Susquehanna Bancshares, Inc. (Susquehanna) (NASDAQ: SUSQ) today announced that it earned net income for the first quarter ended March 31, 2015 of $29.0 million, or $0.16 per diluted share, which included after-tax merger related expenses of $2.9 million or $0.02 per diluted share. This compares to net income of $30.3 million, or $0.17 per diluted share, for the fourth quarter of 2014 and $37.2 million, or $0.20 per diluted share, for the first quarter of 2014.

Linked Quarter Results (First Quarter 2015 vs. Fourth Quarter 2014)

  • Loans and leases decreased $29.9 million or 0.2% from December 31, 2014 to $13.5 billion at March 31, 2015. Changes for the quarter in each major loan category were as follows:
    • Commercial loans increased 0.3%.
    • Real estate – construction loans remained essentially flat.
    • Real estate secured – residential loans decreased 1.1%.
    • Real estate secured – commercial loans decreased 1.3%.
    • Consumer loans increased 3.7%.
    • Leases increased 2.3%.
  • Total deposits increased $43.5 million or 0.3% from December 31, 2014 to $13.8 billion at March 31, 2015. Changes for the quarter in each major deposit category were as follows:
    • Non-interest bearing checking increased 2.8%.
    • Interest-bearing checking decreased 0.5%.
    • Money market deposits increased 2.0%.
    • Savings deposits increased 4.9%.
    • Time deposits decreased 3.2%.
  • Net interest margin decreased 6 basis points to 3.40% for the first quarter of 2015 compared to 3.46% for the fourth quarter of 2014. Net interest margin (excluding purchase accounting) (1) was flat at 3.31% for the first quarter of 2015. The decrease in the net interest margin was driven by a reduction in purchase accounting amortization.
  • Net interest income decreased to $131.6 million for the first quarter of 2015 compared to $135.4 million for the fourth quarter of 2014. The increase in average earning assets was more than offset by a decline in net interest margin and two fewer days in the first quarter of 2015 compared to the fourth quarter of 2014.
  • Non-interest income decreased to $42.3 million for the first quarter of 2015 compared to $46.6 million for the fourth quarter of 2014. The fourth quarter benefited from seasonally-strong SBA loan sales, gains on the sale of foreclosed real estate and interchange volume incentives. In other non-interest income categories, solid performance in mortgage and insurance offset weaker performance in auto leasing and deposit services.
  • Non-interest expense decreased to $126.6 million for the first quarter of 2015 compared to $130.5 million for the fourth quarter of 2014. The decrease was driven by a reduction in incentive compensation expense, which is typically the highest in the fourth quarter. The first quarter of 2015 included pre-tax merger-related expenses of $4.4 million.
  • The efficiency ratio (1), which excludes merger-related expenses, decreased to 68.81% for the first quarter of 2015 compared to 69.73% for the fourth quarter of 2014.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate owned decreased to 0.73% at March 31, 2015 compared to 0.79% at December 31, 2014.
  • The provision for loan and lease losses for the first quarter of 2015 decreased to $5.8 million compared to $7.2 million for the fourth quarter of 2014. Net charge-offs for the first quarter of 2015 increased slightly to $7.6 million, or 0.23% of average loans and leases, compared to $7.5 million, or 0.22% of average loans and leases, for the fourth quarter of 2014. As a result, the allowance for loan and lease losses was $134.7 million at March 31, 2015, representing 1.00% of total loans and leases and 151% of nonaccrual loans and leases compared to $136.5 million at December 31, 2014, representing 1.01% of total loans and leases and 140% of nonaccrual loans and leases.

First Quarter Results (First Quarter 2015 vs. First Quarter 2014)

  • Loans and leases decreased $87.3 million or 0.6% from March 31, 2014 to $13.5 billion at March 31, 2015. In August 2014, Susquehanna and its wholly-owned subsidiary Susquehanna Bank sold approximately $255.8 million of retail auto loans in an off-balance sheet securitization that previously were included in the Consumer loans category. Changes for the twelve month period in each major loan category were as follows:
    • Commercial loans increased 1.1%.
    • Real estate - construction loans increased 10.4%.
    • Real estate secured - residential loans decreased 0.7%.
    • Real estate secured - commercial loans decreased 2.6%.
    • Consumer loans decreased 18.3%.
    • Leases increased 9.3%.
  • Total deposits increased $685.8 million or 5.2% from March 31, 2014 to $13.8 billion as of March 31, 2015. Changes for the twelve month period in each major deposit category were as follows:
    • Non-interest-bearing checking increased 7.4%.
    • Interest-bearing checking increased 8.5%.
    • Money market deposits increased 12.4%.
    • Savings deposits increased 5.9%.
    • Time deposits decreased 4.1%.
  • Net interest margin decreased 21 basis points to 3.40% for the first quarter of 2015 compared to 3.61% for the first quarter of 2014 while average earning assets declined slightly. As a result, net interest income decreased to $131.6 million for the first quarter of 2015 compared to $140.1 million for the first quarter of 2014. The sustained low rate environment reduced the net interest margin as existing loans repriced lower and new originations came on at lower rates than the existing loan portfolio.
  • Non-interest income increased slightly to $42.3 million for the first quarter of 2015 compared to $42.1 million for the first quarter of 2014.
  • Non-interest expense increased to $126.6 million for the first quarter of 2015 compared to $123.0 million for the first quarter of 2014. The first quarter of 2015 included pre-tax merger-related expenses of $4.4 million.
  • The efficiency ratio (1), which excludes merger-related expenses, increased to 68.81% for the first quarter of 2015 compared to 66.18% for the first quarter of 2014.
  • Non-performing assets as a percentage of loans, leases and foreclosed real estate decreased to 0.73% at March 31, 2015 compared to 0.89% at March 31, 2014.
  • The provision for loan and lease losses decreased to $5.8 million for the first quarter of 2015 compared to $6.0 million for the first quarter of 2014. Net charge-offs as a percentage of average loans and leases decreased to 0.23% for the first quarter of 2015 compared to 0.28% for the first quarter of 2014. The allowance for loan and lease losses was $134.7 million at March 31, 2015, representing 1.00% of total loans and leases and 151% 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.
  • Return on average assets and average tangible equity (1) decreased to 0.63% and 8.41%, respectively for the first quarter of 2015 compared to 0.82% and 11.08%, respectively for the first quarter of 2014.
  • The new capital rules had a modest impact on Susquehanna’s capital ratios, which 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 10.82%, Tier 1 capital ratio of 11.84%, Total risk-based capital ratio of 12.95% and a Leverage ratio of 9.77%, each as of March 31, 2015.
(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 15, 2015, Susquehanna’s Board of Directors declared a second quarter dividend of $0.09 per common share, payable May 20, 2015 to shareholders of record as of April 30, 2015.
  • On March 13, 2015 Susquehanna shareholders voted to approve the agreement and plan of merger under which Susquehanna will merge with and into BB&T Corporation (“BB&T”). Completion of the merger is subject to customary closing conditions, including receipt of necessary regulatory approvals. Upon completion of the merger, which is expected to occur in the second half of 2015, Susquehanna shareholders will receive 0.253 shares of BB&T common stock and $4.05 in cash for each share of Susquehanna common stock.

Susquehanna is a financial services holding company with total assets of approximately $18.7 billion. Headquartered in Lititz, Pa., Susquehanna provides banking and financial services at 245 branch locations in the mid-Atlantic region. Through Susquehanna Wealth Management, Susquehanna offers investment, fiduciary, brokerage, insurance, retirement planning, and private banking services, with approximately $7.9 billion in assets under management and administration. Susquehanna also operates an insurance brokerage and employee benefits company, a commercial finance company, a vehicle leasing company, a mortgage division, and a settlement services 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 materially from forward-looking statements or historical performance include, but are not limited to, the following: ineffectiveness of Susquehanna’s business strategy due to internal or external factors, including changes in current or future market conditions; the effects of competition; ability to obtain regulatory approvals and meet other closing conditions to our pending merger with BB&T delay in closing the merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board, and legislative and regulatory actions and reforms; and the other factors detailed in Susquehanna’s and BB&T’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)  
 
1Q15 4Q14 3Q14 2Q14 1Q14
Balance Sheet (EOP)
Investments $ 2,683,358 $ 2,553,655 $ 2,325,734 $ 2,324,782 $ 2,445,322
Loans and leases 13,487,951 13,517,882 13,425,721 13,667,153 13,575,295
Allowance for loan and lease losses (ALLL) 134,733 136,522 136,870 144,483 154,150
Total assets 18,697,294 18,661,390 18,583,327 18,506,626 18,439,682
Deposits 13,765,305 13,721,843 13,588,524 13,314,994 13,079,523
Other short-term borrowings 506,756 516,089 532,675 527,079 584,664
Federal Home Loan Bank borrowings 911,674 913,449 915,362 1,127,302 1,229,296
Other long-term debt 321,389 351,904 356,117 360,033 448,521
Shareholders' equity 2,780,177 2,753,925 2,751,260 2,796,392 2,755,199
 
Average Balance Sheet
Investments $ 2,558,973 $ 2,431,597 $ 2,293,302 $ 2,395,690 $ 2,505,937
Loans and leases 13,468,346 13,438,494 13,499,686 13,589,533 13,574,526
Total earning assets 16,118,051 15,954,179 15,872,628 16,066,177 16,162,210
Total assets 18,618,267 18,628,209 18,411,529 18,378,127 18,411,873
Deposits 13,662,357 13,653,638 13,395,247 13,131,617 12,874,040
Other short-term borrowings 525,107 535,633 541,363 552,367 671,653
Federal Home Loan Bank borrowings 912,395 914,287 961,483 1,174,611 1,387,124
Other long-term debt 348,418 354,179 358,502 396,367 451,267
Shareholders' equity 2,761,177 2,757,933 2,775,786 2,768,665 2,726,465
 
Income Statement
Net interest income $ 131,638 $ 135,384 $ 136,465 $ 141,694 $ 140,064
Provision for loan and lease losses 5,799 7,200 9,000 3,000 6,000
Noninterest income 42,312 46,588 44,617 45,349 42,089
Noninterest expense 126,590 130,470 124,411 125,225 123,032
Income before taxes 41,561 44,302 47,671 58,818 53,121
Provision for income taxes 12,536 13,978 14,203 15,324 15,959
Net income 29,025 30,324 33,468 43,494 37,162
Basic earnings per common share 0.16 0.17 0.18 0.23 0.20
Diluted earnings per common share 0.16 0.17 0.18 0.23 0.20
Cash dividends paid per common share 0.09 0.09 0.09 0.08 0.08
 
Asset Quality
Net charge-offs (NCOs) $ 7,588 $ 7,548 $ 16,613 $ 11,431 $ 9,458
 
Nonaccrual loans and leases $ 89,333 $ 97,697 $ 109,506 $ 105,609 $ 108,408
Foreclosed real estate   9,575     9,672     9,133     10,302     11,980  
Total nonperforming assets (NPAs) $ 98,908   $ 107,369   $ 118,639   $ 115,911   $ 120,388  
 
Restructured loans $ 47,850 $ 46,856 $ 42,418 $ 40,938 $ 39,555
Loans and leases 90 days past due 3,506 8,488 10,303 9,190 9,328
 
Credit Quality
NCOs / Average loans and leases 0.23 % 0.22 % 0.49 % 0.34 % 0.28 %
NPAs / Loans and leases + foreclosed real estate 0.73 % 0.79 % 0.88 % 0.85 % 0.89 %
ALLL / Nonaccrual loans and leases 150.82 % 139.74 % 124.99 % 136.81 % 142.19 %
ALLL / Total loans and leases 1.00 % 1.01 % 1.02 % 1.06 % 1.14 %
 
Profitability
Return on average assets 0.63 % 0.65 % 0.72 % 0.95 % 0.82 %
Return on average equity 4.26 % 4.36 % 4.78 % 6.30 % 5.53 %
Return on average tangible equity (1) 8.41 % 8.65 % 9.41 % 12.34 % 11.08 %
Net interest margin 3.40 % 3.46 % 3.50 % 3.63 % 3.61 %
Efficiency ratio (1) 68.81 % 69.73 % 67.32 % 65.63 % 66.18 %
 
Per Share Data (EOP)
Closing share price $ 13.71 $ 13.43 $ 10.00 $ 10.56 $ 11.37
Stated book value per common share 15.25 15.13 15.17 14.90 14.69
Tangible book value per common share (1) 8.12 7.98 7.99 7.95 7.73
Price/Book Value 89.88 % 88.77 % 65.90 % 70.88 % 77.41 %
Price/Tangible Book Value 168.84 % 168.30 % 125.16 % 132.83 % 147.09 %
Number of outstanding shares ('000) 182,256 182,039 181,310 187,706 187,590
 
Capital Ratios
Tangible common ratio (1) 8.63 % 8.56 % 8.58 % 8.88 % 8.67 %
Common equity Tier 1 ratio (2) 10.82 % 10.95 % 10.86 % 11.03 % 10.84 %
Tier 1 capital ratio (2) 11.84 % 12.00 % 11.92 % 12.07 % 11.95 %
Total risk-based capital ratio (2) 12.95 % 13.16 % 13.08 % 13.27 % 13.23 %
Leverage ratio (2) 9.77 % 9.61 % 9.61 % 9.90 % 9.72 %
(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
 
(2) March 31, 2015 ratios computed under Basel III guidelines. Previous quarters computed under Basel I guidelines.
 

 
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,
2015 2014 2014 2014 2014
 
Assets
  Cash and due from banks $ 446,797 $ 506,304 $ 772,677 $ 456,917 $ 389,793
Unrestricted short-term investments   34,183     37,149     40,508     33,369     24,768  
Cash and cash equivalents 480,980 543,453 813,185 490,286 414,561

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

0 1,439 2,211 1,554 1,689
Restricted short-term investments 54,884 42,949 36,943 43,926 42,993
Securities available for sale 2,567,988 2,438,085 2,192,615 2,183,093 2,299,235
Restricted investment in bank stocks 115,370 115,570 133,119 141,689 146,087
Loans and leases, net of deferred costs and fees 13,487,951 13,455,046 13,361,516 13,600,254 13,505,746

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

0 62,836 64,205 66,899 69,549
Less: Allowance for loan and lease losses   134,733     136,522     136,870     144,483     154,150  
    Net loans and leases   13,353,218     13,381,360     13,288,851     13,522,670     13,421,145  
Premises and equipment, net 162,323 167,048 168,466 169,975 170,349
Other real estate and foreclosed assets 10,002 10,099 9,898 11,102 12,943
Accrued interest receivable 40,151 39,249 39,899 38,878 41,594
Bank-owned life insurance 447,659 446,676 449,199 450,318 449,778
Goodwill 1,275,439 1,275,439 1,275,439 1,275,439 1,275,439
Intangible assets with finite lives 24,240 25,575 27,163 28,579 30,303
Deferred income tax assets 7,012 7,648 6,903 7,357 5,216
Other assets   158,028     166,800     139,436     141,760     128,350  
Total assets $ 18,697,294   $ 18,661,390   $ 18,583,327   $ 18,506,626   $ 18,439,682  
Liabilities and Shareholders' Equity
Deposits $ 13,765,305 $ 13,721,843 $ 13,588,524 $ 13,314,994 $ 13,079,523
Federal Home Loan Bank short-term borrowings 850,000 850,000 850,000 1,050,000 1,150,000
Other short-term borrowings 506,756 516,089 532,675 527,079 584,664
Federal Home Loan Bank long-term borrowings 61,674 63,449 65,362 77,302 79,296
Other long-term debt 175,214 175,217 175,219 175,222 250,224
Junior subordinated debentures 146,175 146,117 146,059 146,002 155,022

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

0 30,570 34,839 38,809 43,275
Accrued interest, taxes, and expenses payable 66,791 85,075 72,044 72,664 69,404
Deferred income tax liabilities 153,556 133,932 128,389 114,119 75,911
Other liabilities   191,646     185,173     238,956     194,043     197,164  
Total liabilities   15,917,117     15,907,465     15,832,067     15,710,234     15,684,483  
Shareholders' equity:
Common stock 365,624 365,184 363,358 376,146 375,845
Treasury stock (5,599 ) (5,571 ) (3,100 ) (3,075 ) (2,735 )
Additional paid-in capital 1,612,414 1,609,663 1,605,671 1,657,699 1,654,357
Retained earnings 838,109 825,471 811,462 794,864 766,381
Accumulated other comprehensive loss   (30,371 )   (40,822 )   (26,131 )   (29,242 )   (38,649 )
Total shareholders' equity   2,780,177     2,753,925     2,751,260     2,796,392     2,755,199  
Total liabilities and shareholders' equity $ 18,697,294   $ 18,661,390   $ 18,583,327   $ 18,506,626   $ 18,439,682  
 

 
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
         
Loans and Leases and Deposits
(in thousands)
Loans and Leases
03/31/15 12/31/14 09/30/14 06/30/14 03/31/14
Commercial, financial, and agricultural $ 2,438,733 $ 2,430,532 $ 2,362,201 $ 2,422,931 $ 2,411,851
Real estate - construction 788,639 788,261 817,492 748,181 714,291
Real estate secured - residential 4,148,908 4,194,738 4,172,943 4,178,842 4,178,505
Real estate secured - commercial 3,938,798 3,991,379 4,016,635 4,053,990 4,041,989
Consumer 781,083 752,975 730,687 962,618 955,577
Leases   1,391,790     1,359,997     1,325,763   1,300,591     1,273,082  
Total loans and leases $ 13,487,951   $ 13,517,882   $ 13,425,721 $ 13,667,153   $ 13,575,295  
 
 
Deposits
03/31/15 12/31/14 09/30/14 06/30/14 03/31/14
Noninterest-bearing checking $ 2,019,931 $ 1,964,510 $ 1,958,308 $ 1,935,635 $ 1,880,284
Interest-bearing checking 3,154,347 3,169,017 3,087,166 2,883,679 2,908,507
Money market 3,580,414 3,509,192 3,297,699 3,025,430 3,184,719
Savings   1,199,154     1,143,596     1,122,232   1,136,044     1,132,850  
Core deposits $ 9,953,846     9,786,315     9,465,405   8,980,788     9,106,360  
Time less than $100 2,160,417 2,179,647 2,265,787 2,266,815 2,166,207
Time of $100 or more   1,651,042     1,755,881     1,857,332   2,067,391     1,806,956  
Total deposits $ 13,765,305   $ 13,721,843   $ 13,588,524 $ 13,314,994   $ 13,079,523  
 
 
Supplemental Loan and Lease Data
(in thousands)
Nonaccrual Loans and Leases
03/31/15 12/31/14 09/30/14 06/30/14 03/31/14
Commercial, financial, and agricultural $ 21,749 $ 23,393 $ 23,121 $ 18,792 $ 24,529
Real estate - construction 6,539 6,832 7,225 7,428 11,695
Real estate secured - residential 25,420 21,858 23,653 24,740 23,189
Real estate secured - commercial 34,421 44,980 54,484 53,687 47,950
Consumer 34 37 40 43 46
Leases   1,170     597     983   919     999  
Total nonaccrual loans and leases $ 89,333   $ 97,697   $ 109,506 $ 105,609   $ 108,408  
 
 
Restructured Loans
03/31/15 12/31/14 09/30/14 06/30/14 03/31/14
Commercial, financial, and agricultural $ 4,534 $ 4,816 $ 4,044 $ 4,228 $ 5,264
Real estate - construction 1,221 315 319 322 325
Real estate secured - residential 16,036 20,534 20,231 18,414 16,168
Real estate secured - commercial 25,120 20,227 16,780 16,903 16,681
Consumer   939     964     1,044   1,071     1,117  
Total restructured loans $ 47,850   $ 46,856   $ 42,418 $ 40,938   $ 39,555  
 
 
Net Charge-offs (Recoveries)
1Q 2015 4Q 2014 3Q 2014 2Q 2014 1Q 2014
Commercial, financial, and agricultural $ 4,121 $ 684 $ 8,069 $ 7,274 $ 3,182
Real estate - construction 35 (468 ) 776 (457 ) (91 )
Real estate secured - residential 2,918 2,949 2,549 2,453 2,796
Real estate secured - commercial (222 ) 3,245 3,827 730 2,134
Consumer 419 572 614 1,013 855
Leases   317     566     778   418     582  
Total net charge-offs $ 7,588   $ 7,548   $ 16,613 $ 11,431   $ 9,458  
 

 
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,
2015 2014 2014 2014 2014
 
Interest Income:
Loans and leases, including deferred costs and fees $ 140,769 $ 147,157 $ 147,761 $ 148,002 $ 149,538
Securities:
Taxable 9,609 9,302 8,459 9,104 9,648
Tax-exempt 3,276 3,339 3,383 3,439 3,501
Dividends 3,421 1,628 2,108 2,134 1,765
Short-term investments   24     23   24   23     19  
Total interest income   157,099     161,449   161,735   162,702     164,471  
Interest Expense:
Deposits:
Interest-bearing demand and savings 5,338 5,313 4,256 4,031 3,962
Time 10,086 10,699 10,803 10,246 9,628
Federal Home Loan Bank short-term borrowings 4,544 4,455 4,554 4,597 4,621
Other short-term borrowings 1,984 2,066 2,091 2,031 2,100
Federal Home Loan Bank long-term borrowings 202 210 247 243 245
Other long-term debt   3,307     3,322   3,319   (140 )   3,851  
Total interest expense   25,461     26,065   25,270   21,008     24,407  
Net interest income 131,638 135,384 136,465 141,694 140,064
Provision for loan and lease losses   5,799     7,200   9,000   3,000     6,000  
Net interest income, after provision for loan and lease losses   125,839     128,184   127,465   138,694     134,064  
Noninterest Income:
Service charges on deposit accounts 8,518 9,260 9,561 9,294 9,000
Vehicle origination and servicing fees 1,449 1,886 1,691 2,915 2,968
Wealth management commissions and fees 12,800 13,163 13,199 12,669 12,719
Commissions on property and casualty insurance sales 4,698 3,676 3,992 4,214 5,666
Other commissions and fees 5,638 5,877 5,689 5,401 5,035
Income from bank-owned life insurance 1,853 1,537 1,634 1,672 1,637
Mortgage banking revenue 2,887 2,489 2,432 3,004 2,410
Capital markets revenue 2,408 2,437 1,593 877 1,240
Net realized gain (loss) on sales of securities (5 ) 125 0 3,293 (8 )
Other   2,066     6,138   4,826   2,010     1,422  
Total noninterest income   42,312     46,588   44,617   45,349     42,089  
Noninterest Expenses:
Salaries and employee benefits 67,165 74,806 68,042 68,325 65,581
Occupancy 13,970 12,262 12,089 11,914 13,847
Furniture and equipment 3,815 4,076 4,043 4,058 3,944
Professional and technology services 7,253 7,122 6,168 7,189 6,070
Advertising and marketing 2,720 3,459 3,784 3,567 3,576
FDIC insurance 4,757 4,833 5,038 4,925 5,121
Legal fees 1,537 1,918 1,699 1,656 1,527
Amortization of intangible assets 1,979 2,211 2,220 2,367 2,539
Vehicle lease disposal 2,914 2,282 2,222 2,215 2,251
Merger related 4,432 885 0 0 0
Other   16,048     16,616   19,106   19,009     18,576  
Total noninterest expenses   126,590     130,470   124,411   125,225     123,032  
Income before income taxes 41,561 44,302 47,671 58,818 53,121
Provision for income taxes   12,536     13,978   14,203   15,324     15,959  
Net Income $ 29,025   $ 30,324 $ 33,468 $ 43,494   $ 37,162  
 
Earnings per common share:
Basic $ 0.16 $ 0.17 $ 0.18 $ 0.23 $ 0.20
Diluted $ 0.16 $ 0.17 $ 0.18 $ 0.23 $ 0.20
Cash dividends per common share $ 0.09 $ 0.09 $ 0.09 $ 0.08 $ 0.08
Average common shares outstanding:
Basic 182,140 181,514 184,985 187,637 187,455
Diluted 183,053 182,387 185,724 188,295 188,378

 
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, 2015 December 31, 2014 March 31, 2014
Average Average Average
Balance   Interest   Rate (%)   Balance   Interest   Rate (%)   Balance   Interest   Rate (%)
Assets
Short-term investments $ 90,732 $ 24 0.11 $ 84,088 $ 23 0.11 $ 81,747 $ 19 0.09
Investment securities:
Taxable(1) 2,198,207 13,031 2.40 2,060,163 10,930 2.10 2,117,969 11,413 2.19
Tax-exempt(1)(2)   360,766     5,040   5.67   371,434     5,135   5.48   387,968     5,388   5.63
Total investment securities   2,558,973     18,071   2.86   2,431,597     16,065   2.62   2,505,937     16,801   2.72
Loans and leases, (net):
Taxable(3) 13,023,814 137,407 4.28 13,011,088 143,336 4.37 13,136,268 146,080 4.51
Tax-exempt(2)(3)   444,532     5,171   4.72   427,406     5,880   5.46   438,258     5,320   4.92
Total loans and leases   13,468,346     142,578   4.29   13,438,494     149,216   4.41   13,574,526     151,400   4.52
 
Total interest-earning assets 16,118,051   160,673   4.04 15,954,179   165,304   4.11 16,162,210   168,220   4.22
Allowance for loan and lease losses (137,475 ) (137,293 ) (157,444 )
Other non-earning assets   2,637,691     2,811,323     2,407,107  
 
Total assets $ 18,618,267   $ 18,628,209   $ 18,411,873  
 
Liabilities
Deposits:
Interest-bearing demand $ 6,749,615 5,054 0.30 $ 6,558,482 5,025 0.30 $ 6,032,537 3,674 0.25
Savings 1,172,519 285 0.10 1,134,827 288 0.10 1,099,944 287 0.11
Time 3,768,581 10,085 1.09 3,984,083 10,699 1.07 3,910,698 9,630 1.00
Other short-term borrowings 525,107 1,983 1.53 535,633 2,066 1.53 671,653 2,101 1.27
FHLB borrowings 912,395 4,746 2.11 914,287 4,666 2.02 1,387,124 4,866 1.42
Long-term debt(4)   348,418     3,307   3.85   354,179     3,321   3.72   451,267     3,849   3.46
 
Total interest-bearing liabilities 13,476,635   25,460   0.77 13,481,491   26,065   0.77 13,553,223   24,407   0.73
Demand deposits 1,971,642 1,976,246 1,830,861
Other liabilities   408,813     412,539     301,324  
 
Total liabilities 15,857,090 15,870,276 15,685,408
 
Equity   2,761,177     2,757,933     2,726,465  
 
Total liabilities & shareholders' equity $ 18,618,267   $ 18,628,209   $ 18,411,873  
 

Net interest income / yield on average earning assets

$ 135,213 3.40 $ 139,239 3.46 $ 143,813 3.61
Taxable equivalent adjustment   (3,575 )   (3,855 )   (3,749 )
Net interest income - as reported $ 131,638   $ 135,384   $ 140,064  

(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
(Dollars and share data in thousands)
1Q15 4Q14 3Q14 2Q14 1Q14

Efficiency Ratio

Other expense $ 126,590 $ 130,470 $ 124,411 $ 125,225 $ 123,032
Less: Merger related expenses   (4,432 )   (885 )   0     0     0  
Noninterest operating expense (numerator) $ 122,158   $ 129,585   $ 124,411   $ 125,225   $ 123,032  
 
Taxable-equivalent net interest income $ 135,213 $ 139,239 $ 140,179 $ 145,447 $ 143,813
Other income   42,312     46,588     44,617     45,349     42,089  
Noninterest operating income (denominator) $ 177,525   $ 185,827   $ 184,796   $ 190,796   $ 185,902  
Efficiency ratio   68.81 %   69.73 %   67.32 %   65.63 %   66.18 %
 
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 $ 2,780,177 $ 2,753,925 $ 2,751,260 $ 2,796,392 $ 2,755,199
Goodwill and other intangible assets (1)   (1,276,004 )   (1,265,178 )   (1,265,598 )   (1,265,846 )   (1,266,403 )
Tangible common equity (numerator) $ 1,504,173   $ 1,488,747   $ 1,485,662   $ 1,530,546   $ 1,488,796  
 
Assets $ 18,697,294 $ 18,661,390 $ 18,583,327 $ 18,506,626 $ 18,439,682
Goodwill and other intangible assets (1)   (1,276,004 )   (1,265,178 )   (1,265,598 )   (1,265,846 )   (1,266,403 )
Tangible assets (denominator) $ 17,421,290   $ 17,396,212   $ 17,317,729   $ 17,240,780   $ 17,173,279  
Tangible common ratio   8.63 %   8.56 %   8.58 %   8.88 %   8.67 %
 
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
 
 

Return on Average Tangible Equity

Income statement data
Net income $ 29,025 $ 30,324 $ 33,468 $ 43,494 $ 37,162
Amortization of intangibles, net of taxes at 35%   1,286     1,437     1,443     1,539     1,650  
Net tangible income (numerator) $ 30,311   $ 31,761   $ 34,911   $ 45,033   $ 38,812  
 
Average balance sheet data
Shareholders' equity $ 2,761,177 $ 2,757,933 $ 2,775,786 $ 2,768,665 $ 2,726,465
Goodwill and other intangible assets   (1,300,282 )   (1,301,750 )   (1,303,275 )   (1,304,736 )   (1,306,298 )
Tangible common equity (denominator) $ 1,460,895   $ 1,456,183   $ 1,472,511   $ 1,463,929   $ 1,420,167  
 
Return on equity (GAAP basis) 4.26 % 4.36 % 4.78 % 6.30 % 5.53 %
Effect of goodwill and other intangibles   4.15 %   4.29 %   4.63 %   6.04 %   5.55 %
Return on average tangible equity   8.41 %   8.65 %   9.41 %   12.34 %   11.08 %
 
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 $ 2,780,177 $ 2,753,925 $ 2,751,260 $ 2,796,392 $ 2,755,199
Goodwill and other intangible assets   (1,299,679 )   (1,301,014 )   (1,302,602 )   (1,304,018 )   (1,305,742 )
Tangible common equity (numerator) $ 1,480,498   $ 1,452,911   $ 1,448,658   $ 1,492,374   $ 1,449,457  
 
Common shares outstanding (denominator)   182,256     182,039     181,310     187,706     187,590  
 
Tangible book value per common share $ 8.12   $ 7.98   $ 7.99   $ 7.95   $ 7.73  
 
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
                 
1Q15 4Q14 3Q14 2Q14 1Q14

Net Interest Margin (excluding purchase accounting)

Reported net interest margin (GAAP basis) 3.40 % 3.46 % 3.50 % 3.63 % 3.61 %
Adjustments for purchase accounting:
Loans and leases -0.07 % -0.12 % -0.10 % -0.12 % -0.17 %
Deposits -0.01 % -0.02 % -0.02 % -0.03 % -0.03 %
Borrowings -0.01 % -0.01 % -0.01 % -0.10 % -0.01 %
Net Interest Margin (excluding purchase accounting) 3.31 % 3.31 % 3.37 % 3.38 % 3.40 %
 
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.