<Page>1

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ______)

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-12

PENSECO FINANCIAL SERVICES CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:
N/A
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
- -------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- -------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- -------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
N/A
- -------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
- -------------------------------------------------------------------------------
(3) Filing Party:
N/A
- -------------------------------------------------------------------------------
(4) Date Filed:
N/A
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<Page>2

PENSECO FINANCIAL SERVICES CORPORATION
150 NORTH WASHINGTON AVENUE
SCRANTON, PENNSYLVANIA 18503

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 2009

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Penseco
Financial Services Corporation will be held at 2:00 p.m., local time, on
Tuesday, May 5, 2009 at the Hilton Scranton and Conference Center, 100 Adams
Avenue, Scranton, Pennsylvania for the following purposes:

1. To elect four directors of the Class of 2013 to each serve for
four-year terms and until their successors are duly elected and
qualified and to elect one director to the Class of 2012 to serve
for a three-year term or until his successor is duly elected and
qualified;

2. To amend the Company's Bylaws to (i) provide that the number of
Company directors shall be fixed from time to time by resolution of
the Board of Directors; (ii) eliminate the restriction that the
Company's Board of Directors cannot increase the size of the Board
by more than two directors in any one year; and (iii) provide that
directors appointed to fill a newly created vacancy on the Board of
Directors may serve until the remainder of the term to which they
are appointed rather than until the next annual meeting of
shareholders;

3. To ratify the selection of McGrail, Merkel, Quinn & Associates as
our independent registered public accounting firm for fiscal year
2009; and

4. To transact such other business as may properly come before the
annual meeting or any adjournment or postponement thereof.

NOTE: The Board of Directors is not aware of any other business to come
before the meeting.

Shareholders of record of the common stock of Penseco Financial Services
Corporation at the close of business on February 27, 2009 are entitled to vote
at the meeting and any adjournment or postponement of the meeting. A list of
shareholders entitled to vote at the annual meeting will be available at our
offices at 150 North Washington Avenue, Scranton, Pennsylvania, for a period of
five days prior to the annual meeting and will also be available at the annual
meeting.

/s/ Craig W. Best

Craig W. Best
President and Chief Executive Officer

April 6, 2009
Scranton, Pennsylvania

IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.

-----------------------------------------------

<Page>3

PENSECO FINANCIAL SERVICES CORPORATION
- -------------------------------------------------------------------------------
PROXY STATEMENT
- -------------------------------------------------------------------------------

GENERAL INFORMATION

This proxy statement is being furnished in connection with the
solicitation of proxies beginning on or about April 6, 2009 by the Board of
Directors of Penseco Financial Services Corporation ("Penseco" or the
"Company"), a Pennsylvania business corporation headquartered at 150 North
Washington Avenue, Scranton, Pennsylvania 18503, to be used at the Company's
Annual Meeting of Shareholders.

Penseco is the holding company for Penn Security Bank and Trust Company
(the "Bank").

The Annual Meeting will be held at the Hilton Scranton and Conference
Center, 100 Adams Avenue, Scranton, Pennsylvania on Tuesday, May 5, 2009 at 2:00
p.m., local time.

We intend to mail this proxy statement and the enclosed proxy card to
shareholders of record on or about April 6, 2009.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 5, 2009

This proxy statement, the enclosed proxy card and the Company's 2008
Annual Report to Shareholders are available at http://www.cfpproxy.com/6609.
----------------------------

On this website, the Company also posts the Company's 2008 Annual Report
on Form 10-K, as filed with the U.S. Securities and Exchange Commission,
including the Company's 2008 audited consolidated financial statements.

INFORMATION ABOUT VOTING

WHO CAN VOTE AT THE MEETING

You are entitled to vote your Penseco Financial Services Corporation
common stock you owned as of the close of business on February 27, 2009. As of
the close of business on February 27, 2009, there were 2,148,000 shares of
Company common stock outstanding.

OWNERSHIP OF SHARES; ATTENDING THE MEETING

You may own shares of Penseco in one of the following ways:

o Directly in your name as the shareholder of record;

o Indirectly through a broker, bank or other holder of record in
"street name"; or

o Indirectly in the Penn Security Bank and Trust Company Employee
Stock Ownership Plan (the "ESOP").

If your shares are registered directly in your name, you are the holder of
record of these shares and we are sending these proxy materials directly to you.
As the holder of record, you have the right to give your proxy directly to us or
to vote in person at the annual meeting.

<Page>4

If you hold your shares in street name, your broker, bank or other holder
of record is sending these proxy materials to you. As the beneficial owner, you
have the right to direct your broker, bank or other holder of record how to vote
by filling out a voting instruction form that accompanies your proxy materials.
Your broker, bank or other holder of record may allow you to provide voting
instructions by telephone or by the Internet. Please see the voting instruction
form provided by your broker, bank or other holder of record that accompanies
this proxy statement. If you hold your shares in street name, you will need
proof of ownership to be admitted to the meeting. A recent brokerage statement
or letter from a bank or broker are examples of proof of ownership. If you want
to vote your shares of Penseco common stock held in street name in person at the
annual meeting, you must obtain a written proxy in your name from the broker,
bank or other holder of record of your shares.

QUORUM AND VOTE REQUIRED

QUORUM. We will have a quorum present and will be able to conduct the
business of the annual meeting if the holders of a majority of the outstanding
shares of common stock entitled to vote are present at the meeting, either in
person or by proxy.

VOTES REQUIRED FOR PROPOSALS. At this year's annual meeting, shareholders
will elect four directors to each serve for a term of four years and one
director to serve for a term of three years. In voting on the election of
directors, you may vote in favor of all the nominees for director, withhold
votes as to all nominees, or withhold votes as to specific nominees. With
respect to the election of directors, you are entitled to one vote for each
share you held on the record date, except that you have cumulative voting rights
and are entitled to cast in the aggregate a number of votes equal to the number
of shares owned multiplied by the number of directors to be elected and to cast
such votes for one candidate or to distribute such votes among two or more
candidates. Shareholders may exercise their right to cumulative voting by
attaching to their proxy card instructions indicating how many votes their proxy
should give to each candidate. The candidates receiving the highest number of
votes up to the number of directors to be chosen shall be elected. The proxy
holders named on the accompanying proxy will vote for the Board's nominees
unless the shareholder has withheld his or her vote from some or all of the
nominees. The proxy holders may exercise discretionary authority to cumulate
votes in the election of directors by distributing the votes they are authorized
to cast among the Board's nominees in order to elect the largest possible number
of them and, to the extent possible, in order to cast the same number of votes
for each Board nominee.

In voting on the proposal to amend the Company's Bylaws, you may vote in
favor of the proposal, vote against the proposal or abstain from voting. To
approve the amendment to the Company's Bylaws, the affirmative vote of a
majority of the Company's outstanding shares is required. For this proposal, you
are entitled to one vote for each share of common stock you held as of the
record date.

In voting on the proposal to ratify the appointment of the independent
registered public accounting firm, you may vote in favor of the proposal, vote
against the proposal or abstain from voting. To ratify the appointment of the
independent registered public accounting firm, the affirmative vote of a
majority of the votes represented at the annual meeting is required. For this
proposal, you are entitled to one vote for each share of common stock you held
as of the record date.

ROUTINE AND NON-ROUTINE PROPOSALS. The rules of the New York Stock
Exchange determine whether proposals presented at shareholder meetings are
routine or non-routine. If a proposal is routine, a broker, bank or other entity
holding shares for an owner in street name may vote on the proposal without
receiving voting instructions from the owner. If a proposal is non-routine, the
broker, bank or other holder of record may vote on the proposal only if the
owner has provided voting instructions. A broker non-vote occurs when a broker,
bank or other entity holding shares for an owner in street name is unable to
vote on a particular proposal and has not received voting instructions from the
owner. The election of directors, the amendment of the Company's Bylaws and the
ratification of the appointment of the independent registered public accounting
firm for 2009 are currently considered routine matters.

HOW WE COUNT VOTES. If you return valid proxy instructions or attend the
meeting in person, we will count your shares for purposes of determining whether
there is a quorum, even if you abstain from voting. Broker non-votes, if any,
also will be counted for purposes of determining the existence of a quorum.

<Page>5

In the election of directors, votes that are withheld will have no effect
on the outcome of the election. In counting votes on the proposal to amend the
Company's Bylaws, abstentions will count as a vote against the proposal. In
counting votes on the proposal to ratify the appointment of the Company's
independent registered public accounting firm for 2009, abstentions will have no
effect on the outcome of the proposal.

VOTING BY PROXY

The Company's Board of Directors is sending you this proxy statement to
request that you allow your shares of Company common stock to be represented at
the annual meeting by the persons named on the enclosed proxy card. All shares
of Company common stock represented at the annual meeting by properly executed
and dated proxy cards will be voted according to the instructions indicated on
the proxy card. If you sign, date and return a proxy card without giving voting
instructions, your shares will be voted as recommended by our Board of
Directors.

The Board of Directors recommends that you vote:

o FOR each of the nominees for director;

o FOR the amendment of the Company's Bylaws; and

o FOR the ratification of the appointment of McGrail, Merkel, Quinn &
Associates as the Company's independent registered public accounting
firm for fiscal year 2009.

If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named on the proxy card will use
their judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the meeting in order to solicit additional proxies. We do
not know of any other matters to be presented at the annual meeting.

You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Secretary of the
Company in writing before your common stock has been voted at the annual
meeting, deliver a later dated proxy, or attend the meeting and vote your shares
in person. Attendance at the annual meeting will not itself constitute
revocation of your proxy.

PARTICIPANTS IN THE ESOP

If you participate in the ESOP, you will receive a single voting
instruction card for the ESOP that reflects all shares you may vote under the
plan. Under the terms of the ESOP, the ESOP trustee votes all shares held by the
ESOP, but each ESOP participant may direct the trustee how to vote the shares of
common stock allocated to his or her account. The ESOP trustee will not vote
shares for which no voting instructions are received.

CORPORATE GOVERNANCE

GENERAL

We periodically review and revise our corporate governance policies and
procedures to ensure that we meet the highest standards of ethical conduct,
report results with accuracy and transparency and maintain full compliance with
the laws, rules and regulations that govern our operations. As part of this
periodic corporate governance review, the Board of Directors reviews and adopts
best corporate governance policies and practices for the Company.

The Board of Directors, which is elected by the shareholders, is our
ultimate decision-making body, except with respect to those matters reserved to
the shareholders. The Board selects our senior management team, which is charged
with the conduct of our business. The Board acts as an advisor and counselor to
senior management and ultimately monitors its performance.

<Page>6

CORPORATE GOVERNANCE GUIDELINES

Although our common stock is traded on the over-the-counter market and is
not presently listed on The Nasdaq Stock Market ("Nasdaq") or on a national
securities exchange, and as such is not subject to the corporate governance
requirements of Nasdaq, the New York Stock Exchange or otherwise, we firmly
believe that sound corporate governance is in the best interests of the Company
and our stakeholders, including our shareholders and employees. To that end, the
Board of Directors has adopted a corporate governance structure that is modeled
upon that required by Nasdaq's listing standards.

The operation and mission of the Board is embodied in our Board Guidelines
on Corporate Governance (the "Guidelines"), a copy of which is posted on our
website (www.pennsecurity.com). The Guidelines were adopted by the Board to
serve as a framework for its oversight responsibilities. Among other matters,
the Guidelines:

o Reinforce that the mission of the Board of Directors is to represent
the shareholders' interests in our success through the Board of
Director's active oversight and monitoring of management;

o Provide that the Board of Directors shall consist of at least a
majority of "independent" directors;

o Confirm that the Board of Directors shall maintain standing committees,
including an Audit Committee, Compensation and Benefits Committee, and
Nominating and Corporate Governance Committee, and that each of such
committees will consist solely of independent directors;

o Provide for an annual evaluation by the Nominating and Corporate
Governance Committee of the performance and procedures of the Board,
with the goal of increasing the effectiveness of the Board of
Directors; and

o Provide that the independent members of the Board of Directors shall
periodically conduct executive sessions without the presence of any of
our employees.

COMMITTEES OF THE BOARD OF DIRECTORS

The following table identifies our standing committees and their members
at December 31, 2008. All members of each committee are independent in
accordance with Nasdaq's listing requirements. The Board's Audit, Compensation
and Benefits and Nominating and Corporate Governance Committees each operate
under a written charter that is approved by the Board of Directors. Each
committee reviews and reassesses the adequacy of its charter at least annually.
The charters of all three committees are available on our website
(www.pennsecurity.com).

<Page>7

NOMINATING
AND
COMPENSATION CORPORATE
AUDIT AND BENEFITS GOVERNANCE
DIRECTOR COMMITTEE COMMITTEE COMMITTEE
- ------------------------------------------ --------- ------------ ----------

Craig W. Best............................
Edwin J. Butler.......................... X * X
Richard E. Grimm.........................
Russell C. Hazelton...................... X
D. William Hume.......................... X *
James G. Keisling........................ X X
P. Frank Kozik........................... X X
Robert W. Naismith....................... X *
James B. Nicholas........................ X
Emily S. Perry........................... X X
Sandra C. Phillips....................... X
Otto P. Robinson, Jr. ...................
Steven L. Weinberger..................... X X

Number of Meetings in 2008............... 7 16 2
</Table>
- ------------------
* Denotes Chairperson

AUDIT COMMITTEE. The Audit Committee assists the Board in undertaking and
fulfilling its oversight responsibilities in connection with: (i) reviewing the
financial reports and other financial information we prepare for submission to
any governmental or regulatory body or the public and monitoring the integrity
of such financial reports; (ii) reviewing our systems of internal controls
established for finance, accounting, legal compliance and ethics; (iii)
reviewing our accounting and financial reporting processes generally and the
audits of our financial statements; (iv) monitoring compliance with legal
regulatory requirements; (v) monitoring the independence and performance of our
independent registered public accounting firm; and (vi) providing for effective
communication between the Board, our senior and financial management and our
independent registered public accounting firm.

The Board of Directors has determined that the Audit Committee does not
have an "audit committee financial expert" as that term is defined in the
Securities and Exchange Commission's rules and regulations. However, the Board
believes that each of the members of the Audit Committee has demonstrated that
he is capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. Because
the Board believes that the current members of the Audit Committee are qualified
to carry out all of the duties and responsibilities of our Audit Committee, the
Board does not believe that it is necessary at this time to actively search for
an outside person to serve on the Board who would qualify as an audit committee
financial expert.

COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee is responsible for: (i) reviewing and approving compensation policies
and practices for our executive officers; (ii) coordinating the Board of
Director's role in establishing performance criteria for executive officers and
evaluating their performance annually; (iii) reviewing and recommending to the
Board of Directors the annual salary, bonus, stock options and other benefits
for our executive officers, including the President and Chief Executive Officer;
and (iv) reviewing and recommending to the Board of Directors new executive
compensation programs and reviewing annually the operation of our executive
compensation programs to determine whether they are properly coordinated and
achieving their intended purpose.

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and
Corporate Governance Committee oversees all aspects of our corporate governance
functions, including (i) recommending, for the Board of Director's selection,
nominees for director; (ii) identifying qualified individuals to become members
of the Board of Directors; and (iii) assisting the Board of Directors in
determining the composition of the Board of Directors and its committees.

<Page>8

DIRECTOR COMPENSATION

The Company's outside directors are compensated through a combination of
retainers and meeting fees. Directors who are also employees of the Company or
Bank do not receive additional compensation for their service on the Board of
Directors. The level and mix of director compensation are reviewed by the
Compensation and Benefits Committee on a periodic basis to ensure consistency
with the objectives of the Company's overall compensation philosophy. The
following table sets forth information concerning the compensation received by
individuals who served as non-employee directors during the year ended December
31, 2008. During 2008, directors did not receive any perquisites.

FEES EARNED OR ALL OTHER
NAME PAID IN CASH ($) COMPENSATION ($) TOTAL ($)
- ------------------------------ ----------------- ------------------ --------------

Edwin J. Butler............ $ 49,150 $ -- $ 49,150
Russell C. Hazelton........ 34,100 -- 34,100
D. William Hume............ 48,700 -- 48,700
James G. Keisling.......... 46,600 -- 46,600
P. Frank Kozik............. 37,500 -- 37,500
Robert W. Naismith, Ph.D... 40,100 -- 40,100
James B. Nicholas.......... 41,500 -- 41,500
Emily S. Perry............ 43,700 -- 43,700
Sandra C. Phillips......... 35,700 -- 35,700
Otto P. Robinson, Jr....... 48,100 24,000 (1) 72,100
Steven L. Weinberger....... 33,800 -- 33,800
</Table>
- ----------------------
(1) Represents a retainer received in 2008 for services as General Counsel
for the Company and the Bank.

Cash Retainer and Meeting Fees for Non-Employee Directors. The following
table sets forth the applicable retainers and fees that will be paid to our
non-employee directors for their service on our Board of Directors during 2009.

Annual Retainer........................................ $ 15,000

Fee per Board Meeting: (1)
Regular Meeting.................................... 1,000
Special Meeting.................................... 1,000

Fee per Committee Meeting (2).......................... 350
----------------------
(1) The Chairman of the Board receives a fee of $1,250 per Board meeting.
(2) The Chairman of the Audit Committee receives a fee of $550 per
Committee meeting and the Chairman of the Compensation and Benefits
Committee and the Chairman of the Nominating and Governance Committee
each receive a fee of $450 per Committee meeting.

MEETINGS OF THE BOARD OF DIRECTORS

During 2008, the Board of Directors held 16 regular meetings. Each of the
directors attended at least 75% of the total number of meetings of the Board and
the total number of meetings held by all committees of the Board on which he or
she served.

DIRECTOR ATTENDANCE AT THE ANNUAL MEETING

We expect our directors to attend annual meetings of shareholders. All
directors attended the 2008 Annual Meeting of Shareholders.

<Page>9

EMPLOYEE CODE OF ETHICS

To aid in its oversight of our management and employees, the Board of
Directors has adopted a Code of Ethical Conduct applicable to all of our
employees, including our principal executive officer and principal accounting
officer, and the employees of the Bank, our wholly owned subsidiary. The Code of
Ethical Conduct is designed to enumerate the expectations of the Board of
Directors for the conduct of our employees in carrying out our mission. The Code
of Ethical Conduct requires that such individuals carry out their jobs in an
honest and ethical manner, in compliance with laws, avoiding conflicts of
interest, while implementing and maintaining our public communication and
disclosure reporting systems. A copy of the Code of Ethical Conduct is posted on
our website (www.pennsecurity.com).

In addition to the compliance reporting mechanisms set forth in the Code
of Ethical Conduct, the Audit Committee of the Board has also implemented
procedures for the receipt, retention and treatment of complaints received by us
regarding accounting, internal accounting controls and auditing matters,
including a mechanism for the confidential, anonymous submission by our
employees of concerns regarding questionable accounting or auditing matters.

<Page>10

STOCK OWNERSHIP

No shareholder owns of record or is known by the Board of Directors to be
the beneficial owner of more than 5% of our outstanding common stock.

The following table sets forth the information concerning the number of
shares of Company common stock beneficially owned as of February 27, 2009 by
each director or nominee for director, by the executive officers named in the
Summary Compensation Table set forth elsewhere herein and by all directors,
nominees for director and executive officers as a group. To the Company's
knowledge, except as set forth in the footnotes to this table and subject to
applicable community property laws, each person named in the table has sole
voting and investment power with respect to the shares set forth opposite his or
her name.

AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP COMMON STOCK
NAME (1) OUTSTANDING(2)
- --------------------------------- ------------ ---------------

Craig W. Best.................... 2,668 (3) *
Edwin J. Butler.................. 21,356 (4) *
Stanley H. Cohen................. 466 (5) *
Richard E. Grimm................. 2,728 (6) *
Russell C. Hazelton.............. 14,876 (7) *
D. William Hume.................. 5,260 (8) *
James G. Keisling................ 30,717 (9) 1.4
Andrew A. Kettel, Jr............. 3,428 (10) *
P. Frank Kozik................... 21,004 (11) *
Robert W. Naismith............... 32,817 (12) 1.5
James B. Nicholas................ 9,550 (13) *
Emily S. Perry................... 2,690 (14) *
Sandra C. Phillips............... 74,460 (15) 3.5
Otto P. Robinson, Jr............. 65,586 (16) 3.4
Patrick Scanlon.................. 2,409 (17) *
Steven L. Weinberger............. 1,800 (18) *
Joseph G. Cesare, M.D............ -- (19) *
Robert J. Mellow................. -- (19) *

All Directors and Executive
Officers as a Group
(24 individuals)................. 298,115 13.9%

- ------------------------
* Less than 1% of the outstanding shares of Common Stock or less than 1% of
the voting power.
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and may include
securities owned by or for the individual's spouse and minor children and
any other relative who has the same home, as well as securities as to which
the individual has, or shares, voting or investment power or has the right
to acquire beneficial ownership of within 60 days after February 27, 2009.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Based on 2,148,000 shares of Company common stock outstanding and entitled
to vote as of the close of business on February 27, 2009.
(3) Includes 2,500 shares held in trust accounts and 167 shares held by Penn
Security Bank and Trust Company under its Employee Stock Ownership Plan in
which Mr. Best has a non-vested interest.
(4) Includes 1,721 shares in a self-directed IRA.
(5) Includes 70 shares owned by Mr. Cohen's wife and 40 shares held by Penn
Security Bank and Trust Company under its Employee Stock Ownership Plan in
which Mr. Cohen has a non-vested interest
(6) Includes 780 shares owned jointly by Mr. Grimm and his wife and 1,944
shares held by Penn Security Bank and Trust Company under its Employee
Stock Ownership Plan in which Mr. Grimm has a vested interest.

<Page>11

(7) Includes 8,724 shares owned jointly by Mr. Hazelton and his wife, 800
shares owned by Mr. Hazelton's wife and 960 shares in a self-directed IRA.
(8) Includes 1,989 shares owned jointly by Mr. Hume and his wife, 100 shares in
a self-directed IRA owned by Mr. Hume's wife and 3,171 shares in a
self-directed IRA.
(9) Includes 1,400 shares owned jointly by Mr. Keisling and his wife, 2,100
shares owned by Mr. Keisling's wife, 15,544 shares in a self-directed IRA
and 10,973 shares held in a custodial account.
(10) Includes 240 shares owned jointly by Mr. Kettel, his brother and his father
and 3,181 shares held by Penn Security Bank and Trust Company under its
Employee Stock Ownership Plan in which Mr. Kettel has a vested interest.
(11) Includes 14,596 shares owned jointly by Mr. Kozik and his wife, 2,400
shares in a self-directed IRA and 3,888 shares held jointly with his
brother.
(12) Includes 19,500 shares owned jointly by Dr. Naismith and his wife, 300
shares held by Dr. Naismith's wife and 13,017 shares in self-directed IRA.
(13) Includes 1,150 shares owned by Mr. Nicholas's mother, for which Mr.
Nicholas has power-of-attorney, 5,300 shares in a self-directed IRA, 600
shares owned by Mr. Nicholas's wife and 2,500 shares held in trust
accounts.
(14) Includes 1,480 shares owned jointly by Mrs. Perry, her husband and her
children and 790 shares in a self-directed IRA.
(15) These shares are held in trust accounts.
(16) Includes 9,456 shares owned jointly by Mr. Robinson and his wife and 2,888
shares owned by Mr. Robinson's wife and children.
(17) These shares are held by Penn Security Bank and Trust Company under its
Employee Stock Ownership Plan in which Mr. Scanlon has a vested interest.
(18) Includes 750 shares held in trust accounts and 950 shares in a
self-directed IRA.
(19) Dr. Cesare and Mr. Mellow are former directors of Old Forge Bank who were
appointed to the Board of Directors of the Company on April 1, 2009 in
connection with the Company's acquisition of Old Forge Bank. Neither
Dr. Cesare nor Mr. Mellow owned any shares of Company common stock as of
the February 27, 2009 record date.

<Page>12

ITEMS TO BE VOTED ON BY SHAREHOLDERS

PROPOSAL 1 -- ELECTION OF DIRECTORS

The Company's Board of Directors currently consists of fifteen members.
During the fiscal year ended December 31, 2008, the Company's Board of Directors
consisted of thirteen members. However, effective April 1, , 2009, the Company
appointed Joseph G. Cesare, M.D. and Robert J. Mellow to its Board of Directors
in connection with its acquisition of Old Forge Bank, thus increasing the size
of the Board from thirteen to fifteen. Dr. Cesare and Mr. Mellow are former
directors of Old Forge Bank. For more information relating to the changes to the
Company's Board of Directors in connection with the Company's acquisition of Old
Forge Bank, see "Item 2--Amendment of Bylaws."

All of the Company's directors are independent under the listing standards
of the Nasdaq Stock Market, except for Craig W. Best, Otto P. Robinson, Jr. and
Richard E. Grimm. The Board is divided into four classes, as nearly equal in
number as possible, and identified by the year in which the term of such class
expires, i.e., the Class of 2009, the Class of 2010, the Class of 2011 and the
Class of 2012. The Class of 2013 directors elected at this annual meeting will
serve for four-year terms. The Classes of 2010, 2011 and 2012 will continue to
serve for one year, two years and three years, respectively, in order to
complete their four-year terms.

The Board of Directors has fixed the number of directors in the Class of
2013 at four and has nominated Richard E. Grimm, James B. Nicholas, Sandra C.
Phillips and Robert J. Mellow for election as Class of 2013 directors to hold
office for four-year terms to expire at the 2013 Annual Meeting of Shareholders
or when their successors are duly elected and qualified. The Board of Directors
has also nominated Joseph G. Cesare for election as a director for the Class of
2012 to hold office for a three-year term to expire at the 2012 Annual Meeting
of Shareholders or when his successor is duly elected and qualified. All of the
Board's nominees are currently members of our Board of Directors.

Unless you indicate on your proxy card that your shares should not be
voted for certain nominees, the Board of Directors intends that the proxies
solicited by it will be voted for the election of all of the Board's nominees.
If any nominee is unable to serve, the persons named on the proxy card would
vote your shares to approve the election of any substitute proposed by the Board
of Directors. Alternatively, the Board may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee might be unable to serve.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF ITS
NOMINEES.

Information regarding the Board of Directors' nominees and the directors
continuing in office is provided below.

<Table>
<Caption>
NOMINEES FOR ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------------------
DIRECTORSHIP
AGE AS OF OTHER
OF PRINCIPAL OCCUPATION DIRECTOR PUBLIC
NAME 2/27/2009 FOR PAST FIVE YEARS SINCE COMPANIES
- -------------------------------------------------------------------------------------------

Richard E. Grimm 61 Executive Vice-President 1994 None
and Treasurer. Mr. Grimm
has served the Bank as
Executive Vice-President
and Cashier since 1994.
- -------------------------------------------------------------------------------------------
James B. Nicholas 57 Mr. Nicholas is President 1981 None
of D.G. Nicholas Co.,
Scranton, PA, a wholesale
auto parts company
- -------------------------------------------------------------------------------------------
Sandra C. Phillips 66 Ms. Phillips has served on 1994 None
the Abington Advisory Board
of Penn Security Bank and Trust
Company since 1984. She is
active in various community
associations and organizations.
- -------------------------------------------------------------------------------------------
</Table>
10

<Page>13

Joseph G. Cesare, M.D. 71 Dr. Cesare is an orthopedic 2009 None
surgeon in Scranton,
Pennsylvania. He is President
of Scranton Orthopedic
Specialists and Medical Arts
Realty.
- -------------------------------------------------------------------------------------------
Robert J. Mellow 66 Mr. Mellow is a State 2009 None
Senator for the
Commonwealth of
Pennsylvania. He is also
a licensed accountant and
insurance broker.
- -------------------------------------------------------------------------------------------
</Table>

DIRECTORS CONTINUING IN OFFICE

- ------------------------------------------------------------------------------------------------------------------
TERM EXPIRES AT
AGE AS ANNUAL MEETING DIRECTORSHIP OF
OF PRINCIPAL OCCUPATION DIRECTOR OF SHAREHOLDERS OTHER PUBLIC
NAME 2/27/2009 FOR PAST FIVE YEARS SINCE TO BE HELD IN COMPANIES
- ------------------------------------------------------------------------------------------------------------------

Craig W. Best 48 President and Chief 2006 2010 None
Executive Officer.
Previously, Mr. Best
was Chief Operating
Officer of First
Commonwealth Bank, a
$6.2 billion financial
services institution
headquartered in
Indiana, PA.
- ------------------------------------------------------------------------------------------------------------------
D. William Hume 82 Chairman of the Board 1991 2010 None
of Directors. Mr. Hume
retired in January 1999
and was Senior Vice-President
and Assistant Secretary of
the Bank at that time.
- ------------------------------------------------------------------------------------------------------------------
James G. Keisling 61 Mr. Keisling is Treasurer of 1984 2010 None
Northeast Architectural
Products, Inc., manufacturers
of hardscape masonry products.
Mr. Keisling was formerly
Chairman of the Board of CPG
International, Inc. and Vycom
Corp., manufacturers of
plastic sheets products.
- ------------------------------------------------------------------------------------------------------------------
Otto P. Robinson, Jr. 70 Mr. Robinson retired as of 1967 2011 None
January 2, 2006 and was
President, Chief Executive
Officer and General Counsel
of the Bank at the time. Mr.
Robinson serves as General
Counsel to the Bank (excluding
corporate governance affairs)
and continues his private
practice of law.
- ------------------------------------------------------------------------------------------------------------------
Edwin J. Butler 82 Mr. Butler retired in 1977 2011 None
September 1991 and
was Executive
Vice-President and
Cashier of the Bank
at that time.
- ------------------------------------------------------------------------------------------------------------------
P. Frank Kozik 69 Secretary. Mr. Kozik 1981 2011 None
is President and
Chief Executive
Officer of Scranton
Craftsmen, Inc.,
Throop, PA, a
corporation dealing in
miscellaneous iron, pre-cast
concrete products and
ready mixed concrete.

Steven L. Weinberger 61 Mr. Weinberger is President 1999 2011 None
of G. Weinberger Company, Old
Forge, PA, a mechanical
contractor specializing in
commercial and industrial
construction.
- ------------------------------------------------------------------------------------------------------------------
</Table>

<Page>14

Russell C. Hazelton 74 Mr. Hazelton is a retired 1977 2012 None
Captain for TransWorld
Airlines.
- ------------------------------------------------------------------------------------------------------------------
Robert W. Naismith, Ph.D. 64 Dr. Naismith has served as 1988 2012 None
Chairman and Chief Executive
Officer of Roosevelt Capital
Partners, LLC since January
2008. Prior to that time,
Dr. Naismith was Chairman
and Chief Executive Officer
of Life Science Analytics, Inc.
- ------------------------------------------------------------------------------------------------------------------
Emily S. Perrry 69 Ms. Perry is a retired 1983 2012 None
Insurance Account Executive
and a community volunteer.
- ------------------------------------------------------------------------------------------------------------------
</Table>

PROPOSAL 2 -- AMENDMENT OF BYLAWS

In connection with Company's acquisition of Old Forge Bank, the Company's
Board of Directors has unanimously approved, declared advisable and recommended
to shareholders the adoption of certain amendments to the Company's Bylaws to
(i) provide that the number of Company directors shall be fixed from time to
time by resolution of the Board of Directors; (ii) eliminate the restriction
that the Company's Board of Directors cannot increase the size of the Board by
more than two directors in any one year; and (iii) provide that directors
appointed to fill a newly created vacancy on the Board of Directors may serve
until the remainder of the term to which they are appointed rather than until
the next annual meeting of shareholders.

THE BOARD OF DIRECTORS BELIEVES THAT THE ADOPTION OF THE PROPOSED
AMENDMENTS IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
RECOMMENDS THAT YOU VOTE "FOR" THE ADOPTION OF THE PROPOSED AMENDMENTS.

PROPOSED AMENDMENTS. Currently, Article III, Sections 3.1 and 3.3 of the
Company's Bylaws read in their entirety as follows:

Section 3.1. The business of the Corporation shall be managed by a
-----------
Board of Directors not less than five or more than fifteen in
number. There shall be four classes of Directors, each class shall
be as nearly equal in number as possible. At the initial meeting of
shareholders, the exact number of Directors for each class shall be
fixed by resolution of the shareholders. Directors of the first
class will be elected to serve until the first annual meeting.
Directors of the second class shall be elected to serve until the
second annual meeting. Directors of the third class shall be elected
to serve until the third annual meeting. Directors of the fourth
class shall be elected to serve until the fourth annual meeting. At
the first annual meeting of the shareholders and at each annual
meeting held thereafter, the number of Directors of the class whose
terms are to expire shall be elected to serve for a period of four
years. The Board may increase the number of Directors by not more
than two in any one year.

Changes in this provision (providing for classes and staggered terms
for Directors) shall require the affirmative vote of 3/4ths of the
outstanding shares of the Corporation.

Section 3.3. Vacancies on the Board of Directors caused by the
-----------
death, resignation, disqualification or otherwise, of any Director
who was previously

<Page>15

duly elected and qualified, or vacancies resulting from an increase
in the number of Directors, may be filled by the remaining members
of the Board, though less than a quorum, and each person so elected
shall be a Director until the expiration of the term of the Director
who proceeded such person, if applicable, or, if such person was
elected to fill a vacancy resulting from an increase in the number
of Directors, until his successor is elected by the shareholders
and has qualified. Failure of the shareholders to make such election
by the next annual meeting shall result in a reduction in the number
of directors of that class.

The proposed amendments would revise Article III, Sections 3.1 and 3.3 of
the Company's Bylaws to read in their entirety as follows:

Section 3.1. The business of the Corporation shall be managed by a
-----------
Board of Directors. The number of the Corporation's Directors shall
be fixed from time to time by resolution of the Board of Directors.
There shall be four classes of Directors, each class shall be as
nearly equal in number as possible. At each annual meeting of
shareholders, the number of Directors of the class whose terms are
to expire shall be elected to serve for a period of four years.

Changes in this provision (providing for classes and staggered terms
for Directors) shall require the affirmative vote of 3/4ths of the
outstanding shares of the Corporation.

Section 3.3. Vacancies on the Board of Directors caused by the
-----------
death, resignation, disqualification or otherwise, of any Director
who was previously duly elected and qualified, or vacancies
resulting from an increase in the number of Directors, may be filled
by the remaining members of the Board, though less than a quorum,
and each person so elected shall hold office for a term expiring at
the annual meeting of shareholders at which the term of office of
the class for which such person has been chosen expires, and until
his successor has been selected and qualified.

REASONS FOR THE PROPOSED AMENDMENTS. The Agreement and Plan of Merger (the
"Merger Agreement"), dated December 5, 2008, by and among the Company, the Bank
and Old Forge Bank provides that the Company shall cause the number of directors
constituting its entire Board of Directors to be increased to sixteen members
following the Company's acquisition of Old Forge Bank, and shall take all
actions necessary to cause three Old Forge Bank directors to be appointed to the
Company's Board of Directors. On March 24, 2009, in connection with the
acquisition of Old Forge Bank, the Board of Directors of the Company increased
the number of the Company's directors from thirteen to fifteen and, effective
April 1, 2009, appointed Joseph G. Cesare, M.D. and Robert J. Mellow, each a
former director of Old Forge Bank, to the Company's Board of Directors. Mr.
Mellow was appointed to the class of directors whose terms expire in 2013 and
Dr. Cesare was appointed to the class of directors whose terms expire in 2012.
Both Dr. Cesare and Mr. Mellow have been nominated for election at this meeting.

In the event that this proposal is approved by shareholders, the Company's
Board of Directors intends to adopt a resolution fixing the size of the Board of
Directors at sixteen members. Pursuant to the terms of the Merger Agreement,
upon the adoption of such a resolution, the Company intends to appoint Jerry J.
Weinberger, a former director of Old Forge Bank, to the Company's Board of
Directors to fill the vacancy created by the increase in the size of the Board.
Mr. Weinberger, age 63, is President of the law firm of Nogi, Appleton,
Weinberger & Wren, P.C. in Scranton, Pennsylvania. It is currently anticipated
that Mr. Weinberger would be appointed to the class of Company directors whose
terms expire in 2011.

Aside from the Old Forge Bank acquisition, the Company believes that
proposed amendments to the Bylaws will also give the Board of Directors the
flexibility to increase the size of the Board of Directors to meet any
identified needs of the Company in the future. In particular, the Board of
Directors believes that it is desirable to have the flexibility to increase the
size of the Board in the future to allow for appointments of additional
directors who possess skills and abilities that would benefit the Company, its
shareholders and the Board of Directors in

<Page>16

overseeing the business of the Company. Pennsylvania law does not require that
the number of directors be set forth in the Bylaws. Allowing the Board to set
the number of Board members by resolution gives the Board the flexibility to
appoint new directors without having to amend the Bylaws of the Company each
time a new director is appointed.

REQUIRED VOTE AND EFFECTIVENESS. The proposed amendments to the Company's
Bylaws set forth above must be approved by the affirmative vote of a majority of
the Company's outstanding shares and will become effective immediately upon
shareholder approval at the annual meeting.

PROPOSAL 3 -- RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed McGrail,
Merkel, Quinn & Associates, as our independent registered public accounting firm
for 2009. McGrail, Merkel, Quinn & Associates has served as our independent
registered public accounting firm for 2008. Representatives of the firm are
expected to be present at the annual meeting and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF MCGRAIL, MERKEL, QUINN & ASSOCIATES AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2009.

AUDIT FEES. The following table sets forth the fees billed to us for the
fiscal years ending December 31, 2008 and 2007, respectively, by McGrail,
Merkel, Quinn & Associates.

Year Ended December 31,
2008 2007
------------ ------------

Audit Fees (1).......... $138,500 $123,000
Audit-Related Fees (2).. 25,500 23,000
Tax Fees (3)............ 10,500 10,000
All Other Fees (4)...... 12,000 --
-------- --------
Total................... $186,500 $156,500
======== ========

- ----------------
(1) Audit fees consist of fees for professional services rendered for the audit
of our financial statements and review of financial statements included in
our quarterly reports and services normally provided by the independent
registered public accounting firm in connection with statutory and
regulatory filings or engagements.
(2) Audit-related fees consist of fees for audits of employee benefit plans and
student loans.
(3) Tax fees consist of compliance fees for the preparation of original tax
returns. Tax service fees also include fees relating to other tax advice,
tax consulting and planning.
(4) All other fees consist of management services fees related to the review of
the Company's accounting treatment of the impact of the VISA covered
litigation and the Company's pension curtailment.

POLICY ON PRE-APPROVAL OF SERVICES BY THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM. The Audit Committee has adopted policies and procedures
relating to the approval of audit, audit-related, tax services and other
services to be performed by our independent registered public accounting firm.
Pursuant to these policies, all services to be performed by our independent
registered public accounting firm must be approved by the Audit Committee in
advance. During the year ended December 31, 2008, all audit and non-audit
services were approved, in advance, by the Audit Committee in compliance with
these procedures.

<Page>17

REPORT OF AUDIT COMMITTEE

The Audit Committee has reviewed Penseco's audited financial statements as
of and for the year ended December 31, 2008, and met separately with management
and McGrail, Merkel, Quinn & Associates, independent registered public
accountants, to discuss those financial statements. Management has represented
to us that the financial statements were prepared in accordance with accounting
principles generally accepted in the United States of America.

Management has primary responsibility for Penseco's financial statements
and the overall reporting process, including Penseco's system of internal
controls. The independent registered public accountants audit the annual
financial statements prepared by management, express an opinion as to whether
those financial statements present fairly, in all material respects, the
financial position, results of operations and cash flows of Penseco in
conformity with accounting principles generally accepted in the United States of
America and discuss with us their independence and any other matters they are
required to discuss with us or that they believe should be raised with us.

The Audit Committee has received from and discussed with McGrail, Merkel,
Quinn & Associates the written disclosure and the letter required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committee) as adopted by the Public Company Accounting Oversight Board in Rule
3600T. These items relate to the firm's independence from the Company and its
management. The Audit Committee also discussed with McGrail, Merkel, Quinn &
Associates any matters required to be discussed by Statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section
380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors, and that Board has approved, that the audited financial
statements be included in Penseco's Annual Report on Form 10-K for the year
ended December 31, 2008 as filed with the Securities and Exchange Commission.
The Audit Committee has also approved the selection of the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2009.

MEMBERS OF THE AUDIT COMMITTEE OF PENSECO FINANCIAL SERVICES CORPORATION

Edwin J. Butler, Chairman
Russell C. Hazelton
James G. Keisling
P. Frank Kozik
Steven L. Weinberger

COMPENSATION DISCUSSION AND ANALYSIS

OUR COMPENSATION PHILOSOPHY

Our compensation philosophy starts from the premise that the success of
Penseco Financial Services Corporation depends, in large part, on the dedication
and commitment of the people we place in key operating positions to drive our
business strategy. We strive to satisfy the demands of our business model by
providing our management team with incentives tied to the successful
implementation of our corporate objectives. However, we recognize that the
Company operates in a competitive environment for talent. Therefore, our
approach to compensation considers the full range of compensation techniques
that enable us to compare favorably with our peers as we week to attract and
retain key personnel.

We base our compensation decisions on the following principles:

o Meeting the Demands of the Market - Our goal is to compensate our
employees at competitive levels that position us as the employer of
choice among our peers who provide similar financial services in the
markets we serve.

<Page>18

o Driving Performance - We will structure compensation around the
attainment of company-wide, business unit and individual targets that
return positive results to our bottom line.

o Reflecting our Business Philosophy - Our approach to compensation
reflects our values and the way we do business in the communities we
serve.

Our compensation program currently relies on three primary elements: (i)
base compensation or salary; (ii) discretionary cash-based, short-term incentive
compensation; and (iii) long-term incentive compensation pursuant to our 2008
Long-Term Incentive Plan. We believe that we can meet the objectives of our
compensation philosophy by achieving a balance among these elements that is
competitive with our industry peers and creates appropriate incentives for our
management team. To achieve the necessary balance, the Compensation and Benefits
Committee of our Board of Directors has consulted with Robert Jones, an
independent compensation consultant, as well as reviewed survey data for peer
institutions to help us benchmark our compensation program and our financial
performance to our peers. See "Role of Compensation Consultant" and "Peer Group
Analysis."

BASE COMPENSATION. The salaries of our named executive officers are
reviewed at least annually to assess our competitive position and make any
necessary adjustments. Our goal is to maintain salary levels for our named
executive officers at a level consistent with base pay received by those in
comparable positions at our peers. To further that goal, we obtain peer group
information from a variety of sources. See "Peer Group Analysis." We also
evaluate salary levels at the time of promotion or other change in
responsibilities or as a result of specific commitments we made when a specific
officer was hired. Individual performance and retention risk are also considered
as part of our annual assessment.

CASH-BASED INCENTIVE COMPENSATION. The Compensation and Benefits Committee
of the Board of Directors authorizes discretionary bonuses for our named
executive officers based on the terms of our cash-based incentive program which
rewards the attainment of annual company-wide financial objectives at specified
levels in the areas of core earnings, revenue, efficiency, growth and asset
quality and individual performance relative to the specific tasks we expect an
employee to accomplish during the year. Our objective is to drive annual
performance at both the company and individual levels to the highest attainable
levels by establishing thresholds tied to incentive awards.

LONG-TERM INCENTIVE COMPENSATION. The Compensation and Benefits Committee
authorizes equity awards under our 2008 Long-Term Incentive Plan. We believe
that incentives and stock-based awards will focus employees on the dual
objectives of creating shareholder value and promoting our success, and the 2008
Long-Term Incentive Plan will help to attract, retain and motivate valued
employees and directors. As of December 31, 2008, no awards had been made under
the 2008 Long-Tern Incentive Plan.

ROLE OF THE COMPENSATION AND BENEFITS COMMITTEE

We rely on the Compensation and Benefits Committee to develop our
executive compensation program and to monitor the success of the program in
achieving the objectives of our compensation philosophy. The Committee, which
consists of five independent directors, is also responsible for the
administration of our compensation programs and policies, including the
administration of our cash- and stock-based incentive programs as well as our
tax-qualified plans. The Committee reviews and approves all compensation
decisions relating to our officers. The compensation of our Chief Executive
Officer and the other named executive officers are set by the Committee. The
Chief Executive Officer attends the Compensation and Benefits Committee meetings
at the invitation of the Committee. The Chief Executive Officer does not
participate in any discussions on his own compensation and does not vote on
matters presented in the Committee. The Committee operates under the mandate of
a formal charter that establishes a framework for the fulfillment of the
Committee's responsibilities. A copy of the charter of the Compensation and
Benefits Committee is posted on our website (www.pennsecurity.com). The
Committee reviews the charter at least annually to ensure that the scope of the
charter is consistent with the Committee's expected role. Under the charter, the
Committee is charged with general responsibility for the oversight and
administration of our compensation program. During 2008, the Compensation and
Benefits Committee met 16 times. The members of the Committee are Edwin J.
Butler, James G. Keisling, P. Frank Kozik, Robert W. Naismith and Emily S.
Perry, each of whom is independent under Nasdaq listing standards.

<Page>19

ROLE OF COMPENSATION CONSULTANTS

Our Compensation and Benefits Committee has worked with Robert Jones, an
independent consultant, to help us benchmark our compensation program against
our peers and to ensure that our program is consistent with prevailing practice
in our industry. We paid Mr. Jones $108,051 in the aggregate for his services
during the 2008 fiscal year.

ROLE OF MANAGEMENT

Our Chief Executive Officer makes recommendations to the Compensation and
Benefits Committee from time to time regarding the appropriate mix and level of
compensation for his subordinates. Those recommendations consider the objectives
of our compensation philosophy and the range of compensation programs authorized
by the Compensation and Benefits Committee. Our Chief Executive Officer does not
participate in Committee discussions or the review of Committee documents
relating to the determination of his own compensation.

PEER GROUP ANALYSIS

A critical element of our compensation philosophy and a key driver of
specific compensation decisions for our management team is the comparative
analysis of our compensation mix and levels relative to a peer group of publicly
traded banks and thrifts. We firmly believe that the cornerstone of our
compensation program is the maintenance of competitive compensation program
relative to the companies with whom we compete for talent. In 2008, our peer
group was selected with the assistance of our compensation consultant on the
basis of several factors, including geographic location, size, operating
characteristics, and financial performance.

SEVERANCE AND CHANGE IN CONTROL BENEFITS

We recognize that an important consideration in our ability to attract and
retain key personnel is our ability to minimize the impact on our management
team of the possible disruption associated with our analysis of strategic
opportunities. Accordingly, we believe that it is in the best interest of
Penseco and its shareholders to provide our key personnel with reasonable
financial arrangements in the event of termination of employment following a
change in control or involuntary termination of employment for reasons other
than cause. Our Chief Executive Officer, who has an employment agreement, has a
provision in his agreement that provides for certain benefits in the event of
voluntary or involuntary termination following a change in control. These
provisions are described in the "Other Potential Post-Termination Benefits"
section below. In addition, the employment agreement contains provisions which
provide for certain severance benefits in the event we terminate the Chief
Executive Officer's employment for reasons other than cause. These provisions
are also described in "Employment Agreement" along with estimates of the
severance and change in control benefits provided to the Chief Executive
Officer.

RETIREMENT BENEFITS; EMPLOYEE WELFARE BENEFITS

During 2008, we offered our employees tax-qualified retirement plans. Our
primary retirement benefit vehicles are (i) a Defined Benefit Pension Plan, (ii)
a 401(k) Profit Sharing Plan, and (iii) an Employee Stock Ownership Plan that
allows participants to accumulate a retirement benefit in employer stock at no
cost to the participants. The pension plan was amended as of June 22, 2008 at
which time benefit accruals ceased in accordance with Section 204(h) of the
Employee Retirement Income Security Act of 1974 ("ERISA"). At the same time, the
401(k) Profit Sharing Plan was established.

We also provide our Chief Executive Officer with an Excess Benefit Plan,
originally effective January 3, 2006, and amended and restated on December 31,
2008 effective January 3, 2006. This plan provides Mr. Best with additional
benefits in excess of those accrued in the 401(k) Profit Sharing Plan due to the
limit on compensation contained in Section 401(a)(17) of the Internal Revenue
Code (the "Code"). We believe that this benefit is consistent with the benefits
provided to similarly-situated officers of institutions in our peer group.

<Page>20

In addition to retirement programs, we provide our employees with coverage
under medical, dental, vision, life insurance and disability plans on terms
consistent with industry practice.

PERQUISITES

We provide certain of our officers, including our Chief Executive Officer,
with perquisites similar to those provided to executives employed by our peers.
The perquisites are intended to further the officers' abilities to promote the
business interests of the Company in our markets and to reflect competitive
practices for similarly situated officers employed by our peers.

DIRECTOR COMPENSATION

Our outside directors are compensated through a combination of retainers
and meeting fees. Directors who are also employees of the Company do not receive
additional compensation for service on the Board. The level and mix of director
compensation is revised by the Compensation and Benefits Committee on a periodic
basis to ensure consistency with the objectives of our overall compensation
philosophy. See "Corporate Governance--Director Compensation."

OUR 2008 COMPENSATION PROGRAM

SALARY LEVELS AND ADJUSTMENTS

The base salaries paid to our named executive officers are set forth below
in the Summary Compensation Table. We believe that the base salaries paid to our
executive officers during 2008 achieves our executive compensation objectives,
compares favorably to our peer group and is within our target of providing a
base salary at the market median.

In January 2009, adjustments to our executive base salaries were made
based on an analysis of current market pay levels of peer companies and in
published surveys. In addition to the pay levels of our peer group, factors
taken into account in making any changes for 2009 included the contributions
made by the executive officer, the performance of the executive officer, the
role and responsibilities of the executive officer and the relationship of the
executive officer's base pay to the base salary of our other executives. The
Committee adjusted base salaries for 2009 by an average of 2%, which places
senior management, as a group, within the peer group median.

BONUS AWARDS

Subject to the final approval of the Bank's full Board of Directors, the
Compensation and Benefits Committee authorized bank-wide cash bonuses. The
Committee determined the bonus of the Chief Executive Officer. The Committee,
based on recommendations of the Chief Executive Officer, determined the bonuses
of the other members of senior management. All bonuses for 2008 were approved
and paid in March 2009.

STOCK APPRECIATION RIGHTS

On February 29, 2008, the Compensation and Benefits Committee of the Board
of Directors awarded 8,500 stock appreciation rights to our Chief Executive
Officer, which vest annually at a rate of 1,700 per year over a five-year
period, at a strike price of $37.50 per share. The stock appreciation rights
grant the executive the right to receive, upon exercise of that right, an amount
equal to the excess of the fair market value of the Company's common stock on
the date of use over the exercise price of the rights. At the discretion of the
Compensation and Benefits Committee, this amount may be paid in cash, stock or a
combination thereof.

<Page>21

COMPENSATION AND BENEFITS COMMITTEE REPORT

The Compensation and Benefits Committee has reviewed and discussed with
management the Compensation Discussion and Analysis that is required by the
rules established by the Securities and Exchange Commission. Based on such
review and discussions, the Compensation and Benefits Committee has recommended
to the Board of Directors that the Compensation Discussion and Analysis be
included in this proxy statement. See "Compensation Discussion and Analysis."

COMPENSATION AND BENEFITS COMMITTEE OF THE BOARD OF DIRECTORS
OF PENSECO FINANCIAL SERVICES CORPORATION

Robert W. Naismith, Ph.D., Chairman
Edwin J. Butler
James G. Keisling
P. Frank Kozik
Emily S. Perry

<Page>22

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth information for the year ended December 31,
2008 concerning the compensation of our principal executive officer, principal
financial officer and the Company's other three most highly compensated
executive officers (or executive officers of its subsidiaries) whose
compensation was $100,000 or more and who were serving as such on December 31,
2008 for services in all capacities to the Company and its subsidiaries. No
named executive officers received perquisites in excess of $10,000 during the
year ended December 31, 2008.

<Table>
<Caption>
CHANGE IN
PENSION VALUE
AND NONQUALIFIED
DEFERRED
STOCK COMPENSATION ALL OTHER
NAME AND SALARY BONUS AWARDS EARNINGS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) ($)(4) TOTAL($)
- ------------------------------------------------------------------------------------------------------------

Craig W. Best 2008 235,887 58,800 14,168 7,093 13,800 329,748
President and 2007 237,444 60,409 9,350 28,835 5,276 341,314
Chief Executive 2006 228,367 45,673 -- 11,333 4,870 290,243
Officer

Patrick Scanlon 2008 104,599 10,601 -- 8,734 40,785 164,719
Senior Vice 2007 101,570 13,168 -- 26,817 2,631 144,186
President and 2006 94,700 10,640 -- 9,951 2,096 117,387
Controller

Richard E. Grimm 2008 176,576 11,764 -- 34,019 97,491 319,850
Executive Vice 2007 172,127 13,718 -- 85,314 4,300 275,459
President, 2006 165,439 11,246 -- 38,398 3,712 218,795
Credit Division
Head

Andrew A. Kettel, 2008 121,858 35,000 -- 23,410 53,050 233,318
Jr. Executive 2007 118,218 39,861 -- 50,093 2,857 211,029
Vice President, 2006 104,849 3,616 -- 14,882 2,358 125,705
Private Banking
Division Head

Stanley H. Cohen(5) 2008 154,670 7,752 -- -- 9,384 171,806
Senior Vice President, 2007 95,735 15,000 -- -- -- 110,735
Retail Division 2006 -- -- -- -- -- --
Head
</Table>
- ---------------------
(1) Represents the dollar value of cash bonuses earned during the fiscal year.
(2) Reflects the dollar amount recognized for financial statement reporting
purposes in accordance with FAS 123(R) of stock appreciation rights awarded
to Mr. Best in 2006 and 2008, using the Black-Scholes pricing model. For
further information on the assumptions used to compute fair value, see note
14 to the consolidated financial statements included in the Company's Annual
Report on Form 10-K.
(3) Represents the aggregate change in the actuarial present value of
accumulated benefits under all defined benefit and actuarial pension plans
from the plan measurement date used for financial statement reporting
purposes with respect to the prior completed fiscal year to the plan
measurement date used for financial statement reporting purposes with
respect to the covered fiscal year.
(4) Details of the amounts reported in the "All Other Compensation" column for
2008 are provided in the table below:
<Table>
<Caption>
MR. BEST MR. SCANLON MR. GRIMM MR. KETTEL MR. COHEN
------------------------------------------------------------------------

Employer Match 401(k)
Profit Sharing Safe $ 6,900 $ 9,967 $16,316 $13,101 $ 4,294
Safe Harbor 6,900 3,533 5,709 4,852 5,090
Supplemental Retirement
Benefit (401(k)) -- 7,066 11,418 9,703 --
Supplemental Retirement
Benefit (Deferred
Compensation) -- 20,219 64,048 25,394 --
</Table>
(5) Mr. Cohen was hired by the Company on May 7, 2007. Accordingly, no
compensation information is available for the fiscal year ended December 31,
2006.

<Page>23

EMPLOYMENT AGREEMENT

The Company and the Bank jointly maintain a three-year employment
agreement with Craig W. Best, President and Chief Executive Officer. The Company
and the Bank entered into the employment agreement, effective as of January 2,
2006, to help ensure a stable and competent management base and encourage the
continued success of the Company and the Bank.

The term of the employment agreement renews automatically on each
anniversary of the effective date for an additional one-year period, unless
either party provides at least 30 days' notice of non-renewal. The executive's
current base salary is $241,638; the Bank's Board of Directors will review his
performance each year and make salary adjustments accordingly. In addition to
base salary, the employment agreement provides for an annual bonus of up to 20%
of base salary, based upon the attainment of performance goals mutually agreed
upon by the executive and the Bank's Board of Directors each year. The
employment agreement also provides that the executive may participate in current
or future employee benefit programs, including stock-based and long-term
incentive compensation plans and a supplemental executive pension plan, and for
the purchase of term life insurance with a death benefit of $500,000 payable
upon the executive's death. Under the agreement, the Company provides the
executive with the use of an automobile, along with reasonable insurance and
maintenance costs, as well as reimbursement for country and dining club
memberships and reasonable business expenses. The Company also agrees to
indemnify the executive to the fullest extent legally allowable.

Under the employment agreement, the executive agrees to maintain the
confidentiality of non-public information and trade secrets learned during the
course of employment and further agrees that the Company and the Bank maintain
ownership over his work product (as defined in the agreement). In addition, for
a period of 12 months following termination of employment for any reason, the
executive agrees that he will not: (1) solicit customers, potential customers or
suppliers for or on behalf of a competing business (as defined under the
agreement); (2) recruit employees of the Bank or Company for a competing
business; or (3) serve as a director, officer, employee or investor in a
competing business.

See "Other Potential Post-Termination Benefits" for a discussion of the
benefits and payments Mr. Best may receive under his employment agreement upon
his termination of employment.

<Page>24

GRANTS OF PLAN-BASED AWARDS

The following table provides information concerning grants of plan-based
awards made to our named executive officers during the year ended December 31,
2008.

PER SHARE GRANT DATE
NUMBER OF EXERCISE OR FAIR VALUE OF
SHARES OF BASE PRICE STOCK AND
STOCK OR OF OPTION OPTION AWARDS
NAME GRANT DATE UNITS (1) AWARDS (2)
- --------------- ---------- --------- ----------- --------------

Craig W. Best 2/29/2008 8,500 $37.50 $53,310
</Table>

- ---------------------
(1) Represents 8,500 stock appreciation rights, which vest annually at a
rate of 1,700 per year over a five year period. (2) Reflects the grant date
fair value dollar amount computed in accordance with FAS
123(R), using the Black-Scholes pricing model. For further information on
the assumptions used to compute fair value, see note 14 to the
consolidated financial statements included in the Company's Annual Report
on Form 10-K.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The following table sets forth information concerning equity awards
outstanding as of December 31, 2008.

NUMBER OF NUMBER OF
SECURITIES SECURITIES
UNDERLYING UNDERLYING
UNEXERCISED UNEXERCISED
OPTIONS OPTIONS OPTION EXERCISE OPTION
NAME EXERCISABLE(1) UNEXERCISABLE(1) PRICE EXPIRATION DATE
- --------------- -------------- ----------------- --------------- ---------------

Craig W. Best -- 8,500 $37.50 02/28/2018
4,000 6,000 43.00 01/02/2016

</Table>

- ---------------------
(1) Represents outstanding stock appreciation rights. Mr. Best was awarded
10,000 stock appreciation rights on January 2, 2006, which vest annually
at a rate of 2,000 per year over a five year period. Mr. Best was also
awarded 8,500 stock appreciation rights on February 29, 2008, which vest
annually at a rate of 1,700 per year over a five year period.

PENSION BENEFITS

The following table sets forth information concerning our plans that
provide for payments or other benefits at, following, or in connection with,
retirement for each of the named executive officers.

<Table>
<Caption>
NUMBER PAYMENT
OF YEARS PRESENT DURING
OF VALUE OF LAST
CREDITED ACCUMULATED FISCAL
SERVICE BENEFIT YEAR
NAME PLAN NAME (#) (1) ($) (2) ($) (3)
- ------------------ ------------------------ ---------- ----------- ---------

Craig W. Best Employees Pension Plan 3 32,756 --
Patrick Scanlon Employees Pension Plan 34 144,060 --
Richard E. Grimm Employees Pension Plan 30 497,910 --
Andrew A. Kettel, Jr. Employees Pension Plan 38 370,008 --
Stanley H. Cohen Employees Pension Plan 0 -- --
</Table>
- --------------------
(1) Represents the number of years of service credited to the executive
officer under the plan, computed as of the same pension plan measurement
date used for financial statement reporting purposes with respect to the
registrant's audited financial statements for the last completed fiscal
year.
(2) Reflects the actuarial present value of the named executive officer's
accumulated benefit under the plan(s), computed as of the same pension
plan measurement date used for financial statement reporting purposes with
respect to the registrant's audited financial statements for the last
completed fiscal year.
(3) Represents the dollar amount of any payments and benefits paid to the
named executive officer during the registrant's last completed fiscal
year.

<Page>25

The information in the foregoing table relates to the Bank's qualified
defined benefit retirement plan (the "Pension Plan") for its employees and
officers and the Supplemental Benefit Plan Agreement with Mr. Best (the "Excess
Benefit Plan"). The information in the table has been determined using interest
rate and mortality rate assumptions consistent with those used in the Company's
financial statements. Executive officers of the Bank participate in the Pension
Plan on the same basis as all other employees and receive only those benefits
that are available to all other employees. Directors who are not employees are
not included in the Pension Plan. In 2008, the Bank contributed $100,000 to the
Pension Plan.

NON-QUALIFIED DEFERRED COMPENSATION

The following table sets forth non-qualified deferred compensation
contributions during the year ended December 31, 2008.

<Table>
<Caption>
EXECUTIVE COMPANY
CONTRIBUTIONS CONTRIBUTIONS IN AGGREGATE EARNINGS AGGREGATE BALANCE AT
NAME IN 2008 ($) 2008 ($)(1) IN 2008 ($) DECEMBER 31, 2008 ($)
- --------------------- ------------- ---------------- ------------------ ---------------------

Craig W. Best (2) -- -- 211 (3) 1,243
Craig W. Best (4) 9,112 -- -- 9,112
Patrick Scanlon -- 20,219 -- 20,219
Richard E. Grimm -- 64,048 -- 64,048
Andrew A. Kettel, Jr. -- 25,394 -- 25,394
Stanley H. Cohen -- -- -- --
</Table>
- ----------------------------
(1) The Company contributions are included in "All Other Compensation" in the
Summary Compensation Table set forth above.
(2) Represents contributions made pursuant to the Excess Benefit Plan. (3)
Represents an increase in accrued benefits. (4) Represents contributions
made pursuant to the Deferred Compensation Plan. Executive
contributions are included in "Salary" in the Summary Compensation Table set
forth above.

SUPPLEMENTAL BENEFIT PLAN AGREEMENT. The Bank maintains the Penn
Security Bank and Trust Company Excess Benefit Plan (the "Excess Benefit Plan")
for Craig W. Best, originally adopted as of January 3, 2006. The purpose of the
plan is to grant additional benefits in excess of those accrued in the 401(k)
Profit Sharing Plan due to the limit on compensation contained in Section
401(a)(17) of the Code. The Excess Benefit Plan is intended to be an unfunded
excess benefit plan under Section 201(2) of ERISA. The plan provides Mr. Best
with benefits in an amount which is equivalent to the excess, if any, of the
amount he would have been entitled to receive under the 401(k) Profit Sharing
Plan for each plan year, if the provisions of the 401(k) Profit Sharing Plan
were administered without regard to the limitations required by Section
401(a)(17) of the Code and any regulations thereunder, over the amount he is
entitled to receive under the 401(k) Profit Sharing Plan for such plan year.

The benefit described above is to be computed as of the date of Mr.
Best's separation from service. The accrued benefit will become payable if Mr.
Best separates from service with the Bank for any reason. If a change in control
of the Bank (as defined in the Excess Benefit Plan) occurs, the accrued benefit
at the date of the change in control shall be valued and payable according to
the provisions set forth below as if the change in control constituted a
separation from service.

Mr. Best, or his beneficiaries, will be entitled to receive, by virtue of
his separation from service, a distribution in an aggregate amount equal to his
accrued benefit. The actuarial equivalent of his accrued benefit will be
distributed in a single lump sum payment within five days following the date
that is six months after the date Mr. Best separates from service.

If Mr. Best dies before terminating his employment with the Bank and
before the commencement of payments under the Excess Benefit Plan, the actuarial
equivalent of the entire value of his accrued benefit will be

<Page>26

paid, in a single lump sum, within sixty days following the date of his death,
to his designated beneficiaries.

If Mr. Best's employment had terminated on December 31, 2008, his accrued
benefit under the Excess Benefit Plan would have been $1,243.

EXECUTIVE DEFERRED COMPENSATION PLAN. During 2008, the Company established
an Executive Deferred Compensation Plan for the benefit of Mr. Best and a select
group of executives who were adversely impacted by the freezing of the Company's
Pension Plan and establishment of the 401(k) Profit Sharing Plan. The Executive
Deferred Compensation Plan is an unfunded arrangement for the benefit of
participants.

OTHER POTENTIAL POST-TERMINATION BENEFITS

PAYMENTS MADE UPON TERMINATION FOR CAUSE. Under Mr. Best's employment
agreement, the Bank and the Company may terminate Mr. Best's employment for
cause (as defined in the agreement) at any time. If Mr. Best is terminated for
cause, Mr. Best will receive only accrued compensation and vested benefits
through his termination date.

PAYMENTS MADE UPON TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. Pursuant
to his employment agreement, upon voluntary termination by Mr. Best without good
reason (as defined in the employment agreement), Mr. Best will receive only
accrued compensation and vested benefits through his termination date. Upon
involuntary termination by the Company without cause or voluntary termination by
Mr. Best with good reason (i.e., constructive termination), Mr. Best will
receive his accrued compensation and other benefits through his termination
date, along with a severance payment equal to 12 months of continued base
salary, payment of health insurance premiums for 12 months (for executive and
his dependents) and $30,000 in outplacement assistance to be paid by the Company
to a firm selected by Mr. Best. If the Company terminated Mr. Best's employment
without cause on December 31, 2008, the severance payment due under the
employment agreement (based solely on Mr. Best's then current cash compensation,
without regard to future base salary adjustments or bonuses) would have been
$275,266.

PAYMENTS MADE UPON DISABILITY OR DEATH. Mr. Best's employment agreement
provides that, upon termination due to his death or disability, Mr. Best will
receive only accrued compensation and vested benefits through his termination
date.

PAYMENTS MADE UPON A CHANGE IN CONTROL. In accordance with the terms of
his employment agreement, if the Company terminates Mr. Best without cause or
Mr. Best terminates for good reason within 12 months of a change in control, he
will receive, in addition to previously accrued compensation and benefits, a
severance payment equal to 24 months of base salary, 24 months of health
insurance continuation, and $30,000 in outplacement assistance. In addition, Mr.
Best will immediately vest in all outstanding stock-based compensation awards
upon termination in connection with a change in control.

Generally, under Section 280G of the Internal Revenue Code, severance
payments made in connection with a change in control that equal or exceed three
times an executive's average annual compensation over the five preceding tax
years (or period of employment, if less) are considered "excess parachute
payments." Amounts that exceed the Section 280G limit are subject to an excise
tax payable by Mr. Best and are non-deductible by the Company. The employment
agreement limits payments to Mr. Best to an amount that will not exceed his
Section 280G limit under the Internal Revenue Code.

If a change in control had occurred at December 31, 2008, the severance
payment due to Mr. Best under his employment agreement (based solely on Mr.
Best's then current cash compensation, without regard to future base salary
adjustments or bonuses) would have been $520,532 and 6,000 unvested stock
appreciation rights with a per share exercise price of $43.00 and 8,500 unvested
stock appreciation rights with a per share exercise price of $37.50 would have
become fully vested. The closing market price of the Company's common stock on
December 31, 2008 was $36.74 per share.

<Page>27

OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVE OFFICERS

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors, and persons who own more than 10% of our common
stock, to file reports of ownership and changes of ownership with the Securities
and Exchange Commission. Executive officers, directors and greater than 10%
shareholders are required by regulation to furnish us with copies of all Section
16(a) reports they file.

Based solely on our review of the copies of the reports we have received
and written representations provided to us from the individuals required to file
the reports, we believe that (i) we have no 10% shareholders and (ii) each of
our executive officers and directors has complied with applicable reporting
requirements for transactions in our common stock during the year ended December
31, 2008.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to
its executive officers and directors. However, the Sarbanes-Oxley Act contains a
specific exemption from such prohibition for loans by the Bank to its executive
officers and directors in compliance with federal banking regulations. Federal
regulations require that all loans or extensions of credit to executive officers
and directors of insured financial institutions must be made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is therefore prohibited from making any new loans or extensions of
credit to executive officers and directors at different rates or terms than
those offered to the general public. Notwithstanding this rule, federal
regulations permit the Bank to make loans to executive officers and directors at
reduced interest rates if the loan is made under a benefit program generally
available to all other employees and does not give preference to any executive
officer or director over any other employee.

The Audit Committee of the Board of Directors periodically reviews a
summary of the Company's transactions with directors and executive officers of
the Company and with firms that employ directors, as well as other related
person transactions, to recommend to the disinterested members of the Board of
Directors that the transactions are fair, reasonable and with Company policy and
should be ratified and approved. Besides including such requirement in the Audit
Committee Charter, the Company does not maintain written policies or procedures
for the review, approval or ratification of certain transactions with related
persons. However, in accordance with banking regulations, the Board of Directors
reviews all loans made to a director or executive officer in an amount that,
when aggregated with the amount of all other loans made to such person and his
or her related interests exceed the greater of $25,000 or 5% of the Company's
capital and surplus (up to a maximum of $500,000) and such loan must be approved
in advance by a majority of the disinterested members of the Board of Directors.

At December 31, 2008, certain of the Company's directors, nominees, and
executive officers or their associates had outstanding loans or commitments from
Penn Security Bank and Trust Company. These transactions were made in the
ordinary course of the Bank's business and on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with unrelated persons and do not involve more than the
normal risk of collectability or present other unfavorable features.

COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS

Directors Edwin J. Butler, James G. Keisling, P. Frank Kozik, Robert W.
Naismith and Emily S. Perry served as members of the Compensation and Benefits
Committee during 2008. Except for Mr. Butler, who retired his position as
Executive Vice President and Cashier of the Bank in September 1991, no member of
the Compensation and Benefits Committee has ever served as an officer or
employee of the Company or its subsidiaries. There are no compensation committee
interlocks between the Company or its subsidiaries and any other entity
involving the Company or its subsidiaries or any such entity's executive
officers or Board members. The Bank has made, and expects to continue to make in
the future, loans to the Company's directors, including members of the
Compensation and Benefits Committee, and their family members and to firms,
corporations and other entities in

<Page>28

which they and their family members maintain interests. For more information,
see "--Certain Relationships and Related Transactions."

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE PROCEDURES

GENERAL

It is the policy of the Nominating and Corporate Governance Committee of
the Board of Directors to consider director candidates recommended by
shareholders who appear to be qualified to serve on our Board of Directors. The
Nominating and Corporate Governance Committee may choose not to consider an
unsolicited recommendation if no vacancy exists on the Board of Directors and
the Nominating and Corporate Governance Committee does not perceive a need to
increase the size of the Board of Directors. In order to avoid the unnecessary
use of the Nominating and Corporate Governance Committee's resources, the
Nominating and Corporate Governance Committee will consider only those director
candidates recommended in accordance with the procedures set forth below.

PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS

A shareholder who proposes to nominate an individual for election to the
Board of Directors at an annual meeting must deliver a written notice to the
Secretary of the Company within the times frames set forth under "Submission of
Business Proposals and Shareholder Nominees" which includes:

1. The name and address of the person recommended as a director
candidate;

2. All information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended;

3. The written consent of the person being recommended as a director
candidate to be named in the proxy statement as a nominee and to
serve as a director if elected;

4. The name and address of the shareholder giving the notice, as it
appears on our books;

5. The name and address of the beneficial owner, if any, on whose
behalf the nomination is being made;

6. The class and number of shares owned beneficially and of record by
such shareholder and such beneficial owner and a representation that
such shareholder and beneficial owner intend to appear in person or
by proxy at the meeting;

7. If the recommending shareholder is not a shareholder of record, a
statement from the record holder verifying the holdings of the
shareholder and a statement from the recommending shareholder of the
length of time that the shares have been held;

8. A statement from the shareholder as to whether the shareholder has a
good faith intention to continue to hold the reported shares through
the date of the meeting; and

9. A statement from the recommending shareholder supporting its view
that the proposed nominee possesses the minimum qualifications for
nominees (if any) and describing the contributions that the nominee
would be expected to make to the Board and to the governance of
Penseco.

Of those persons who are nominated by a shareholder only those nominated
in accordance with these procedures shall be eligible for election as directors
at the annual meeting.

<Page>29

PROCESS FOR IDENTIFYING AND EVALUATING NOMINEES

The process the Nominating and Corporate Governance Committee follows when
it identifies and evaluates individuals to be nominated for election to the
Board of Directors is as follows:

IDENTIFICATION. For purposes of identifying nominees for the Board of
Directors, the Nominating and Corporate Governance Committee relies on personal
contacts of the Committee and other members of the Board of Directors as well as
its knowledge of members of the Bank's local communities. The Nominating and
Corporate Governance Committee will also consider director candidates
recommended by shareholders in accordance with the policy and procedures set
forth above. The Nominating and Corporate Governance Committee may use an
independent search firm in identifying nominees.

EVALUATION. In evaluating potential nominees, the Nominating and Corporate
Governance Committee determines whether the candidate is eligible and qualified
for service on the Board of Directors by evaluating the candidate under the
selection criteria set forth above. In addition, the Nominating and Corporate
Governance Committee will conduct a check of the individual's background and may
interview the candidate. Candidates proposed by shareholders are considered
under the same criteria except that the Committee may also consider the size and
duration of the equity interest of the recommending shareholder in Penseco and
the extent to which the recommending shareholder intends to continue holding
this interest.

MINIMUM QUALIFICATIONS

The Nominating and Corporate Governance Committee has not adopted a
specific set of minimum qualifications that must be met by nominees. Nominees
are selected on the basis of their integrity, experience, achievements,
judgment, intelligence, personal character and capacity to make independent
analytical inquiries, ability and willingness to devote adequate time to Board
duties and the likelihood of being able to serve on the Board for a sustained
period. Consideration is also given to the Board's overall balance of diversity
of perspectives, backgrounds and experiences. The Committee also considers
factors such as global experience, experience as a director of a public company
and knowledge of relevant industries.

In addition, prior to nominating an existing director for re-election to
the Board of Directors, the Committee will consider and review an existing
director's Board and committee performance and his or her satisfaction of any
minimum qualifications established by the Committee.

SUBMISSION OF BUSINESS PROPOSALS AND SHAREHOLDER NOMINATIONS

We must receive proposals that shareholders seek to include in the Proxy
Statement for our next annual meeting no later than December 4, 2009. If next
year's annual meeting is held on a date more than 30 calendar days from May 5,
2010, a shareholder proposal must be received by a reasonable time before we
begin to print and mail our proxy solicitation for such annual meeting. Any
shareholder proposals will be subject to the requirements of the proxy rules
adopted by the Securities and Exchange Commission.

The Company's bylaws provide that, in order for a shareholder to make
nominations for the election of directors or proposals for business to be
brought before the annual meeting, a shareholder must deliver notice of such
nominations and/or proposals to the Corporate Secretary not less than 60 days
nor more than 90 days prior to May 5, 2010. However, if the date of the
Company's annual meeting is more than 30 days before or more than 60 days prior
to May 5, 2010, notice must be received not less than 60 days nor more than 90
days prior to the annual meeting date or no later than 15 days after public
announcement of the date of the annual meeting. A copy of the bylaws may be
obtained from the Company.

<Page>30

SHAREHOLDER COMMUNICATIONS

In order to provide our shareholders and other stakeholders with a direct
and open means of communication to the Board of Directors, the Board has adopted
the following procedures for communications to our Board of Directors or
individual directors.

o Shareholders and other interested persons may communicate with the
Board or the non-management Directors as a group by writing to the
Chairman of the Board, c/o Penseco Financial Services Corporation, 150
North Washington Avenue, Scranton, Pennsylvania 18503. The
correspondence should specify the intended recipient.

o All communications received in accordance with these procedures will be
reviewed initially by the Chairman of the Board, who will relay all
such communications to the appropriate director or directors unless the
Chairman of the Board determines that the communication:

o Does not relate to our business or affairs or the functioning or
constitution of the Board or any of its committees;

o Relates to routine or insignificant matters that do not warrant the
attention of the Board;

o Is an advertisement or other commercial solicitation or communication;
is frivolous or offensive; or

o Is otherwise inappropriate for delivery to directors.

The director or directors who receive any such communication will have
discretion to determine whether the subject matter of the communication should
be brought to the attention of the full Board or one or more of its committees
and whether any response to the person sending the communication is appropriate.
Any such response will be made through the Chairman of the Board and only in
accordance with our policies and procedures and applicable laws and regulations
relating to the disclosure of information.

MISCELLANEOUS

We will pay the cost of this proxy solicitation. We will reimburse
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to the beneficial owners of
our common stock. In addition to soliciting proxies by mail, our directors,
officers and regular employees may solicit proxies personally, by email or by
telephone without receiving additional compensation.

Our Annual Report to Shareholders has been mailed to persons who were
shareholders as of the close of business on February 27, 2009. Any shareholder
who has not received a copy of the Annual Report may obtain a copy by writing to
the Secretary of the Company. The Annual Report is not to be treated as part of
the proxy solicitation material or as having been incorporated in this Proxy
Statement by reference.

If you and others who share your address own shares in street name, your
broker or other holder of record may be sending only one Annual Report and Proxy
Statement to your address. This practice, known as "householding," is designed
to reduce our printing and postage costs. However, if a shareholder residing at
such an address wishes to receive a separate Annual Report or Proxy Statement in
the future, he or she should contact the broker or other holder of record. If
you own your shares in street name and are receiving multiple copies of our
Annual Report and Proxy Statement, you can request householding by contacting
your broker or other holder of record.

<Page>31

Whether or not you plan to attend the annual meeting, please vote by
marking, signing, dating and promptly returning the enclosed proxy card in the
enclosed envelope.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Craig W. Best

Craig W. Best
President and Chief Executive Officer

April 6, 2009
Scranton, Pennsylvania

<Page>32

REVOCABLE PROXY

PENSECO FINANCIAL SERVICES CORPORATION

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 5, 2009

The enclosed proxy statement and the Company's 2008 Annual Report to
Shareholders are available at http://www.cfpproxy.com/6609.
----------------------------

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PENSECO FINANCIAL SERVICES CORPORATION

ANNUAL MEETING OF SHAREHOLDERS
MAY 5, 2009

The shareholder(s) hereby appoint(s) Richard C. Kunkle and Mark D. Young, or
either of them, as proxies, each with the power of substitution, and hereby
authorizes them to represent and to vote, as designated on the reverse side of
this ballot, all of the shares of Common Stock of Penseco Financial Services
Corporation that the shareholder(s) is/are entitled to vote at the Annual
Meeting of Shareholders to be held at 2:00 p.m., Eastern Time on May 5, 2009, at
the Hilton Scranton and Conference Center, 100 Adams Avenue, Scranton,
Pennsylvania, and any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS
AND FOR EACH PROPOSAL.

THIS PROXY MAY BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL
MEETING

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED REPLY ENVELOPE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

<Page>33

PENSECO FINANCIAL SERVICES CORPORATION
150 N. WASHINGTON AVENUE
SCRANTON, PA 18503

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE PROPOSALS

VOTE ON DIRECTORS

FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. To elect as directors of Class of
2013 the nominees listed below.

/_/ /_/ /_/
NOMINEES:
01) Richard E. Grimm
02) James B. Nicholas
03) Sandra C. Phillips
04) Robert J. Mellow

To elect as directors of Class of
2012 the nominees listed below:
05) Joseph G. Cesare, M.D.

To withhold authority to vote for any individual nominee(s), mark "For All
Except" and write the number(s) of the nominee(s) on the line below.

- --------------------------------------------------------------------------------

VOTE ON PROPOSALS

FOR AGAINST ABSTAIN

2. The amendment of the Company's /_/ /_/ /_/
Bylaws to (i) provide that the
number of Company director
shall be fixed from time to
time by resolution of the
Board of Directors; (ii)
eliminate the restriction that
the Company's Board of
Directors cannot increase the
size of the Board by more than
two directors in any one year;
and (iii) provide that
directors appointed to fill a
newly created vacancy on the
Board of Directors may serve
until the remainder of the
term to which they are
appointed rather than until
the next annul meeting of
shareholders.

FOR AGAINST ABSTAIN

3. The ratification of the appointment /_/ /_/ /_/
of McGrail Merkel Quinn and
Associates as independent auditors
for the year ending December 31,
2009.

This proxy is revocable prior to its exercise. The shares represented by this
proxy when properly executed will be voted in the manner directed herein by the
undersigned Shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS AND FOR EACH
PROPOSAL. If any other matters properly come before the meeting, or if
cumulative voting is required, the persons named in this proxy will vote in
their discretion.

Please indicate if you plan to attend this meeting. /_/

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