Susquehanna Bancshares, Inc.’s (SUSQ) fourth-quarter 2013 operating earnings came in at 22 cents per share, beating the Zacks Consensus Estimate by a penny. However, this compared unfavorably with the year-ago earnings of 23 cents.
For 2013, the company reported earnings of 92 cents per share that beat the Zacks Consensus Estimate by a penny. This was higher than 77 cents earned in the prior year.
Results were driven by a rise in non-interest income and lower provision for loan losses. Further, strong capital ratios and a better asset quality were the other positives. However, lower interest income and increased expenses were headwinds for the quarter.
Tax equivalent net income was $41.3 million, compared with $43.2 million in the prior-year quarter. For 2013, net income was $173.7 million, up 23% year over year.
Performance in Detail
Susquehanna Bancshares’ total revenue came in at $193.4 million, down 3.0% from the prior-year quarter. Further, it surpassed the Zacks Consensus Estimate of $191.0 million.
For 2013, total revenue came in at $769.7 million, up 2% year over year.
Net interest income declined 8% year over year to $142.7 million. Moreover, net interest margin declined 46 basis points from the prior-year quarter to 3.60%.
Non-interest income increased 16% from the prior-year quarter to $50.7 million. The increase reflects a rise in service charges on deposit accounts, wealth management commissions and fees, other commissions and fees as well as realized gain on sale of branch properties.
Non-interest expense increased 8% year over year to $135.7 million. The rise was primarily attributable to increase in salaries and employee benefits expenses, advertising expenses, occupancy costs, FDIC insurance costs and branch consolidation expenses.
Asset quality exhibited a marked improvement during the quarter with total nonperforming assets decreasing 5% on a year-over-year basis to $117.3 million.
Annualized net charge offs as a percentage of average loans and leases came in at 0.33%, down from 0.50% in the year-ago period.
Likewise, provision for credit losses declined 85% from the prior-year quarter to $2 million. Moreover, allowance for loan and lease losses decreased 14% year over year to $157.6 million.
Loans and Deposits
As of Dec 31, 2013, Susquehanna’s total loans were $13.6 billion, up 4% from the previous-year quarter. Total deposits were $12.9 billion, up 2% from the prior-year quarter.
The company’s capital ratios remained strong in the quarter. As of Dec 31, 2013, Tier 1 common ratio rose to 10.58% from 9.94% in the year-ago quarter. Tier 1 capital ratio was 11.68%, up from 11.08% at the end of the prior-year quarter.
Susquehanna’s consistent organic growth, improving credit quality and a strong balance sheet are impressive. However, mounting expenses, the prevailing low interest rate environment and a stringent regulatory landscape remain major near-term concerns.
The company currently carries a Zacks Rank #3 (Hold).
However, other Northeast banks that look promising include Webster Financial Corp. (WBS), Boston Private Financial Holdings, Inc. (BPFH) and Community Bank System Inc. (CBU). All of these have a Zacks Rank #2 (Buy).