1
EXHIBIT 99.1
NEWS RELEASE
CONTACT: Patrick Scanlon, Senior Vice President, Controller
Penseco Financial Services Corporation
(570) 346-7741
FOR RELEASE: 4:00 P.M. Eastern Time: August 10, 2009
PENSECO FINANCIAL SERVICES CORPORATION REPORTS EARNINGS AS OF JUNE 30, 2009
SCRANTON, PA, August 10, 2009 -- Penseco Financial Services Corporation (OTC
Bulletin Board: PFNS), the Scranton, Pennsylvania based financial holding
company of Penn Security Bank & Trust Company, reported an increase in net
income of $941,000 or 48.8% for the three months ended June 30, 2009 to
$2,869,000 or $.88 per share compared with $1,928,000 or $.89 per share from the
year ago period. The increase in net income was primarily attributed to the
Merger with Old Forge Bank, which was completed on April 1, 2009. Net interest
income increased $2,373,000 or 41.9% largely due to an increased loan portfolio
of $144.7 million from Old Forge Bank. Core net income increased $1,083,000 or
56.2% due to higher earning assets related to the Merger with Old Forge Bank.
Non-interest income increased $407,000 or 17.2% partly from service charges on
deposit accounts and higher operating income. The Company realized security
gains of $314,000, primarily from the sale of Old Forge Bank securities which
was reinvested in higher credit quality securities. Offsetting this increase was
higher total non-interest expenses of $1,475,000 or 27.0% mainly from higher
salary and benefits expenses and operating expenses, primarily merger costs and
a special one time FDIC insurance assessment of $242,000. Return on average
assets and return on average equity was 1.35% and 10.00% for the three months
ending June 30, 2009, respectively, versus 1.25% and 10.53% for the same period
last year.
The Company reported a decrease in net income of $1,575,000 for the six months
ended June 30, 2009 to $3,310,000 or $1.22 per weighted average share compared
with $4,885,000 or $2.27 per share from the year ago period. The decrease in net
income was primarily attributed to $1,550,000 of merger related costs associated
with the acquisition of Old Forge Bank, along with the first quarter 2008 one
time positive impact of $1,710,000 related to Visa International's Initial
Public Offering. Net interest income, after provision for loan losses, increased
$2,014,000 or 18.7% largely due to increased interest and fees on loans and
reduced interest expense from lower deposit costs. Core net income increased
$577,000 or 15.4% due to increases in earning assets. The Company increased the
provision for potential loan losses by $780,000 due to the softness in the
economy. As of June 30, 2009 there are no significant loans as to which
management has serious doubt about their collectibility.
Net non-cash accretion and amortization from the acquisition of Assets and
Liabilities due to the Old Forge Bank merger was $266,000 at three months and
six months ended June 30, 2009.
NON-INTEREST INCOME
Total non-interest income increased $407,000 or 17.2% to $2,771,000 for the
three months ended June 30, 2009, compared with $2,364,000 for the same period
in 2008. Service charges on deposit accounts increased $85,000 or 21.5%
primarily due to the increased number of accounts and increased service charge
activity. Merchant transaction income decreased $94,000 or 10.1% due to lower
transaction volume mainly from continued softness in the economy. Brokerage fee
income decreased $90,000 or 53.3% mostly due to the decline in the overall
market. Bank-owned life insurance income increased $52,000 or 65.0% due to the
Old Forge Bank merger. Other operating income increased $136,000 largely due to
gains on the sale of low yielding long-term fixed rate real estate loans. The
majority of the Old Forge Bank securities portfolio was sold during the second
quarter of 2009 netting gains of $302,000, with the proceeds reinvested into
higher quality securities.
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Total non-interest income decreased $801,000 or 13.4% to $5,181,000 during the
first half of 2009 from $5,982,000 for the same period of 2008. The lower
non-interest income was primarily attributed to a one time gain of $1,213,000
related to the Visa IPO during first quarter of 2008. Service charges on deposit
accounts increased $161,000 or 24.4%. Merchant transaction income decreased
$70,000 or 3.3%, mainly due to lower transaction volume from continued softness
in the economy. Brokerage fee income decreased $155,000 or 44.2% mostly due to
the decline in the overall market. Bank-owned life insurance income increased
$53,000 or 33.5% due to the Old Forge Bank merger. Other operating income
increased $170,000 or 144.1% largely due to gains on the sale of low yielding
long-term fixed rate real estate loans. The majority of the Old Forge Bank
securities portfolio was sold during the second quarter of 2009 netting gains of
$302,000, with the proceeds reinvested into higher quality securities.
NON-INTEREST EXPENSES
Total non-interest expenses increased $1,475,000 or 27.0% to $6,932,000 for the
three months ended June 30, 2009 compared with $5,457,000 for the same period of
2008. Salaries and employee benefits expense increased $740,000 or 29.5% due to
additional staff from the Old Forge Bank acquisition. Expense of premises and
fixed assets increased $150,000 or 22.5%. Merchant transaction expenses
decreased $98,000 or 13.9% due to lower transaction volume from the softness in
the economy. Merger related costs of $215,000 consist of severance payments and
stay bonuses to key employees of Old Forge Bank to help with the transition and
conversion process. Other operating expenses increased $468,000 or 29.7% partly
from a higher one time FDIC special assessment cost of $242,000, increased
shares tax of $96,000 and higher legal and professional expenses.
Total non-interest expenses increased $3,541,000 or 33.7% to $14,056,000 during
the first half of 2009 compared with $10,515,000 for the same period of 2008.
Salaries and employee benefits expense increased $803,000 or 16.3% mainly due to
increased salaries resulting from additional employees as a result of the Merger
with Old Forge Bank. Premises and fixed assets expense increased $173,000 or
12.1% due to additional depreciation and increased occupancy expense in part due
to the Old Forge Bank merger. Merchant transaction expenses decreased $143,000
or 8.9% due to lower transaction volume. Merger related costs of $1,550,000
consist of computer and equipment upgrades of $606,000, investment banking,
valuation services, legal and accounting fees of $429,000, severance payments of
$450,000 and stay bonuses of $65,000. Other operating expenses increased
$1,158,000 or 45.4% due to the reversal in the first quarter of 2008 of the
$497,000 VISA litigation accrual recorded by the Company in the fourth quarter
of 2007, offset by an increase in advertising expenses, professional services
and increased general operating expenses and a one time FDIC special assessment
cost of $385,000.
ASSET QUALITY
The allowance for loan losses at June 30, 2009 was $6,050,000 or 1.03% of total
loans compared to $5,140,000 or 1.22% of total loans at June 30, 2008.
Management believes the loan loss reserve is adequate. The reserve for credit
losses, which includes the loan loss reserve plus a credit discount for loans
acquired in the Old Forge Bak merger, equalled 2.15% of total loans at June 30,
2009.
Loans on which the accrual of interest has been discontinued or reduced amounted
to $2,731,000 at June 30, 2009, up from $1,454,00 at December 31, 2008 and
$550,000 at June 30, 2008. If interest on those loans had been accrued, such
income would have been $336,000 and $28,000 for the six months ended June 30,
2009 and June 30, 2008, respectively. There were no commitments to lend
additional funds to individuals whose loans are in non-accrual status.
Net loan charge-offs amounted to $235,000 or .040% of average outstanding loans
for the three months ended June 30, 2009 compared to $1,000 or .000% at June 30,
2008. Net loan charge-offs amounted to $456,000 or .089% of average outstanding
loans for the six months ended June 30, 2009 compared to $11,000 or .003% at
June 30, 2008.
As of June 30, 2009 there were no significant loans as to which management had
serious doubt about their collectibility. During the second quarter of 2008, the
Company was notified that The Education Resources Institute, Inc. (TERI), a
guarantor of a portion of our student loan portfolio, had filed for
reorganization under Chapter 11 of the Federal Bankruptcy Act. Currently, the
Company holds $8.2 million of TERI loans out of a total student loan portfolio
of $19.4 million. The Company does not anticipate that TERI's bankruptcy filing
will significantly impact the Company's financial statements. These loans are
placed on non-accrual status when they become more than 90 days past due. At
June 30, 2009 there was $93,966 in such loans placed on non-accrual status.
The Company does not engage in any sub-prime or Alt-A credit lending. Therefore,
the Company is not subject to any credit risks associated with such loans. The
Company's loan portfolio consists primarily of residential and commercial
mortgage loans secured by properties located in Northeastern Pennsylvania and
subject to conservative underwriting standards.
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INCOME TAX EXPENSE
Applicable income taxes increased $345,000 for the three months ended June 30,
2009 due to overall higher income. Also, applicable income taxes decreased
$753,000 or 54.8% during the first half of 2009 primarily due to the $1,550,000
of merger costs associated with the Old Forge Bank merger, a higher provision
for loan losses in 2009 and a one time gain on the VISA IPO during the six
months ended June 30, 2008.
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, June 30,
----------------------------- Increase %
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2009 2008 $ Change
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Ended
----------------------
PERFORMANCE RATIOS
Return on Average Assets 1.35% 1.25% 8.00%
Return on Average Equity 10.00% 10.53% -5.03%
Six Months Ended
----------------------
PERFORMANCE RATIOS
Return on Average Assets 0.89% 1.62% -45.06%
Return on Average Equity 6.99% 13.59% -48.57%
STOCKHOLDERS' VALUE
Net Income $ 3,310 $ 4,885 $ (1,575) -32.24%
Earnings per share 1.22 2.27 (1.05) -46.26%
Dividends Per Share 0.84 0.82 0.02 2.44%
Book Value Per Share 34.56 33.70 0.86 2.55%
Tangible Book Value Per Share 25.86 33.67 (7.81) -23.20%
Market Value Per Share 36.75 39.90 (3.15) -7.89%
Market Value/Book Value 106.34% 118.40% -10.19%
Price Earnings Multiple 15.06x 8.79x 71.33%
Dividend Payout Ratio 68.85% 36.12% 90.62%
Dividend Yield 4.57% 4.11% 11.19%
SAFETY AND SOUNDNESS
Stockholders' Equity/Assets 13.25% 11.51% 15.12%
Tangible Equity/Tangible Assets 10.26% 11.50% -10.78%
Total Capital/Risk Weighted Assets 16.70% 19.67% -15.10%
Tier 1 Capital/Risk Weighted Assets 15.61% 18.42% -15.26%
Tier 1 Capital/Average Assets 12.11% 12.19% -0.66%
Allowance for Loan Loss as
a Percent of Loans 1.03% 1.22% -15.57%
Non-accrual Loans/Total Loans 0.47% 0.13% 261.54%
Non-performing Assets/Total Assets 0.39% 0.09% 333.33%
Non-performing loans to period end loans 0.47% 0.13% 261.54%
Allowance for loan losses to period end loans 1.03% 1.22% -15.57%
Allowance for credit losses to period end loans 2.15% 1.22% 76.23%
Allowance for loan losses to non-performing loans 221.53% 934.55% -76.30%
Allowance for credit losses to non-performing loans 467.77% 934.55% -49.95%
BALANCE SHEET HIGHLIGHTS
Total Assets $ 854,123 $ 628,896 $ 225,227 35.81%
Total Investments 191,165 167,824 23,341 13.91%
Net Loans 580,643 417,153 163,490 39.19%
Allowance for Loan Losses 6,050 5,140 910 17.70%
Total Deposits 639,278 437,029 202,249 46.28%
Stockholders' Equity 113,213 72,391 40,822 56.39%
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, June 30,
2009 2008
----------------- -----------------
ASSETS
Cash and due from banks $ 11,112 $ 15,054
Interest bearing balances with banks 2,253 4,171
Federal funds sold - -
------------ ------------
Cash and Cash Equivalents 13,365 19,225
Investment securities:
Available-for-sale, at fair value 135,102 103,154
Held-to-maturity (fair value of $58,278
and $65,685, respectively) 56,063 64,670
------------ ------------
Total Investment Securities 191,165 167,824
Loans, net of unearned income 586,693 422,293
Less: Allowance for loan losses 6,050 5,140
------------ ------------
Loans, Net 580,643 417,153
Bank premises and equipment 12,216 9,092
Other real estate owned 687 -
Accrued interest receivable 4,058 3,641
Goodwill 26,398 -
Cash surrender value of life insurance 14,121 7,525
Other assets 11,470 4,436
------------ ------------
Total Assets $ 854,123 $ 628,896
------------ ------------
LIABILITIES
Deposits:
Non-interest bearing $ 97,805 $ 75,049
Interest bearing 541,473 361,980
------------ ------------
Total Deposits 639,278 437,029
Other borrowed funds:
Repurchase agreements 25,100 38,376
Short-term borrowings 1,234 454
Long-term borrowings 67,539 77,807
Accrued interest payable 1,382 1,423
Other liabilities 6,377 1,416
------------ ------------
Total Liabilities 740,910 556,505
------------ ------------
STOCKHOLDERS' EQUITY
Common stock; $ .01 par value, 15,000,000 shares authorized,
3,276,079 shares issued and outstanding at June 30, 2009
and 2,148,000 shares issued and outstanding at
December 31, 2008 33 21
Surplus 48,865 10,819
Retained earnings 65,777 62,820
Accumulated other comprehensive income (1,462) (1,269)
------------ ------------
Total Stockholders' Equity 113,213 72,391
------------ ------------
Total Liabilities and Stockholders' Equity $ 854,123 $ 628,896
============ ============
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ------------------------------
2009 2008 2009 2008
------------ ------------ ------------- -------------
INTEREST INCOME
Interest and fees on loans $ 8,727 $ 6,436 $ 15,011 $ 13,097
Interest and dividends on investments:
U.S. Treasury securities and U.S. Agency obligations 872 1,100 1,750 2,005
States & political subdivisions 1,133 836 1,994 1,672
Other securities 8 69 22 143
Interest on Federal funds sold - - - -
Interest on balances with banks 3 23 6 34
---------- ---------- ----------- ----------
Total Interest Income 10,743 8,464 18,783 16,951
---------- ---------- ----------- ----------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 482 355 760 806
Interest on other deposits 1,441 1,424 2,384 2,957
Interest on other borrowed funds 780 1,018 1,601 1,944
---------- ---------- ----------- ----------
Total Interest Expense 2,703 2,797 4,745 5,707
---------- ---------- ----------- ----------
Net Interest Income 8,040 5,667 14,038 11,244
Provision for loan losses 235 216 1,231 451
---------- ---------- ----------- ----------
Net Interest Income After Provision for Loan Losses 7,805 5,451 12,807 10,793
---------- ---------- ----------- ----------
NON-INTEREST INCOME
Trust department income 375 382 685 747
Service charges on deposit accounts 481 396 820 659
Merchant transaction income 841 935 2,049 2,119
Brokerage income 79 169 196 351
Other fee income 331 320 618 617
Bank-owned life insurance income 132 80 211 158
Other operating income 218 82 288 118
VISA mandatory share redemption - - - 1,213
Realized (losses) gains on securities, net 314 - 314 -
---------- ---------- ----------- ----------
Total Non-Interest Income 2,771 2,364 5,181 5,982
---------- ---------- ----------- ----------
NON-INTEREST EXPENSES
Salaries and employee benefits 3,249 2,509 5,727 4,924
Expense of premises and equipment, net 817 667 1,608 1,435
Merchant transaction expenses 605 703 1,462 1,605
Merger related costs 215 - 1,550 -
Other operating expenses 2,046 1,578 3,709 2,551
----------- ---------- ----------- ----------
Total Non-Interest Expenses 6,932 5,457 14,056 10,515
---------- ---------- ----------- ----------
Income before income taxes 3,644 2,358 3,932 6,260
Applicable income taxes 775 430 622 1,375
----------- ---------- ----------- ----------
Net Income $ 2,869 $ 1,928 $ 3,310 $ 4,885
========== ========== ========== ==========
Weighted average shares outstanding 3,276,079 2,148,000 2,712,040 2,148,000
Earnings per Common Share $ 0.88 $ 0.89 $ 1.22 $ 2.27
Cash Dividends Declared Per Common Share $ 0.42 $ 0.41 $ 0.84 $ 0.82
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Accumulated
Other Total
Common Retained Comprehensive Stockholders'
Stock Surplus Earnings Income Equity
----------- ---------- ----------- -------------- -------------
Balance, March 31, 2008 $ 21 $ 10,819 $ 61,773 $ (416) $ 72,197
Comprehensive income:
Net income - - 1,928 - 1,928
Other comprehensive income, net of tax
Unrealized losses on securities, net of
reclassification adjustment - - - (1,298) (1,298)
Minimum pension liability adjustment - - - 445 445
--------- ---------
Other comprehensive income (853) (853)
---------
Comprehensive income 1,075
Cash dividends declared ($0.41 per share) - - (881) - (881)
--------- --------- --------- --------- ---------
Balance, June 30, 2008 $ 21 $ 10,819 $ 62,820 $ (1,269) $ 72,391
========= ========= ========= ========= =========
Balance, March 31, 2009 $ 21 $ 10,819 $ 64,284 $ (1,793) $ 73,331
Fair value of consideration exchanged in merger 12 38,046 - - 38,058
Comprehensive income:
Net income - - 2,869 - 2,869
Other comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment - - - 331 331
--------- ---------
Other comprehensive income 331 331
---------
Comprehensive income 3,200
Cash dividends declared ($0.42 per share) - - (1,376) - (1,376)
--------- --------- --------- --------- ---------
Balance, June 30, 2009 $ 33 $ 48,865 $ 65,777 $ (1,462) $ 113,213
========= ========= ========= ========= =========
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Accumulated
Other Total
Common Retained Comprehensive Stockholders'
Stock Surplus Earnings Income Equity
----------- ---------- ----------- -------------- -------------
Balance, December 31, 2007 $ 21 $ 10,819 $ 59,697 $ (822) $ 69,715
Comprehensive income:
Net income - - 4,885 - 4,885
Other comprehensive income, net of tax
Unrealized losses on securities, net of
reclassification adjustment - - - (892) (892)
Minimum pension liability adjustment - - - 445 445
------- ---------
Other comprehensive income
(447) (447)
---------
Comprehensive income 4,438
Cash dividends declared ($0.82 per share) - - (1,762) - (1,762)
------- --------- --------- ------- ---------
Balance, June 30, 2008 $ 21 $ 10,819 $ 62,820 $(1,269) $ 72,391
======= ========= ========= ======= =========
Balance, December 31, 2008 $ 21 $ 10,819 $ 64,745 $(1,943) $ 73,642
Fair value of consideration exchanged in merger 12 38,046 - - 38,058
Comprehensive income:
Net income - - 3,310 - 3,310
Other comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment - - - 481 481
------- ---------
Other comprehensive income 481 481
---------
Comprehensive income 3,791
Cash dividends declared ($0.84 per share) - - (2,278) - (2,278)
------- --------- ----------- ------- ---------
Balance, June 30, 2009 $ 33 $ 48,865 $ 65,777 $(1,462) $ 113,213
======= ========= =========== ======= =========
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Penseco Financial Services Corporation, through its subsidiary Penn Security
Bank & Trust Company, operates twelve offices in Lackawanna, Luzerne, Wayne and
Monroe counties. The Company's stock is traded on the OTC Bulletin Board Market,
under the symbol, "PFNS".
SAFE HARBOR FORWARD-LOOKING STATEMENTS
This press release, as well as other written communications made from time to
time by the Company and its subsidiaries and oral communications made from time
to time by authorized officers of the Company, may contain statements relating
to the future results of the Company (including certain projections and business
trends) that are considered "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such
forward-looking statements may be identified by the use of such words as
"believe," "expect," "anticipate," "should," "planned," "estimated," "intend"
and "potential". For these statements, the Company claims the protection of the
safe harbor for forward-looking statements contained in the PSLRA.
The Company cautions you that a number of important factors could cause actual
results to differ materially from those currently anticipated in any
forward-looking statement. Such factors include, but are not limited to:
prevailing economic and geopolitical conditions; changes in interest rates, loan
demand, real estate values and competition; changes in accounting principles,
policies, and guidelines; changes in any applicable law, rule, regulation or
practice with respect to tax or legal issues; and other economic, competitive,
governmental, regulatory and technological factors affecting the Company's
operations, pricing, products and services and other factors that may be
described in the Company's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q as filed with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this release, and, except
as may be required by applicable law or regulation, the Company assumes no
obligation to update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.
NON-GAAP FINANCIAL MEASURES:
Certain financial measures contained in this Form 8-K with respect to the three
months and six months ended June 30, 2009 exclude the decrease of the liability
accrual related to VISA's covered litigation provision as well as the gain from
the mandatory redemption of a portion of the Company's class B shares in VISA.
Also, as to the three months and six months ended June 30, 2008, these financial
measures exclude Merger related costs related to the acquisition of Old Forge
Bank on April 1, 2009. Financial measures which exclude the above-referenced
items have not been determined in accordance with generally accepted accounting
principles ("GAAP") and are therefore non-GAAP financial measures. Management of
the Company believes that investors' understanding of the Company's performance
is enhanced by disclosing these non-GAAP financial measures as a reasonable
basis for comparison of the Company's ongoing results of operations. These
non-GAAP measures should not be considered a substitute for GAAP-basis measures
and results. Our non-GAAP measures may not be comparable to non-GAAP measures of
other companies. The attached Non-GAAP Reconciliation Schedule provides a
reconciliation of these non-GAAP financial measures to the most closely
analogous measure determined in accordance with GAAP.
In March 2008, VISA, Inc. (VISA) completed its initial public offering. The Bank
and certain other VISA member banks are shareholders in VISA. Following the
initial public offering, the Company received $1.2 million in proceeds from the
offering, as a mandatory partial redemption of 28,351 shares, reducing the
Company's holdings from 73,333 to 44,982 shares of Class B common stock. Using
proceeds from this offering, VISA established a $3.0 billion escrow account to
cover the resolution of pending litigation and related claims. The partial
redemption proceeds of $1.2 million are reflected in other non-interest income
in the first quarter of 2008.
The remaining unredeemed shares of VISA Class B common stock are restricted and
may not be transferred until the later of (1) three years from the date of the
initial public offering or (2) the period of time necessary to resolve the
covered litigation. The current conversion ratio of 0.5824 was established for
the conversion rate of Class B shares into Class A shares. If the funds in the
escrow account are insufficient to settle all the covered litigation, VISA may
sell additional Class A shares, use the proceeds to settle litigation, and
further reduce the conversion ratio. If funds remain in the escrow account after
all litigation is settled, the Class B conversion ratio will be increased to
reflect that surplus. As of June 30, 2009, the value of the Class A shares was
$62.26 per share. The value of unredeemed Class A equivalent shares owned by the
Company was $1.6 million as of June 30, 2009, and has not yet been reflected in
the accompanying financial statements.
9
In connection with VISA's establishment of the litigation escrow account, the
Company reversed $497,000 reserve in the first quarter of 2008, reflected as a
reduction of other non-interest expense. This reserve was created in the fourth
quarter of 2007, pending completion of the VISA, Inc. initial public offering as
a charge to other non-interest expense.
Merger costs of $215,000 and $1,550,000 in the three months and six months ended
June 30, 2009, respectively, related to the acquisition of Old Forge Bank
consist primarily of investment banking costs, system conversion costs,
valuation services, legal and accounting fees and severance payments.
NON-GAAP RECONCILIATION SCHEDULE
PENSECO FINANCIAL SERVICES CORPORATION
(UNAUDITED)
(IN THOUSANDS)
The following tables present the reconciliation of non-GAAP financial measures
to reported GAAP financial measures.
Three Months Ended
June 30,
2009 2008 Change
-------------- ------------ -----------
Net interest income after provision for loan losses $ 7,805 $ 5,451 $ 2,354
Non-interest income 2,771 2,364 407
Non-interest expense (6,932) (5,457) (1,475)
Income tax benefit (provision) (775) (430) (345)
-------- -------- --------
Net income 2,869 1,928 941
ADJUSTMENTS
Non-interest income
Gain on mandatory redemption of VISA, Inc.
class B common stock - - -
Non-interest expense
Merger related costs 215 - 215
Covered litigation provision - - -
-------- -------- --------
Total Adjustments pre-tax 215 - 215
Income tax provision (benefit) 73 - 73
-------- -------- --------
After tax adjustments to GAAP 142 - 142
-------- -------- --------
Adjusted net income $ 3,011 $ 1,928 $ 1,083
======== ======== ========
Return on Average Assets 1.42% 1.25%
Return on Average Equity 10.49% 10.53%
Dividend Payout Ratio 45.65% 46.07%
Return on average equity (ROE) and return on average assets (ROA) for the three
months ended June 30, 2009 was 10.00% (10.49% excluding the merger costs) and
1.35% (1.42% excluding the merger costs), respectively. ROE was 10.53% and ROA
was 1.25% for the same period last year. The dividend payout ratio was 47.73%
(45.65% excluding the merger costs) and was 46.07% for the same period last
year.
10
NON-GAAP RECONCILIATION SCHEDULE
PENSECO FINANCIAL SERVICES CORPORATION
(UNAUDITED)
(IN THOUSANDS)
The following tables present the reconciliation of non-GAAP financial measures
to reported GAAP financial measures.
Six Months Ended
June 30,
2009 2008 Change
--------------- ------------- --------------
Net interest income after provision for loan losses $ 12,807 $ 10,793 $ 2,014
Non-interest income 5,181 5,982 (801)
Non-interest expense (14,056) (10,515) (3,541)
Income tax benefit (provision) (622) (1,375) 753
------------ ---------- ----------
Net income 3,310 4,885 (1,575)
ADJUSTMENTS
Non-interest income
Gain on mandatory redemption of VISA, Inc.
class B common stock - (1,213) 1,213
Non-interest expense
Merger related costs 1,550 - 1,550
Covered litigation provision - (497) 497
------------ ---------- ----------
Total Adjustments pre-tax 1,550 (1,710) 3,260
Income tax provision (benefit) 527 (581) 1,108
------------ ---------- ----------
After tax adjustments to GAAP 1,023 (1,129) 2,152
------------ ---------- ----------
Adjusted net income $ 4,333 $ 3,756 $ 577
============ ========== ==========
Return on Average Assets 1.17% 1.24%
Return on Average Equity 9.15% 10.45%
Dividend Payout Ratio 52.50% 46.86%
Return on average equity (ROE) and return on average assets (ROA) for the six
months ended June 30, 2009 was 6.99% (9.15% excluding the merger costs) and .89%
(1.17% excluding the merger costs), respectively. ROE was 13.59% (10.45%
excluding the VISA IPO impact) and ROA was 1.62% (1.24% excluding the VISA IPO
impact) for the same period last year. The dividend payout ratio was 68.85%
(52.50% excluding the merger costs) and was 36.12% (46.86% excluding the VISA
IPO impact) for the same period last year.