Susquehanna Bancshares, Inc. Announces First Quarter 2014 Results

First Quarter Highlights

  • GAAP EPS of $0.20
  • Linked Quarter Commercial Loan and Deposit Growth
  • Reduced Expenses Lowers Efficiency Ratio
  • Capital Ratios Continue to Build

Business Wire

LITITZ, Pa.--(BUSINESS WIRE)--

Susquehanna Bancshares, Inc. (Susquehanna) (SUSQ) today announced that it earned net income for the first quarter ended March 31, 2014 of $37.2 million, or $0.20 per diluted share, compared to $41.3 million, or $0.22 per diluted share, for the fourth quarter of 2013 and $42.4 million, or $0.23 per diluted share, for the first quarter of 2013.

“First quarter results were affected by the competitive lending environment and an overall slowdown in business activity due to the harsh winter weather throughout the Mid-Atlantic region,” said William J. Reuter, Susquehanna Bancshares Chairman and Chief Executive Officer. “Nevertheless, we made solid progress on key initiatives, including deposit growth and adding commercial loans and leases to our loan portfolio.”

Linked Quarter Results (First Quarter 2014 vs. Fourth Quarter 2013)

  • Loans and leases were essentially flat on a linked-quarter basis, ending the first quarter of 2014 at $13.6 billion. Changes for the quarter in each major loan category were as follows:
    • Commercial loans increased 0.7%.
    • Real estate – construction loans decreased 2.9%.
    • Real estate secured – residential loans decreased 0.6%.
    • Real estate secured – commercial loans decreased 0.7%.
    • Consumer loans increased 0.3%.
    • Leases increased 4.4%.
  • Total deposits increased $210.2 million or 1.6% from December 31, 2013 to $13.1 billion at March 31, 2014. Changes for the quarter in each major deposit category were as follows:
    • Non-interest bearing demand deposits decreased 1.7%.
    • Interest-bearing demand deposits were essentially flat.
    • Money market deposits increased 1.3%.
    • Savings deposits increased 5.1%.
    • Time deposits increased 3.9%.
  • Net interest margin increased 1 basis point to 3.61% for the first quarter of 2014 compared to 3.60% for the fourth quarter of 2013. Net interest margin (excluding purchase accounting) (1) declined 5 basis points to 3.40% for the first quarter of 2014 compared to 3.45% for the fourth quarter of 2013.
  • Non-interest income decreased to $42.1 million for the first quarter of 2014 compared to $50.7 million for the fourth quarter of 2013. The fourth quarter of 2013 included a gain on sale of branch properties of $5.0 million related to the sale leaseback transaction completed in December 2013.
  • Non-interest expense decreased to $123.0 million for the first quarter of 2014 compared to $135.7 million in the fourth quarter of 2013. The fourth quarter of 2013 included branch consolidation costs of $6.6 million and additional incentive compensation expense due to a stronger than anticipated fourth quarter, particularly in commercial loan growth.
  • The efficiency ratio (1) decreased to 66.18% for the first quarter of 2014 compared to 68.84% in the fourth quarter of 2013. The primary drivers of the decrease were lower salary and benefit expenses in the first quarter of 2014, and the fact that the first quarter of 2014 did not include branch consolidation costs or a gain on sale of branch properties, which both impacted the fourth quarter of 2013.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate owned increased slightly to 0.89% at March 31, 2014 compared to 0.86% at December 31, 2013. Loans classified as Troubled Debt Restructurings (“TDR”) declined from $72.1 million at December 31, 2013 to $39.5 million at March 31, 2014, a decline of $32.6 million. Approximately $28.1 million of this decline was due to our annual assessment where TDR loans that have performed in accordance with the new terms for six consecutive months, are in a current status, reflected a market rate of interest at the time of the restructuring, and cross over a year end are considered cured and are no longer classified as TDR loans.
  • The provision for loan and lease losses in the first quarter increased to $6.0 million compared to $2.0 million in the fourth quarter of 2013. Net charge-offs for the first quarter decreased to $9.5 million, or 0.28% of average loans, compared to $11.1 million, or 0.33% of average loans, for the fourth quarter of 2013. As a result, the allowance for loan and lease losses was $154.2 million at March 31, 2014, representing 1.14% of total loans and leases and 142% of nonaccrual loans and leases compared to $157.6 million at December 31, 2013, representing 1.16% of total loans and leases and 156% of nonaccrual loans and leases.

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

  • Loans and leases increased $575.6 million or 4.4% from March 31, 2013 to $13.6 billion at March 31, 2014. Changes for the twelve month period in each major loan category were as follows:
    • Commercial loans increased 4.3%.
    • Real estate - construction loans decreased 8.3%.
    • Real estate secured - residential loans increased 2.5%.
    • Real estate secured - commercial loans increased 1.8%.
    • Consumer loans increased 11.2%.
    • Leases increased 27.5%.
  • Total deposits increased $388.1 million or 3.1% from March 31, 2013 to $13.1 billion as of March 31, 2014. Changes for the twelve month period in each major deposit category were as follows:
    • Non-interest-bearing demand deposits decreased 2.0%.
    • Interest-bearing demand deposits increased 4.8%.
    • Money market deposits increased 0.8%
    • Savings deposits increased 5.1%.
    • Time deposits increased 5.7%.
  • Net interest margin decreased 36 basis points to 3.61% compared to 3.97% for the first quarter of 2013. Net interest margin (excluding purchase accounting) (1) declined 22 basis points to 3.40% compared to 3.62% for the first quarter of 2013.
  • Non-interest income decreased to $42.1 million compared to $42.6 million in the first quarter of 2013.
  • Non-interest expense increased to $123.0 million compared to $117.7 million in the first quarter of 2013.
  • The efficiency ratio (1) increased to 66.18% compared to 60.17% in the first quarter of 2013.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate decreased to 0.89% compared to 0.97% at March 31, 2013. The provision for loan and lease losses decreased to $6.0 million compared to $12.0 million for the first quarter of 2013. Net charge-offs as a percentage of average loans and leases decreased to 0.28% compared to 0.62% for the first quarter of 2013. The allowance for loan and lease losses was $154.2 million, representing 1.14% of total loans and leases and 142% of nonaccrual loans and leases, compared to $176.4 million at March 31, 2013, representing 1.36% of total loans and leases and 171% of nonaccrual loans and leases.
  • Return on average assets and average tangible equity (1) decreased to 0.82% and 11.08%, respectively compared to 0.95% and 13.87%, respectively for the first 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 10.84%, Tier 1 risk-weighted capital ratio of 11.95%, Total risk-weighted capital ratio of 13.23% and a Leverage ratio of 9.72%, each as of March 31, 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 March 31, 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

  • On April 16, 2014, Susquehanna’s Board of Directors declared a second quarter dividend of $0.08 per common share, payable May 20, 2014 to shareholders of record as of May 1, 2014.

Susquehanna will broadcast its first quarter 2014 conference call over the Internet on April 24, 2014, at 11:00 a.m. Eastern time. The conference call will include management’s discussion of first quarter 2014 financial results. The discussion may also include forward-looking statements relating to customer relationship strategies; 2014 performance; capital management; loan and deposit volume and growth; fee income activities and revenues; and the impact of purchase accounting benefit on financial results. 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 first 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 $18.4 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 $7.7 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 references to future periods; however, such words are not the exclusive means of identifying such statements. 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; 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)  
 
 
1Q14 4Q13 3Q13 2Q13 1Q13
Balance Sheet (EOP)
Investments $ 2,445,322 $ 2,533,456 $ 2,644,162 $ 2,494,178 $ 2,552,600
Loans and leases 13,575,295 13,576,086 13,376,454 13,157,762 12,999,703
Allowance for loan and lease losses 154,150 157,608 166,740 178,594 176,377
Total assets 18,439,682 18,473,489 18,481,150 18,083,039 17,967,174
Deposits 13,079,523 12,869,372 12,721,685 12,764,232 12,691,432
Other short-term borrowings 584,664 555,740 688,456 706,065 786,251
Federal Home Loan Bank borrowings 1,229,296 1,531,282 1,593,272 1,161,995 1,044,480
Other long-term debt 448,521 453,260 457,804 489,002 501,559
Shareholders' equity 2,755,199 2,717,587 2,679,348 2,644,940 2,639,489
 
Average Balance Sheet
Investments $ 2,505,937 $ 2,616,807 $ 2,584,212 $ 2,503,991 $ 2,603,595
Loans and leases 13,574,526 13,421,474 13,290,513 13,110,128 12,929,365
Total earning assets 16,162,210 16,124,369 15,960,228 15,720,859 15,642,309
Total assets 18,411,873 18,437,954 18,258,982 18,071,466 18,031,127
Deposits 12,874,040 12,806,503 12,794,022 12,867,874 12,640,550
Other short-term borrowings 671,653 671,923 758,079 728,497 817,816
Federal Home Loan Bank borrowings 1,387,124 1,502,120 1,285,276 1,041,577 1,155,637
Other long-term debt 451,267 455,787 475,655 496,240 508,541
Shareholders' equity 2,726,465 2,679,242 2,642,806 2,648,314 2,614,319
 
Income Statement
Net interest income $ 140,064 $ 142,688 $ 145,949 $ 148,097 $ 149,206
Provision for loan and lease losses 6,000 2,000 5,000 12,000 12,000
Noninterest income 42,089 50,666 41,343 49,076 42,644
Noninterest expense 123,032 135,672 117,701 119,738 117,729
Income before taxes 53,121 55,682 64,591 65,435 62,121
Provision for income taxes 15,959 14,341 20,300 19,787 19,722
Net income 37,162 41,341 44,291 45,648 42,399
Basic earnings per common share 0.20 0.22 0.24 0.24 0.23
Diluted earnings per common share 0.20 0.22 0.24 0.24 0.23
Cash dividends paid per common share 0.08 0.08 0.08 0.08 0.00
 
Asset Quality
Net charge-offs (NCOs) $ 9,458 $ 11,132 $ 16,854 $ 9,784 $ 19,643
 
Nonaccrual loans and leases $ 108,408 $ 100,815 $ 101,976 $ 105,110 $ 103,351
Foreclosed real estate   11,980   16,555   17,760   18,349   22,557
Total nonperforming assets (NPAs) $ 120,388 $ 117,370 $ 119,736 $ 123,459 $ 125,908
         

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

 

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

(in thousands, except per share data)
 

 

1Q14

4Q13

3Q13

2Q13

1Q13

 

Restructured loans $ 39,555 $ 72,133 $ 69,975 $ 63,822 $ 65,773
Loans and leases 90 days past due 9,328 9,757 8,655 7,203 6,396
 
Credit Quality
NCOs / Average loans and leases 0.28 % 0.33 % 0.50 % 0.30 % 0.62 %
NPAs / Loans and leases + foreclosed real estate 0.89 % 0.86 % 0.89 % 0.94 % 0.97 %
ALLL / Nonaccrual loans and leases 142.19 % 156.33 % 163.51 % 169.91 % 170.66 %
ALLL / Total loans and leases 1.14 % 1.16 % 1.25 % 1.36 % 1.36 %
 
Profitability
Return on average assets 0.82 % 0.89 % 0.96 % 1.01 % 0.95 %
Return on average equity 5.53 % 6.12 % 6.65 % 6.91 % 6.58 %
Return on average tangible equity (1) 11.08 % 12.49 % 13.67 % 14.30 % 13.87 %
Net interest margin 3.61 % 3.60 % 3.72 % 3.88 % 3.97 %
Efficiency ratio (1) 66.18 % 68.84 % 61.62 % 59.57 % 60.17 %
 
Per Share Data (EOP)
Closing share price $ 11.37 $ 12.84 $ 12.53 $ 12.85 $ 12.43
Stated book value per common share 14.69 14.50 14.31 14.14 14.13
Tangible book value per common share (1) 7.73 7.52 7.32 7.13 7.10
Price/Book Value 77.41 % 88.52 % 87.56 % 90.86 % 87.97 %
Price/Tangible Book Value 147.09 % 170.74 % 171.17 % 180.22 % 175.07 %
Number of outstanding shares ('000) 187,590 187,363 187,225 187,023 186,800
 
Capital Ratios
Tangible common ratio (1) 8.67 % 8.44 % 8.22 % 8.21 % 8.22 %
Tier 1 common ratio 10.84 % 10.60 % 10.41 % 10.41 % 10.20 %
Leverage ratio 9.72 % 9.55 % 9.47 % 9.42 % 9.23 %
Tier 1 capital ratio 11.95 % 11.71 % 11.52 % 11.54 % 11.34 %
Total risk-based capital ratio 13.23 % 13.04 % 12.92 % 12.94 % 12.88 %
(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)
March 31, December 31, September 30, June 30, March 31,
  2014     2013     2013     2013     2013  
 
Assets
Cash and due from banks $ 389,793 $ 305,357 $ 377,730 $ 367,902 $ 291,434
Unrestricted short-term investments   24,768     37,967     30,663     30,759     38,662  
Cash and cash equivalents 414,561 343,324 408,393 398,661 330,096

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

1,689 2,347 2,138 5,356 4,304
Restricted short-term investments 42,993 42,913 44,928 45,341 68,020
Securities available for sale 2,299,235 2,375,224 2,483,375 2,343,429 2,400,626
Restricted investment in bank stocks 146,087 158,232 160,787 150,749 151,974
Loans and leases, net of deferred costs and fees 13,505,746 13,503,392 13,300,309 13,005,013 12,840,305

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

69,549 72,694 76,145 152,749 159,398
Less: Allowance for loan and lease losses   154,150     157,608     166,740     178,594     176,377  
Net loans and leases   13,421,145     13,418,478     13,209,714     12,979,168     12,823,326  
Premises and equipment, net 170,349 173,542 189,096 187,826 186,102
Other real estate and foreclosed assets 12,943 17,573 18,729 19,319 26,302
Accrued interest receivable 41,594 41,690 41,715 42,665 44,202
Bank-owned life insurance 449,778 449,320 449,419 451,278 450,351
Goodwill 1,275,439 1,275,439 1,275,439 1,275,439 1,275,439
Intangible assets with finite lives 30,303 32,262 33,666 35,737 38,209
Deferred income tax assets 5,216 6,472 7,921 7,999 7,594
Other assets   128,350     136,673     155,830     140,072     160,629  
Total assets $ 18,439,682   $ 18,473,489   $ 18,481,150   $ 18,083,039   $ 17,967,174  
Liabilities and Shareholders' Equity
Deposits $ 13,079,523 $ 12,869,372 $ 12,721,685 $ 12,764,232 $ 12,691,432
Federal Home Loan Bank short-term borrowings 1,150,000 1,450,000 1,510,000 1,070,000 948,000
Other short-term borrowings 584,664 555,740 688,456 706,065 786,251
Federal Home Loan Bank long-term borrowings 79,296 81,282 83,272 91,995 96,480
Other long-term debt 250,224 250,227 250,229 250,231 251,019
Junior subordinated debentures 155,022 155,002 154,983 154,964 154,946

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

43,275 48,031 52,592 83,807 95,594
Accrued interest, taxes, and expenses payable 69,404 82,150 101,040 78,211 61,265
Deferred income tax liabilities 75,911 70,308 52,214 31,694 29,694
Other liabilities   197,164     193,790     187,331     206,900     213,004  
Total liabilities   15,684,483     15,755,902     15,801,802     15,438,099     15,327,685  
Shareholders' equity:
Common stock 375,845 375,353 374,982 374,566 374,118
Treasury stock (2,735 ) (2,531 ) (1,918 ) (1,875 ) (1,871 )
Additional paid-in capital 1,654,357 1,652,116 1,651,382 1,649,636 1,648,062
Retained earnings 766,381 744,215 717,850 688,535 657,835
Accumulated other comprehensive loss   (38,649 )   (51,566 )   (62,948 )   (65,922 )   (38,655 )
Total shareholders' equity   2,755,199     2,717,587     2,679,348     2,644,940     2,639,489  
Total liabilities and shareholders' equity $ 18,439,682   $ 18,473,489   $ 18,481,150   $ 18,083,039   $ 17,967,174  
         

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

 
Loans and Leases and Deposits
(in thousands)
Loans and Leases
03/31/14 12/31/13 09/30/13 06/30/13 03/31/13
Commercial, financial, and agricultural $ 2,411,851 $ 2,394,847 $ 2,273,735 $ 2,289,159 $ 2,312,660
Real estate - construction 714,291 735,877 765,246 769,722 779,344
Real estate secured - residential 4,178,505 4,204,430 4,145,522 4,098,938 4,077,810
Real estate secured - commercial 4,041,989 4,068,816 4,109,329 4,029,454 3,971,438
Consumer 955,577 953,000 935,117 908,328 859,664
Leases   1,273,082   1,219,116   1,147,505   1,062,161   998,787
Total loans and leases $ 13,575,295 $ 13,576,086 $ 13,376,454 $ 13,157,762 $ 12,999,703
 
 
Deposits
03/31/14 12/31/13 09/30/13 06/30/13 03/31/13
Non-interest bearing checking $ 1,880,284 $ 1,913,526 $ 1,871,461 $ 1,931,874 $ 1,917,719
Interest-bearing checking 2,908,507 2,909,376 2,895,027 2,766,831 2,775,454
Money market 3,184,719 3,144,106 3,062,955 3,101,559 3,160,645
Savings   1,132,850   1,077,923   1,065,699   1,086,184   1,077,446
Core deposits   9,106,360   9,044,931   8,895,142   8,886,448   8,931,264
Time less than $100 2,166,207 2,113,209 2,103,650 2,152,539 2,205,304
Time of $100 or more   1,806,956   1,711,232   1,722,893   1,725,245   1,554,864
Total deposits $ 13,079,523 $ 12,869,372 $ 12,721,685 $ 12,764,232 $ 12,691,432
         
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
 
Supplemental Loan and Lease Data
(in thousands)
Nonaccrual Loans and Leases
  03/31/14     12/31/13     09/30/13   06/30/13   03/31/13

Commercial, financial, and agricultural

$ 24,529 $ 16,827 $ 10,048 $ 10,810 $ 9,542
Real estate - construction 11,695 13,230 16,497 13,243 18,945
Real estate secured - residential 23,189 23,365 27,878 31,945 30,372
Real estate secured - commercial 47,950 46,147 45,906 48,010 43,341
Consumer 46 47 177 40 37
Leases   999     1,199     1,470   1,062     1,114
Total nonaccrual loans and leases $ 108,408   $ 100,815   $ 101,976 $ 105,110   $ 103,351
 
 
Restructured Loans
  03/31/14     12/31/13     09/30/13   06/30/13   03/31/13
Commercial, financial, and agricultural $ 5,264 $ 6,885 $ 9,609 $ 9,200 $ 14,863
Real estate - construction 325 615 331 334 937
Real estate secured - residential 16,168 31,623 26,848 23,207 20,172
Real estate secured - commercial 16,681 31,295 31,766 29,482 28,689
Consumer   1,117     1,715     1,421   1,599     1,112
Total restructured loans $ 39,555   $ 72,133   $ 69,975 $ 63,822   $ 65,773
 
 
Net Charge-offs (Recoveries)
1Q 2014 4Q 2013 3Q 2013 2Q 2013 1Q 2013
Commercial, financial, and agricultural $ 3,182 $ (480 ) $ 3,731 $ 8,790 $ 8,041
Real estate - construction (91 ) (3,312 ) 6,504 (555 ) 4,301
Real estate secured - residential 2,796 2,724 3,524 2,006 2,362
Real estate secured - commercial 2,134 11,060 2,007 (1,241 ) 3,881
Consumer 855 330 726 549 236
Leases   582     810     362   235     822
Total net charge-offs $ 9,458   $ 11,132   $ 16,854 $ 9,784   $ 19,643
       

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
March 31, December 31, September 30, June 30, March 31,
  2014     2013   2013   2013   2013
 
Net interest income $ 140,064 $ 142,688 $ 145,949 $ 148,097 $ 149,206
Provision for loan and lease losses   6,000     2,000     5,000   12,000     12,000
Net interest income, after provision for loan and lease losses   134,064     140,688     140,949   136,097     137,206
Noninterest Income:
Service charges on deposit accounts 9,000 9,456 9,514 9,347 8,672
Vehicle origination and servicing fees 2,968 3,057 2,907 2,407 3,354
Wealth management commissions and fees 12,719 13,048 12,606 13,289 12,390
Commissions on property and casualty insurance sales 5,666 4,023 3,872 4,360 4,542
Other commissions and fees 5,035 5,077 4,885 4,727 4,328
Income from bank-owned life insurance 1,637 1,492 1,493 1,520 1,508
Mortgage banking revenue 2,410 2,483 2,237 3,998 4,110
Capital markets revenue 1,240 3,216 111 3,256 902
Net realized gain (loss) on sales of securities (8 ) (1,343 ) 2 (71 ) 18
Realized gain on sale of branch properties 0 4,945 0 0 0
Other   1,422     5,212     3,716   6,243     2,820
Total noninterest income   42,089     50,666     41,343   49,076     42,644
Noninterest Expenses:
Salaries and employee benefits 65,581 70,837 61,879 66,888 62,614
Occupancy 13,847 11,727 11,352 11,154 11,215
Furniture and equipment 3,944 3,865 3,661 3,747 3,578
Professional and technology services 6,070 6,404 7,173 5,831 5,729
Advertising and marketing 3,576 3,618 3,319 2,465 3,300
FDIC insurance 5,121 6,118 5,421 4,541 3,798
Legal fees 1,527 1,968 1,774 1,810 1,870
Amortization of intangible assets 2,539 2,803 2,502 3,053 3,268
Vehicle lease disposal 2,251 1,216 1,193 1,313 1,290
Branch consolidation costs 0 6,603 0 0 0
Other   18,576     20,513     19,427   18,936     21,067
Total noninterest expenses   123,032     135,672     117,701   119,738     117,729
Income before income taxes 53,121 55,682 64,591 65,435 62,121
Provision for income taxes   15,959     14,341     20,300   19,787     19,722
Net Income $ 37,162   $ 41,341   $ 44,291 $ 45,648   $ 42,399
 
Earnings per common share:
Basic $ 0.20 $ 0.22 $ 0.24 $ 0.24 $ 0.23
Diluted $ 0.20 $ 0.22 $ 0.24 $ 0.24 $ 0.23
Cash dividends per common share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.00
Average common shares outstanding:
Basic 187,455 187,186 187,096 186,812 186,607
Diluted 188,378 188,078 188,109 187,723 187,442
           
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 Three Months Ended Three Months Ended
March 31, 2014 December 31, 2013 March 31, 2013
Average Average Average
Balance   Interest   Rate (%) Balance   Interest   Rate (%) Balance   Interest   Rate (%)
Assets
Short-term investments $ 81,747 $ 19 0.09 $ 86,088 $ 20 0.09 $ 109,349 $ 36 0.13
Investment securities:
Taxable(1) 2,117,969 11,413 2.19 2,227,191 12,055 2.15 2,202,136 11,426 2.10
Tax-exempt(1)(2)   387,968     5,388   5.63   389,616     5,403   5.50   401,459     5,529   5.59
Total investment securities   2,505,937     16,801   2.72   2,616,807     17,458   2.65   2,603,595     16,955   2.64
Loans and leases, (net):
Taxable(3) 13,136,268 146,080 4.51 13,003,680 148,469 4.53 12,501,991 156,853 5.09
Tax-exempt(2)(3)   438,258     5,320   4.92   417,794     5,289   5.02   427,374     5,371   5.10
Total loans and leases   13,574,526     151,400   4.52   13,421,474     153,758   4.55   12,929,365     162,224   5.09
 
Total interest-earning assets 16,162,210   168,220   4.22 16,124,369   171,236   4.21 15,642,309   179,215   4.65
Allowance for loan and lease losses (157,444 ) (165,298 ) (184,909 )
Other non-earning assets   2,407,107     2,478,883     2,573,727  
 
Total assets $ 18,411,873   $ 18,437,954   $ 18,031,127  
 
Liabilities
Deposits:
Interest-bearing demand $ 6,032,537 3,674 0.25 $ 6,058,107 3,915 0.26 $ 5,895,120 4,622 0.32
Savings 1,099,944 287 0.11 1,075,598 286 0.11 1,048,881 279 0.11
Time 3,910,698 9,630 1.00 3,791,625 9,597 1.00 3,778,086 11,232 1.21
Other short-term borrowings 671,653 2,101 1.27 671,923 2,146 1.27 817,816 2,153 1.07
FHLB borrowings 1,387,124 4,866 1.42 1,502,120 4,704 1.24 1,155,637 3,672 1.29
Long-term debt   451,267     3,849   3.46   455,787     4,158   3.62   508,541     4,236   3.38
 
Total interest-bearing liabilities 13,553,223   24,407   0.73 13,555,160   24,806   0.73 13,204,081   26,194   0.80
Demand deposits 1,830,861 1,881,173 1,918,463
Other liabilities   301,324     322,379     294,264  
 
Total liabilities 15,685,408 15,758,712 15,416,808
 
Equity   2,726,465     2,679,242     2,614,319  
 
Total liabilities & shareholders' equity $ 18,411,873   $ 18,437,954   $ 18,031,127  
 

Net interest income / yield on average earning assets

$ 143,813 3.61 $ 146,430 3.60 $ 153,021 3.97
Taxable equivalent adjustment   (3,749 )   (3,742 )   (3,815 )
Net interest income - as reported $ 140,064   $ 142,688   $ 149,206  
 

(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.

 

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

       
Appendix A - GAAP to Non-GAAP Reconciliation
(Dollars and share data in thousands)
1Q14 4Q13 3Q13 2Q13 1Q13

Efficiency Ratio

Other expense $ 123,032   $ 135,672   $ 117,701   $ 119,738   $ 117,729  
Noninterest operating expense (numerator) $ 123,032   $ 135,672   $ 117,701   $ 119,738   $ 117,729  
 
Taxable-equivalent net interest income $ 143,813 $ 146,430 $ 149,683 $ 151,916 $ 153,021
Other income   42,089     50,666     41,343     49,076     42,644  
Noninterest operating income (denominator) $ 185,902   $ 197,096   $ 191,026   $ 200,992   $ 195,665  
Efficiency ratio   66.18 %   68.84 %   61.62 %   59.57 %   60.17 %
 
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

$ 2,755,199 $ 2,717,587 $ 2,679,348 $ 2,644,940 $ 2,639,489
Goodwill and other intangible assets (1)   (1,266,403 )   (1,264,839 )   (1,263,928 )   (1,265,016 )   (1,266,610 )
Tangible common equity (numerator) $ 1,488,796   $ 1,452,748   $ 1,415,420   $ 1,379,924   $ 1,372,879  
 
Assets $ 18,439,682 $ 18,473,489 $ 18,481,150 $ 18,083,039 $ 17,967,174
Goodwill and other intangible assets (1)   (1,266,403 )   (1,264,839 )   (1,263,928 )   (1,265,016 )   (1,266,610 )
Tangible assets (denominator) $ 17,173,279   $ 17,208,650   $ 17,217,222   $ 16,818,023   $ 16,700,564  
Tangible common ratio   8.67 %   8.44 %   8.22 %   8.21 %   8.22 %
 
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

(Dollars and share data in thousands)

1Q14

4Q13

3Q13

2Q13

1Q13

Return on Average Tangible Equity

Income statement data
Net income $ 37,162 $ 41,341 $ 44,291 $ 45,648 $ 42,399
Amortization of intangibles, net of taxes at 35%   1,650     1,822     1,626     1,984     2,124  
Net tangible income (numerator) $ 38,812   $ 43,163   $ 45,917   $ 47,632   $ 44,523  
 
Average balance sheet data
Shareholders' equity $ 2,726,465 $ 2,679,242 $ 2,642,806 $ 2,648,314 $ 2,614,319
Goodwill and other intangible assets   (1,306,298 )   (1,308,690 )   (1,310,155 )   (1,312,257 )   (1,312,662 )
Tangible common equity (denominator) $ 1,420,167   $ 1,370,552   $ 1,332,651   $ 1,336,057   $ 1,301,657  
 
Return on equity (GAAP basis) 5.53 % 6.12 % 6.65 % 6.91 % 6.58 %
Effect of goodwill and other intangibles   5.55 %   6.37 %   7.02 %   7.39 %   7.29 %
Return on average tangible equity   11.08 %   12.49 %   13.67 %   14.30 %   13.87 %
 
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 $ 2,755,199 $ 2,717,587 $ 2,679,348 $ 2,644,940 $ 2,639,489
Goodwill and other intangible assets   (1,305,742 )   (1,307,701 )   (1,309,105 )   (1,311,176 )   (1,313,648 )
Tangible common equity (numerator) $ 1,449,457   $ 1,409,886   $ 1,370,243   $ 1,333,764   $ 1,325,841  
 
Common shares outstanding (denominator)   187,590     187,363     187,225     187,023     186,800  
 
Tangible book value per common share $ 7.73   $ 7.52   $ 7.32   $ 7.13   $ 7.10  
 
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
 
1Q14 4Q13 3Q13 2Q13 1Q13

Net Interest Margin (excluding purchase accounting)

Reported net interest margin (GAAP basis) 3.61% 3.60% 3.72% 3.88% 3.97%
Adjustments for purchase accounting:
Loans and leases -0.17% -0.11% -0.13% -0.27% -0.27%
Deposits -0.03% -0.03% -0.04% -0.06% -0.07%
Borrowings -0.01% -0.01% -0.01% -0.01% -0.01%
Net Interest Margin (excluding purchase accounting) 3.40% 3.45% 3.54% 3.54% 3.62%
 
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.
 

Contact:
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

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