Susquehanna Bancshares (SUSQ) 8-K Other Events

Exhibit 99.1

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION OF

SUSQUEHANNA BANCSHARES, INC. AND COMMUNITY BANKS, INC.

The following unaudited pro forma condensed combined financial information and explanatory notes present how the combined financial statements of Susquehanna and Community may have appeared had the businesses actually been combined at an earlier date. The unaudited pro forma condensed combined financial information shows the impact of the merger of Susquehanna and Community on the companies’ respective historical financial positions and results of operations under the purchase method of accounting with Susquehanna treated as the acquirer. Under this method of accounting, the assets and liabilities of Community will be recorded by Susquehanna at their estimated fair values as of the date the merger is completed. The unaudited pro forma condensed combined balance sheet as of June 30, 2007 assumes the merger was completed on that date. The unaudited pro forma combined condensed income statements for the year ended December 31, 2006 and the six months ended June 30, 2007 give effect to the merger as if the merger had been completed January 1, 2006 and January 1, 2007, respectively.

The unaudited pro forma combined condensed income statements for the six months ended June 30, 2007 include pre-tax merger related charges of $4.2 million from the Community acquisitions which closed on April 1, 2007. In March 2007, Community recorded a $4.4 million pre-tax charge for other-than-temporary impairment of investment securities. In the second quarter of 2007, Susquehanna sold approximately $233.0 million of its available-for-sale securities and recorded an $11.8 million pre-tax charge to earnings.

In addition, the unaudited pro forma condensed combined financial information includes the effects of Susquehanna’s anticipated $100 million trust preferred securities offering expected to occur in the fourth quarter of 2007.

The merger agreement was executed on July 25, 2007 and provides that Community shareholders will be entitled to elect to receive either $34.00 in cash, 1.48 shares of Susquehanna common stock or a combination thereof in exchange for their shares of Community common stock. Elections by Community shareholders to receive either stock or cash consideration in the merger will be subject to certain allocation procedures. The unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the historical consolidated financial statements and the related notes of both Susquehanna and Community.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not indicate financial results of the combined companies had the companies actually been combined at the beginning of each period presented and had the impact of possible revenue enhancements, expense efficiencies, and asset dispositions, among other factors, been considered. In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the allocation of the purchase price reflected in the pro forma condensed combined financial information is subject to adjustment.

Susquehanna Bancshares, Inc./ Community Banks, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheets As of June 30, 2007

(dollars in thousands)

	As Reported						Pro Forma Adjustments				Pro Forma Combined
	Susquehanna			Community
ASSETS
Cash and due from banks	$	198,899		$	74,983		$	100,000		(A)	$	289,543
								(69,346	)	(B)
								(14,993	)	(C)
Restricted short-term investments		214			0							214
Unrestricted short-term investments		99,634			4,438							104,072
Trading assets		0			19,750							19,750
Securities available for sale		1,406,342			635,012							2,041,354
Securities held to maturity		4,887			23,090			(670	)	(H)		27,307
Net loans and leases		5,512,987			2,542,628			(32,416	)	(I)		8,023,199
Premises and equipment, net		107,334			50,232			12,666		(L)		170,232
Foreclosed assets		4,587			2,122							6,709
Accrued income receivable		32,075			15,884							47,959
Bank-owned life insurance		267,788			72,010							339,798
Goodwill		338,284			265,130			14,993		(C)		953,735
								(265,129	)	(E)
								588,536		(E)
								(41,476	)	(F)
								(11,400	)	(G)
								670		(H)
								32,416		(I)
								3,581		(J)
								(5,533	)	(K)
								(12,666	)	(L)
								56,215		(M)
								(9,886	)	(O)
Intangible assets with finite lives		17,846			14,833			(14,833	)	(E)		70,722
								41,476		(F)
								11,400		(G)
Investment in and receivables from unconsolidated entities		161,445			2,260							163,705
Deferred taxes		0			14,970			(14,970	)	(N)		0
Other assets		161,287			13,502							174,789
Total assets	$	8,313,609		$	3,750,844		$	368,635			$	12,433,088
Deposits:
Demand	$	911,383		$	379,624						$	1,291,007
Interest-bearing demand		2,126,459			593,435							2,719,894
Savings		445,333			303,125							748,458
Time		1,592,165			1,010,010			3,581		(J)		2,605,756
Time of $100 or more		903,941			321,970							1,225,911
Short-term borrowings		440,672			72,724							513,396
FHLB borrowings		460,034			455,104			(4,765	)	(K)		910,373
Long-term debt		150,031			0							150,031
Junior subordinated debentures		72,004			75,260			100,000		(A)		246,496
								(768	)	(K)
Accrued interest, taxes, and expenses payable		36,394			10,765							47,159
Deferred taxes		146,485			0			(14,970	)	(N)		121,629
								(9,886	)	(O)
Other liabilities		83,568			11,634			56,215		(M)		151,417
Total liabilities		7,368,469			3,233,651			129,407				10,731,527
SHAREHOLDERS’ EQUITY
Common stock		104,343			128,471			(128,471	)	(D)		171,730
								67,387		(B)
Additional paid-in-capital		348,897			396,489			(396,489	)	(D)		1,037,931
								689,034		(B)
Retained earnings		510,344			23,806			(23,806	)	(D)		510,344
Accumulated other comprehensive income		(18,444	)		(8,300	)		8,300		(D)		(18,444	)
Less: cost of treasury stock		0			(23,273	)		23,273		(D)		0
Total shareholders’ equity		945,140			517,193			239,228				1,701,561
Total liabilities and shareholders’ equity	$	8,313,609		$	3,750,844		$	368,635			$	12,433,088

The accompanying notes are an integral part of the consolidated financial statements.

Susquehanna Bancshares, Inc./ Community Banks, Inc.

Unaudited Pro Forma Combined Income Statement for the Six Months Ended June 30, 2007

(dollars in thousands, except per share data)

	As Reported						Community Acquisitions			Pro Forma Community			Pro Forma Adjustments				Pro Forma Combined
	Susquehanna			Community
Interest Income:
Loans and leases, including fees	$	205,240		$	90,317		$	2,469		$	92,786		$	4,052		(I)	$	302,078
Securities		33,940			17,216			484			17,700			1,274		(H)		52,914
Short-term Investments		2,392			1,177			110			1,287			(347	)	(C)		2,249
														(1,083	)	(M)
Trading account		0			232			0			232							232
Total interest income		241,572			108,942			3,063			112,005			3,896				357,473
Interest Expense:
Deposits:
Interest-bearing demand		32,864			9,090			23			9,113							41,977
Savings		2,053			1,396			574			1,970							4,023
Time		56,686			29,119			600			29,719			(895	)	(J)		85,510
Short-term borrowings		7,772			2,321			178			2,499							10,271
FHLB borrowings		9,129			9,801			61			9,862			681		(K)		19,672
Long-term debt		6,583			2,369			51			2,420			3,825		(A)		12,770
														(58	)	(K)
Total interest expense		115,087			54,096			1,487			55,583			3,553				174,223
Net interest income		126,485			54,846			1,576			56,422			343				183,250
Provision for loan and lease losses		3,933			2,000			535			2,535							6,468
Net interest income after provision for loan and lease losses		122,552			52,846			1,041			53,887			343				176,782
Noninterest Income:
Service charges on deposit accounts		13,656			7,673			592			8,265			0				21,921
Vehicle origination, servicing, and securitization fees		7,906			0			0			0			0				7,906
Asset management fees		9,403			1,795			0			1,795			0				11,198
Income from fiduciary-related activities		3,343			1,253			0			1,253			0				4,596
Commissions on brokerage, life insurance, and annuity sales		2,678			0			6			6			0				2,684
Commissions on property and casualty insurance sales		7,033			2,239			0			2,239			0				9,272
Income from bank-owned life insurance		5,299			1,444			22			1,466			0				6,765
Net gain on sale of loans and leases		5,525			1,242			0			1,242			0				6,767
Net realized gain /(loss) on securities		(11,740	)		2			0			2			0				(11,738	)
Other than temporary impairment of investment securities		0			(4,390	)		0			(4,390	)		0				(4,390	)
Other		10,328			5,074			172			5,246			0				15,574
Total noninterest income		53,431			16,332			792			17,124			0				70,555
Noninterest Expenses:
Salaries and employee benefits		69,116			25,078			3,855			28,933							98,049
Occupancy		11,774			4,235			529			4,764			158		(L)		16,696
Furniture and equipment		5,809			3,539			10			3,549							9,358
Amortization of intangible assets		1,246			1,472			149			1,621			(1,621	)	(E)		3,890
														2,074		(F)
														570		(G)
Advertising and marketing		4,633			1,057			520			1,577							6,210
Vehicle lease disposal		6,179			0			0			0							6,179
Other		33,433			11,251			1,545			12,796							46,229
Total noninterest expenses		132,190			46,632			6,608			53,240			1,181				186,611
Income before taxes		43,793			22,546			(4,775	)		17,771			(838	)			60,726
Provision for income taxes		13,249			5,009			(1,555	)		3,454			(293	)			16,410
Net income	$	30,544		$	17,537		($	3,220	)	$	14,317		($	545	)		$	44,316
Net Income Per Common Share:
Basic net income per share	$	0.59		$	0.73		($	5.36	)	$	0.58						$	0.52
Weighted average basic shares outstanding		52,111			24,154			601			24,755			(24,755	)	(D)		85,805
														33,694		(B)
Diluted net income per share	$	0.59		$	0.72		($	5.36	)	$	0.57						$	0.52
Weighted average diluted shares outstanding		52,198			24,350			601			24,951			(24,951	)	(D)		85,892
														33,694		(B)

The accompanying notes are an integral part of the consolidated financial statements.

Susquehanna Bancshares, Inc./ Community Banks, Inc.

Unaudited Pro Forma Combined Income Statement for the Twelve Months Ended December 31, 2006

(dollars in thousands, except per share data)

	As Reported					Community Acquisitions		Pro Forma Community		Pro Forma Adjustments				Pro Forma Combined
	Susquehanna			Community
Interest Income:
Loans and leases, including fees	$	404,814		$	166,061	$	9,094	$	175,155	$	8,104		(I)	$	588,073
Securities		54,308			29,670		2,086		31,756		2,548		(H)		88,612
Short-term Investments		3,669			1,903		277		2,180		(694	)	(C)		2,990
											(2,165	)	(M)
Total interest income		462,791			197,634		11,457		209,091		7,793				679,675
Interest Expense:
Deposits:
Interest-bearing demand		51,424			16,183		96		16,279						67,703
Savings		4,960			1,441		1,866		3,307						8,267
Time		99,195			49,026		1,935		50,961		(1,791	)	(J)		148,365
Short-term borrowings		13,495			3,021		797		3,818						17,313
FHLB borrowings		24,788			17,380		316		17,696		1,361		(K)		43,845
Long-term debt		12,159			3,683		206		3,889		7,650		(A)		23,582
											(116	)	(K)
Total interest expense		206,021			90,734		5,216		95,950		7,104				309,075
Net interest income		256,770			106,900		6,241		113,141		689				370,600
Provision for loan and lease losses		8,680			2,050		476		2,526		0				11,206
Net interest income after provision for loan and lease losses		248,090			104,850		5,765		110,615		689				359,394
Noninterest Income:
Service charges on deposit accounts		26,446			11,507		2,754		14,261		0				40,707
Vehicle origination, servicing, and securitization fees		18,524			0		0		0		0				18,524
Asset management fees		18,439			1,989		0		1,989		0				20,428
Income from fiduciary-related activities		6,160			2,405		0		2,405		0				8,565
Commissions on brokerage, life insurance, and annuity sales		4,350			0		29		29		0				4,379
Commissions on property and casualty insurance sales		12,660			4,120		4		4,124		0				16,784
Income from bank-owned life insurance		10,000			2,725		82		2,807		0				12,807
Net gain on sale of loans and leases		16,816			2,172		66		2,238		0				19,054
Net gain on sale of bank branches		4,189			0		0		0		0				4,189
Net (loss) gain on securities		(949	)		732		744		1,476		0				527
Other		19,678			9,317		96		9,413		0				29,091
Total noninterest income		136,313			34,967		3,775		38,742		0				175,055
Noninterest Expenses:
Salaries and employee benefits		128,465			46,434		3,954		50,388		0				178,853
Occupancy		20,905			6,965		933		7,898		317		(L)		29,120
Furniture and equipment		10,948			7,152		35		7,187						18,135
Amortization of intangible assets		2,231			2,639		597		3,236		(3,236	)	(E)		7,519
											4,148		(F)
											1,140		(G)
Advertising and marketing		9,627			1,752		462		2,214						11,841
Vehicle residual value		3,722			0		0		0						3,722
Vehicle delivery and preparation		10,498			0		0		0						10,498
Other		76,440			19,943		1,991		21,934		0				98,374
Total noninterest expenses		262,836			84,885		7,972		92,857		2,369				358,062
Income before taxes		121,567			54,932		1,568		56,500		(1,680	)			176,387
Provision for income taxes		37,929			13,901		463		14,364		(588	)			51,705
Net income	$	83,638		$	41,031	$	1,105	$	42,136	($	1,092	)		$	124,682
Net Income Per Common Share:
Basic Net Income Per Share	$	1.66		$	1.74	$	0.92	$	1.70					$	1.48
Weighted average basic shares outstanding		50,340			23,645		1,203		24,848		(24,848	)	(D)		84,034
											33,694		(B)
Diluted Net Income Per Share	$	1.66		$	1.72	$	0.92	$	1.68					$	1.48
Weighted average diluted shares outstanding		50,507			23,918		1,203		25,121		(25,121	)	(D)		84,201
											33,694		(B)

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

Note 1. Basis for Pro Forma Presentation

The unaudited pro forma condensed combined financial information related to the merger is presented as of and for the six months ended June 30, 2007 and the unaudited pro forma combined income statement for the year ended December 31, 2006. The pro forma adjustments consist of the expected purchase price adjustments necessary to combine Susquehanna and Community, including:

Community shareholders will receive for their shares of Community common stock

• $34.00 in cash for each share of Community common stock; or

• 1.48 shares of Susquehanna common stock for each share of Community common stock; or

• a combination of such cash and shares of Susquehanna common stock.

The aggregate amount of cash consideration to be paid to Community shareholders in the merger will be calculated as follows:

• the aggregate amount of cash consideration available for Community shareholders will equal the product of $34.00 multiplied by 10% of the sum of (i) the outstanding shares of Community common stock and (ii) the outstanding Community stock options on the third trading day prior to the effective date of the merger; and

• this amount then will be reduced by the aggregate amount of cash to be paid by Susquehanna for cancellation of outstanding Community stock options.

The merger will be accounted for using the purchase method of accounting. Accordingly, Susquehanna’s cost to acquire Community will be allocated to the assets (including identifiable intangible assets) and liabilities of Community at their respective fair values on the date the merger is completed.

The unaudited pro forma condensed combined financial information includes estimated adjustments to record the assets and liabilities of Community at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of Community’s tangible, and identifiable intangible, assets and liabilities as of the completion date. Accordingly, the final purchase accounting adjustments and restructuring charges may be materially different from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets and other items of Community as compared to the information shown in this document may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities.

Certain amounts in the historical consolidated financial statements of Community have been reclassified to conform to Susquehanna’s historical financial information presentation. The unaudited pro forma condensed combined financial information presented in this document does not necessarily indicate the results of operations or the combined financial position that would have resulted had the merger actually been completed at the beginning of the applicable period presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined company.

Note 2. Pro Forma Adjustments

The unaudited pro forma condensed combined financial information for the merger includes the pro forma balance sheet as of June 30, 2007 assuming the merger was completed on June 30, 2007. The unaudited pro forma combined condensed income statements for the year ended December 31, 2006 and the six months ended June 30, 2007 give effect to the merger as if the merger had been completed January 1, 2006 and January 1, 2007, respectively.

				June 30, 2007
				(dollars in thousands except per share data)
Purchase Price:
Purchase Price Assigned to Stock:
Shares exchanged for stock		22,766
Exchange ratio		1.48
Susquehanna common stock to be issued		33,694
New Susquehanna common stock issued		33,694
Average purchase price per Susquehanna common share	$	22.45
Purchase price assigned to shares exchanged for stock				$	756,421
Purchase Price Assigned to Cash:
Shares exchanged for cash		2,040
Cash purchase price per Community common share	$	34.00
Purchase price assigned to shares exchanged for cash				$	69,346
Purchase price assigned to options cashed out					14,993
Transaction costs					56,215
Total Purchase Price				$	896,975
Net Assets Acquired:
Community shareholders’ equity		517,193
Community goodwill and intangibles		(279,962	)
Estimated adjustments to reflect assets acquired at fair value:
Investment securities		(670	)
Loans and leases		(32,416	)
Core deposit intangible		41,476
Customer list intangibles		4,478
Covenant to not compete intangible		6,096
Mortgage servicing rights		826
Bank premises & furniture, fixtures and equipment		12,666
Estimated adjustments to reflect liabilities acquired at fair value:
Time deposits		(3,581	)
FHLB borrowings		4,765
Junior subordinated debt		768
Deferred tax liability		9,886
					281,525
Goodwill resulting from merger				$	615,450

The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:

(A) Estimated proceeds from a $100 million trust preferred securities debt offering by Susquehanna. The offering is anticipated to occur during the fourth quarter of 2007. Related interest expense is computed at 7.65% per annum.

(B) To record the purchase price for the settlement of 90% of the Community shares exchanged for Susquehanna common stock and 10% of Community common shares settled for cash.

(C) Cash outlays for payment of stock options, net of deferred tax benefits. Related interest income lost is computed at 5.25% per annum.

(D) Adjustment to eliminate Community’s historical shareholders’ equity.

(E) `To eliminate Community’s historical goodwill and other intangible assets, adjustment to reverse the amortization expense of Community’s other intangible assets, and to record excess purchase price over historical tangible equity.

(F) To record the fair value of Community’s core deposit intangible, and adjustment to amortize the new core deposit intangible over a ten year period.

(G) To record the fair value of other Community intangible assets including customer intangibles related to Community’s insurance and asset management businesses and originated mortgage servicing rights, and adjustments to amortize these other intangibles over a ten year period.

(H) Fair value adjustments for held to maturity investments, the reclass of available for sale gain position to an amortizing premium, and related amortization over estimated life of the investments.

(I) Fair value adjustments for fixed-rate loans and related amortization over estimated life of the loans. Management reviewed the Community loan portfolio and allowance for loan losses and determined that no other adjustments were material.

(J) Fair value adjustments for non-core deposits and related amortization over estimated life of the deposits.

(K) Fair value adjustments for long-term borrowings and trust preferred securities and related amortization over estimated life of the instruments.

(L) Fair value adjustment for owned premises and related depreciation expense over the remaining useful life.

(M) To record a merger-related accrual for the pre-tax estimate of transaction costs. Such expenses include fees related to accounting, legal and investment banker services, severance, contract cancellations and third party data processing costs. Related interest income lost is computed at 5.25% per annum on the tax effected transaction costs.

(N) Adjustment to reclassify Community’s net deferred tax asset to the combined net deferred tax liability.

(O) Adjustment to record the net deferred tax impact arising from adjustments to record fair values of assets and liabilities and impact related to merger transaction costs. The tax effect of the pro forma adjustments employed Susquehanna’s incremental tax rate of 35%.