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 1, 2007
Penseco Financial Services Corporation Reports Increased Earnings of 16.4%
for the 3rd Quarter 2007
SCRANTON, PA, November 1 -- 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 $308,000 or 16.4%
for the three months ended September 30, 2007 to $2,181,000 or $1.01 per share
compared with $1,873,000 or $.87 per share from the year ago period. Net
interest income after provision for loan losses increased $151,000 or 3.0%, to
$5,222,000 for three months ended September 30, 2007 compared to $5,071,000 for
the same quarter of 2006. Largely, the increase came from higher interest and
fees on loans of $883,000 or 15.0%, due to net loan growth of $41.1 million
since September 30, 2006, including $25.7 million from December 31, 2006.
Interest on investments declined $159,000 or 7.5%, due to maturing investments
being redeployed to fund future loan demand.
For the nine months ended September 30, 2007, net income increased $543,000 or
10.8%, to $5,551,000 or $2.58 per share compared with the year ago period of
$5,008,000 or $2.33 per share. Net interest income after provision for loan
losses increased $289,000 or 1.9%, to $15,589,000 for the nine months ended
September 30, 2007 from $15,300,000 for the same period of 2006. Largely, the
increase came from higher interest and fees on loans of $2,502,000 or 14.6%, as
net loans increased $41.1 million since the year age period. Interest on
investments declined $400,000 or 6.1% for the nine months ended September 30,
2007, due to maturing investments being redeployed to fund future loan demand.
The allowance for loan losses at September 30, 2007 was $4,600,000 or 1.16% of
total loans compared to $4,000,000 or 1.13% of total loans at September 30,
2006.
Other Income
Other income increased $211,000 or 8.6% for the three months ended September 30,
2007 to $2,663,000 compared with $2,452,000 for the three months ended September
30, 2006. Service charges on deposit accounts increased $27,000 or 12.4%
primarily due to increased service charge collections during 2007. Merchant
transaction income increased $95,000 or 6.8% due to higher transaction volume
and new business. Bank-Owned Life Insurance (BOLI) income increased $80,000. The
Company entered into a BOLI investment during the fourth quarter of 2006.
Other income increased $594,000 or 9.7% to $6,739,000 during the first nine
months of 2007 from $6,145,000 for the same period of 2006. Service charges on
deposit accounts increased $122,000 or 19.2% primarily due to increased service
charge collections during 2007. Merchant transaction income increased $175,000
or 5.4%, mainly due to higher transaction volume and new business. Bank-Owned
Life Insurance income increased $235,000. The Company entered into a BOLI
investment during the fourth quarter of 2006. Other operating income decreased
$65,000 mainly lower brokerage income of $32,000 along with a reduction in
general operating income. The Company realized a gain of $49,000 due to the sale
of equity securities during the first nine months of 2007.
Other Expenses
Total other expenses remained relatively unchanged at $5,100,000 for the three
months ended September 30, 2007. Salaries and employee benefits decreased
$24,000 or 1.1%. The decrease was largely due to a refund of $144,000 from a
health insurance provider. Premises and fixed assets expense increased $25,000
or 4.3%, mainly due to higher depreciation expense related to the conversion to
a new computer system during 2006. Merchant transaction expense increased
$60,000 or 5.5% due to higher transaction volume and new business. Other
operating expenses decreased $60,000 or 4.6%.
Total other expenses increased $389,000 or 2.6% to $15,443,000 during the first
nine months of 2007 compared with $15,054,000 for the same period of 2006.
Salaries and employee benefits expense decreased $99,000 or 1.4%. The decrease
was largely due to a refund of $144,000 from a health insurance provider.
Premises and fixed assets expense increased $141,000 or 7.8%, mainly due to the
increased depreciation expense related to the new computer system completed
during 2006. Merchant transaction expenses increased $101,000 or 4.0% due to
higher transaction volume. Other operating expenses increased $246,000 or 6.5%
from general operating expenses related to the promotion of our Totally Free
Checking program.
Asset Quality
Non-accrual loans decreased $3,759,000 to $406,000 or .10% of total loans at
September 30, 2007 from $4,165,000 or 1.18% of total loans at September of 2006.
This decrease was due to two borrowing relationships being resolved during the
third quarter of 2007. The allowance for loan losses at September 30, 2007 was
$4,600,000 or 1.16% of total loans compared to $4,000,000 or 1.13% of total
loans at September 30, 2006. Management believes 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 $406,000 and $4,165,000 at September 30, 2007 and September 30, 2006,
respectively. If interest on those loans had been accrued, such income would
have been $253,000 and $190,000 for the nine months ended September 30, 2007 and
September 30, 2006, respectively. Interest income on those loans, which is
recorded only when received, amounted to $143,000 and $84,000 for September 30,
2007 and September 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 September 30, 2007 applicable income taxes increased
$53,000 or 9.6% to $604,000 due to due to higher operating income. For the nine
months ended September 30, 2007 applicable income taxes decreased $49,000 or
3.5% to $1,334,000 due to increased tax-free income and BOLI 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 BOLI appreciation,
as well as tax-free interest.
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(unaudited)
(in thousands, except per share amounts)
Nine Months Ended
September 30, September 30, Increase %
--------------- ---------------
(in thousands, except per share amounts) 2007 2006 $ Change
- -------------------------------------------------------------------------------------------------
Net Income $ 5,551 $ 5,008 $ 543 10.84%
Earnings per share $ 2.58 $ 2.33 $ 0.25 10.73%
Net Income - Core $ 5,543 $ 5,008 $ 535 10.68%
Earnings per share - Core $ 2.58 $ 2.33 $ 0.25 10.73%
ROA 1.27% 1.19% 6.72%
ROA- Core 1.27% 1.19% 6.72%
ROE 10.86% 10.27% 5.74%
ROE - Core 10.84% 10.27% 5.55%
Efficiency Ratio 67.57% 69.24% (2.41%)
Efficiency Ratio - Core 67.60% 69.24% (2.37%)
Non-accrual Loans/Total Loans 0.10% 1.18% (91.53%)
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
September 30, September 30,
2007 2006
---------------- ----------------
ASSETS
Cash and due from banks $ 12,358 $ 11,751
Interest bearing balances with banks 13,063 668
Federal funds sold 7,000 -
---------------- ----------------
Cash and Cash Equivalents 32,421 12,419
Investment securities:
Available-for-sale, at fair value 72,804 105,491
Held-to-maturity (fair value of $69,887
and $76,930, respectively) 69,387 76,100
---------------- ----------------
Total Investment Securities 142,191 181,591
Loans, net of unearned income 396,035 354,308
Less: Allowance for loan losses 4,600 4,000
---------------- ----------------
Loans, Net 391,435 350,308
Bank premises and equipment 9,489 9,331
Other real estate owned - 80
Accrued interest receivable 3,632 3,294
Cash surrender value of life insurance 7,289 -
Other assets 3,348 3,819
---------------- ----------------
Total Assets $ 589,805 $ 560,842
================ ================
LIABILITIES
Deposits:
Non-interest bearing $ 78,187 $ 75,187
Interest bearing 345,245 325,724
---------------- ----------------
Total Deposits 423,432 400,911
Other borrowed funds:
Repurchase agreements 33,295 18,592
Short-term borrowings 625 2,070
Long-term borrowings 58,470 68,272
Accrued interest payable 1,386 1,342
Other liabilities 2,903 2,524
---------------- ----------------
Total Liabilities 520,111 493,711
---------------- ----------------
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 59,560 56,360
Accumulated other comprehensive income (706) (69)
---------------- ----------------
Total Stockholders' Equity 69,694 67,131
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 589,805 $ 560,842
================ ================
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
2007 2006 2007 2006
---------- ----------- ---------- ----------
Interest and fees on loans $ 6,769 $ 5,886 $ 19,621 $ 17,119
Interest and dividends on investments:
U.S. Treasury securities and U.S. Agency obligations 896 1,267 2,859 4,178
States & political subdivisions 733 697 2,178 1,958
Other securities 84 86 322 250
Interest on Federal funds sold 129 - 433 -
Interest on balances with banks 121 72 314 120
---------- ---------- ---------- ----------
Total Interest Income 8,732 8,008 25,727 23,625
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on time deposits of $100,000 or more 504 299 1,540 805
Interest on other deposits 1,858 1,679 5,585 4,638
Interest on other borrowed funds 840 816 2,485 2,585
---------- ---------- ---------- ----------
Total Interest Expense 3,202 2,794 9,610 8,028
---------- ---------- ---------- ----------
Net Interest Income 5,530 5,214 16,117 15,597
Provision for loan losses 308 143 528 297
---------- ---------- ---------- ----------
Net Interest Income After Provision for Loan Losses 5,222 5,071 15,589 15,300
---------- ---------- ---------- ----------
OTHER INCOME
Trust department income 421 408 1,160 1,113
Service charges on deposit accounts 245 218 756 634
Merchant transaction income 1,482 1,387 3,402 3,227
Other fee income 325 319 908 877
Bank-Owned Life Insurance Income 80 - 235 -
Other operating income 112 120 229 294
Realized (losses) gains on securities, net (2) - 49 -
---------- ---------- ---------- ----------
Total Other Income 2,663 2,452 6,739 6,145
---------- ---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits 2,108 2,132 6,813 6,912
Expense of premises and equipment, net 605 580 1,955 1,814
Merchant transaction expenses 1,149 1,089 2,644 2,543
Other operating expenses 1,238 1,298 4,031 3,785
---------- ---------- ---------- ----------
Total Other Expenses 5,100 5,099 15,443 15,054
---------- ---------- ---------- ----------
Income before income taxes 2,785 2,424 6,885 6,391
Applicable income taxes 604 551 1,334 1,383
---------- ---------- ---------- ----------
$ 2,181 $ 1,873 $ 5,551 $ 5,008
========== ========== ========== ==========
Earnings per Common Share
(Based on 2,148,000 shares outstanding) $ 1.01 $ 0.87 $ 2.58 $ 2.33
Cash Dividends Declared Per Common Share $ 0.37 $ 0.35 $ 1.11 $ 1.05
Penseco Financial Services Corporation, through its subsidiary Penn Security
Bank & Trust Company, operates nine offices in Lackawanna, Wayne and Monroe
counties. The Company's stock is traded on the OTC Bulletin Board Market, under
the symbol, "PFNS".
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.