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: July 30, 2007
Penseco Financial Services Corporation Reports 2nd Quarter 2007 Earnings
SCRANTON, PA, July 30 -- Penseco Financial Services Corporation (OTC Bulletin
Board: PFNS), the Scranton, Pennsylvania based financial holding company of Penn
Security Bank & Trust Company reported net income increased $139,000 or 8.9% for
the three months ended June 30, 2007 to $1,700,000 or $.79 per share compared
with $1,561,000 or $.73 per share from the year ago period. Net interest income
after provision for loan losses increased $33,000 or .6%, to $5,218,000 for
three months ended June 30, 2007 compared to $5,185,000 for the same quarter of
2006. Partly, the increase resulted from higher interest on loans due to net
loan growth of $49.8 million since June 30, 2006, including $15.8 million from
December 31, 2006. Interest on investments declined $86,000 or 3.9% due to
maturing investments being redeployed to fund future loan demand.
For the six months ended June 30, 2007, net income increased $235,000 or 7.5% to
$3,370,000 or $1.57 per share compared with the year ago period of $3,135,000 or
$1.46 per share. Net interest income after provision for loan losses increased
$138,000 or 1.3% to $10,367,000 for the first half of 2007 from $10,229,000 for
the same period of 2006. Largely, the increase came from higher interest and
fees on loans of $1,619,000 or 14.4%, as net loans increased $49.8 million.
Interest on investments declined $241,000 or 5.5% due to maturing investments
being redeployed to fund future loan demand.
Other Income
Other income increased $325,000 or 19.6% to $1,980,000 for the three months
ended June 30, 2007 compared with $1,655,000 for the similar period of 2006.
Trust income increased $16,000 or 4.6% from new business. Merchant transaction
income increased $141,000 or 19.3% due to higher transaction volume and new
business. Service charges on deposit accounts increased $33,000 or 14.5%
primarily due to increased service charge collections during 2007, while other
fee income increased $20,000 from prior year levels. Other operating income
increased $115,000 largely due to Bank-Owned Life Insurance income of $77,000,
in addition to higher brokerage income compared to the prior year period.
Other income increased $383,000 or 10.4% to $4,076,000 during the first half of
2007 from $3,693,000 for the same period of 2006. Service charges on deposit
accounts increased $95,000 or 22.8% primarily due to increased service charge
collections during 2007. Merchant transaction income increased $80,000 or 4.3%
mainly due to higher transaction volume and new business. Other fee income
increased $25,000 or 4.5%. Other operating income increased $98,000 mainly from
Bank-Owned Life Insurance income of $155,000 offset by lower brokerage income
during the first quarter of 2007. The Company realized a gain of $51,000 due to
the sale of equity securities in the first quarter of 2007.
Other Expenses
Total other expenses increased $279,000 or 5.8% to $5,111,000 for the three
months ended June 30, 2007 compared with $4,832,000 for the same period of 2006.
Salaries and employee benefits decreased $10,000. Premises and fixed assets
expense increased $143,000 or 24.6% mainly due to higher depreciation expense
related to the conversion to a new computer system during the first quarter of
2006. Merchant transaction expense increased $69,000 or 11.5% due to higher
transaction volume. Other operating expenses increased $77,000 or 5.9%, from
increases in professional fees and general operating expenses related to the
promotion of our Totally Free Checking program.
Total other expenses increased $388,000 or 3.9% to $10,343,000 during the first
half of 2007 compared with $9,955,000 for the same period of 2006. Salaries and
employee benefits expense decreased $75,000 or 1.6%. Premises and fixed assets
expense increased $116,000 or 9.4% mainly due to the conversion to a new
computer system completed during the first quarter of 2006. Merchant transaction
expenses increased $41,000 or 2.8% due to higher transaction volume. Other
operating expenses increased $306,000 or 12.3% mostly from higher professional
fees and general operating expenses related to the promotion of our Totally Free
Checking program.
Asset Quality
Non-accrual loans increased $1,003,000 to $2,825,000 at June 30, 2007 from
$1,822,000 at June of 2006. This increase was due to a single borrowing
relationship being placed into non-accrual during the third quarter of 2006.
Management believes the Company is well secured and anticipates no loss of
principal as we work toward a resolution to this credit. The allowance for loan
losses at June 30, 2007 was $4,320,000 or 1.12% of total loans compared to
$3,900,000 or 1.16% of total loans at June 30, 2006. Management continues to
believe the loan loss reserve is adequate. The Company does not engage in any
Sub-Prime or Alt-A credit lending. Therefore, the Company is not subject to any
associated credit risks.
Loans on which the accrual of interest has been discontinued or reduced amounted
to $2,825,000 and $1,822,000 at June 30, 2007 and June 30, 2006, respectively.
If interest on those loans had been accrued, such income would have been
$209,000 and $62,000 for the six months ended June 30, 2007 and June 30, 2006,
respectively. Interest income on those loans, which is recorded only when
received, amounted to $127,000 and $14,000 for June 30, 2007 and June 30, 2006,
respectively. There are no commitments to lend additional funds to individuals
whose loans are in non-accrual status.
Income Tax Expense
For the three months ended June 30, 2007 applicable income taxes decreased
$60,000 or 13.4% to $387,000 due to more tax free income included in overall
operating income. For the six months ended June 30, 2007 applicable income taxes
decreased $102,000 or 12.3% to $730,000 due to more tax free income included in
overall operating income. The Company's effective income tax rate has been
affected by the Company's income being derived in part from Bank-Owned Life
Insurance appreciation, as well as tax-exempt interest.
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(unaudited)
(in thousands, except per share amounts)
Six Months Ended
-------------------
(in thousands, except per share June 30, June 30, Increase % Change
amounts) 2007 2006 $
- -----------------------------------------------------------------------------
Net Income $ 3,370 $ 3,135 $ 235 7.50%
Earnings per share $ 1.57 $ 1.46 $ 0.11 7.53%
Net Income - Core $ 3,361 $ 3,135 $ 226 7.21%
Earnings per share - Core $ 1.56 $ 1.46 $ 0.10 6.85%
ROA 1.16% 1.11% 4.50%
ROA- Core 1.16% 1.11% 4.50%
ROE 9.96% 9.69% 2.79%
ROE - Core 9.93% 9.69% 2.48%
Efficiency Ratio 70.54% 70.72% 0.25%
Efficiency Ratio - Core 70.58% 70.72% 0.20%
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
June 30, June 30,
2007 2006
---------------- ----------------
ASSETS
Cash and due from banks $ 11,099 $ 12,176
Interest bearing balances with banks 7,493 8,959
Federal funds sold 16,000 -
---------------- ----------------
Cash and Cash Equivalents 34,592 21,135
Investment securities:
Available-for-sale, at fair value 75,059 110,669
Held-to-maturity (fair value of $70,798
and $77,255, respectively) 71,090 77,991
---------------- ----------------
Total Investment Securities
146,149 188,660
Loans, net of unearned income 385,868 335,562
Less: Allowance for loan losses 4,320 3,900
---------------- ----------------
Loans, Net 381,548 331,662
Bank premises and equipment 9,795 9,381
Other real estate owned 31 2
Accrued interest receivable 3,667 3,452
Cash surrender value of life insurance 7,209 -
Other assets 3,783 5,145
---------------- ----------------
Total Assets $ 586,774 $ 559,437
================ ================
LIABILITIES
Deposits:
Non-interest bearing $ 73,686 $ 80,527
Interest bearing 350,464 319,105
---------------- ----------------
Total Deposits 424,150 399,632
Other borrowed funds:
Repurchase agreements 28,560 20,388
Short-term borrowings 418 -
Long-term borrowings 60,953 70,669
Accrued interest payable 1,561 1,292
Other liabilities 2,981 2,278
---------------- ----------------
Total Liabilities 518,623 494,259
---------------- ----------------
STOCKHOLDERS' EQUITY
Common stock ($ .01 par value, 15,000,000 shares
authorized, 2,148,000 shares issued and outstanding) 21 21
Surplus 10,819 10,819
Retained earnings 58,173 55,238
Accumulated other comprehensive income (862) (900)
---------------- ----------------
Total Stockholders' Equity 68,151 65,178
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 586,774 $ 559,437
================ ================
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,
--------------------------- ---------------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
INTEREST INCOME
Interest and fees on loans $ 6,559 $ 5,718 $ 12,852 $ 11,233
Interest and dividends on investments:
U.S. Treasury securities and U.S. Agency obligations 952 1,399 1,963 2,911
States & political subdivisions 724 636 1,445 1,261
Other securities 97 106 238 164
Interest on Federal funds sold 219 - 304 -
Interest on balances with banks 102 39 193 48
---------- ---------- ---------- ----------
Total Interest Income 8,653 7,898 16,995 15,617
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 527 287 1,036 506
Interest on other deposits 1,915 1,533 3,727 2,959
Interest on other borrowed funds 869 866 1,645 1,769
---------- ---------- ---------- ----------
Total Interest Expense 3,311 2,686 6,408 5,234
---------- ---------- ---------- ----------
Net Interest Income 5,342 5,212 10,587 10,383
Provision for loan losses 124 27 220 154
---------- ---------- ---------- ----------
Net Interest Income After Provision for Loan Losses 5,218 5,185 10,367 10,229
---------- ---------- ---------- ----------
OTHER INCOME
Trust department income 367 351 739 705
Service charges on deposit accounts 260 227 511 416
Merchant transaction income 873 732 1,920 1,840
Other fee income 323 303 583 558
Other operating income 157 42 272 174
Realized gains (losses) on securities, net - - 51 -
---------- ----------- ---------- ----------
Total Other Income 1,980 1,655 4,076 3,693
---------- ----------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 2,330 2,340 4,705 4,780
Expense of premises and equipment, net 725 582 1,350 1,234
Merchant transaction expenses 671 602 1,495 1,454
Other operating expenses 1,385 1,308 2,793 2,487
---------- ---------- ---------- ----------
Total Other Expenses 5,111 4,832 10,343 9,955
---------- ---------- ---------- ----------
Income before income taxes 2,087 2,008 4,100 3,967
Applicable income taxes 387 447 730 832
---------- ---------- ---------- ----------
Net Income $ 1,700 $ 1,561 $ 3,370 $ 3,135
========== ========== ========== ==========
Earnings per Common Share
(Based on 2,148,000 shares outstanding) $ 0.79 $ 0.73 $ 1.57 $ 1.46
Cash Dividends Declared Per Common Share $ 0.37 $ 0.35 $ 0.74 $ 0.70