Susquehanna Bancshares, Inc. Announces Second Quarter 2013 Results

Susquehanna Bancshares, Inc. Announces Second Quarter 2013 Results

Second Quarter Highlights

  • GAAP EPS of $0.24

  • Strong Growth in Core Fee Income

  • Return on Average Tangible Equity (ROATE) of 14.30%; Return on Average Assets (ROA) of 1.01%

  • Continued Improvement in Credit Quality Metrics

  • Efficiency Ratio Under 60%

LITITZ, Pa.--(BUSINESS WIRE)-- Susquehanna Bancshares, Inc. (Susquehanna) (NAS: SUSQ) today announced that it earned net income for the second quarter ended June 30, 2013 of $45.6 million, or $0.24 per diluted share, compared to $37.8 million, or $0.20 per diluted share, for the second quarter of 2012. Net income for the first six months of 2013 was $88.0 million, or $0.47 per diluted share, compared with $61.3 million, or $0.34 per diluted share for the same period in 2012.


"Our second quarter results demonstrate the success of our employees in executing upon the key elements of our strategic plan. With a focus on providing exceptional service and building enduring relationships with customers, we have achieved strong growth in commercial and consumer loans, core deposits, and non-interest income during the past year," said William J. Reuter, Chairman and Chief Executive Officer of Susquehanna. "Our key profitability metrics - including return on average tangible equity, return on average assets and efficiency ratio - have all experienced significant improvement as well."

Linked Quarter Results (Second Quarter 2013 vs. First Quarter 2013)

  • Loans and leases increased $158.1 million or 1.2% from March 31, 2013 to $13.2 billion at June 30, 2013. Changes for the quarter in each major loan category were as follows:

    • Commercial loans decreased 1.0%.

    • Real estate - construction loans decreased 1.2%.

    • Real estate secured - residential loans increased 0.5%.

    • Real estate secured - commercial loans increased 1.5%.

    • Consumer loans increased 5.7%.

    • Leases increased 6.3%.

  • Total deposits increased $72.8 million or 0.6% from March 31, 2013 to $12.8 billion at June 30, 2013. Changes for the quarter in each major deposit category were as follows:

    • Non-interest bearing demand deposits increased 0.7%.

    • Interest-bearing demand deposits decreased 1.1%.

    • Savings deposits increased 0.8%

    • Time deposits increased 3.1%.

  • Net interest margin declined 9 basis points to 3.88% for the second quarter of 2013, compared to 3.97% for the first quarter of 2013.

  • Non-interest income increased to $49.1 million for the second quarter of 2013, compared to $42.6 million for the first quarter. Other non-interest income included $2.3 million in claim proceeds from bank-owned life insurance.

  • Non-interest expense for the second quarter of 2013 increased to $119.7 million, compared to $117.7 million in the prior quarter.

  • The efficiency ratio for the second quarter of 2013 improved to 59.57%, compared to 60.17% in the first quarter.

  • Net charge-offs as a percentage of average loans and leases for the quarter ended June 30, 2013 was 0.30% compared to 0.62% for the first quarter. Non-performing assets as a percentage of loans, leases and foreclosed real estate owned decreased to 0.94% at June 30, 2013, compared to 0.97% at March 31, 2013. The provision for loan and lease losses for the quarter ended June 30, 2013 was stable at $12.0 million. The allowance for loan and lease losses was $178.6 at June 30, 2013, representing 1.36% of total loans and leases and 170% 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.

Second Quarter Results (Second Quarter 2013 vs. Second Quarter 2012)

  • Loans and leases increased $571.9 million or 4.5% from June 30, 2012 to $13.2 billion at June 30, 2013. Changes for the twelve month period in each major loan category were as follows:

    • Commercial loans increased 8.9%.

    • Real estate - construction loans decreased 17.9%.

    • Real estate secured - residential loans increased 3.2%.

    • Real estate secured - commercial loans were generally flat.

    • Consumer loans increased 12.8%.

    • Leases increased 44.0%.

  • Total deposits increased $73.7 million or 0.6% to $12.8 billion at June 30, 2013, as a 6.2% increase in core deposits was offset by a 10.2% decrease in time deposits. Changes for the twelve month period in each major deposit category were as follows:

    • Non-interest-bearing demand deposits decreased 0.5%.

    • Interest-bearing demand deposits increased 8.2%.

    • Savings deposits increased 7.8%.

    • Time deposits decreased 10.2%.

  • Net interest margin decreased 22 basis points to 3.88% compared to 4.10% for the second quarter of 2012.

  • The efficiency ratio for the second quarter of 2013 improved to 59.57% from 60.21% in the second quarter of 2012, calculated after excluding pre-tax merger related expenses for the second quarter of 2012.

  • Net charge-offs as a percentage of average loans and leases for the quarter ended June 30, 2013 was 0.30% compared to 0.65% for the second quarter of 2012. Non-performing assets as a percentage of loans, leases and foreclosed real estate was 0.94% at June 30, 2013 compared to 1.26% at June 30, 2012. The provision for loan and lease losses for the quarter ended June 30, 2013 was $12.0 million, compared to $16.0 million for the quarter ended June 30, 2012. The allowance for loan and lease losses was $178.6 million at June 30, 2013, representing 1.36% of total loans and leases and 170% of nonaccrual loans and leases, compared to $190.6 million at June 30, 2012, representing 1.51% of total loans and leases and 150% of nonaccrual loans and leases.

  • Return on average assets and average tangible equity (1) for the second quarter ended June 30, 2013 finished at 1.01% and 14.30%, respectively. This compared to results of 0.85% and 13.23%, for the same measurements, respectively, for the second quarter of 2012.

(1) Return on average tangible equity is a non-GAAP based financial measure. Please refer to the calculations and management's reasons for using this measure in the accompanying financial schedules.

  • Susquehanna's capital ratios continue to exceed those required to be considered "well-capitalized" under the current regulatory requirements, with a Tier 1 risk-weighted capital ratio of 11.54% and a total risk-weighted capital ratio of 12.94%, each as of June 30, 2013. On July 2, 2013, the Federal Reserve Board approved new rules related to capital adequacy as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules become effective for Susquehanna on January 1, 2015, with an implementation period that stretches to 2019. Based on a preliminary analysis of the new rules, management believes that it would be fully compliant with the revised standards as of June 30, 2013 if they were effective on that date.

Additional Events

  • On July 17, 2013, Susquehanna's Board of Directors declared a third quarter dividend of $0.08 per common share, payable August 20, 2013 to shareholders of record as of July 31, 2013.

Susquehanna will broadcast its second quarter 2013 results conference call over the Internet on July 25, 2013 at 11:00 a.m. Eastern time. The conference call will include management's discussion of second quarter 2013 results. The discussion may also include forward-looking information and financial targets. Investors will have the opportunity to listen to the conference call through a live broadcast on Susquehanna's Web site. The event may be accessed by selecting "Investor Relations" near the top right of the home page then "Overview" and clicking on the second quarter webcast link. To listen to the live call, please go to the Web site at least fifteen 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 Web site shortly after the call concludes.

Susquehanna is a financial services holding company with assets of approximately $18.1 billion. Headquartered in Lititz, Pa., Susquehanna provides banking and financial services at 261 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 Web site 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.Such 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, and of changes in laws and regulations, including industry consolidation and development of competing financial products and services; interest rate movements; changes in credit quality; deteriorating economic conditions; and other risks and uncertainties, including those 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 Ended

June 30,

2Q13

1Q13

4Q12

3Q12

2Q12

2013

2012

Balance Sheet (EOP)

Investments

$

2,494,178

$

2,552,600

$

2,730,335

$

2,908,404

$

2,866,119

$

2,494,178

$

2,866,119

Loans and leases

13,157,762

12,999,703

12,894,741

12,675,607

12,585,912

13,157,762

12,585,912

Allowance for loan and lease losses

178,594

176,377

184,020

186,897

190,628

178,594

190,628

Total assets

18,083,039

17,967,174

18,037,667

18,106,730

18,040,009

18,083,039

18,040,009

Deposits

12,764,232

12,691,432

12,580,046

12,725,379

12,690,524

12,764,232

12,690,524

Other short-term borrowings

706,065

786,251

817,577

762,257

648,675

706,065

648,675

Federal Home Loan Bank borrowings

1,161,995

1,044,480

1,199,062

1,110,884

1,015,724

1,161,995

1,015,724

Other long-term debt

489,002

501,559

513,401

639,753

678,282

489,002

678,282

Shareholders' equity

2,644,940

2,639,489

2,595,909

2,584,682

2,544,730

2,644,940

2,544,730

Average Balance Sheet

Investments

$

2,503,991

$

2,603,595

$

2,764,886

$

2,811,730

$

2,704,232

$

2,553,518

$

2,625,820

Loans and leases

13,110,128

12,929,365

12,725,886

12,612,477

12,527,713

13,020,246

11,969,652

Total earning assets

15,720,859

15,642,309

15,604,029

15,537,037

15,332,806

15,681,801

14,699,194

Total assets

18,071,466

18,031,127

18,018,889

18,021,108

17,799,678

18,051,408

17,037,226

Deposits

12,867,874

12,640,550

12,602,430

12,588,697

12,471,296

12,754,840

11,912,917

Other short-term borrowings

728,497

817,816

810,517

748,841

726,309

772,910

684,218

Federal Home Loan Bank borrowings

1,041,577

1,155,637

1,166,765

1,072,555

1,082,293

1,098,292

1,033,794

Other long-term debt

496,240

508,541

560,906

727,382

686,492

502,356

680,107

Shareholders' equity

2,648,314

2,614,319

2,597,254

2,562,092

2,537,250

2,631,411

2,442,788

Income Statement

Net interest income

$

148,097

$

149,206

$

155,304

$

149,142

$

152,670

$

297,303

$

286,792

Provision for loan and lease losses

12,000

12,000

13,000

16,000

16,000

24,000

35,000

Noninterest income

49,076

42,644

43,772

43,661

39,811

91,720

79,326

Noninterest expense

119,738

117,729

125,277

122,910

121,475

237,467

241,830

Income before taxes

65,435

62,121

60,799

53,893

55,006

127,556

89,288

Provision for income taxes

19,787

19,722

17,625

17,161

17,213

39,509

28,022

Net income

45,648

42,399

43,174

36,732

37,793

88,047

61,266

Basic earnings per common share

0.24

0.23

0.23

0.20

0.20

0.47

0.34

Diluted earnings per common share

0.24

0.23

0.23

0.20

0.20

0.47

0.34

Cash dividends paid per common share

0.08

0.00

0.14

0.06

0.05

0.08

0.08

Asset Quality

Net charge-offs (NCOs)

$

9,784

$

19,643

$

15,877

$

19,731

$

20,102

$

29,427

$

32,472

Nonaccrual loans and leases

$

105,110

$

103,351

$

97,767

$

118,448

$

127,250

$

105,110

$

127,250

Foreclosed real estate

18,349

22,557

26,245

28,641

31,302

18,349

31,302

Total nonperforming assets (NPAs)

$

123,459

$

125,908

$

124,012

$

147,089

$

158,552

$

123,459

$

158,552

Restructured loans

$

63,822

$

65,773

$

67,775

$

56,823

$

66,777

$

63,822

$

66,777

Loans and leases 90 days past due

7,203

6,396

8,209

8,451

11,203

7,203

11,203

Susquehanna Bancshares, Inc.

26 North Cedar Street

Lititz, PA 17543

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

(in thousands, except per share data)

Six Months Ended

June 30,

2Q13

1Q13

4Q12

3Q12

2Q12

2013

2012

Credit Quality

NCOs / Average loans and leases

0.30

%

0.62

%