses.
Asset Quality
The Company maintains an allowance for loan and lease losses which reflects management’s estimate of probable loan losses, as determined in accordance with the Company’s allowance for loan and lease losses methodology. The ratio of the allowance for loan and lease losses to total loans was 1.09% and 1.05% as of September 30, 2012 and 2011, respectively.
Non-accrual loans equaled $2,583,000, or 0.40%, of loans at September 30, 2012, representing a decrease of $870,000, or 25.2%, from $3,453,000, or 0.54%, of loans at September 30, 2011. We believe that the decrease in non-accrual loans reflects management’s focused efforts to proactively address delinquent accounts. There were no commitments to lend additional funds to borrowers whose loans were in non-accrual status at September 30, 2012.
Net loan charge-offs amounted to $522,000, or 0.08%, of average outstanding loans for the nine months ended September 30, 2012, compared to $1,502,000, or 0.24%, of average loans outstanding for the nine months ended September 30, 2011.
The Company continues to proactively evaluate probable loan and lease losses and address delinquent loans by, among other things, obtaining current appraisals of collateral, increasing communication with borrowers and placing loans on non-accrual status when collection is in doubt and the loan is moving toward foreclosure.
Income Tax Expense
Applicable income taxes decreased $168,000 or 18.1% and $150,000 or 6.1% primarily due to lower taxable income for the three months and nine months ended September 30, 2012, respectively.
Restatement
During the quarter ended June 30, 2012, the Company became aware that the actuarially computed value of its postretirement benefit liability was inaccurate. The postretirement benefit plan provides employees with life insurance coverage that continues at various levels after retirement. Due to a change in the assumptions provided by the Company to its actuary as to the cost of future premiums, the actuarially computed unfunded liability was understated.
The restatement resulted in the following changes to numbers previously reported:
As of December 31, 2010, an increase in other liabilities (postretirement liability) of $2,206,000 and an increase in other assets (deferred taxes) of $750,000 resulted in a net decrease to Stockholder’s Equity of $1,456,000, from $121,922,000 to $120,466,000.
As of June 30, 2011, an increase in other liabilities of $2,338,000 and an increase in other assets of $795,000 resulted in a net decrease to Stockholder’s Equity of $1,543,000, from $125,943,000 to $124,400,000.
For the three months ended September 30, 2011, an increase of $66,000 in salaries and employee benefits expense and a decrease of $22,000 in applicable income taxes, or a net reduction in net income of $44,000 from $2,818,000 to $2,774,000 or approximately $0.01 per share. Comprehensive income also was reduced by $44,000, from $3,929,000 to $3,885,000.
For the nine months ended September 30, 2011, an increase of $198,000 in salaries and employee benefits expense and a decrease of $67,000 in applicable income taxes, or a net reduction in net income of $131,000 from $8,193,000 to $8,062,000 or approximately $0.04 per share. Comprehensive income also was reduced by $131,000, from $10,702,000 to $10,571,000.
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As of September 30, 2011, an increase in other liabilities (postretirement liability) of $2,404,000 and an increase in other assets (deferred taxes) of $817,000 resulted in a net decrease to Stockholder’s Equity of $1,587,000, from $128,496,000 to $126,909,000.
As of December 31, 2011, an increase in other liabilities (postretirement liability) of $2,525,000 and an increase in other assets (deferred taxes) of $858,000 resulted in a net decrease to Stockholder’s Equity of $1,667,000, from $129,000,000 to $127,333,000.
3
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(unaudited)
(in thousands, except per share amounts based on weighted average shares outstanding in each period)
| | | | | | | | | | | | | | | | |
| | | September 30,
2012 | | | September 30,
2011 | | | Inc / (Dec)
$ | | | %
Change | |
| | | Three Months Ended | | | | | | | | | |
| | | | | | | | | | | | |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | |
Return on Average Assets | | | 1.11 | % | | | 1.18 | % | | | | | | | -5.93 | % |
Return on Average Equity | | | 7.69 | % | | | 8.83 | % | | | | | | | -12.91 | % |
Net Interest Margin (1) | | | 4.12 | % | | | 4.15 | % | | | | | | | -0.72 | % |
Efficiency Ratio (2) | | | 65.40 | % | | | 63.83 | % | | | | | | | 2.46 | % |
| | | Nine Months Ended | | | | | | | | | |
| | | | | | | | | | | | |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | |
Return on Average Assets | | | 1.14 | % | | | 1.16 | % | | | | | | | -1.72 | % |
Return on Average Equity | | | 8.05 | % | | | 8.70 | % | | | | | | | -7.47 | % |
Net Interest Margin (1) | | | 4.15 | % | | | 4.12 | % | | | | | | | 0.73 | % |
Efficiency Ratio (2) | | | 66.07 | % | | | 63.58 | % | | | | | | | 3.92 | % |
STOCKHOLDERS’ VALUE | | | | | | | | | | | | | | | | |
Net Income | | $ | 7,881 | | | $ | 8,062 | | | $ | (181 | ) | | | -2.25 | % |
Earnings per share - Basic | | | 2.41 | | | | 2.46 | | | | (0.05 | ) | | | -2.03 | % |
Earnings per share - Diluted | | | 2.41 | | | | 2.46 | | | | (0.05 | ) | | | -2.03 | % |
Dividends Per Share | | | 1.26 | | | | 1.26 | | | | — | | | | — | |
Book Value Per Share | | | 40.33 | | | | 38.74 | | | | 1.59 | | | | 4.10 | % |
Market Value Per Share | | | 38.25 | | | | 38.00 | | | | 0.25 | | | | 0.66 | % |
Market Value/Book Value | | | 94.84 | % | | | 98.09 | % | | | | | | | -3.31 | % |
Price Earnings Multiple | | | 11.90x | | | | 11.59x | | | | | | | | 2.67 | % |
Dividend Payout Ratio | | | 52.28 | % | | | 51.22 | % | | | | | | | 2.07 | % |
Dividend Yield | | | 4.39 | % | | | 4.42 | % | | | | | | | -0.68 | % |
SAFETY AND SOUNDNESS | | | | | | | | | | | | | | | | |
Stockholders’ Equity/Assets | | | 14.55 | % | | | 13.35 | % | | | | | | | 8.99 | % |
Total Capital/Risk Weighted Assets | | | 17.38 | % | | | 16.60 | % | | | | | | | 4.70 | % |
Tier 1 Capital/Risk Weighted Assets | | | 16.24 | % | | | 15.50 | % | | | | | | | 4.77 | % |
Tier 1 Capital/Average Assets | | | 11.40 | % | | | 10.72 | % | | | | | | | 6.34 | % |
Non-performing Assets/Total Assets | | | 0.35 | % | | | 0.59 | % | | | | | | | -40.68 | % |
Non-performing loans to period end loans | | | 0.40 | % | | | 0.54 | % | | | | | | | -25.93 | % |
Allowance for loan and lease losses to period end loans | | | 1.09 | % | | | 1.05 | % | | | | | | | 3.81 | % |
BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | | | | | |
Total Assets | | $ | 908,194 | | | $ | 950,348 | | | $ | (42,154 | ) | | | -4.44 | % |
Total Investments | | | 181,393 | | | | 177,363 | | | | 4,030 | | | | 2.27 | % |
Net Loans | | | 632,094 | | | | 631,130 | | | | 964 | | | | 0.15 | % |
Allowance for Loan and Lease Losses | | | 6,966 | | | | 6,711 | | | | 255 | | | | 3.80 | % |
Total Deposits | | | 705,132 | | | | 731,684 | | | | (26,552 | ) | | | -3.63 | % |
Stockholders’ Equity | | | 132,110 | | | | 126,909 | | | | 5,201 | | | | 4.10 | % |
| (1) | The net interest margin is equal to tax equivalent net interest income divided by average interest-earning assets. In order to make pre-tax income on tax-exempt investments and loans comparable to taxable investments and loans, a tax equivalent adjustment is made to interest income. This adjustment increased interest income by $541 and $572 for the three months ended September 30, 2012 and 2011, respectively and by $1,711 and $1,742 for the nine months ended September 30, 2012 and 2011, respectively. The Company believes that the tax equivalent presentation is consistent with industry practice. Although the Company believes that these financial measures enhance investors’ understanding of our business and performance, these measures should not be considered an alternative to GAAP. |
| (2) | The efficiency ratio is equal to non-interest expenses, excluding amortization of core deposit intangible expense, divided by the sum of net interest income and non-interest income. Amortization of core deposit intangible expense is included in other operating expenses, and was $65 and $73 for the three months ended September 30, 2012 and 2011, respectively and $203 and $230 for the nine months ended September 30, 2012 and 2011, respectively. |
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
| | | | | | | | |
| | | September 30,
2012 | | | September 30,
2011* | |
ASSETS | | | | | | | | |
Cash and due from banks | | $ | 11,901 | | | $ | 60,565 | |
Interest bearing balances with banks | | | 6,414 | | | | 3,450 | |
Federal funds sold | | | — | | | | — | |
| | | | | | | | |
Cash and Cash Equivalents | | | 18,315 | | | | 64,015 | |
Investment securities: | | | | | | | | |
Available-for-sale, at fair value | | | 163,703 | | | | 149,156 | |
Held-to-maturity (fair value of $18,786 and $29,616, respectively) | | | 17,690 | | | | 28,207 | |
| | | | | | | | |
Total Investment Securities | | | 181,393 | | | | 177,363 | |
Loans, net of unearned income | | | 639,060 | | | | 637,841 | |
Less: Allowance for loan and lease losses | | | 6,966 | | | | 6,711 | |
| | | | | | | | |
Loans, Net | | | 632,094 | | | | 631,130 | |
Bank premises and equipment | | | 15,013 | | | | 13,192 | |
Other real estate owned | | | 582 | | | | 2,109 | |
Accrued interest receivable | | | 3,073 | | | | 3,145 | |
Goodwill | | | 26,398 | | | | 26,398 | |
Bank owned life insurance | | | 17,490 | | | | 15,749 | |
Federal Home Loan Bank stock | | | 4,764 | | | | 5,214 | |
Other assets | | | 9,072 | | | | 12,033 | |
| | | | | | | | |
Total Assets | | $ | 908,194 | | | $ | 950,348 | |
| | | | | | | | |
LIABILITIES | | | | | | | | |
Deposits: | | | | | | | | |
Non-interest bearing | | $ | 141,181 | | | $ | 131,189 | |
Interest bearing | | | 563,951 | | | | 600,495 | |
| | | | | | | | |
Total Deposits | | | 705,132 | | | | 731,684 | |
Other borrowed funds: | | | | | | | | |
Securities sold under agreements to repurchase | | | 11,873 | | | | 22,640 | |
Short-term borrowings | | | — | | | | 863 | |
Long-term borrowings | | | 49,576 | | | | 60,403 | |
Accrued interest payable | | | 815 | | | | 1,041 | |
Other liabilities | | | 8,688 | | | | 6,808 | |
| | | | | | | | |
Total Liabilities | | | 776,084 | | | | 823,439 | |
| | | | | | | | |
STOCKHOLDERS’ EQUITY | | | | | | | | |
Common stock; $ .01 par value, 15,000,000 shares authorized, 3,276,079 shares issued and outstanding | | | 33 | | | | 33 | |
Surplus | | | 48,890 | | | | 48,865 | |
Retained earnings | | | 82,467 | | | | 77,620 | |
Accumulated other comprehensive income | | | 720 | | | | 391 | |
| | | | | | | | |
Total Stockholders’ Equity | | | 132,110 | | | | 126,909 | |
| | | | | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 908,194 | | | $ | 950,348 | |
| | | | | | | | |
5
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2012 | | | 2011* | | | 2012 | | | 2011* | |
INTEREST INCOME | | | | | | | | | | | | | | | | |
Interest and fees on loans and leases | | $ | 8,059 | | | $ | 8,463 | | | $ | 24,525 | | | $ | 25,133 | |
Interest and dividends on investments: | | | | | | | | | | | | | | | | |
U.S. Treasury securities and U.S. Agency obligations | | | 544 | | | | 597 | | | | 1,798 | | | | 2,157 | |
States & political subdivisions | | | 645 | | | | 803 | | | | 2,027 | | | | 2,527 | |
Other securities | | | 14 | | | | 16 | | | | 43 | | | | 45 | |
Interest on Federal funds sold | | | — | | | | 2 | | | | — | | | | 2 | |
Interest on balances with banks | | | 3 | | | | 3 | | | | 7 | | | | 9 | |
| | | | | | | | | | | | | | | | |
Total Interest Income | | | 9,265 | | | | 9,884 | | | | 28,400 | | | | 29,873 | |
| | | | | | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | | | | | |
Interest on time deposits of $100,000 or more | | | 287 | | | | 367 | | | | 899 | | | | 1,100 | |
Interest on other deposits | | | 500 | | | | 833 | | | | 1,758 | | | | 2,680 | |
Interest on other borrowed funds | | | 475 | | | | 585 | | | | 1,493 | | | | 1,824 | |
| | | | | | | | | | | | | | | | |
Total Interest Expense | | | 1,262 | | | | 1,785 | | | | 4,150 | | | | 5,604 | |
| | | | | | | | | | | | | | | | |
Net Interest Income | | | 8,003 | | | | 8,099 | | | | 24,250 | | | | 24,269 | |
Provision for loan and lease losses | | | 471 | | | | 445 | | | | 777 | | | | 1,713 | |
| | | | | | | | | | | | | | | | |
Net Interest Income After Provision for Loan and Lease Losses | | | 7,532 | | | | 7,654 | | | | 23,473 | | | | 22,556 | |
| | | | | | | | | | | | | | | | |
NON-INTEREST INCOME | | | | | | | | | | | | | | | | |
Trust department income | | | 409 | | | | 431 | | | | 1,112 | | | | 1,214 | |
Service charges on deposit accounts | | | 489 | | | | 540 | | | | 1,416 | | | | 1,531 | |
Merchant transaction income | | | 1,357 | | | | 1,680 | | | | 3,455 | | | | 3,853 | |
Brokerage fee income | | | 60 | | | | 52 | | | | 201 | | | | 185 | |
Other fee income | | | 427 | | | | 450 | | | | 1,291 | | | | 1,259 | |
Bank-owned life insurance income | | | 129 | | | | 124 | | | | 378 | | | | 369 | |
Other operating income | | | 247 | | | | 135 | | | | 678 | | | | 1,080 | |
Impairment losses on investment securities | | | — | | | | — | | | | — | | | | — | |
Realized gains (losses) on securities, net | | | 3 | | | | 159 | | | | 119 | | | | 439 | |
| | | | | | | | | | | | | | | | |
Total Non-Interest Income | | | 3,121 | | | | 3,571 | | | | 8,650 | | | | 9,930 | |
| | | | | | | | | | | | | | | | |
NON-INTEREST EXPENSES | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 3,413 | | | | 3,463 | | | | 10,617 | | | | 10,366 | |
Premises and equipment | | | 678 | | | | 887 | | | | 2,230 | | | | 2,714 | |
Merchant transaction expenses | | | 866 | | | | 1,110 | | | | 2,193 | | | | 2,609 | |
FDIC insurance assessments | | | 113 | | | | 14 | | | | 343 | | | | 436 | |
Other operating expenses | | | 2,270 | | | | 2,048 | | | | 6,558 | | | | 5,848 | |
| | | | | | | | | | | | | | | | |
Total Non-Interest Expenses | | | 7,340 | | | | 7,522 | | | | 21,941 | | | | 21,973 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 3,313 | | | | 3,703 | | | | 10,182 | | | | 10,513 | |
Applicable income taxes | | | 761 | | | | 929 | | | | 2,301 | | | | 2,451 | |
| | | | | | | | | | | | | | | | |
Net Income | | $ | 2,552 | | | $ | 2,774 | | | $ | 7,881 | | | $ | 8,062 | |
| | | | | | | | | | | | | | | | |
Weighted average shares outstanding—Basic | | | 3,276,079 | | | | 3,276,079 | | | | 3,276,079 | | | | 3,276,079 | |
Weighted average shares outstanding—Diluted | | | 3,276,529 | | | | 3,276,079 | | | | 3,276,243 | | | | 3,276,079 | |
Earnings per Common Share—Basic | | $ | 0.78 | | | $ | 0.85 | | | $ | 2.41 | | | $ | 2.46 | |
Earnings per Common Share—Diluted | | $ | 0.78 | | | $ | 0.85 | | | $ | 2.41 | | | $ | 2.46 | |
Cash Dividends Declared Per Common Share | | $ | 0.42 | | | $ | 0.42 | | | $ | 1.26 | | | $ | 1.26 | |
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in thousands)
| | | | | | | | |
| | | Three Months Ended
September 30, 2012 | | | Three Months Ended
September 30, 2011* | |
Net Income | | $ | 2,552 | | | $ | 2,774 | |
| | | | | | | | |
Other comprehensive income, net of tax: | | | | | | | | |
Unrealized gains (losses) on securities: | | | | | | | | |
Unrealized holding gains (losses) arising during the period | | | 550 | | | | 1,199 | |
Less: reclassification adjustment for (losses) gains included in net income | | | (1 | ) | | | 88 | |
| | | | | | | | |
Other comprehensive income (loss) | | | 551 | | | | 1,111 | |
| | | | | | | | |
Comprehensive Income | | $ | 3,103 | | | $ | 3,885 | |
| | | | | | | | |
| | |
| | | Nine Months Ended
September 30, 2012 | | | Nine Months Ended
September 30, 2011* | |
Net Income | | $ | 7,881 | | | $ | 8,062 | |
| | | | | | | | |
Other comprehensive income, net of tax: | | | | | | | | |
Unrealized gains (losses) on securities: | | | | | | | | |
Unrealized holding gains (losses) arising during the period | | | 1,068 | | | | 2,778 | |
Less: reclassification adjustment for (losses) gains included in net income | | | 70 | | | | 269 | |
| | | | | | | | |
Other comprehensive income (loss) | | | 998 | | | | 2,509 | |
| | | | | | | | |
Comprehensive Income | | $ | 8,879 | | | $ | 10,571 | |
| | | | | | | | |
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(unaudited)
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | |
| | | Common
Stock | | | Surplus | | | Retained
Earnings | | | Accumulated
Other
Comprehensive
Income | | | Total
Stockholders’
Equity | |
Balance, June 30, 2011* | | $ | 33 | | | $ | 48,865 | | | $ | 76,222 | | | $ | (720 | ) | | $ | 124,400 | |
Net income* | | | — | | | | — | | | | 2,774 | | | | — | | | | 2,774 | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | 1,111 | | | | 1,111 | |
Cash dividends declared ($0.42 per share) | | | — | | | | — | | | | (1,376 | ) | | | — | | | | (1,376 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2011* | | $ | 33 | | | $ | 48,865 | | | $ | 77,620 | | | $ | 391 | | | $ | 126,909 | |
| | | | | | | | | | | | | | | | | | | | |
Balance, June 30, 2012 | | $ | 33 | | | $ | 48,875 | | | $ | 81,290 | | | $ | 169 | | | $ | 130,367 | |
Stock-based compensation | | | | | | | 15 | | | | | | | | | | | | 15 | |
Net income | | | — | | | | — | | | | 2,552 | | | | — | | | | 2,552 | |
Other comprehensive income (loss) | | | | | | | | | | | | | | | 551 | | | | 551 | |
Cash dividends declared ($0.42 per share) | | | — | | | | — | | | | (1,375 | ) | | | — | | | | (1,375 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2012 | | $ | 33 | | | $ | 48,890 | | | $ | 82,467 | | | $ | 720 | | | $ | 132,110 | |
| | | | | | | | | | | | | | | | | | | | |
8
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(unaudited)
(in thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | |
| | | Common
Stock | | | Surplus | | | Retained
Earnings | | | Accumulated
Other
Comprehensive
Income | | | Total
Stockholders’
Equity | |
Balance, December 31, 2010* | | $ | 33 | | | $ | 48,865 | | | $ | 73,686 | | | $ | (2,118 | ) | | $ | 120,466 | |
Net income* | | | — | | | | — | | | | 8,062 | | | | — | | | | 8,062 | |
Other comprehensive income | | | | | | | | | | | | | | | 2,509 | | | | 2,509 | |
Cash dividends declared ($1.26 per share) | | | — | | | | — | | | | (4,128 | ) | | | — | | | | (4,128 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2011* | | $ | 33 | | | $ | 48,865 | | | $ | 77,620 | | | $ | 391 | | | $ | 126,909 | |
| | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2011* | | $ | 33 | | | $ | 48,865 | | | $ | 78,713 | | | $ | (278 | ) | | $ | 127,333 | |
Stock-based compensation | | | | | | | 25 | | | | | | | | | | | | 25 | |
Net income | | | — | | | | — | | | | 7,881 | | | | — | | | | 7,881 | |
Other comprehensive income | | | | | | | | | | | | | | | 998 | | | | 998 | |
Cash dividends declared ($1.26 per share) | | | — | | | | — | | | | (4,127 | ) | | | — | | | | (4,127 | ) |
| | | | | | | | | | | | | | | | | | | | |
Balance, September 30, 2012 | | $ | 33 | | | $ | 48,890 | | | $ | 82,467 | | | $ | 720 | | | $ | 132,110 | |
| | | | | | | | | | | | | | | | | | | | |
9
About Penseco Financial Services Corporation
Penseco Financial Services Corporation, through its subsidiary Penn Security Bank & Trust Company, operates thirteen offices in Lackawanna, Luzerne, Wayne and Monroe counties. The Company’s stock is quoted on the OTC Bulletin Board, under the symbol, “PFNS”.
Safe Harbor Forward-Looking Statements
This press release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by management of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). Such forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “intend” and “potential”. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.
The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Company’s operations, pricing, products and services and other factors that may be described in the Company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
Reconciliation of Non-GAAP Financial Measures
Core Operations Calculation
Certain financial measures for the three and nine months ended September 30, 2011 reported herein exclude the effect of the reversal of a contingent liability recorded in connection with the 2009 acquisition of Old Forge Bank. Management of the Company believes that investors’ understanding of the Company’s performance is enhanced by disclosing these non-GAAP financial measures as a reasonable basis for comparison of the Company’s ongoing results of operations. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies.
The following tables present the reconciliation of non-GAAP financial measures to reported GAAP financial measures:
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | | |
Unadjusted (GAAP) | | 2012 | | | 2011* | | | Change | |
Net interest income after provision for loan and lease losses | | $ | 7,532 | | | $ | 7,654 | | | $ | (122 | ) |
Non-interest income | | | 3,121 | | | | 3,571 | | | | (450 | ) |
Non-interest expense | | | (7,340 | ) | | | (7,522 | ) | | | 182 | |
Income tax (provision) benefit | | | (761 | ) | | | (929 | ) | | | 168 | |
| | | | | | | | | | | | |
Net income | | | 2,552 | | | | 2,774 | | | | (222 | ) |
Adjustments | | | | | | | | | | | | |
Non-interest income | | | | | | | | | | | | |
Reversal of a contingent liability recorded in the Merger | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Total adjustments pre-tax | | | — | | | | — | | | | — | |
Income tax provision (benefit) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
After tax adjustments to GAAP | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Adjusted “net income from core operations” | | $ | 2,552 | | | $ | 2,774 | | | $ | (222 | ) |
| | | | | | | | | | | | |
Adjusted Return on Average Assets | | | 1.11 | % | | | 1.18 | % | | | | |
Adjusted Return on Average Equity | | | 7.69 | % | | | 8.83 | % | | | | |
Adjusted Dividend Payout Ratio | | | 53.85 | % | | | 49.41 | % | | | | |
10
Return on average equity (ROE) and return on average assets (ROA) for the three months ended September 30, 2012 was 7.69% and 1.11%, respectively. ROE was 8.83% and ROA was 1.18% for the same period last year. The dividend payout ratio was 53.85% for the three months ended September 30, 2012 and 49.41% for the same period last year.
| | | | | | | | | | | | |
| | | Nine Months Ended
September 30, | | | | |
Unadjusted (GAAP) | | 2012 | | | 2011* | | | Change | |
Net interest income after provision for loan and lease losses | | $ | 23,473 | | | $ | 22,556 | | | $ | 917 | |
Non-interest income | | | 8,650 | | | | 9,930 | | | | (1,280 | ) |
Non-interest expense | | | (21,941 | ) | | | (21,973 | ) | | | 32 | |
Income tax (provision) benefit | | | (2,301 | ) | | | (2,451 | ) | | | 150 | |
| | | | | | | | | | | | |
Net income | | | 7,881 | | | | 8,062 | | | | (181 | ) |
Adjustments | | | | | | | | | | | | |
Non-interest income | | | | | | | | | | | | |
Reversal of a contingent liability recorded in the Merger | | | — | | | | (500 | ) | | | 500 | |
| | | | | | | | | | | | |
Total adjustments pre-tax | | | — | | | | (500 | ) | | | 500 | |
Income tax provision (benefit) | | | — | | | | 170 | | | | (170 | ) |
| | | | | | | | | | | | |
After tax adjustments to GAAP | | | — | | | | (330 | ) | | | 330 | |
| | | | | | | | | | | | |
Adjusted “net income from core operations” | | $ | 7,881 | | | $ | 7,732 | | | $ | 149 | |
| | | | | | | | | | | | |
Adjusted Return on Average Assets | | | 1.14 | % | | | 1.11 | % | | | | |
Adjusted Return on Average Equity | | | 8.05 | % | | | 8.35 | % | | | | |
Adjusted Dividend Payout Ratio | | | 52.28 | % | | | 53.39 | % | | | | |
Return on average equity (ROE) and return on average assets (ROA) for the nine months ended September 30, 2012 was 8.05% and 1.14%, respectively. ROE was 8.70% (8.35% excluding the reversal of a contingent liability) and ROA was 1.16% (1.11% excluding the reversal of a contingent liability) for the same period last year. The dividend payout ratio was 52.28% for the nine months ended September 30, 2012 and 51.22% (53.39% excluding the reversal of a contingent liability) for the same period last year.
11
Tangible Assets and Equity
Management believes that tangible assets, tangible equity, and the related ratios of tangible equity to tangible assets, tangible book value per share, and market value to tangible book value, are useful to investors in evaluating the Company’s results of operations and financial condition. Our intangible assets, namely goodwill and the core deposit intangible, are the result of our accounting for the Merger, and we would not be able to sell those assets separately from all other assets of the business. Tangible equity and tangible book value per share are used generally as conservative measures of net worth, approximating liquidation value.
The following table presents a reconciliation of tangible assets / tangible equity.
| | | | | | | | |
| | | September 30, 2012 | | | September 30, 2011* | |
| Tangible Assets | | | | | | | | |
Total Assets | | $ | 908,194 | | | $ | 950,348 | |
Less: | | | | | | | | |
Goodwill | | | 26,398 | | | | 26,398 | |
Core Deposit Intangible | | | 903 | | | | 1,179 | |
| | | | | | | | |
| | | 27,301 | | | | 27,577 | |
| | | | | | | | |
Tangible Assets | | $ | 880,893 | | | $ | 922,771 | |
| | | | | | | | |
| Tangible Equity | | | | | | | | |
Total Equity | | $ | 132,110 | | | $ | 126,909 | |
Less: | | | | | | | | |
Goodwill | | | 26,398 | | | | 26,398 | |
Core Deposit Intangible | | | 903 | | | | 1,179 | |
| | | | | | | | |
| | | 27,301 | | | | 27,577 | |
| | | | | | | | |
Tangible Equity | | $ | 104,809 | | | $ | 99,332 | |
| | | | | | | | |
Tangible Equity / Tangible Assets | | | 11.90 | % | | | 10.76 | % |
Tangible Book Value Per Share | | $ | 31.99 | | | $ | 30.32 | |
Market Value / Tangible Book Value | | | 119.57 | % | | | 125.33 | % |
12
