Susquehanna Bancshares (SUSQ) 8-K Susquehanna Bancshares, Inc. Announces Second Quarter 2013 Results

Exhibit 99.1

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)--July 24, 2013--Susquehanna Bancshares, Inc. (Susquehanna) (NASDAQ: 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	%		0.50	%		0.62	%		0.65	%		0.46	%		0.55	%
NPAs / Loans and leases + foreclosed real estate		0.94	%		0.97	%		0.96	%		1.16	%		1.26	%		0.94	%		1.26	%
ALLL / Nonaccrual loans and leases		169.91	%		170.66	%		188.22	%		157.79	%		149.81	%		169.91	%		149.81	%
ALLL / Total loans and leases		1.36	%		1.36	%		1.43	%		1.47	%		1.51	%		1.36	%		1.51	%
Profitability
Return on average assets		1.01	%		0.95	%		0.95	%		0.81	%		0.85	%		0.98	%		0.72	%
Return on average equity		6.91	%		6.58	%		6.61	%		5.70	%		5.99	%		6.75	%		5.04	%
Return on average tangible equity (1)		14.30	%		13.87	%		14.01	%		12.41	%		13.23	%		14.09	%		10.77	%
Net interest margin		3.88	%		3.97	%		4.06	%		3.92	%		4.10	%		3.92	%		4.03	%
Efficiency ratio (1)		59.57	%		60.17	%		60.96	%		58.98	%		60.21	%		59.86	%		60.77	%
Per Share Data (EOP)
Closing share price	$	12.85		$	12.43		$	10.48		$	10.45		$	10.28		$	12.85		$	10.28
Stated book value per common share		14.14			14.13			13.92			13.86			13.67			14.14			13.67
Tangible book value per common share (1)		7.13			7.10			6.88			6.82			6.59			7.13			6.59
Price/Book Value		90.86	%		87.97	%		75.31	%		75.39	%		75.20	%		90.86	%		75.20	%
Price/Tangible Book Value		180.22	%		175.07	%		152.33	%		153.23	%		155.99	%		180.22	%		155.99	%
Number of outstanding shares ('000)		187,023			186,800			186,554			186,465			186,221			187,023			186,221
Capital Ratios
Tangible common ratio (1)		8.21	%		8.22	%		7.94	%		7.84	%		7.61	%		8.21	%		7.61	%
Tier 1 common ratio		10.41	%		10.20	%		9.94	%		10.07	%		9.97	%		10.41	%		9.97	%
Leverage ratio		9.42	%		9.23	%		8.98	%		8.97	%		9.95	%		9.42	%		9.95	%
Tier 1 capital ratio		11.54	%		11.34	%		11.08	%		11.37	%		12.63	%		11.54	%		12.63	%
Total risk-based capital ratio		12.94	%		12.88	%		12.63	%		13.14	%		14.38	%		12.94	%		14.38	%

⁽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)
	June 30,			March 31,			December 31,			September 30,			June 30,
		2013			2013			2012			2012			2012
Assets
Cash and due from banks	$	367,902		$	291,434		$	277,042		$	380,100		$	412,282
Unrestricted short-term investments		30,759			38,662			39,550			24,826			31,239
Cash and cash equivalents		398,661			330,096			316,592			404,926			443,521
Interest-bearing deposits held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities		5,356			4,304			4,423			3,679			5,485
Restricted short-term investments		45,341			68,020			75,203			76,103			67,650
Securities available for sale		2,343,429			2,400,626			2,577,901			2,763,477			2,719,186
Restricted investment in bank stocks		150,749			151,974			152,434			144,927			146,933
Loans and leases, net of deferred costs and fees		13,005,013			12,840,305			12,728,082			12,503,737			12,409,181
Loans held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities		152,749			159,398			166,659			171,870			176,731
Less: Allowance for loan and lease losses		178,594			176,377			184,020			186,897			190,628
Net loans and leases		12,979,168			12,823,326			12,710,721			12,488,710			12,395,284
Premises and equipment, net		187,826			186,102			188,983			190,793			193,404
Other real estate and foreclosed assets		19,319			26,302			31,017			33,735			37,220
Accrued interest receivable		42,665			44,202			40,304			44,681			41,274
Bank-owned life insurance		451,278			450,351			450,270			448,866			449,023
Goodwill		1,275,439			1,275,439			1,270,359			1,268,761			1,269,205
Intangible assets with finite lives		35,737			38,209			41,332			44,549			47,831
Deferred income tax assets		7,999			7,594			4,685			30,682			47,914
Other assets		140,072			160,629			173,443			162,841			176,079
Total assets	$	18,083,039		$	17,967,174		$	18,037,667		$	18,106,730		$	18,040,009
Liabilities and Shareholders' Equity
Deposits	$	12,764,232		$	12,691,432		$	12,580,046		$	12,725,379		$	12,690,524
Federal Home Loan Bank short-term borrowings		1,070,000			948,000			1,098,000			1,000,000			900,000
Other short-term borrowings		706,065			786,251			817,577			762,257			648,675
Federal Home Loan Bank long-term borrowings		91,995			96,480			101,062			110,884			115,724
Other long-term debt		250,231			251,019			251,021			349,984			200,298
Junior subordinated debentures		154,964			154,946			154,927			171,370			346,393
Long-term debt of consolidated variable interest entities for which creditors do not have recourse to Susquehanna's general credit		83,807			95,594			107,453			118,399			131,591
Accrued interest, taxes, and expenses payable		78,211			61,265			81,808			72,060			83,102
Deferred income tax liabilities		31,694			29,694			14,475			0			0
Other liabilities		206,900			213,004			235,389			211,715			378,972
Total liabilities		15,438,099			15,327,685			15,441,758			15,522,048			15,495,279
Shareholders' equity:
Common stock		374,566			374,118			373,623			373,352			372,848
Treasury stock		(1,875	)		(1,871	)		(1,850	)		(1,368	)		(1,282	)
Additional paid-in capital		1,649,636			1,648,062			1,645,958			1,645,692			1,643,474
Retained earnings		688,535			657,835			615,436			598,371			572,818
Accumulated other comprehensive loss		(65,922	)		(38,655	)		(37,258	)		(31,365	)		(43,128	)
Total shareholders' equity		2,644,940			2,639,489			2,595,909			2,584,682			2,544,730
Total liabilities and shareholders' equity	$	18,083,039		$	17,967,174		$	18,037,667		$	18,106,730		$	18,040,009

Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Loans and Leases and Deposits
(in thousands)
	Loans and Leases
	06/30/13		03/31/13		12/31/12		09/30/12		06/30/12
Commercial, financial, and agricultural	$	2,289,159	$	2,312,660	$	2,273,611	$	2,168,708	$	2,101,561
Real estate - construction		769,722		779,344		847,781		904,285		936,996
Real estate secured - residential		4,098,938		4,077,810		4,065,818		4,047,761		3,970,115
Real estate secured - commercial		4,029,454		3,971,438		3,964,608		3,947,447		4,034,109
Consumer		908,328		859,664		842,552		829,760		805,490
Leases		1,062,161		998,787		900,371		777,646		737,641
Total loans and leases	$	13,157,762	$	12,999,703	$	12,894,741	$	12,675,607	$	12,585,912
	Deposits
	06/30/13		03/31/13		12/31/12		09/30/12		06/30/12
Demand	$	1,931,874	$	1,917,719	$	1,973,664	$	1,929,529	$	1,940,990
Interest-bearing demand		5,868,390		5,936,099		5,829,147		5,717,663		5,423,198
Savings		1,086,184		1,077,446		1,032,293		1,009,110		1,007,157
Core deposits		8,886,448		8,931,264		8,835,104		8,656,302		8,371,345
Time less than $100		2,152,539		2,205,304		2,262,262		2,341,623		2,441,902
Time of $100 or more		1,725,245		1,554,864		1,482,680		1,727,454		1,877,277
Total deposits	$	12,764,232	$	12,691,432	$	12,580,046	$	12,725,379	$	12,690,524

Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Supplemental Loan and Lease Data
(in thousands)
	Nonaccrual Loans and Leases
	06/30/13			03/31/13		12/31/12		09/30/12		06/30/12
Commercial, financial, and agricultural	$	10,810		$	9,542	$	10,464	$	10,572	$	16,076
Real estate - construction		13,243			18,945		14,817		22,534		25,985
Real estate secured - residential		31,945			30,372		28,440		30,740		31,723
Real estate secured - commercial		48,010			43,341		42,621		52,390		52,296
Consumer		40			37		43		211		263
Leases		1,062			1,114		1,382		2,001		907
Total nonaccrual loans and leases	$	105,110		$	103,351	$	97,767	$	118,448	$	127,250
	Restructured Loans
	06/30/13			03/31/13		12/31/12		09/30/12		06/30/12
Commercial, financial, and agricultural	$	9,200		$	14,863	$	8,744	$	7,254	$	9,130
Real estate - construction		334			937		940		943		3,979
Real estate secured - residential		23,207			20,172		23,224		20,828		16,494
Real estate secured - commercial		29,482			28,689		33,589		27,192		36,671
Consumer		1,599			1,112		1,278		606		503
Total restructured loans	$	63,822		$	65,773	$	67,775	$	56,823	$	66,777
	Net Charge-offs (Recoveries)
	2Q 2013			1Q 2013		4Q 2012		3Q 2012		2Q 2012
Commercial, financial, and agricultural	$	8,790		$	8,041	$	233	$	3,757	$	7,145
Real estate - construction		(555	)		4,301		3,311		2,909		4,987
Real estate secured - residential		2,006			2,362		3,738		2,470		2,553
Real estate secured - commercial		(1,241	)		3,881		6,704		9,439		4,485
Consumer		549			236		707		448		53
Leases		235			822		1,184		708		879
Total net charge-offs	$	9,784		$	19,643	$	15,877	$	19,731	$	20,102

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												Six Months Ended
	June 30,			March 31,		December 31,			September 30,		June 30,		June 30,
	2013			2013		2012			2012		2012		2013			2012
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
Net interest income, after provision for loan and lease losses		136,097			137,206		142,304			133,142		136,670		273,303			251,792
Noninterest Income:
Service charges on deposit accounts		9,347			8,672		9,158			9,013		8,583		18,019			16,257
Vehicle origination and servicing fees		2,407			3,354		3,746			2,470		2,226		5,761			4,150
Wealth management commissions and fees		13,289			12,390		11,882			11,923		12,297		25,679			23,900
Commissions on property and casualty insurance sales		4,360			4,542		3,749			3,158		3,930		8,902			8,987
Other commissions and fees		6,686			5,237		6,680			5,387		4,800		11,923			9,443
Income from bank-owned life insurance		1,520			1,508		1,603			1,726		1,631		3,028			3,103
Mortgage banking revenue		3,998			4,110		4,835			5,113		4,343		8,108			7,856
Net realized gain (loss) on sales of securities		(71	)		18		(200	)		31		1,361		(53	)		1,602
Other		7,540			2,813		2,319			4,840		640		10,353			4,028
Total noninterest income		49,076			42,644		43,772			43,661		39,811		91,720			79,326
Noninterest Expenses:
Salaries and employee benefits		66,888			63,034		66,865			62,236		64,524		129,922			122,482
Occupancy		11,154			11,215		11,345			11,350		11,725		22,369			22,536
Furniture and equipment		3,747			3,578		3,976			3,823		4,309		7,325			7,926
Professional and technology services		5,831			5,729		6,697			4,916		5,127		11,560			10,478
Advertising and marketing		2,369			3,203		3,029			2,947		3,287		5,572			6,341
FDIC insurance		4,541			3,798		5,264			5,275		4,769		8,339			9,947
Legal fees		1,810			1,870		2,178			2,012		1,907		3,680			3,960
Amortization of intangible assets		3,053			3,268		3,272			3,337		3,402		6,321			5,916
Vehicle lease disposal		1,313			1,290		1,361			1,401		1,745		2,603			3,580
Merger related		0			0		1,054			1,500		3,318		0			14,797
Loss on extinguishment of debt		0			0		409			5,451		0		0			0
Other		19,032			20,744		19,827			18,662		17,362		39,776			33,867
Total noninterest expenses		119,738			117,729		125,277			122,910		121,475		237,467			241,830
Income before income 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
Earnings per common share:
Basic	$	0.24		$	0.23	$	0.23		$	0.20	$	0.20	$	0.47		$	0.34
Diluted	$	0.24		$	0.23	$	0.23		$	0.20	$	0.20	$	0.47		$	0.34
Cash dividends per common share	$	0.08		$	0.00	$	0.14		$	0.06	$	0.05	$	0.08		$	0.08
Average common shares outstanding:
Basic		186,812			186,607		186,353			186,214		187,616		186,710			179,471
Diluted		187,723			187,442		186,990			187,004		188,301		187,612			180,156

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							Six Months Ended							Six Months Ended
	June 30, 2013							March 31, 2013							June 30, 2012							June 30, 2013							June 30, 2012
	Average Balance			Interest			Rate (%)	Average Balance			Interest			Rate (%)	Average Balance			Interest			Rate (%)	Average Balance			Interest			Rate (%)	Average Balance			Interest			Rate (%)
Assets
Short-term investments	$	106,740		$	34		0.13	$	109,349		$	36		0.13	$	100,861		$	35		0.14	$	108,037		$	71		0.13	$	103,722		$	65		0.13
Investment securities:
Taxable(1)		2,107,031			10,830		2.06		2,202,136			11,426		2.10		2,329,950			14,054		2.43		2,154,321			22,256		2.08		2,248,264			27,844		2.49
Tax-exempt(1)(2)		396,960			5,478		5.54		401,459			5,529		5.59		374,282			5,571		5.99		399,197			11,008		5.56		377,556			11,358		6.05
Total investment securities		2,503,991			16,308		2.61		2,603,595			16,955		2.64		2,704,232			19,625		2.92		2,553,518			33,264		2.63		2,625,820			39,202		3.00
Loans and leases, (net):
Taxable(3)		12,690,334			156,560		4.95		12,501,991			156,853		5.09		12,148,763			162,812		5.39		12,596,683			313,413		5.02		11,606,955			308,032		5.34
Tax-exempt(2)(3)		419,794			5,326		5.09		427,374			5,371		5.10		378,950			5,134		5.45		423,563			10,755		5.12		362,697			9,957		5.52
Total loans and leases		13,110,128			161,886		4.95		12,929,365			162,224		5.09		12,527,713			167,946		5.39		13,020,246			324,168		5.02		11,969,652			317,989		5.34
Total interest-earning assets		15,720,859			178,229		4.55		15,642,309			179,215		4.65		15,332,806			187,606		4.92		15,681,801			357,503		4.60		14,699,194			357,256		4.89
Allowance for loan and lease losses		(179,273	)						(184,909	)						(190,095	)						(182,075	)						(190,700	)
Other non-earning assets		2,529,880							2,573,727							2,656,967							2,551,682							2,528,732
Total assets	$	18,071,466						$	18,031,127						$	17,799,678						$	18,051,408						$	17,037,226
Liabilities
Deposits:
Interest-bearing demand	$	5,983,543			4,219		0.28	$	5,895,120			4,622		0.32	$	5,479,962			5,292		0.39	$	5,939,576			8,842		0.30	$	5,235,126			11,009		0.42
Savings		1,080,427			294		0.11		1,048,881			279		0.11		1,004,829			332		0.13		1,064,741			572		0.11		967,164			661		0.14
Time		3,892,237			11,653		1.20		3,778,086			11,232		1.21		4,064,876			11,406		1.13		3,835,477			22,886		1.20		3,905,863			23,433		1.21
Other short-term borrowings		728,497			2,154		1.19		817,816			2,153		1.07		726,309			2,179		1.21		772,910			4,306		1.12		684,218			4,301		1.26
FHLB borrowings		1,041,577			3,754		1.45		1,155,637			3,672		1.29		1,082,293			3,459		1.29		1,098,292			7,427		1.36		1,033,794			6,417		1.25
Long-term debt		496,240			4,239		3.43		508,541			4,236		3.38		686,492			8,522		4.99		502,356			8,475		3.40		680,107			17,182		5.08
Total interest-bearing liabilities		13,222,521			26,313		0.80		13,204,081			26,194		0.80		13,044,761			31,190		0.96		13,213,352			52,508		0.80		12,506,272			63,003		1.01
Demand deposits		1,911,667							1,918,463							1,921,629							1,915,046							1,804,764
Other liabilities		288,964							294,264							296,038							291,599							283,402
Total liabilities		15,423,152							15,416,808							15,262,428							15,419,997							14,594,438
Equity		2,648,314							2,614,319							2,537,250							2,631,411							2,442,788
Total liabilities & shareholders' equity	$	18,071,466						$	18,031,127						$	17,799,678						$	18,051,408						$	17,037,226
Net interest income / yield on average earning assets				$	151,916		3.88				$	153,021		3.97				$	156,416		4.10				$	304,995		3.92				$	294,253		4.03
Taxable equivalent adjustment					(3,819	)						(3,815	)						(3,746	)						(7,692	)						(7,461	)
Net interest income - as reported				$	148,097						$	149,206						$	152,670						$	297,303						$	286,792

(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																Six Months Ended
(Dollars and share data in thousands)																June 30,
	2Q13			1Q13			4Q12			3Q12			2Q12			2013			2012
Efficiency Ratio
Other expense	$	119,738		$	117,729		$	125,277		$	122,910		$	121,475		$	237,467		$	241,830
Less: Merger related expenses		0			0			(1,054	)		(1,500	)		(3,318	)		0			(14,797	)
Loss on extinguishment of debt		0			0			(409	)		(5,451	)		0			0			0
Noninterest operating expense (numerator)	$	119,738		$	117,729		$	123,814		$	115,959		$	118,157		$	237,467		$	227,033
Taxable-equivalent net interest income	$	151,916		$	153,021		$	159,332		$	152,948		$	156,416		$	304,995		$	294,253
Other income		49,076			42,644			43,772			43,661			39,811			91,720			79,326
Denominator	$	200,992		$	195,665		$	203,104		$	196,609		$	196,227		$	396,715		$	373,579
Efficiency ratio		59.57	%		60.17	%		60.96	%		58.98	%		60.21	%		59.86	%		60.77	%
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	$	2,644,940		$	2,639,489		$	2,595,909		$	2,584,682		$	2,544,730		$	2,644,940		$	2,544,730
Goodwill and other intangible assets (1)		(1,265,016	)		(1,266,610	)		(1,263,563	)		(1,263,361	)		(1,267,630	)		(1,265,016	)		(1,267,630	)
Tangible common equity (numerator)	$	1,379,924		$	1,372,879		$	1,332,346		$	1,321,321		$	1,277,100		$	1,379,924		$	1,277,100
Assets	$	18,083,039		$	17,967,174		$	18,037,667		$	18,106,730		$	18,040,009		$	18,083,039		$	18,040,009
Goodwill and other intangible assets (1)		(1,265,016	)		(1,266,610	)		(1,263,563	)		(1,263,361	)		(1,267,630	)		(1,265,016	)		(1,267,630	)
Tangible assets (denominator)	$	16,818,023		$	16,700,564		$	16,774,104		$	16,843,369		$	16,772,379		$	16,818,023		$	16,772,379
Tangible common ratio		8.21	%		8.22	%		7.94	%		7.84	%		7.61	%		8.21	%		7.61	%

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																Six Months Ended
(Dollars and share data in thousands)																June 30,
	2Q13			1Q13			4Q12			3Q12			2Q12			2013			2012
Return on Average Tangible Equity
Income statement data
Net income	$	45,648		$	42,399		$	43,174		$	36,732		$	37,793		$	88,047		$	61,266
Amortization of intangibles, net of taxes at 35%		1,984			2,124			2,127			2,169			2,211			4,109			3,845
Net tangible income (numerator)	$	47,632		$	44,523		$	45,301		$	38,901		$	40,004		$	92,156		$	65,111
Average balance sheet data
Shareholders' equity	$	2,648,314		$	2,614,319		$	2,597,254		$	2,562,092		$	2,537,250		$	2,631,411		$	2,442,788
Goodwill and other intangible assets		(1,312,257	)		(1,312,662	)		(1,311,192	)		(1,315,071	)		(1,320,658	)		(1,312,458	)		(1,226,501	)
Tangible common equity (denominator)	$	1,336,057		$	1,301,657		$	1,286,062		$	1,247,021		$	1,216,592		$	1,318,953		$	1,216,287
Return on equity (GAAP basis)		6.91	%		6.58	%		6.61	%		5.70	%		5.99	%		6.75	%		5.04	%
Effect of goodwill and other intangibles		7.39	%		7.29	%		7.40	%		6.71	%		7.24	%		7.34	%		5.73	%
Return on average tangible equity		14.30	%		13.87	%		14.01	%		12.41	%		13.23	%		14.09	%		10.77	%
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	$	2,644,940		$	2,639,489		$	2,595,909		$	2,584,682		$	2,544,730		$	2,644,940		$	2,544,730
Goodwill and other intangible assets		(1,311,176	)		(1,313,648	)		(1,311,691	)		(1,313,310	)		(1,317,036	)		(1,311,176	)		(1,317,036	)
Tangible common equity (numerator)	$	1,333,764		$	1,325,841		$	1,284,218		$	1,271,372		$	1,227,694		$	1,333,764		$	1,227,694
Common shares outstanding (denominator)		187,023			186,800			186,554			186,465			186,221			187,023			186,221
Tangible book value per common share	$	7.13		$	7.10		$	6.88		$	6.82		$	6.59		$	7.13		$	6.59

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.

CONTACT:
Susquehanna Bancshares, Inc.
INVESTOR RELATIONS:
Carl D. Lundblad, Senior Vice President
717-625-6207
or
MEDIA RELATIONS:
Stephen Trapnell, Director of Corporate Communications
717-625-6548