Susquehanna Bancshares, Inc. Announces Second Quarter 2014 Results and Stock Repurchase Plan

Second Quarter Highlights

  • GAAP EPS of $0.23
  • Linked Quarter Commercial and Construction Loan Growth
  • Solid Deposit Growth
  • Asset Quality Improved
  • Capital Ratios Continue to Build

LITITZ, Pa.--()--Susquehanna Bancshares, Inc. (Susquehanna) (NASDAQ: SUSQ) today announced that it earned net income for the second quarter ended June 30, 2014 of $43.5 million, or $0.23 per diluted share, compared to $37.2 million, or $0.20 per diluted share, for the first quarter of 2014 and $45.6 million, or $0.24 per diluted share, for the second quarter of 2013.

In addition, Susquehanna announced that its Board of Directors has authorized the repurchase of up to 3.5% of total outstanding common shares through December 31, 2014. As of June 30, 2014, Susquehanna had approximately 187.7 million shares of common stock outstanding. As permitted by securities laws and subject to market conditions and other factors, purchases may be made from time to time in the open market or through negotiated transactions. The repurchase program may be discontinued at any time.

“We continued to execute on our strategic plan by growing deposits, commercial loans and branch-based HELOCs while deemphasizing other loan categories, such as residential loans we portfolio,” said William J. Reuter, Susquehanna’s Chairman and Chief Executive Officer. “Also, during the last few years we have been accumulating capital. After careful consideration, we have concluded that our capital position is in excess of our need, and therefore, determined that we should begin returning this excess capital to our shareholders.”

Linked Quarter Results (Second Quarter 2014 vs. First Quarter 2014)

  • Loans and leases increased $91.9 million or 0.7% from March 31, 2014 to $13.7 billion at June 30, 2014. Changes for the quarter in each major loan category were as follows:
    • Commercial loans increased 0.5%.
    • Real estate – construction loans increased 4.7%.
    • Real estate secured – residential loans were essentially flat.
    • Real estate secured – commercial loans increased 0.3%.
    • Consumer loans increased 0.7%.
    • Leases increased 2.2%.
  • Total deposits increased $235.5 million or 1.8% from March 31, 2014 to $13.3 billion at June 30, 2014. Changes for the quarter in each major deposit category were as follows:
    • Non-interest bearing checking increased 2.9%.
    • Interest-bearing checking decreased 0.9%.
    • Money market deposits decreased 5.0%.
    • Savings deposits increased 0.3%.
    • Time deposits increased 9.1%.
  • As a result of growth in the deposit portfolio, the loan to deposit ratio decreased to 102.6% for the second quarter of 2014 compared to 103.8% for the first quarter of 2014.
  • Net interest margin increased 2 basis points to 3.63% for the second quarter of 2014 compared to 3.61% for the first quarter of 2014. The second quarter of 2014 included a 9 basis point gain from the redemption of a trust preferred security. Net interest margin (excluding purchase accounting) (1) declined 2 basis points to 3.38% for the second quarter of 2014 compared to 3.40% for the first quarter of 2014.

    In the third quarter of 2014, management expects the net interest margin (excluding purchase accounting) (1) to decline slightly, within a range of 3.32% to 3.36%.
  • Non-interest income increased to $45.3 million for the second quarter of 2014 compared to $42.1 million for the first quarter of 2014. The second quarter of 2014 included a net realized gain on sale of securities of $3.3 million.

    Excluding the net realized gain on sale of securities in the second quarter of 2014, management expects noninterest income to increase in the third quarter of 2014 due to an anticipated increase in mortgage banking activity and SBA loan sales.
  • Non-interest expense increased to $125.2 million for the second quarter of 2014 compared to $123.0 million in the first quarter of 2014.

    Management expects non-interest expenses to increase slightly in the third quarter of 2014.
  • The efficiency ratio (1) decreased to 65.63% for the second quarter of 2014 compared to 66.18% in the first quarter of 2014.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate owned decreased to 0.85% at June 30, 2014 compared to 0.89% at March 31, 2014.
  • The provision for loan and lease losses in the second quarter decreased to $3.0 million compared to $6.0 million in the first quarter of 2014. Net charge-offs for the second quarter increased to $11.4 million, or 0.34% of average loans and leases, compared to $9.5 million, or 0.28% of average loans and leases, for the first quarter of 2014. As a result, the allowance for loan and lease losses was $144.5 million at June 30, 2014, representing 1.06% of total loans and leases and 137% of nonaccrual loans and leases compared to $154.2 million at March 31, 2014, representing 1.14% of total loans and leases and 142% of nonaccrual loans and leases.

Second Quarter Results (Second Quarter 2014 vs. Second Quarter 2013)

  • Loans and leases increased $509.4 million or 3.9% from June 30, 2013 to $13.7 billion at June 30, 2014. Changes for the twelve month period in each major loan category were as follows:
    • Commercial loans increased 5.8%.
    • Real estate - construction loans decreased 2.8%.
    • Real estate secured - residential loans increased 1.9%.
    • Real estate secured - commercial loans increased 0.6%.
    • Consumer loans increased 6.0%.
    • Leases increased 22.4%.
  • Total deposits increased $550.8 million or 4.3% from June 30, 2013 to $13.3 billion as of June 30, 2014. Changes for the twelve month period in each major deposit category were as follows:
    • Non-interest-bearing checking increased 0.2%.
    • Interest-bearing checking increased 4.2%.
    • Money market deposits decreased 2.5%.
    • Savings deposits increased 4.6%.
    • Time deposits increased 11.8%.
  • Loan to deposit ratio decreased to 102.6% for the second quarter of 2014 compared to 103.1% for the second quarter of 2013.
  • Net interest margin decreased 25 basis points to 3.63% compared to 3.88% for the second quarter of 2013. Net interest margin (excluding purchase accounting) (1) declined 16 basis points to 3.38% compared to 3.54% for the second quarter of 2013.
  • Non-interest income decreased to $45.3 million compared to $49.1 million in the second quarter of 2013.
  • Non-interest expense increased to $125.2 million compared to $119.7 million in the second quarter of 2013.
  • The efficiency ratio (1) increased to 65.63% compared to 59.57% in the second quarter of 2013.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate decreased to 0.85% compared to 0.94% at June 30, 2013.
  • The provision for loan and lease losses decreased to $3.0 million compared to $12.0 million for the second quarter of 2013. Net charge-offs as a percentage of average loans and leases increased to 0.34% compared to 0.30% for the second quarter of 2013. The allowance for loan and lease losses was $144.5 million, representing 1.06% of total loans and leases and 137% of nonaccrual loans and leases, compared to $178.6 million at June 30, 2013, representing 1.36% of total loans and leases and 170% of nonaccrual loans and leases.
  • Return on average assets and average tangible equity (1) decreased to 0.95% and 12.34%, respectively compared to 1.01% and 14.30%, respectively for the second quarter of 2013.
  • Susquehanna’s capital ratios continue to exceed internal capital targets and those required to be considered “well-capitalized” under the current regulatory requirements, with a Tier 1 common ratio of 10.99%, Tier 1 capital ratio of 12.02%, Total risk-based capital ratio of 13.22% and a Leverage ratio of 9.90%, each as of June 30, 2014. Based on a preliminary analysis of the new capital rules approved in July 2013, management believes that Susquehanna would be fully compliant with the revised capital ratio standards as of June 30, 2014 if they had been effective on that date.

    (1) Non-GAAP based financial measure. Please refer to the calculations and management’s reasons for using this measure in the accompanying financial schedules

Additional Events

  • At June 30, 2014, Susquehanna reclassified approximately $265 million of indirect auto loans from held for investment to held for sale. The loans were transferred to held for sale at their amortized cost basis on the date of transfer and will be measured at the lower of their amortized cost or fair value until the loans are sold or securitized. Amortized cost was lower than fair value as of June 30, 2014. Susquehanna expects to complete a securitization or other off balance sheet transaction involving substantially all of these loans during 2014.
  • On July 7, 2014, Standard & Poor’s Ratings Services raised its ratings on Susquehanna, including its long-term issuer credit rating to ‘BBB’ from ‘BBB-’.
  • On July 16, 2014, Susquehanna’s Board of Directors declared a second quarter dividend of $0.09 per common share, payable on August 20, 2014 to shareholders of record on August 1, 2014.

Susquehanna will broadcast its second quarter 2014 conference call over the Internet on July 24, 2014, at 11:00 a.m. Eastern time. The conference call will include management’s discussion of second quarter 2014 financial results and may also include forward-looking information and financial goals. Investors will have the opportunity to listen to the conference call through a live broadcast on Susquehanna’s website. The event may be accessed by selecting "Investor Relations" near the bottom of the home page and clicking on the second quarter webcast link. To listen to the live call, please go to the website at least 15 minutes prior to the scheduled start time to download and install any necessary audio software. For those who are unable to listen to the live broadcast, an archived replay and podcast will be available on the website shortly after the call concludes.

Susquehanna is a financial services holding company with assets of approximately $18.5 billion. Headquartered in Lititz, Pa., Susquehanna provides banking and financial services at 245 branch locations in the mid-Atlantic region. Through Susquehanna Wealth Management, the company offers investment, fiduciary, brokerage, insurance, retirement planning, and private banking services, with approximately $8.0 billion in assets under management and administration. Susquehanna also operates an insurance brokerage and employee benefits company, a commercial finance company and a vehicle leasing company. Investor information may be requested through Susquehanna’s Website at www.susquehanna.net.

This press release contains certain financial information determined by methods other than in accordance with GAAP. Susquehanna’s management uses these non-GAAP measures in its analysis of the company’s performance. These non-GAAP financial measures require management to make judgments about the exclusion of certain items, and if different judgments were made, the amounts reported would be different. These measures typically exclude the effects of intangibles and related amortization and include the tax benefit associated with revenue items that are tax-exempt. Disclosures regarding these non-GAAP financial measures are included in the accompanying financial information.

The presentation of these non-GAAP financial measures is intended to supplement investors’ understanding of Susquehanna’s core business activities. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

This release includes forward-looking statements as that term is defined in the U.S. Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors. Forward-looking statements can be identified by words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “continue,” “remain,” “will,” “should,” “may,” “plans,” “estimates,” and similar words or expressions. The risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: ineffectiveness of Susquehanna’s business strategy due to changes in current or future market conditions; the effects of competition, including industry consolidation and development of competing financial products and services; the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; interest rate movements; changes in credit quality; deteriorating economic conditions; market or other events adversely affecting our ability to conduct off-balance transactions; other risks and uncertainties; our success at managing the risks involved in the foregoing items; and the other factors detailed in Susquehanna’s filings with the Securities and Exchange Commission. Susquehanna encourages readers of this release to understand forward-looking statements to be strategic objectives rather than absolute targets of future performance. Forward-looking statements speak only as of the date they are made. Susquehanna does not intend to update publicly any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events except as required by law.

           

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

 
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)  
 
Six Months YTD
2Q14 1Q14 4Q13 3Q13 2Q13   2014     2013  
Balance Sheet (EOP)
Investments $ 2,324,782 $ 2,445,322 $ 2,533,456 $ 2,644,162 $ 2,494,178 $ 2,324,782 $ 2,494,178
Loans and leases 13,667,153 13,575,295 13,576,086 13,376,454 13,157,762 13,667,153 13,157,762
Allowance for loan and lease losses 144,483 154,150 157,608 166,740 178,594 144,483 178,594
Total assets 18,506,626 18,439,682 18,473,489 18,481,150 18,083,039 18,506,626 18,083,039
Deposits 13,314,994 13,079,523 12,869,372 12,721,685 12,764,232 13,314,994 12,764,232
Other short-term borrowings 527,079 584,664 555,740 688,456 706,065 527,079 706,065
Federal Home Loan Bank borrowings 1,127,302 1,229,296 1,531,282 1,593,272 1,161,995 1,127,302 1,161,995
Other long-term debt 360,033 448,521 453,260 457,804 489,002 360,033 489,002
Shareholders' equity 2,796,392 2,755,199 2,717,587 2,679,348 2,644,940 2,796,392 2,644,940
 
Average Balance Sheet
Investments $ 2,395,690 $ 2,505,937 $ 2,616,807 $ 2,584,212 $ 2,503,991 $ 2,450,509 $ 2,553,518
Loans and leases 13,589,533 13,574,526 13,421,474 13,290,513 13,110,128 13,582,071 13,020,246
Total earning assets 16,066,177 16,162,210 16,124,369 15,960,228 15,720,859 16,114,489 15,681,801
Total assets 18,378,127 18,411,873 18,437,954 18,258,982 18,071,466 18,419,028 18,051,408
Deposits 13,131,617 12,874,040 12,806,503 12,794,022 12,867,874 13,003,540 12,754,840
Other short-term borrowings 552,367 671,653 671,923 758,079 728,497 611,681 772,910
Federal Home Loan Bank borrowings 1,174,611 1,387,124 1,502,120 1,285,276 1,041,577 1,280,280 1,098,292
Other long-term debt 396,367 451,267 455,787 475,655 496,240 423,666 502,356
Shareholders' equity 2,768,665 2,726,465 2,679,242 2,642,806 2,648,314 2,753,315 2,631,411
 
Income Statement
Net interest income $ 141,694 $ 140,064 $ 142,688 $ 145,949 $ 148,097 $ 281,758 $ 297,303
Provision for loan and lease losses 3,000 6,000 2,000 5,000 12,000 9,000 24,000
Noninterest income 45,349 42,089 50,666 41,343 49,076 87,438 91,720
Noninterest expense 125,225 123,032 135,672 117,701 119,738 248,257 237,467
Income before taxes 58,818 53,121 55,682 64,591 65,435 111,939 127,556
Provision for income taxes 15,324 15,959 14,341 20,300 19,787 31,283 39,509
Net income 43,494 37,162 41,341 44,291 45,648 80,656 88,047
Basic earnings per common share 0.23 0.20 0.22 0.24 0.24 0.43 0.47
Diluted earnings per common share 0.23 0.20 0.22 0.24 0.24 0.43 0.47
Cash dividends paid per common share 0.08 0.08 0.08 0.08 0.08 0.16 0.08
 
Asset Quality
Net charge-offs (NCOs) $ 11,431 $ 9,458 $ 11,132 $ 16,854 $ 9,784 $ 20,889 $ 29,427
 
Nonaccrual loans and leases $ 105,609 $ 108,408 $ 100,815 $ 101,976 $ 105,110 $ 105,609 $ 105,110
Foreclosed real estate   10,302     11,980     16,555     17,760     18,349     10,302     18,349  
Total nonperforming assets (NPAs) $ 115,911   $ 120,388   $ 117,370   $ 119,736   $ 123,459   $ 115,911   $ 123,459  
 
Restructured loans $ 40,938 $ 39,555 $ 72,133 $ 69,975 $ 63,822 $ 40,938 $ 63,822
Loans and leases 90 days past due 9,190 9,328 9,757 8,655 7,203 9,190 7,203
 
Credit Quality
NCOs / Average loans and leases 0.34 % 0.28 % 0.33 % 0.50 % 0.30 % 0.31 % 0.46 %
NPAs / Loans and leases + foreclosed real estate 0.85 % 0.89 % 0.86 % 0.89 % 0.94 % 0.85 % 0.94 %
ALLL / Nonaccrual loans and leases 136.81 % 142.19 % 156.33 % 163.51 % 169.91 % 136.81 % 169.91 %
ALLL / Total loans and leases 1.06 % 1.14 % 1.16 % 1.25 % 1.36 % 1.06 % 1.36 %
 
Profitability
Return on average assets 0.95 % 0.82 % 0.89 % 0.96 % 1.01 % 0.88 % 0.98 %
Return on average equity 6.30 % 5.53 % 6.12 % 6.65 % 6.91 % 5.91 % 6.75 %
Return on average tangible equity (1) 12.34 % 11.08 % 12.49 % 13.67 % 14.30 % 11.68 % 14.09 %
Net interest margin 3.63 % 3.61 % 3.60 % 3.72 % 3.88 % 3.62 % 3.92 %
Efficiency ratio (1) 65.63 % 66.18 % 68.84 % 61.62 % 59.57 % 65.90 % 59.87 %
 
Per Share Data (EOP)
Closing share price $ 10.56 $ 11.37 $ 12.84 $ 12.53 $ 12.85 $ 10.56 $ 12.85
Stated book value per common share 14.90 14.69 14.50 14.31 14.14 14.90 14.14
Tangible book value per common share (1) 7.95 7.73 7.52 7.32 7.13 7.95 7.13
Price/Book Value 70.88 % 77.41 % 88.52 % 87.56 % 90.86 % 70.88 % 90.86 %
Price/Tangible Book Value 132.83 % 147.09 % 170.74 % 171.17 % 180.22 % 132.83 % 180.22 %
Number of outstanding shares ('000) 187,706 187,590 187,363 187,225 187,023 187,706 187,023
 
Capital Ratios
Tangible common ratio (1) 8.88 % 8.67 % 8.44 % 8.22 % 8.21 % 8.88 % 8.21 %
Tier 1 common ratio 10.99 % 10.84 % 10.60 % 10.41 % 10.41 % 10.99 % 10.41 %
Leverage ratio 9.90 % 9.72 % 9.55 % 9.47 % 9.42 % 9.90 % 9.42 %
Tier 1 capital ratio 12.02 % 11.95 % 11.71 % 11.52 % 11.54 % 12.02 % 11.54 %
Total risk-based capital ratio 13.22 % 13.23 % 13.04 % 12.92 % 12.94 % 13.22 % 12.94 %
 
(1) Non-GAAP based financial measures. Please refer to the calculations and management's reasons for using these measures in Appendix A - GAAP to Non-GAAP Reconciliation

 

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

 
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
 
  June 30,   March 31,   December 31,   September 30,   June 30,
2014 2014 2013 2013 2013
 
Assets
Cash and due from banks $ 456,917 $ 389,793 $ 305,357 $ 377,730 $ 367,902
Unrestricted short-term investments   33,369     24,768     37,967     30,663     30,759  
Cash and cash equivalents 490,286 414,561 343,324 408,393 398,661

Interest-bearing deposits held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities

1,554 1,689 2,347 2,138 5,356
Restricted short-term investments 43,926 42,993 42,913 44,928 45,341
Securities available for sale 2,183,093 2,299,235 2,375,224 2,483,375 2,343,429
Restricted investment in bank stocks 141,689 146,087 158,232 160,787 150,749
Loans and leases, net of deferred costs and fees 13,600,254 13,505,746 13,503,392 13,300,309 13,005,013

Loans held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities

66,899 69,549 72,694 76,145 152,749
Less: Allowance for loan and lease losses   144,483     154,150     157,608     166,740     178,594  

Net loans and leases

  13,522,670     13,421,145     13,418,478     13,209,714     12,979,168  
Premises and equipment, net 169,975 170,349 173,542 189,096 187,826
Other real estate and foreclosed assets 11,102 12,943 17,573 18,729 19,319
Accrued interest receivable 38,878 41,594 41,690 41,715 42,665
Bank-owned life insurance 450,318 449,778 449,320 449,419 451,278
Goodwill 1,275,439 1,275,439 1,275,439 1,275,439 1,275,439
Intangible assets with finite lives 28,579 30,303 32,262 33,666 35,737
Deferred income tax assets 7,357 5,216 6,472 7,921 7,999
Other assets   141,760     128,350     136,673     155,830     140,072  

Total assets

$ 18,506,626   $ 18,439,682   $ 18,473,489   $ 18,481,150   $ 18,083,039  
Liabilities and Shareholders' Equity
Deposits $ 13,314,994 $ 13,079,523 $ 12,869,372 $ 12,721,685 $ 12,764,232
Federal Home Loan Bank short-term borrowings 1,050,000 1,150,000 1,450,000 1,510,000 1,070,000
Other short-term borrowings 527,079 584,664 555,740 688,456 706,065
Federal Home Loan Bank long-term borrowings 77,302 79,296 81,282 83,272 91,995
Other long-term debt 175,222 250,224 250,227 250,229 250,231
Junior subordinated debentures 146,002 155,022 155,002 154,983 154,964

Long-term debt of consolidated variable interest entities for which creditors do not have recourse to Susquehanna's general credit

38,809 43,275 48,031 52,592 83,807
Accrued interest, taxes, and expenses payable 72,664 69,404 82,150 101,040 78,211
Deferred income tax liabilities 114,119 75,911 70,308 52,214 31,694
Other liabilities   194,043     197,164     193,790     187,331     206,900  

Total liabilities

  15,710,234     15,684,483     15,755,902     15,801,802     15,438,099  
Shareholders' equity:
Common stock 376,146 375,845 375,353 374,982 374,566
Treasury stock (3,075 ) (2,735 ) (2,531 ) (1,918 ) (1,875 )
Additional paid-in capital 1,657,699 1,654,357 1,652,116 1,651,382 1,649,636
Retained earnings 794,864 766,381 744,215 717,850 688,535

Accumulated other comprehensive loss

  (29,242 )   (38,649 )   (51,566 )   (62,948 )   (65,922 )

Total shareholders' equity

  2,796,392     2,755,199     2,717,587     2,679,348     2,644,940  

Total liabilities and shareholders' equity

$ 18,506,626   $ 18,439,682   $ 18,473,489   $ 18,481,150   $ 18,083,039  
 

             
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 
 
Loans and Leases and Deposits
(in thousands)
Loans and Leases
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
Commercial, financial, and agricultural $ 2,422,931 $ 2,411,851 $ 2,394,847 $ 2,273,735 $ 2,289,159
Real estate - construction 748,181 714,291 735,877 765,246 769,722
Real estate secured - residential 4,178,842 4,178,505 4,204,430 4,145,522 4,098,938
Real estate secured - commercial 4,053,990 4,041,989 4,068,816 4,109,329 4,029,454
Consumer 962,618 955,577 953,000 935,117 908,328
Leases   1,300,591   1,273,082   1,219,116   1,147,505   1,062,161
Total loans and leases $ 13,667,153 $ 13,575,295 $ 13,576,086 $ 13,376,454 $ 13,157,762
 
 
Deposits
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
Non-interest bearing checking $ 1,935,635 $ 1,880,284 $ 1,913,526 $ 1,871,461 $ 1,931,874
Interest-bearing checking 2,883,679 2,908,507 2,909,376 2,895,027 2,766,831
Money market 3,025,430 3,184,719 3,144,106 3,062,955 3,101,559
Savings   1,136,044   1,132,850   1,077,923   1,065,699   1,086,184
Core deposits   8,980,788   9,106,360   9,044,931   8,895,142   8,886,448
Time less than $100 2,266,815 2,166,207 2,113,209 2,103,650 2,152,539
Time of $100 or more   2,067,391   1,806,956   1,711,232   1,722,893   1,725,245
Total deposits $ 13,314,994 $ 13,079,523 $ 12,869,372 $ 12,721,685 $ 12,764,232
 

             
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 
 
Supplemental Loan and Lease Data
(in thousands)
Nonaccrual Loans and Leases
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
Commercial, financial, and agricultural $ 18,792 $ 24,529 $ 16,827 $ 10,048 $ 10,810
Real estate - construction 7,428 11,695 13,230 16,497 13,243
Real estate secured - residential 24,740 23,189 23,365 27,878 31,945
Real estate secured - commercial 53,687 47,950 46,147 45,906 48,010
Consumer 43 46 47 177 40
Leases   919     999     1,199     1,470   1,062  
Total nonaccrual loans and leases $ 105,609   $ 108,408   $ 100,815   $ 101,976 $ 105,110  
 
 
Restructured Loans
06/30/14 03/31/14 12/31/13 09/30/13 06/30/13
Commercial, financial, and agricultural $ 4,228 $ 5,264 $ 6,885 $ 9,609 $ 9,200
Real estate - construction 322 325 615 331 334
Real estate secured - residential 18,414 16,168 31,623 26,848 23,207
Real estate secured - commercial 16,903 16,681 31,295 31,766 29,482
Consumer   1,071     1,117     1,715     1,421   1,599  
Total restructured loans $ 40,938   $ 39,555   $ 72,133   $ 69,975 $ 63,822  
 
 
Net Charge-offs (Recoveries)
2Q 2014 1Q 2014 4Q 2013 3Q 2013 2Q 2013
Commercial, financial, and agricultural $ 7,274 $ 3,182 $ (480 ) $ 3,731 $ 8,790
Real estate - construction (457 ) (91 ) (3,312 ) 6,504 (555 )
Real estate secured - residential 2,453 2,796 2,724 3,524 2,006
Real estate secured - commercial 730 2,134 11,060 2,007 (1,241 )
Consumer 1,013 855 330 726 549
Leases   418     582     810     362   235  
Total net charge-offs $ 11,431   $ 9,458   $ 11,132   $ 16,854 $ 9,784  
 

 
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
             
 
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, March 31, December 31, September 30, June 30, June 30,
2014 2014 2013 2013 2013 2014 2013
 
Interest Income:
Loans and leases, including deferred costs and fees $ 148,002 $ 149,538 $ 151,907 $ 155,596 $ 159,986 $ 297,540 $ 320,330
Securities:
Taxable 9,104 9,648 10,406 10,641 9,683 18,752 19,943
Tax-exempt 3,439 3,501 3,511 3,527 3,561 6,940 7,155
Dividends 2,134 1,765 1,649 1,297 1,146 3,899 2,312
Short-term investments   23     19     21   16   35     42   71  
Total interest income   162,702     164,471     167,494   171,077   174,411     327,173   349,811  
Interest Expense:
Deposits:
Interest-bearing demand and savings 4,031 3,962 4,202 4,190 4,513 7,993 9,414
Time 10,246 9,628 9,597 10,229 11,654 19,874 22,886
Federal Home Loan Bank short-term borrowings 4,597 4,621 4,449 3,915 3,452 9,218 6,823
Other short-term borrowings 2,031 2,100 2,146 2,242 2,153 4,131 4,306
Federal Home Loan Bank long-term borrowings 243 245 254 284 303 488 604
Other long-term debt   (140 )   3,851     4,158   4,268   4,239     3,711   8,475  
Total interest expense   21,008     24,407     24,806   25,128   26,314     45,415   52,508  
Net interest income $ 141,694 $ 140,064 $ 142,688 $ 145,949 $ 148,097 281,758 297,303
Provision for loan and lease losses   3,000     6,000     2,000   5,000   12,000     9,000   24,000  
Net interest income, after provision for loan and lease losses   138,694     134,064     140,688   140,949   136,097     272,758   273,303  
Noninterest Income:
Service charges on deposit accounts 9,294 9,000 9,456 9,514 9,347 18,294 18,019
Vehicle origination and servicing fees 2,915 2,968 3,057 2,907 2,407 5,883 5,761
Wealth management commissions and fees 12,669 12,719 13,048 12,606 13,289 25,388 25,679
Commissions on property and casualty insurance sales 4,214 5,666 4,023 3,872 4,360 9,880 8,902
Other commissions and fees 5,401 5,035 5,077 4,885 4,727 10,436 9,055
Income from bank-owned life insurance 1,672 1,637 1,492 1,493 1,520 3,309 3,028
Mortgage banking revenue 3,004 2,410 2,483 2,237 3,998 5,414 8,108
Capital markets revenue 877 1,240 3,216 111 3,256 2,117 4,158
Net realized gain (loss) on sales of securities 3,293 (8 ) (1,343 ) 2 (71 ) 3,285 (53 )
Realized gain on sale of branch properties 0 0 4,945 0 0 0 0
Other   2,010     1,422     5,212   3,716   6,243     3,432   9,063  
Total noninterest income   45,349     42,089     50,666   41,343   49,076     87,438   91,720  
Noninterest Expenses:
Salaries and employee benefits 68,325 65,581 70,837 61,879 66,888 133,906 129,502
Occupancy 11,914 13,847 11,727 11,352 11,154 25,761 22,369
Furniture and equipment 4,058 3,944 3,865 3,661 3,747 8,002 7,325
Professional and technology services 7,189 6,070 6,404 7,173 5,831 13,259 11,560
Advertising and marketing 3,567 3,576 3,618 3,319 2,465 7,143 5,765
FDIC insurance 4,925 5,121 6,118 5,421 4,541 10,046 8,339
Legal fees 1,656 1,527 1,968 1,774 1,810 3,183 3,680
Amortization of intangible assets 2,367 2,539 2,803 2,502 3,053 4,906 6,321
Vehicle lease disposal 2,215 2,251 1,216 1,193 1,313 4,466 2,603
Branch consolidation costs 0 0 6,603 0 0 0 0
Other   19,009     18,576     20,513   19,427   18,936     37,585   40,003  
Total noninterest expenses   125,225     123,032     135,672   117,701   119,738     248,257   237,467  
Income before income taxes 58,818 53,121 55,682 64,591 65,435 111,939 127,556
Provision for income taxes   15,324     15,959     14,341   20,300   19,787     31,283   39,509  
Net Income $ 43,494   $ 37,162   $ 41,341 $ 44,291 $ 45,648   $ 80,656 $ 88,047  
 
Earnings per common share:
Basic $ 0.23 $ 0.20 $ 0.22 $ 0.24 $ 0.24 $ 0.43 $ 0.47
Diluted $ 0.23 $ 0.20 $ 0.22 $ 0.24 $ 0.24 $ 0.43 $ 0.47
Cash dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.16 $ 0.08
Average common shares outstanding:
Basic 187,637 187,455 187,186 187,096 186,812 187,547 186,710
Diluted 188,295 188,378 188,078 188,109 187,723 188,296 187,612
 

                               
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 
 
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands)
Interest rates and interest differential-taxable equivalent basis
 
Three Months Ended
June 30, 2014
Three Months Ended
March 31, 2014
Three Months Ended
June 30, 2013
Six Months Ended
June 30, 2014
Six Months Ended
June 30, 2013
Average
Balance
  Interest   Rate (%) Average
Balance
  Interest   Rate (%) Average
Balance
  Interest   Rate (%)

Average
Balance

  Interest   Rate (%) Average
Balance
  Interest   Rate (%)
Assets
Short-term investments $ 80,954 $ 23 0.11 $ 81,747 $ 19 0.09 $ 106,740 $ 34 0.13 $ 81,909 $ 41 0.10 $ 108,037 $ 71 0.13
Investment securities:
Taxable(1) 2,013,166 11,238 2.24 2,117,969 11,413 2.19 2,107,031 10,830 2.06 2,065,278 22,651 2.21 2,154,321 22,256 2.08
Tax-exempt(1)(2)   382,524     5,291   5.55   387,968     5,388   5.63   396,960     5,478   5.54   385,231     10,677   5.59   399,197     11,008   5.56
Total investment securities   2,395,690     16,529   2.77   2,505,937     16,801   2.72   2,503,991     16,308   2.61   2,450,509     33,328   2.74   2,553,518     33,264   2.63
Loans and leases, (net):
Taxable(3) 13,154,917 144,471 4.40 13,136,268 146,080 4.51 12,690,334 156,561 4.95 13,145,644 290,552 4.46 12,596,683 313,413 5.02
Tax-exempt(2)(3)   434,616     5,432   5.01   438,258     5,320   4.92   419,794     5,326   5.09   436,427     10,752   4.97   423,563     10,697   5.09
Total loans and leases   13,589,533     149,903   4.42   13,574,526     151,400   4.52   13,110,128     161,887   4.95   13,582,071     301,304   4.47   13,020,246     324,110   5.02
 
Total interest-earning assets 16,066,177   166,455   4.16 16,162,210   168,220   4.22 15,720,859   178,229   4.55 16,114,489   334,673   4.19 15,681,801   357,445   4.60
Allowance for loan and lease losses (154,710 ) (157,444 ) (179,273 ) (156,070 ) (182,075 )
Other non-earning assets   2,466,660     2,407,107     2,529,880     2,460,609     2,551,682  
 
Total assets $ 18,378,127   $ 18,411,873   $ 18,071,466   $ 18,419,028   $ 18,051,408  
 
Liabilities
Deposits:
Interest-bearing demand $ 5,998,086 3,726 0.25 $ 6,032,537 3,674 0.25 $ 5,983,543 4,219 0.28 $ 6,015,217 7,400 0.25 $ 5,939,576 8,842 0.30
Savings 1,134,421 305 0.11 1,099,944 287 0.11 1,080,427 294 0.11 1,117,278 592 0.11 1,064,741 572 0.11
Time 4,129,738 10,245 1.00 3,910,698 9,630 1.00 3,892,237 11,653 1.20 4,020,822 19,874 1.00 3,835,477 22,886 1.20
Other short-term borrowings 552,367 2,030 1.47 671,653 2,101 1.27 728,497 2,154 1.19 611,681 4,131 1.36 772,910 4,306 1.12
FHLB borrowings 1,174,611 4,840 1.65 1,387,124 4,866 1.42 1,041,577 3,754 1.45 1,280,280 9,706 1.53 1,098,292 7,427 1.36
Long-term debt(4)   396,367     (138 ) (0.14 )   451,267     3,849   3.46   496,240     4,239   3.43   423,666     3,712   1.77   502,356     8,475   3.40
 
Total interest-bearing liabilities 13,385,590   21,008   0.63 13,553,223   24,407   0.73 13,222,521   26,313   0.80 13,468,944   45,415   0.68 13,213,352   52,508   0.80
Demand deposits 1,869,372 1,830,861 1,911,667 1,850,223 1,915,046
Other liabilities   354,500     301,324     288,964     346,546     291,599  
 
Total liabilities 15,609,462 15,685,408 15,423,152 15,665,713 15,419,997
 
Equity   2,768,665     2,726,465     2,648,314     2,753,315     2,631,411  
 
Total liabilities & shareholders' equity $ 18,378,127   $ 18,411,873   $ 18,071,466   $ 18,419,028   $ 18,051,408  
 

Net interest income / yield on average earning assets

$ 145,447 3.63 $ 143,813 3.61 $ 151,916 3.88 $ 289,258 3.62 $ 304,937 3.92
Taxable equivalent adjustment   (3,753 )   (3,749 )   (3,819 )   (7,500 )   (7,634 )
Net interest income - as reported $ 141,694   $ 140,064   $ 148,097   $ 281,758   $ 297,303  
 

(1)

 

For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.

(2)

Tax-exempt income has been adjusted to a tax-equivalent basis using a marginal tax rate of 35%.

(3)

Average loan balances include non-accrual loans.

(4)

Includes $3.7 million purchase accounting adjustment on redemption of junior subordinated debt in second quarter of 2014.

 

 

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

             

Appendix A - GAAP to Non-GAAP Reconciliation

Six Months Ended

(Dollars and share data in thousands)

June 30,

2Q14

1Q14

4Q13

3Q13

2Q13

 

2014

   

2013

 

Efficiency Ratio

Other expense $ 125,225   $ 123,032   $ 135,672   $ 117,701   $ 119,738   $ 248,257   $ 237,467  
Noninterest operating expense (numerator) $ 125,225   $ 123,032   $ 135,672   $ 117,701   $ 119,738   $ 248,257   $ 237,467  
 
Taxable-equivalent net interest income $ 145,447 $ 143,813 $ 146,430 $ 149,683 $ 151,916 289,258 $ 304,937
Other income   45,349     42,089     50,666     41,343     49,076     87,438     91,720  
Noninterest operating income (denominator) $ 190,796   $ 185,902   $ 197,096   $ 191,026   $ 200,992   $ 376,696   $ 396,657  
Efficiency ratio   65.63 %   66.18 %   68.84 %   61.62 %   59.57 %   65.90 %   59.87 %
 
The efficiency ratio is a non-GAAP based financial measure. Management excludes merger-related expenses and certain other selected items when calculating this ratio, which is used to measure the relationship of operating expenses to revenues.
 
 

Tangible Common Ratio

End of period balance sheet data
Shareholders' equity $ 2,796,392 $ 2,755,199 $ 2,717,587 $ 2,679,348 $ 2,644,940 $ 2,796,392 $ 2,644,940
Goodwill and other intangible assets (1)   (1,265,846 )   (1,266,403 )   (1,264,839 )   (1,263,928 )   (1,265,016 )   (1,265,846 )   (1,265,016 )
Tangible common equity (numerator) $ 1,530,546   $ 1,488,796   $ 1,452,748   $ 1,415,420   $ 1,379,924   $ 1,530,546   $ 1,379,924  
 
Assets $ 18,506,626 $ 18,439,682 $ 18,473,489 $ 18,481,150 $ 18,083,039 $ 18,506,626 $ 18,083,039
Goodwill and other intangible assets (1)   (1,265,846 )   (1,266,403 )   (1,264,839 )   (1,263,928 )   (1,265,016 )   (1,265,846 )   (1,265,016 )
Tangible assets (denominator) $ 17,240,780   $ 17,173,279   $ 17,208,650   $ 17,217,222   $ 16,818,023   $ 17,240,780   $ 16,818,023  
Tangible common ratio   8.88 %   8.67 %   8.44 %   8.22 %   8.21 %   8.88 %   8.21 %
 
The tangible common ratio is a non-GAAP based financial measure using non-GAAP based amounts. The most directly comparable GAAP-based measure is the ratio of common shareholders’ equity to total assets. In order to calculate tangible common shareholders equity and assets, our management subtracts the intangible assets from both the common shareholders’ equity and total assets. Tangible common equity is then divided by the tangible assets to arrive at the ratio. Management uses the ratio to assess the strength of our capital position.
 
(1) Net of applicable deferred income taxes
 
 
 
 
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 

Appendix A - GAAP to Non-GAAP Reconciliation

Six Months Ended

(Dollars and share data in thousands)

June 30,

2Q14

1Q14

4Q13

3Q13

2Q13

 

2014

   

2013

 

Return on Average Tangible Equity

Income statement data
Net income $ 43,494 $ 37,162 $ 41,341 $ 44,291 $ 45,648 $ 80,656 $ 88,047
Amortization of intangibles, net of taxes at 35%   1,539     1,650     1,822     1,626     1,984     3,189     4,109  
Net tangible income (numerator) $ 45,033   $ 38,812   $ 43,163   $ 45,917   $ 47,632   $ 83,845   $ 92,156  
 
Average balance sheet data
Shareholders' equity $ 2,768,665 $ 2,726,465 $ 2,679,242 $ 2,642,806 $ 2,648,314 $ 2,753,315 $ 2,631,411
Goodwill and other intangible assets   (1,304,736 )   (1,306,298 )   (1,308,690 )   (1,310,155 )   (1,312,257 )   (1,305,513 )   (1,312,458 )
Tangible common equity (denominator) $ 1,463,929   $ 1,420,167   $ 1,370,552   $ 1,332,651   $ 1,336,057   $ 1,447,802   $ 1,318,953  
 
Return on equity (GAAP basis) 6.30 % 5.53 % 6.12 % 6.65 % 6.91 % 5.91 % 6.75 %
Effect of goodwill and other intangibles   6.04 %   5.55 %   6.37 %   7.02 %   7.39 %   5.77 %   7.34 %
Return on average tangible equity   12.34 %   11.08 %   12.49 %   13.67 %   14.30 %   11.68 %   14.09 %
 
Return on average tangible equity is a non-GAAP based financial measure calculated using non-GAAP based amounts. The most directly comparable GAAP-based measure is return on average equity. We calculate return on average tangible equity by excluding the balance of intangible assets and their related amortization expense from our calculation of return on average equity. Management uses the return on average tangible equity in order to review our core operating results. Management believes that this is a better measure of our performance. In addition, this is consistent with the treatment by bank regulatory agencies, which excludes goodwill and other intangible assets from the calculation of risk-based capital ratios.
 
 

Tangible Book Value per Common Share

End of period balance sheet data
Shareholders' equity $ 2,796,392 $ 2,755,199 $ 2,717,587 $ 2,679,348 $ 2,644,940 $ 2,796,392 $ 2,644,940
Goodwill and other intangible assets   (1,304,018 )   (1,305,742 )   (1,307,701 )   (1,309,105 )   (1,311,176 )   (1,304,018 )   (1,311,176 )
Tangible common equity (numerator) $ 1,492,374   $ 1,449,457   $ 1,409,886   $ 1,370,243   $ 1,333,764   $ 1,492,374   $ 1,333,764  
 
Common shares outstanding (denominator)   187,706     187,590     187,363     187,225     187,023     187,706     187,023  
 
Tangible book value per common share $ 7.95   $ 7.73   $ 7.52   $ 7.32   $ 7.13   $ 7.95   $ 7.13  
 
Tangible book value per share is a non-GAAP based financial measure calculated using non-GAAP based amounts. The most directly comparable GAAP based measure is book value per share. In order to calculate tangible book value per share, we divide tangible common equity, which is a non-GAAP based measure calculated as common shareholders’ equity less intangible assets, by the number of shares of common stock outstanding. In contrast, book value per share is calculated by dividing total common shareholders’ equity by the number of shares of common stock outstanding. Management uses tangible book value per share to assess our capital position and ratios.

 
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 
Appendix A - GAAP to Non-GAAP Reconciliation          
 
2Q14 1Q14 4Q13 3Q13 2Q13

Net Interest Margin (excluding purchase accounting)

Reported net interest margin (GAAP basis) 3.63 % 3.61 % 3.60 % 3.72 % 3.88 %
Adjustments for purchase accounting:
Loans and leases -0.12 % -0.17 % -0.11 % -0.13 % -0.27 %
Deposits -0.03 % -0.03 % -0.03 % -0.04 % -0.06 %
Borrowings -0.10 % -0.01 % -0.01 % -0.01 % -0.01 %
Net Interest Margin (excluding purchase accounting) 3.38 % 3.40 % 3.45 % 3.54 % 3.54 %
 
Net interest margin (excluding purchase accounting) is a non-GAAP based financial measure using non-GAAP based amounts. The most directly comparable GAAP based measure is net interest margin. In order to calculate net interest margin (excluding purchase accounting) we subtract the effects of amortizing/accreting purchase accounting valuation amounts from net interest income, and divide the remainder by average earning assets. Our management uses net interest margin (excluding purchase accounting) to measure and monitor the impact of the current economic environment on our net interest income and believes that this measure is more representative of our ongoing earnings power because it excludes the effect of valuation variables used to arrive at the acquisition fair value recorded on the acquisition date. We believe this non-GAAP measure, when taken together with the corresponding GAAP measure, provides meaningful supplemental information to investors regarding our performance. However, this non-GAAP measure should be considered in addition to, and not as a substitute for or preferable to, net interest margin prepared in accordance with GAAP.

Contacts

Susquehanna Bancshares, Inc.
INVESTOR RELATIONS CONTACT:
Jason H. Weber, Director of Investor Relations
717-626-9801
or
MEDIA RELATIONS CONTACT:
Stephen Trapnell, Director of Corporate Communications
717-625-6548

Release Summary

Susquehanna Bancshares, Inc. Announces Second Quarter 2014 Results and Stock Repurchase Plan

Sharing

Contacts

Susquehanna Bancshares, Inc.
INVESTOR RELATIONS CONTACT:
Jason H. Weber, Director of Investor Relations
717-626-9801
or
MEDIA RELATIONS CONTACT:
Stephen Trapnell, Director of Corporate Communications
717-625-6548