<Page>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: November 2, 2009
PENSECO FINANCIAL SERVICES CORPORATION REPORTS EARNINGS AS OF SEPTEMBER 30, 2009
SCRANTON, PA, November 2, 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 $853,000 or 38.0% for the three months ended September 30, 2009 to
$3,095,000 or $.94 per share compared with $2,242,000 or $1.04 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 $2,315,000 or 39.7% largely due to an increased loan portfolio
of $155.4 million from Old Forge Bank. Core net income increased $853,000 or
38.0% due to higher earning assets related to the Merger. Non-interest income
increased $157,000 or 5.3% primarily as a result of higher service charges on
deposit accounts and higher operating income. Offsetting this increase was
higher total non-interest expenses of $1,211,000 or 20.8% mainly from higher
salary and benefits expenses, operating expenses and FDIC insurance assessments.
Return on average assets and return on average equity was 1.44% and 10.82%
respectively, for the three months ending September 30, 2009, versus 1.41% and
12.24% respectively, for the same period last year.
The Company reported a decrease in net income of $722,000 for the nine months
ended September 30, 2009 to $6,405,000 or $2.21 per weighted average share
compared with $7,127,000 or $3.32 per share from the year ago period. The
decrease in net income was primarily attributed to $1,550,000 of costs
associated with the Merger, in addition to a $530,000 increase in FDIC insurance
costs, 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 $4,154,000 or 25.2% during the 2009
period, largely due to increased interest and fees on loans and reduced interest
expense from lower deposit costs. Core net income increased $1,430,000 or 23.8%
due to increases in earning assets. The Company increased the provision for
potential loan loss expense by $955,000 to $1,573,000 in the first nine months
of 2009 compared to $618,000 for the first nine months of 2008, due to the
softness in the economy.
Net non-cash accretion and amortization from the acquisition of Assets and
Liabilities due to the Old Forge Bank merger was $214,000 and $480,000 for the
three months and the nine months ended September 30, 2009, respectively.
NON-INTEREST INCOME
Total non-interest income increased $157,000 or 5.3% to $3,143,000 for the three
months ended September 30, 2009, compared with $2,986,000 for the same period in
2008. Service charges on deposit accounts increased $143,000 or 35.5% primarily
due to the increased number of accounts resulting from the Merger and increased
service charge activity. Brokerage fee income decreased $43,000 or 31.6% mostly
due to the decline in the overall market. Bank-owned life insurance income
increased $54,000 or 69.2% due to the Merger. Other operating income decreased
$16,000 largely due to a gain on the sale of an other real estate owned property
during 2008.
Total non-interest income decreased $644,000 or 7.2% to $8,324,000 during the
first nine months of 2009 from $8,968,000 for the same period of 2008. The
decrease in 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 $304,000 or 28.6% primarily due to the increased
number of accounts resulting from the Merger and increased service charge
activity. Merchant transaction income decreased $89,000 or 2.4%, mainly due to
lower transaction volume from continued softness in the economy. Brokerage fee
income decreased $198,000 or 40.7% mostly due to the decline in the overall
market. Bank-owned life insurance income increased $107,000 or 45.3% due to the
Merger. Other operating income increased $154,000 or 104.1% 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.
<Page>2
NON-INTEREST EXPENSES
Total non-interest expenses increased $1,211,000 or 20.8% to $7,037,000 for the
three months ended September 30, 2009 compared with $5,826,000 for the same
period of 2008. Salaries and employee benefits expense increased $743,000 or
29.9% due to additional staff from the Merger. Expense of premises and fixed
assets increased $201,000 or 32.1%. Merchant transaction expenses decreased
$121,000 or 10.2% due to lower transaction volume from the softness in the
economy. FDIC insurance assessments increased $110,000 or 647.1%. Other
operating expenses increased $278,000 or 18.3% partly from increased shares tax
of $96,000, increased professional services and increased general operating
expenses.
Total non-interest expenses increased $4,752,000 or 29.1% to $21,093,000 during
the first nine months of 2009 compared with $16,341,000 for the same period of
2008. Salaries and employee benefits expense increased $1,546,000 or 20.9%
mainly due to increased salaries resulting from additional employees as a result
of the Merger. Premises and fixed assets expense increased $374,000 or 18.1% due
to additional depreciation and increased occupancy expense in part due to the
Merger. Merchant transaction expenses decreased $264,000 or 9.5% 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. FDIC insurance assessments increased $530,000 or 1,292.7% due to a
one time FDIC special assessment cost of $385,000 and increases in quarterly
assessments. Other operating expenses increased $1,016,000 or 25.1% 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.
ASSET QUALITY
The allowance for loan losses at September 30, 2009 was $6,300,000 or 1.05% of
total loans compared to $5,240,000 or 1.21% of total loans at September 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 Bank merger, equaled 2.10% of total loans at
September 30, 2009.
Loans on which the accrual of interest has been discontinued or reduced amounted
to $3,111,000 at September 30, 2009, up from $1,454,000 at December 31, 2008 and
$1,352,000 at September 30, 2008. If interest on those loans had been accrued,
such income would have been $394,000 and $186,000 for the nine months ended
September 30, 2009 and September 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 $92,000 or .016% of average outstanding loans
for the three months ended September 30, 2009 compared to $67,000 or .016% at
September 30, 2008. Net loan charge-offs amounted to $548,000 or .102% of
average outstanding loans for the nine months ended September 30, 2009 compared
to $78,000 or .019% at September 30, 2008.
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. At September 30, 2009, the Company had $8.1 million of TERI
loans out of a total student loan portfolio of $19.0 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 September 30, 2009 there was
$147 thousand 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.
<Page>3
INCOME TAX EXPENSE
Applicable income taxes increased $233,000 for the three months ended September
30, 2009 due to overall higher income. Also, applicable income taxes decreased
$520,000 or 26.6% during the first nine months of 2009 primarily due to the
$1,550,000 of costs associated with the Merger, a higher provision for loan
losses in 2009 and a one time gain on the VISA IPO during the nine months ended
September 30, 2008.
<Page>4
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
September September
30, 30,
------------------------ Inc/(Dec) %
(in thousands, except per share amounts) 2009 2008 $ Change
- ---------------------------------------------------------------------------------------------------------------------
Three Months Ended
------------------
PERFORMANCE RATIOS
Return on Average Assets 1.44% 1.41% 2.13%
Return on Average Equity 10.82% 12.24% -11.60%
Nine Months Ended
-----------------
PERFORMANCE RATIOS
Return on Average Assets 1.09% 1.55% -29.68%
Return on Average Equity 8.43% 13.14% -35.84%
STOCKHOLDERS' VALUE
Net Income $ 6,405 $ 7,127 $ (722) -10.13%
Earnings per share 2.21 3.32 (1.11) -33.43%
Dividends Per Share 1.26 1.24 0.02 1.61%
Book Value Per Share 35.78 33.48 2.30 6.87%
Tangible Book Value Per Share 27.11 33.46 (6.35) -18.98%
Market Value Per Share 31.80 39.50 (7.70) -19.49%
Market Value/Book Value 88.88% 117.98% -24.67%
Price Earnings Multiple 10.78x 8.92x 20.85%
Dividend Payout Ratio 57.01% 37.35% 52.64%
Dividend Yield 5.28% 4.20% 25.71%
SAFETY AND SOUNDNESS
Stockholders' Equity/Assets 13.45% 11.24% 19.66%
Tangible Equity/Tangible Assets 10.53% 11.24% -6.32%
Total Capital/Risk Weighted Assets 16.88% 19.80% -14.75%
Tier 1 Capital/Risk Weighted Assets 15.76% 18.55% -15.04%
Tier 1 Capital/Average Assets 11.69% 12.20% -4.18%
Non-performing Assets/Total Assets 0.36% 0.21% 71.43%
Non-performing loans to period end oans 0.52% 0.31% 67.74%
Allowance for loan losses to period end loans 1.05% 1.21% -13.22%
Allowance for credit losses to period end loans 2.10% 1.21% 73.55%
Allowance for loan losses to non-performing loans 202.51% 387.57% -47.75%
Allowance for credit losses to non-performing loans 406.88% 387.57% 4.98%
BALANCE SHEET HIGHLIGHTS
Total Assets $871,641 $639,642 $231,999 36.27%
Total Investments 201,159 154,553 46,606 30.16%
Net Loans 591,264 427,740 163,524 38.23%
Allowance for Loan Losses 6,300 5,240 1,060 20.23%
Total Deposits 636,908 442,522 194,386 43.93%
Stockholders' Equity 117,223 71,914 45,309 63.00%
</Table>
<Page>5
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
September 30, September 30,
2009 2008
------------- -------------
ASSETS
Cash and due from banks $ 9,686 $ 7,457
Interest bearing balances with banks 2,244 19,325
Federal funds sold - 5,000
------------- -------------
Cash and Cash Equivalents 11,930 31,782
Investment securities:
Available-for-sale, at fair value 149,366 91,029
Held-to-maturity (fair value of $54,375
and $65,685, respectively) 51,793 63,524
------------- -------------
Total Investment Securities 201,159 154,553
Loans, net of unearned income 597,564 432,980
Less: Allowance for loan losses 6,300 5,240
------------- -------------
Loans, Net 591,264 427,740
Bank premises and equipment 12,158 9,175
Other real estate owned 190 -
Accrued interest receivable 4,226 3,606
Goodwill 26,398 -
Cash surrender value of life insurance 14,253 7,605
Other assets 10,063 5,181
------------- -------------
Total Assets $871,641 $639,642
============= =============
LIABILITIES
Deposits:
Non-interest bearing 104,354 80,944
Interest bearing 532,554 361,578
------------- -------------
Total Deposits 636,908 442,522
Other borrowed funds:
Repurchase agreements 25,104 45,857
Short-term borrowings 17,974 572
Long-term borrowings 65,872 75,275
Accrued interest payable 1,264 1,090
Other liabilities 7,296 2,412
------------- -------------
Total Liabilities 754,418 567,728
------------- -------------
STOCKHOLDERS' EQUITY
Common stock; $ .01 par value, 15,000,000
shares authorized, 3,276,079 shares issued
and outstanding at September 30, 2009 and
2,148,000 shares issued and outstanding at
December 31, 2008 33 21
Surplus 48,865 10,819
Retained earnings 67,495 64,160
Accumulated other comprehensive income 830 (3,086)
------------- -------------
Total Stockholders' Equity 117,223 71,914
------------- -------------
Total Liabilities and Stockholders' Equity $871,641 $639,642
============= =============
</Table>
<Page>6
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ---------------------------
2009 2008 2009 2008
---------- ---------- ----------- -----------
INTEREST INCOME
Interest and fees on loans $ 8,718 $ 6,543 $ 23,729 $ 19,640
Interest and dividends on investments:
U.S. Treasury securities and U.S.
Agency obligations 800 1,047 2,550 3,052
States & political subdivisions 1,216 849 3,210 2,521
Other securities 8 68 30 211
Interest on Federal funds sold - 31 - 31
Interest on balances with banks 3 28 9 62
---------- ---------- ----------- -----------
Total Interest Income 10,745 8,566 29,528 25,517
---------- ---------- ----------- -----------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 507 336 1,267 1,142
Interest on other deposits 1,376 1,385 3,760 4,342
Interest on other borrowed funds 719 1,017 2,320 2,961
---------- ---------- ----------- -----------
Total Interest Expense 2,602 2,738 7,347 8,445
---------- ---------- ----------- -----------
Net Interest Income 8,143 5,828 22,181 17,072
Provision for loan losses 342 167 1,573 618
---------- ---------- ----------- -----------
Net Interest Income After Provision for Loan Losses 7,801 5,661 20,608 16,454
---------- ---------- ----------- -----------
NON-INTEREST INCOME
Trust department income 369 386 1,054 1,133
Service charges on deposit accounts 546 403 1,366 1,062
Merchant transaction income 1,564 1,583 3,613 3,702
Brokerage income 93 136 289 487
Other fee income 398 347 1,016 964
Bank-owned life insurance income 132 78 343 236
Other operating income 14 30 302 148
VISA mandatory share redemption - - - 1,213
Realized (losses) gains on securities, net 27 23 341 23
---------- ---------- ----------- -----------
Total Non-Interest Income 3,143 2,986 8,324 8,968
---------- ---------- ----------- -----------
NON-INTEREST EXPENSES
Salaries and employee benefits 3,224 2,481 8,951 7,405
Expense of premises and equipment, net 827 626 2,435 2,061
Merchant transaction expenses 1,061 1,182 2,523 2,787
Merger related costs - - 1,550 -
FDIC insurance assessments 127 17 571 41
Other operating expenses 1,798 1,520 5,063 4,047
---------- ---------- ----------- -----------
Total Non-Interest Expenses 7,037 5,826 21,093 16,341
---------- ---------- ----------- -----------
Income before income taxes 3,907 2,821 7,839 9,081
Applicable income taxes 812 579 1,434 1,954
---------- ---------- ----------- -----------
Net Income $ 3,095 $ 2,242 $ 6,405 $ 7,127
========== ========== =========== ===========
Weighted average shares outstanding 3,276,079 2,148,000 2,900,053 2,148,000
Earnings per Common Share $ 0.94 $ 1.04 $ 2.21 $ 3.32
Cash Dividends Declared Per Common Share $ 0.42 $ 0.42 $ 1.26 $ 1.24
</Table>
<Page>7
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
Accumulated
Other Total
Common Retained Comprehensive Stockholders'
Stock Surplus Earnings Income Equity
---------- --------- ---------- -------------- -------------
Balance, June 30, 2008 $ 21 $10,819 $62,820 $(1,269) $ 72,391
Comprehensive income:
Net income - - 2,242 - 2,242
Other comprehensive income, net of tax
Unrealized losses on securities, net of
reclassification adjustment - - - (1,817) (1,817)
-------------- -------------
Other comprehensive income (1,817) (1,817)
-------------
Comprehensive income 425
Cash dividends declared ($0.42 per share) - - (902) - (902)
---------- --------- ---------- -------------- -------------
Balance, September 30, 2008 $ 21 $10,819 $64,160 $(3,086) $ 71,914
========== ========= ========== ============== =============
Balance, June 30, 2009 $ 33 $48,865 $65,777 $(1,462) $113,213
Comprehensive income:
Net income - - 3,095 - 3,095
Other comprehensive income, net of tax
Unrealized gains onsecurities, net of
reclassification adjustment - - - 2,292 2,292
-------------- -------------
Other comprehensive income 2,292 2,292
-------------
Comprehensive income 5,387
Cash dividends declared ($0.42 per share) - - (1,377) - (1,377)
---------- --------- ---------- -------------- -------------
Balance, September 30, 2009 $ 33 $48,865 $67,495 $ 830 $117,223
========== ========= ========== ============== =============
</Table>
<Page>8
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
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 - - 7,127 - 7,127
Other comprehensive income, net of tax
Unrealized losses on securities, net of
reclassification adjustment - - - (2,709) (2,709)
Minimum pension liability adjustment - - - 445 445
-------------- -------------
Other comprehensive income (2,264) (2,264)
-------------
Comprehensive income 4,863
Cash dividends declared ($1.24 per share) - - (2,664) - (2,664)
---------- --------- ---------- -------------- -------------
Balance, September 30, 2008 $ 21 $10,819 $64,160 $(3,086) $ 71,914
========== ========= ========== ============== =============
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 - - 6,405 - 6,405
Other comprehensive income, net of tax
Unrealized gains on securities, net of
reclassification adjustment - - - 2,773 2,773
-------------- -------------
Other comprehensive income 2,773 2,773
-------------
Comprehensive income 9,178
Cash dividends declared ($1.26 per share) - - (3,655) - (3,655)
---------- --------- ---------- -------------- -------------
Balance, September 30, 2009 $ 33 $48,865 $67,495 $ 830 $117,223
========== ========= ========== ============== =============
</Table>
<Page>9
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 nine months ended September 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, both of which occurred in 2008. Also, as to the three months and nine
months ended September 30, 2009, 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 September 30, 2009, the value of the Class A shares
was $69.11 per share. The value of unredeemed Class A equivalent shares owned by
the Company was $1.8 million as of September 30, 2009, and has not yet been
reflected in the accompanying financial statements.
<Page>10
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 $0 and $1,550,000 in the three months and nine months ended
September 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.
<Table>
<Caption>
Three Months Ended
September 30,
2009 2008 Change
----------- --------- -----------
Net interest income after provision for loan losses $ 7,801 $ 5,661 $ 2,140
Non-interest income 3,143 2,986 157
Non-interest expense (7,037) (5,826) (1,211)
Income tax benefit (provision) (812) (579) (233)
----------- --------- -----------
Net income 3,095 2,242 853
ADJUSTMENTS
- -----------
Non-interest income
Gain on mandatory redemption of VISA, Inc.
class B common stock - - -
Non-interest expense
Merger related costs - - -
Covered litigation provision - - -
----------- --------- -----------
Total Adjustments pre-tax - - -
Income tax provision (benefit) - - -
----------- --------- -----------
After tax adjustments to GAAP - - -
----------- --------- -----------
Adjusted net income $3,095 $2,242 $ 853
=========== ========= ===========
Return on Average Assets 1.44% 1.41%
Return on Average Equity 10.82% 12.24%
Dividend Payout Ratio 44.68% 40.38%
</Table>
Return on average equity (ROE) and return on average assets (ROA) for the three
months ended September 30, 2009 was 10.82% and 1.44%, respectively. ROE was
12.24% and ROA was 1.41% for the same period last year. The dividend payout
ratio was 44.68% and was 40.38% for the same period last year.
<Page>11
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.
<Table>
<Caption>
Nine Months Ended
September 30,
2009 2008 Change
----------- --------- -----------
Net interest income after provision for loan losses $ 20,608 $ 16,454 $ 4,154
Non-interest income 8,324 8,968 (644)
Non-interest expense (21,093) (16,341) (4,752)
Income tax benefit (provision) (1,434) (1,954) 520
----------- --------- -----------
Net income 6,405 7,127 (722)
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 $ 7,428 $ 5,998 $ 1,430
=========== ========= ===========
Return on Average Assets 1.27% 1.30%
Return on Average Equity 9.78% 11.05%
Dividend Payout Ratio 49.22% 44.44%
</Table>
Return on average equity (ROE) and return on average assets (ROA) for the nine
months ended September 30, 2009 was 8.43% (9.78% excluding the Merger costs) and
1.09% (1.27% excluding the Merger costs), respectively. ROE was 13.14% (11.05%
excluding the VISA IPO impact) and ROA was 1.55% (1.30% excluding the VISA IPO
impact) for the same period last year. The dividend payout ratio was 57.01%
(49.22% excluding the Merger costs) and was 37.35% (44.44% excluding the VISA
IPO impact) for the same period last year.