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Susquehanna Bancshares Inc. 2nd Quarter Investor Presentation
 

Susquehanna Bancshares Inc. 2nd Quarter Investor Presentation

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    Susquehanna Bancshares Inc. 2nd Quarter Investor Presentation Susquehanna Bancshares Inc. 2nd Quarter Investor Presentation Presentation Transcript

    • Susquehanna Bancshares, Inc. Investor Presentation 2nd Quarter, 2012
    • Forward-Looking StatementsDuring the course of this presentation, we may make projections and otherforward-looking statements regarding events or the future financial performanceof Susquehanna, including our strategic objectives and targets for 2012 and2013. We encourage investors to understand forward-looking statements to bestrategic objectives rather than absolute targets of future performance. Wewish to caution you that these forward-looking statements may differ materiallyfrom actual results due to a number of risks and uncertainties. For a moredetailed description of the factors that may affect Susquehanna’s operatingresults, we refer you to our filings with the Securities and ExchangeCommission. Susquehanna assumes no obligation to update the forward-looking statements made during this presentation. For more information, please visit our Web site at: www.susquehanna.net 2
    • Susquehanna Profile Corporate Overview Super-Community Bank headquartered in Lititz, PA 260 banking offices located in PA, NJ, MD and WV 36th largest U.S. commercial bank based on asset size Additional affiliates: Wealth management Insurance brokerage and employee benefits Commercial finance Vehicle leasing Financial Highlights 6/30/2012Assets: $18.0 billionDeposits: $12.7 billionLoans & Leases: $12.6 billionAssets under management $7.5 billionand administration: 3
    • Executive Leadership Team William Reuter Chairman and CEO 39 years banking experience, including 23 with Susquehanna Drew Michael Gregory Andrew Mike Hostetter Quick Duncan Samuel Harrington Chief Financial Chief Revenue Treasurer Chief Corporate Chief Operating Officer Credit Officer Officer Officer 30 years banking 42 years banking 29 years banking 28 years banking 26 years bankingexperience, including experience, including experience, including experience, including experience, including18 with Susquehanna 21 with Susquehanna 22 with Susquehanna 1 with Susquehanna 1 with Susquehanna 4
    • Top 3 Market Share in 14 Counties Susquehanna Bank Branch Map Source: SNL Financial Note: Shaded counties indicate those in which Susquehanna holds a top 3 market position 5
    • Attractive Footprint Median 2011 Household Income Strong markets that are $58,000 $57,116 demographically and $56,000 $54,000 economically diverse $52,000 $50,227 $50,000 $49,405 $48,000 $46,000 $44,000 SUSQ operates in 8 of the top SUSQ Pennsylvania National 20 counties in PA, MD and NJ 10.3 for median household income. Unemployment Trend 9.3 8.3 7.3 6.3 5.3 4.3 3.3 Unemployment rate in SUSQ 2.3 markets was 7.9% for 2011 1.3 compared with 8.9% national 0.3 2003 2004 2005 2006 2007 2008 2009 2010 2011 average. SUSQ National AverageSource: SNL Financial and United States Department of LaborSusquehanna Bancorp Inc. weighted by county deposits 6
    • Community Banking Opportunities Deposit Market Share: Counties of Operation Total Deposits Total Uniquely positioned as the largest Branch Pennsylvania based community bank Rank Institution in Market Market Count ($000) Share (%) 1 Wells Fargo & Co. 369 43,345,663 16.2%  1st overall in market share, 2 PNC Financial Services Group Inc. 357 26,422,590 9.9% 3 Bank of America Corp. 228 25,496,995 9.5% excluding companies with 4 M&T Bank Corp. 293 21,986,372 8.2% greater than $75 billion in 5 Toronto-Dominion Bank 164 18,523,241 6.9% assets 6 Royal Bank of Scotland Group Plc 180 16,439,153 6.1% 7 Susquehanna Bancshares Inc. 262 11,833,347 4.4% 8 Banco Santander SA 177 11,157,524 4.2%  7th overall in deposit market 9 Fulton Financial Corp. 184 9,192,043 3.4% share in the counties of 10 National Penn Bancshares Inc. 110 5,620,114 2.1% operation 11 Beneficial Mutual Bancorp Inc. (MHC) 64 4,004,134 1.5% 12 BB&T Corp. 68 3,705,210 1.4% 13 First Niagara Financial Group Inc. 63 2,718,970 1.0%  Significant opportunities exist 14 SunTrust Banks Inc. 38 1,928,002 0.7% to gain market share within 15 Metro Bancorp Inc. 33 1,916,897 0.7% current footprintTotal (1-15) 2,590 204,290,255 76.4%Total (1-244) 3,960 267,377,935 100.0% Source: SNL Financial Note: Regulatory branch and deposit data as of June 30, 2011; banks and thrifts with deposits in counties SUSQ operates in Pa/NJ/MD Tradition branches only, as defined by SNL 7
    • Main Street BankingThe Susquehanna WayPersonalized customer service of a local community bank, backed by thelending capacity and diverse expertise of a regional financial services companyA focus on building enduring relationshipsBroad, diverse product offeringsCulture of excellence and exceeding customer expectationsAttracting, retaining and developing top level talentKnowing our customersSupported by regional banking model 8
    • Regional Banking Model 12 Regions with local leadership teams 9
    • Regional Banking Model Stress “ownership” of local markets by leadership teams Each region is led by a regional president and retail and commercial executives with strong community ties Customers have access to bank decision makers Line of business reporting for cash management, commercial real estate lending and middle-market lending Centralized credit underwriting and risk management 10
    • Organic growth supported bystrategic acquisitionsAssets ($ millions)$23,000 $18,040$18,000 $14,974 $13,683 $13,689 $13,954 $13,078$13,000 $8,225 $8,000 $7,475 $7,466 $5,545 $5,953 $5,089 $3,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2Q 2012 Completed Bank Acquisitions 2003 –Patriot Bank Corp. 2005 –Minotola National Bank 2007 –Community Banks Inc. 2011 –Abington Bancorp, Inc. 2012 –Tower Bancorp, Inc. 11
    • Deposit GrowthDeposits ($ millions)$20,000$15,000 $12,691 $10,290 $8,945 $9,066 $9,191$10,000 $8,974 $5,878 $5,131 $5,309 $4,134 $5,000 $3,484 $3,831 $- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2Q 2012 Organic Growth Acquisitive Growth 12
    • Deposit Composition 12/31/2009 6/30/2012 Demand, Demand 14% Time < Deposits, Time < $100K, 19% 15% $100K, 28% Interest Bearing Interest Checking, Time of Bearing 18% $100K or Checking, Time of more, 15% 20% $100K or more, 13% Money Market, 19% Money Market, 23% Savings, 8% Savings, 8% Average Cost of Deposits 13
    • Loan GrowthLoans ($ millions)$20,000$15,000 $12,586 $10,448 $9,654 $9,827 $9,633$10,000 $8,752 $5,253 $5,219 $5,561 $4,264 $3,520 $3,831 $5,000 $- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2Q 2012 Organic Growth Acquisitive Growth 14
    • Loan Composition Total Loans 6/30/2012 Total CRE & Construction Loans Real estate - construction, 7% RE-OtherLeases, 6% 12% Commercial, financial and Office agricultural, 17% 17% Service 8% Consumer, 6% Real estate Warehouse secured - 6% commercial, Mixed Use 32% Retail 4% 15% Real estate secured - residential, Land 32% Residential 6% 11% Hotels/Motels 6% Recreational 1% Commercial Industrial/ Multi-Family Construction Manufacturing 8% 4% 2%  Diversified loan portfolio  Construction and LAD composition decreased from 15% in 2007 to 7% at 6/30/2012  Continued focus on C&I lending 15
    • Asset Quality Net Charge-Offs / Average Loans & Leases (%) NPAs / Loans & leases + foreclosed real estate (%)1.65 1.46 2.75 2.48 2.49 1.421.45 1.32 1.33 2.23 2.271.25 2.25 1.95 1.881.05 0.96 0.95 1.750.85 0.65 1.35 1.260.65 1.25 0.430.450.25 0.75 2009 2010 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 2009 2010 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 ALLL / Nonaccrual loans & leases (%) 160.00 149.81 145.88 140.00 120.21 119.28 120.00 97.43 99.24 100.00 90.74 78.51 80.00 60.00 2009 2010 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 16
    • Quarterly Loan and LeaseOriginations($ in Millions)$900 $862$850 $790$800 $745$750$700 $662 $657$650$600$550$500 2Q11 3Q11 4Q11 1Q12 2Q12 Loan and Lease Activity Trends  Overall loan originations are up 30% from 2Q 2011  C&I originations are up 72% vs. 2Q 2011  HELOC originations are up 34% versus 2Q 2011 17
    • 2nd Quarter 2012 HighlightsNet interest margin expansion to 4.10% • Balance sheet restructure in 4Q 2011 • Tower purchase accounting • Core Tower • Core SusquehannaContinued improvement in credit quality metrics • NPA’s declined by $11.4 million in 2Q to 1.26% of loans, leases and foreclosed real estate • Strong coverage ratio with allowance representing 150% of nonaccrual loans and leasesOrganic loan growth continues for 5th consecutive quarter • $862 million in new loans and leases originated in 2Q 2012, up 9.2% from 2Q 2011 • Excluding decrease in real estate construction loans, loans and leases increased by $121.1 million, or 1.1% from first quarter • Organic loan growth of 3.6% YOYAnnounced increase in dividend to $0.06 per share 18
    • Net Income($000s) $45,000 1.20% $40,000 $37,793 1.00% $35,000 $30,000 0.80% 0.85% $23,473 $25,000 0.60% $20,000 $19,129 $14,960 0.58% $15,000 0.40% $11,055 0.50% $10,000 0.42% 0.32% 0.20% $5,000 $- 0.00% 2Q11 3Q11 4Q11 1Q12 2Q12 ROAA 19
    • Net Interest Margin4.20% 1.60% 4.10%4.10% 1.40% 1.40% 1.35%4.00% 3.94%3.90% 1.20% 1.18%3.80% 0.94% 1.00%3.70% 3.62% 3.59% 0.84%3.60% 3.58% 0.80%3.50%3.40% 0.60% 2Q11 3Q11 4Q11 1Q12 2Q12 Cost of Funds 20
    • Efficiency Ratio*$215,000 73.00% 71.00%$195,000 68.90% 68.32% 69.00%$175,000 66.34% 67.00%$155,000 65.00%$135,000 63.00% 61.93% 60.21% 61.00%$115,000 59.00% $95,000 57.00% $75,000 55.00% 2Q11 3Q11 4Q11 1Q12 2Q12 Total Revenue Total Noninterest Expense Efficiency Ratio*Efficiency ratio excludes net realized gain on acquisition, merger related expenses and loss on extinguishment of debt. 21
    • Capital Ratios Proposed Management 6/30/2012 Minimum Basel Minimum Targets III Requirements* Tangible Common Equity 7.64%** N/A 7.50% Tier 1 Common/RWA 9.97% 7.00% 8.00% Tier 1 Leverage 9.95% 4.00% 6.00% Tier 1 Risk-Based 12.63% 8.50% 9.50% Total Risk-Based 14.38% 10.50% 11.50% *Including proposed conservation buffers ** Including deferred tax liability associated with intangibles of $49.4 million Capital Planning Priorities  Support continued organic growth  Increase quarterly cash dividends to shareholders  Position for changing regulatory landscape  Consider strategic M&A opportunities 22
    • Strategic Objectives for 2012Continue strong progress in improving credit qualityComplete acquisition and integration of Tower BancorpGrow loans, deposits and revenueIncrease profitability and shareholder dividends 23
    • Shareholder Return Improving Results Corporate Focus$0.25 $0.12 Manage Credit Quality$0.20 $0.20 $0.10 $0.08$0.15 $0.14 $0.12 $0.12 $0.06 $0.06 Enhanced Grow$0.10 $0.09 Revenue Return to $0.05 $0.04 Shareholders$0.05 $0.03 $0.03 $0.02 $0.02 $0.02 $- $- 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 Control Diluted EPS (GAAP) Dividends Declared Expenses 24
    • Investment MeritsDeep and proven management teamDiverse footprint with significant franchise value • Some of the best markets in the Mid Atlantic regionRevenue growth potential fueled by Main Street Banking • Regional banking structure with local market leadersSuccessful and proven growth strategy • Strong organic deposit and loan growth • History of success as a strategic acquirer, including two bank acquisitions in the past yearAttractive valuation • Upside capital appreciation and dividend payout 25
    • Questions
    • Additional Materials
    • 2nd Quarter 2012 FinancialHighlights Quarterly Performance Highlights(Dollars in thousands, except earning per share data) 6/30/2012 3/31/2012 6/30/2011Balance Sheet: Loans and Leases $ 12,585,912 $ 12,521,669 $ 9,636,187 Deposits $ 12,690,524 $ 12,563,541 $ 9,402,515Income Statement: Net interest income $ 152,670 $ 134,123 $ 106,086 Provision for loan and lease losses $ 16,000 $ 19,000 $ 28,000 Pre-tax pre-provision income $ 71,006 $ 53,283 $ 41,983 GAAP Net Income $ 37,793 $ 23,473 $ 11,055 GAAP EPS $ 0.20 $ 0.14 $ 0.09 28
    • Improved Market Position in FocusMarkets Sorted by 2011 market rank Market Share MSA Rank by Market Share MSA 2005 2011 % Change 2005 2011 Change Current Rank 1-3 Sunbury, PA 18.7% 21.7% 3.0% 1 1 Flat Hagerstown-Martinsburg, MD-WV 19.0% 30.2% 11.2% 1 1 Flat Lancaster, PA 12.9% 25.1% 12.2% 3 1 +2 Chambersburg, PA 13.4% 28.6% 15.2% 5 1 +4 Cumberland, MD-WV 24.8% 44.0% 19.2% 2 1 +1 Williamsport, PA 14.2% 13.1% -1.1% 3 3 Flat York-Hanover, PA 3.5% 12.7% 9.2% 11 3 +8 Gettysburg, PA 0.0% 10.3% 10.3% N/A 3 N/A Vineland-Millville-Bridgeton, NJ 0.0% 13.6% 13.6% N/A 3 N/A Current Rank 4-8 Selinsgrove, PA 8.4% 11.1% 2.7% 5 4 +1 Pottsville, PA 0.0% 10.6% 10.6% N/A 4 N/A Harrisburg-Carlisle, PA 0.0% 8.3% 8.3% N/A 5 N/A Baltimore-Towson, MD 2.0% 1.8% -0.3% 9 7 +2 Lewisburg, PA 2.5% 2.2% -0.3% 7 7 Flat Atlantic City-Hammonton, NJ 0.0% 5.1% 5.1% N/A 8 N/A Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 0.4% 2.2% 1.8% 24 8 + 16 Reading, PA 2.9% 3.9% 1.0% 9 8 +1 Source: SNL Financial 29
    • Deposit Mix & Cost by Product$ in millionsAvg Bal QTR 2Q11 3Q11 4Q11 1Q12 2Q12INT % QTRDemand 1,382 0.00% 1,401 0.00% 1,528 0.00% 1,688 0.00% 1,922 0.00%Interest Bearing Demand 3,653 0.58% 3,797 0.52% 4,394 0.49% 4,990 0.46% 5,480 0.39%Savings 807 0.15% 797 0.14% 876 0.13% 930 0.14% 1,005 0.13%Certificates of Deposits 3,501 1.62% 3,491 1.55% 3,503 1.29% 3,747 1.29% 4,065 1.13%Total Interest-Bearing Deposits 7,961 0.99% 8,085 0.93% 8,773 0.77% 9,667 0.75% 10,550 0.65%Core Deposits/Total 62.5% 63.2% 66.0% 67.0% 67.4%Loans(excluding VIE)/Deposits 100.8% 99.6% 98.7% 98.9% 99.0% 30
    • Borrowing Mix & Cost$ in millionsAvg Bal QTR 2Q11 3Q11 4Q11 1Q12 2Q12INT % QTR (excludes SWAP expense)Short-Term Borrowings 668 0.31% 632 0.32% 589 0.30% 642 0.27% 726 0.26%FHLB Advances 1,116 2.91% 1,115 2.90% 1,163 2.44% 985 0.21% 1,082 0.15%Long Term Debt 691 5.03% 679 4.78% 666 4.93% 674 5.11% 686 5.01%Total Borrowings 2,475 2.80% 2,426 2.75% 2,418 2.60% 2,301 1.66% 2,494 1.52%Off Balance Sheet Swap Impact 625 0.68% 675 0.76% 675 0.75% 675 0.74% 675 0.77%Total Borrowing Cost 3.48% 3.51% 3.35% 2.40% 2.29%Avg Borrowings / Avg Total 17.6% 17.1% 15.8% 14.1% 14.0%Assets 31
    • Quarterly Loan and Lease Originations 2Q11 3Q11 4Q11 1Q12 2Q12Average Balance*($ in Millions) Balance Originations Balance Originations Balance Originations Balance Originations Balance OriginationsCommercial 1,549 120 1,531 154 1,587 150 1,708 115 1,847 206Real Estate - Const & Land 750 49 728 63 812 92 863 95 936 74Real Estate - 1-4 Family Res 1,410 38 1,413 55 1,818 77 2,033 68 2,262 101Real Estate - Commercial 3,286 146 3,264 108 3,348 132 3,872 192 4,350 110Real Estate - HELOC 802 66 842 68 908 65 1,013 52 1,128 88Tax-Free 305 12 317 7 330 7 346 53 379 22Consumer Loans 646 101 685 109 709 97 736 96 764 116Commercial Leases 276 79 285 51 282 82 287 76 306 79Consumer Leases 390 51 380 42 370 43 367 43 376 65VIE 206 - 201 - 193 - 187 - 180 -Total $ 9,620 $ 662 $ 9,646 $ 657 $ 10,357 $ 745 $ 11,412 $ 790 $ 12,528 $ 862*By collateral type 32
    • Loan Mix & Yield$ in millionsAvg Bal QTR* 2Q11 3Q11 4Q11 1Q12 2Q12INT % QTRCommercial 1,549 5.10% 1,531 5.38% 1,587 5.31% 1,708 5.24% 1,847 5.43%Real Estate - Const & Land 750 4.74% 728 4.74% 812 4.95% 863 5.60% 936 5.66%Real Estate - 1-4 Family Res 1,410 5.89% 1,413 5.81% 1,818 5.22% 2,033 5.27% 2,262 5.26%Real Estate - Commercial 3,286 5.51% 3,264 5.47% 3,348 5.45% 3,872 5.46% 4,350 5.78%Real Estate - HELOC 802 3.61% 842 3.60% 908 3.83% 1,013 3.98% 1,128 3.81%Tax-Free 305 5.62% 317 6.06% 330 5.11% 346 5.60% 379 5.45%Consumer Loans 646 6.18% 685 5.61% 709 5.48% 736 5.33% 764 5.21%Commercial Leases 276 8.11% 285 7.92% 282 7.90% 287 7.98% 306 7.72%Consumer Leases 390 5.13% 380 4.90% 370 4.75% 367 4.73% 376 4.60%VIE 206 4.62% 201 4.58% 193 4.54% 187 4.47% 180 4.46%Total Loans 9,620 5.37% 9,646 5.34% 10,357 5.22% 11,412 5.29% 12,528 5.33%*By collateral type 33
    • Asset Quality($ in Millions) Non Accruals TDRs$200 $191 $75 $73 $72$190$180 $70 $67$170 $160$160 $156 $65 $62 $62$150$140 $133 $60 $127$130$120 $55$110$100 $50 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 ($ in million) 2Q11 3Q11 4Q11 1Q12 2Q12 NPLs Beginning of Period $ 212.9 $ 190.7 $ 160.1 $ 156.5 $ 133.5 New NonAccruals $ 23.4 $ 20.4 $ 43.8 $ 22.3 $ 34.5 Cure/Exits/Other $ (8.9) $ (27.4) $ (10.1) $ (28.8) $ (16.8) Gross Charge-Offs $ (26.3) $ (16.2) $ (25.6) $ (11.0) $ (17.3) Transfer to OREO $ (10.4) $ (7.5) $ (11.7) $ (5.5) $ (6.6) NPLs End of Period $ 190.7 $ 160.0 $ 156.5 $ 133.5 $ 127.3 34
    • Asset Quality ($ in Millions) OAEM* Substandard*$320 $313 $505 $482 $297 $300 $485$300 $465 $278 $275 $436$280 $445 $425$260 $405 $383$240 $385 $365 $365$220 $346 $345$200 $325 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 Past Due 30-89 days Past due 90 days or more$70 $20 $65 $18$65 $18 $59$60 $16$55 $14 $13$50 $12 $11 $44 $10 $10$45 $10 $39$40 $36 $8$35 $6$30 $4 2Q11 3Q11 4Q11 1Q12 2Q12 2Q11 3Q11 4Q11 1Q12 2Q12 35 *Legacy Susquehanna
    • Investment Securities$ in millionsEOP Balance 2Q11 3Q11 4Q11 1Q12 2Q12QTR YieldTotal Investment Securities $2,624 $2,700 $2,432 $2,766 $2,875Duration (years) 3.9 3.6 3.5 3.6 3.6Yield 3.61% 3.32% 3.02% 3.09% 2.92%Unrealized Gain/(Loss) $25.50 $42.00 $32.30 $30.80 $40.80 36
    • Earnings Drivers 2013 Targets – 2Q11 3Q11 4Q11 1Q12 2Q12 Quarterly ($000) AverageAvg. interest-earning assets 12,171,868 12,275,793 13,128,969 14,065,583 15,332,806 16,500,000Net interest margin (FTE) 3.62% 3.58% 3.59% 3.94% 4.10% 3.85%Net interest income 106,086 106,839 115,201 134,123 152,670 155,000Noninterest income 37,054 36,800 32,204* 39,515 39,811 41,000Total revenue 143,140 143,639 147,405 173,638 192,481 196,000Noninterest expense 101,157 100,745 100,164* 108,876* 118,157* 116,000Pre-tax, pre-provision income 41,983 42,894 47,241* 64,762* 74,324* 80,000Provision for loan losses 28,000 25,000 22,000 19,000 16,000Pre-tax income 13,983 17,894 25,241* 45,762* 58,324* * Core: excludes merger-related expenses, net gain on acquisition and loss on extinguishment of debt 2012 Financial Targets FTE margin 3.96% Loan growth 25%* Deposit growth 26%* Non-interest income growth -14%* Non-interest expense growth 0%* Tax rate 31% *The growth percentages included in these financial targets are based upon 2011 reported numbers and not core numbers. These percentages do not include any one-time merger- related costs in 2012. 37