Susquehanna Bancshares (SUSQ) 8-K Susquehanna Bancshares, Inc. Announces Third Quarter 2014 Results

Exhibit 99.1

Susquehanna Bancshares, Inc. Announces Third Quarter 2014 Results

Third Quarter Highlights

• GAAP EPS of $0.18
• Solid Core Deposit Growth
• Non-Interest Expenses Down Linked Quarter
• Realigned Retail and Small Business Operations and Regional Footprint
• Increased Dividend and Executed Share Repurchase Program

LITITZ, Pa.--(BUSINESS WIRE)--October 22, 2014--Susquehanna Bancshares, Inc. (Susquehanna) (NASDAQ: SUSQ) today announced that it earned net income for the third quarter ended September 30, 2014 of $33.5 million, or $0.18 per diluted share, compared to $43.5 million, or $0.23 per diluted share, for the second quarter of 2014 and $44.3 million, or $0.24 per diluted share, for the third quarter of 2013.

“Despite a challenging economic and financial environment, we were able to achieve solid core deposit growth, improve our balance sheet positioning, and return capital to shareholders,” said William J. Reuter, Susquehanna’s Chairman and Chief Executive Officer. “In addition, we launched an initiative that will realign our bank to improve efficiency and create a more consistent management structure for our teams focused on sales and the customer experience in the retail, small business and commercial banking segments.”

Linked Quarter Results (Third Quarter 2014 vs. Second Quarter 2014)

• Loans and leases decreased $241.4 million or 1.8% from June 30, 2014 to $13.4 billion at September 30, 2014. During the third quarter of 2014, Susquehanna and its wholly-owned subsidiary Susquehanna Bank sold approximately $255.8 million of retail loans from the Consumer loans category. Changes for the quarter in each major loan category were as follows:
  • Commercial loans decreased 2.5%.
  • Real estate – construction loans increased 9.3%.
  • Real estate secured – residential loans decreased 0.1%.
  • Real estate secured – commercial loans decreased 0.9%.
  • Consumer loans decreased 24.1%.
  • Leases increased 1.9%.
• Total deposits increased $273.5 million or 2.1% from June 30, 2014 to $13.6 billion at September 30, 2014. Changes for the quarter in each major deposit category were as follows:
  • Non-interest bearing checking increased 1.2%.
  • Interest-bearing checking increased 7.1%.
  • Money market deposits increased 9.0%.
  • Savings deposits decreased 1.2%.
  • Time deposits decreased 4.9%.
• Primarily as a result of the loan sale and growth in the deposit portfolio, the loan to deposit ratio decreased to 98.8% for the third quarter of 2014 compared to 102.6% for the second quarter of 2014.
• Net interest margin decreased 13 basis points to 3.50% for the third quarter of 2014 compared to 3.63% for the second quarter of 2014. The second quarter of 2014 included a 9 basis point gain from the redemption of a trust preferred security. Net interest margin (excluding purchase accounting) ⁽¹⁾ declined 1 basis points to 3.37% for the third quarter of 2014 compared to 3.38% for the second quarter of 2014.
  
  In the fourth quarter of 2014, management expects the net interest margin (excluding purchase accounting) ⁽¹⁾ to decline 3 to 5 basis points.

• Non-interest income decreased to $44.6 million for the third quarter of 2014 compared to $45.3 million for the second quarter of 2014. The third quarter of 2014 included a $2.6 million gain related to the loan sale while the second quarter of 2014 included a net realized gain on sale of investment securities of $3.3 million.
  
  Excluding the gain related to the loan sale in the third quarter of 2014, management expects noninterest income to increase modestly in the fourth quarter of 2014.

• Non-interest expense decreased to $124.4 million for the third quarter of 2014 compared to $125.2 million in the second quarter of 2014. The third quarter of 2014 included a $1.6 million expense related to employee severance for the organizational realignment within our small business and retail operations.
  
  Management expects non-interest expenses to increase modestly in the fourth quarter of 2014.

• The efficiency ratio ⁽¹⁾ increased to 67.32% for the third quarter of 2014 compared to 65.63% in the second quarter of 2014.
• Non-performing assets as a percentage of loans, leases and foreclosed real estate owned increased to 0.88% at September 30, 2014 compared to 0.85% at June 30, 2014.
• The provision for loan and lease losses in the third quarter increased to $9.0 million compared to $3.0 million in the second quarter of 2014. Net charge-offs for the third quarter increased to $16.6 million, or 0.49% of average loans and leases, compared to $11.4 million, or 0.34% of average loans and leases, for the second quarter of 2014. As a result, the allowance for loan and lease losses was $136.9 million at September 30, 2014, representing 1.02% of total loans and leases and 125% of nonaccrual loans and leases compared to $144.5 million at June 30, 2014, representing 1.06% of total loans and leases and 137% of nonaccrual loans and leases.

Third Quarter Results (Third Quarter 2014 vs. Third Quarter 2013)

• Loans and leases increased $49.3 million or 0.4% from September 30, 2013 to $13.4 billion at September 30, 2014. During the third quarter of 2014, Susquehanna and its wholly-owned subsidiary Susquehanna Bank sold approximately $255.8 million of retail loans from the Consumer loans category. Changes for the twelve month period in each major loan category were as follows:
  • Commercial loans increased 3.9%.
  • Real estate - construction loans increased 6.8%.
  • Real estate secured - residential loans increased 0.7%.
  • Real estate secured - commercial loans decreased 2.3%.
  • Consumer loans decreased 21.9%.
  • Leases increased 15.5%.
• Total deposits increased $866.8 million or 6.8% from September 30, 2013 to $13.6 billion as of September 30, 2014. Changes for the twelve month period in each major deposit category were as follows:
  • Non-interest-bearing checking increased 4.6%.
  • Interest-bearing checking increased 6.6%.
  • Money market deposits increased 7.7%.
  • Savings deposits increased 5.3%.
  • Time deposits increased 7.8%.
• Primarily as a result of the loan sale and growth in the deposit portfolio, the loan to deposit ratio decreased to 98.8% for the third quarter of 2014 compared to 105.1% for the third quarter of 2013.
• Net interest margin decreased 22 basis points to 3.50% compared to 3.72% for the third quarter of 2013. Net interest margin (excluding purchase accounting) ⁽¹⁾ declined 17 basis points to 3.37% compared to 3.54% for the third quarter of 2013.
• Non-interest income increased to $44.6 million compared to $41.3 million in the third quarter of 2013. The third quarter of 2014 included a $2.6 million gain related to the loan sale.
• Non-interest expense increased to $124.4 million compared to $117.7 million in the third quarter of 2013. The third quarter of 2014 included a $1.6 million expense related to employee severance for the organizational realignment within our small business and retail operations while the third quarter of 2013 included a reduction in salaries and benefits by $5.0 million due to the adjustment of incentive and benefit accruals.
• The efficiency ratio ⁽¹⁾ increased to 67.32% compared to 61.62% in the third quarter of 2013.
• Non-performing assets as a percentage of loans, leases and foreclosed real estate decreased to 0.88% compared to 0.89% at September 30, 2013.
• The provision for loan and lease losses increased to $9.0 million compared to $5.0 million for the third quarter of 2013. Net charge-offs as a percentage of average loans and leases decreased to 0.49% compared to 0.50% for the third quarter of 2013. The allowance for loan and lease losses was $136.9 million, representing 1.02% of total loans and leases and 125% of nonaccrual loans and leases, compared to $166.7 million at September 30, 2013, representing 1.25% of total loans and leases and 164% of nonaccrual loans and leases.
• Return on average assets and average tangible equity ⁽¹⁾ decreased to 0.72% and 9.41%, respectively compared to 0.96% and 13.67%, respectively for the third quarter of 2013.
• Susquehanna’s capital ratios 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 10.86%, Tier 1 capital ratio of 11.92%, Total risk-based capital ratio of 13.08% and a Leverage ratio of 9.61%, each as of September 30, 2014. Based on a preliminary analysis of the new capital rules approved in July 2013, management believes that Susquehanna would be fully compliant with the revised capital ratio standards as of September 30, 2014 if they had been effective on that date.
  
  ⁽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 August 14, 2014, Susquehanna and its wholly-owned subsidiary Susquehanna Bank completed an off-balance sheet securitization of approximately $255.8 million of indirect retail installment contracts secured by new and used automobiles, light-duty trucks and vans.
• On August 21, 2014, Moody’s Investor Service upgraded the long-term ratings of Susquehanna, including its senior debt rating from Baa3 to Baa2.
• On October 15, 2014, Susquehanna’s Board of Directors declared a third quarter dividend of $0.09 per common share, payable on November 20, 2014 to shareholders of record on October 30, 2014.
• During the third quarter of 2014, Susquehanna repurchased approximately 6.5 million shares of common stock, completing its outstanding share repurchase program on October 1, 2014.

Susquehanna will broadcast its third quarter 2014 conference call over the Internet on October 23, 2014, at 11:00 a.m. Eastern time. The conference call will include management’s discussion of third quarter 2014 financial results and may also include forward-looking information and financial goals. Investors will have the opportunity to listen to the conference call through a live broadcast on Susquehanna’s website. The event may be accessed by selecting “Investor Relations” near the bottom of the home page or go directly to http://ir.susquehanna.net. At the site, please click on the third quarter webcast link. To listen to the live call, please go to the website at least 15 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 website shortly after the call concludes.

Susquehanna is a financial services holding company with total assets of approximately $18.6 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 $7.6 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 from those projected 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, including industry consolidation and development of competing financial products and services; the costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; interest rate movements; changes in credit quality; deteriorating economic conditions; market or other events adversely affecting our ability to conduct off-balance transactions; inability to successfully execute Susquehanna's initiatives and planned and proposed organizational, process and technology improvements; other risks and uncertainties; our success at managing the risks involved in the foregoing items; and the other factors 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)
											Nine Months YTD
	3Q14		2Q14		1Q14		4Q13		3Q13		2014		2013
Balance Sheet (EOP)
Investments	$	2,325,734	$	2,324,782	$	2,445,322	$	2,533,456	$	2,644,162	$	2,325,734	$	2,644,162
Loans and leases		13,425,721		13,667,153		13,575,295		13,576,086		13,376,454		13,425,721		13,376,454
Allowance for loan and lease losses (ALLL)		136,870		144,483		154,150		157,608		166,740		136,870		166,740
Total assets		18,583,327		18,506,626		18,439,682		18,473,489		18,481,150		18,583,327		18,481,150
Deposits		13,588,524		13,314,994		13,079,523		12,869,372		12,721,685		13,588,524		12,721,685
Other short-term borrowings		532,675		527,079		584,664		555,740		688,456		532,675		688,456
Federal Home Loan Bank borrowings		915,362		1,127,302		1,229,296		1,531,282		1,593,272		915,362		1,593,272
Other long-term debt		356,117		360,033		448,521		453,260		457,804		356,117		457,804
Shareholders' equity		2,751,260		2,796,392		2,755,199		2,717,587		2,679,348		2,751,260		2,679,348
Average Balance Sheet
Investments	$	2,293,302	$	2,395,690	$	2,505,937	$	2,616,807	$	2,584,212	$	2,397,531	$	2,563,862
Loans and leases		13,499,686		13,589,533		13,574,526		13,421,474		13,290,513		13,554,307		13,111,325
Total earning assets		15,872,628		16,066,177		16,162,210		16,124,369		15,960,228		16,032,982		15,775,630
Total assets		18,411,529		18,378,127		18,411,873		18,437,954		18,258,982		18,417,499		18,121,360
Deposits		13,395,247		13,131,617		12,874,040		12,806,503		12,794,022		13,135,544		12,768,046
Other short-term borrowings		541,363		552,367		671,653		671,923		758,079		589,462		767,911
Federal Home Loan Bank borrowings		961,483		1,174,611		1,387,124		1,502,120		1,285,276		1,172,846		1,161,305
Other long-term debt		358,502		396,367		451,267		455,787		475,655		401,706		493,358
Shareholders' equity		2,775,786		2,768,665		2,726,465		2,679,242		2,642,806		2,760,888		2,635,251
Income Statement
Net interest income	$	136,465	$	141,694	$	140,064	$	142,688	$	145,949	$	418,223	$	443,252
Provision for loan and lease losses		9,000		3,000		6,000		2,000		5,000		18,000		29,000
Noninterest income		44,617		45,349		42,089		50,666		41,343		132,055		133,063
Noninterest expense		124,411		125,225		123,032		135,672		117,701		372,668		355,168
Income before taxes		47,671		58,818		53,121		55,682		64,591		159,610		192,147
Provision for income taxes		14,203		15,324		15,959		14,341		20,300		45,486		59,809
Net income		33,468		43,494		37,162		41,341		44,291		114,124		132,338
Basic earnings per common share		0.18		0.23		0.20		0.22		0.24		0.61		0.71
Diluted earnings per common share		0.18		0.23		0.20		0.22		0.24		0.61		0.70
Cash dividends paid per common share		0.09		0.08		0.08		0.08		0.08		0.25		0.16
Asset Quality
Net charge-offs (NCOs)	$	16,613	$	11,431	$	9,458	$	11,132	$	16,854	$	37,502	$	46,280
Nonaccrual loans and leases	$	109,506	$	105,609	$	108,408	$	100,815	$	101,976	$	109,506	$	101,976
Foreclosed real estate		9,133		10,302		11,980		16,555		17,760		9,133		17,760
Total nonperforming assets (NPAs)	$	118,639	$	115,911	$	120,388	$	117,370	$	119,736	$	118,639	$	119,736
Restructured loans	$	42,418	$	40,938	$	39,555	$	72,133	$	69,975	$	42,418	$	69,975
Loans and leases 90 days past due		10,303		9,190		9,328		9,757		8,655		10,303		8,655
Credit Quality
NCOs / Average loans and leases		0.49%		0.34%		0.28%		0.33%		0.50%		0.37%		0.47%
NPAs / Loans and leases + foreclosed real estate		0.88%		0.85%		0.89%		0.86%		0.89%		0.88%		0.89%
ALLL / Nonaccrual loans and leases		124.99%		136.81%		142.19%		156.33%		163.51%		124.99%		163.51%
ALLL / Total loans and leases		1.02%		1.06%		1.14%		1.16%		1.25%		1.02%		1.25%
Profitability
Return on average assets		0.72%		0.95%		0.82%		0.89%		0.96%		0.83%		0.98%
Return on average equity		4.78%		6.30%		5.53%		6.12%		6.65%		5.53%		6.71%
Return on average tangible equity (1)		9.41%		12.34%		11.08%		12.49%		13.67%		10.90%		13.95%
Net interest margin		3.50%		3.63%		3.61%		3.60%		3.72%		3.58%		3.85%
Efficiency ratio (1)		67.32%		65.63%		66.18%		68.84%		61.62%		66.37%		60.43%
Per Share Data (EOP)
Closing share price	$	10.00	$	10.56	$	11.37	$	12.84	$	12.53	$	10.00	$	12.53
Stated book value per common share		15.17		14.90		14.69		14.50		14.31		15.17		14.31
Tangible book value per common share (1)		7.99		7.95		7.73		7.52		7.32		7.99		7.32
Price/Book Value		65.90%		70.88%		77.41%		88.52%		87.56%		65.90%		87.56%
Price/Tangible Book Value		125.16%		132.83%		147.09%		170.74%		171.17%		125.16%		171.17%
Number of outstanding shares ('000)		181,310		187,706		187,590		187,363		187,225		181,310		187,225
Capital Ratios
Tangible common ratio (1)		8.58%		8.88%		8.67%		8.44%		8.22%		8.58%		8.22%
Tier 1 common ratio		10.86%		11.03%		10.84%		10.60%		10.41%		10.86%		10.41%
Leverage ratio		9.61%		9.90%		9.72%		9.55%		9.47%		9.61%		9.47%
Tier 1 capital ratio		11.92%		12.07%		11.95%		11.71%		11.52%		11.92%		11.52%
Total risk-based capital ratio		13.08%		13.27%		13.23%		13.04%		12.92%		13.08%		12.92%

⁽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)
	September 30,			June 30,			March 31,			December 31,			September 30,
	2014			2014			2014			2013			2013
Assets
Cash and due from banks	$	772,677		$	456,917		$	389,793		$	305,357		$	377,730
Unrestricted short-term investments		40,508			33,369			24,768			37,967			30,663
Cash and cash equivalents		813,185			490,286			414,561			343,324			408,393
Interest-bearing deposits held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities		2,211			1,554			1,689			2,347			2,138
Restricted short-term investments		36,943			43,926			42,993			42,913			44,928
Securities available for sale		2,192,615			2,183,093			2,299,235			2,375,224			2,483,375
Restricted investment in bank stocks		133,119			141,689			146,087			158,232			160,787
Loans and leases, net of deferred costs and fees		13,361,516			13,600,254			13,505,746			13,503,392			13,300,309
Loans held by consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities		64,205			66,899			69,549			72,694			76,145
Less: Allowance for loan and lease losses		136,870			144,483			154,150			157,608			166,740
Net loans and leases		13,288,851			13,522,670			13,421,145			13,418,478			13,209,714
Premises and equipment, net		168,466			169,975			170,349			173,542			189,096
Other real estate and foreclosed assets		9,898			11,102			12,943			17,573			18,729
Accrued interest receivable		39,899			38,878			41,594			41,690			41,715
Bank-owned life insurance		449,199			450,318			449,778			449,320			449,419
Goodwill		1,275,439			1,275,439			1,275,439			1,275,439			1,275,439
Intangible assets with finite lives		27,163			28,579			30,303			32,262			33,666
Deferred income tax assets		6,903			7,357			5,216			6,472			7,921
Other assets		139,436			141,760			128,350			136,673			155,830
Total assets	$	18,583,327		$	18,506,626		$	18,439,682		$	18,473,489		$	18,481,150
Liabilities and Shareholders' Equity
Deposits	$	13,588,524		$	13,314,994		$	13,079,523		$	12,869,372		$	12,721,685
Federal Home Loan Bank short-term borrowings		850,000			1,050,000			1,150,000			1,450,000			1,510,000
Other short-term borrowings		532,675			527,079			584,664			555,740			688,456
Federal Home Loan Bank long-term borrowings		65,362			77,302			79,296			81,282			83,272
Other long-term debt		175,219			175,222			250,224			250,227			250,229
Junior subordinated debentures		146,059			146,002			155,022			155,002			154,983
Long-term debt of consolidated variable interest entities for which creditors do not have recourse to Susquehanna's general credit		34,839			38,809			43,275			48,031			52,592
Accrued interest, taxes, and expenses payable		72,044			72,664			69,404			82,150			101,040
Deferred income tax liabilities		128,389			114,119			75,911			70,308			52,214
Other liabilities		238,956			194,043			197,164			193,790			187,331
Total liabilities		15,832,067			15,710,234			15,684,483			15,755,902			15,801,802
Shareholders' equity:
Common stock		363,358			376,146			375,845			375,353			374,982
Treasury stock		(3,100	)		(3,075	)		(2,735	)		(2,531	)		(1,918	)
Additional paid-in capital		1,605,671			1,657,699			1,654,357			1,652,116			1,651,382
Retained earnings		811,462			794,864			766,381			744,215			717,850
Accumulated other comprehensive loss		(26,131	)		(29,242	)		(38,649	)		(51,566	)		(62,948	)
Total shareholders' equity		2,751,260			2,796,392			2,755,199			2,717,587			2,679,348
Total liabilities and shareholders' equity	$	18,583,327		$	18,506,626		$	18,439,682		$	18,473,489		$	18,481,150

Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Loans and Leases and Deposits
(in thousands)
	Loans and Leases
	09/30/14		06/30/14			03/31/14			12/31/13			09/30/13
Commercial, financial, and agricultural	$	2,362,201	$	2,422,931		$	2,411,851		$	2,394,847		$	2,273,735
Real estate - construction		817,492		748,181			714,291			735,877			765,246
Real estate secured - residential		4,172,943		4,178,842			4,178,505			4,204,430			4,145,522
Real estate secured - commercial		4,016,635		4,053,990			4,041,989			4,068,816			4,109,329
Consumer		730,687		962,618			955,577			953,000			935,117
Leases		1,325,763		1,300,591			1,273,082			1,219,116			1,147,505
Total loans and leases	$	13,425,721	$	13,667,153		$	13,575,295		$	13,576,086		$	13,376,454
	Deposits
	09/30/14		06/30/14			03/31/14			12/31/13			09/30/13
Noninterest-bearing checking	$	1,958,308	$	1,935,635		$	1,880,284		$	1,913,526		$	1,871,461
Interest-bearing checking		3,087,166		2,883,679			2,908,507			2,909,376			2,895,027
Money market		3,297,699		3,025,430			3,184,719			3,144,106			3,062,955
Savings		1,122,232		1,136,044			1,132,850			1,077,923			1,065,699
Core deposits		9,465,405		8,980,788			9,106,360			9,044,931			8,895,142
Time less than $100		2,265,787		2,266,815			2,166,207			2,113,209			2,103,650
Time of $100 or more		1,857,332		2,067,391			1,806,956			1,711,232			1,722,893
Total deposits	$	13,588,524	$	13,314,994		$	13,079,523		$	12,869,372		$	12,721,685
Supplemental Loan and Lease Data
(in thousands)
	Nonaccrual Loans and Leases
	09/30/14		06/30/14			03/31/14			12/31/13			09/30/13
Commercial, financial, and agricultural	$	23,121	$	18,792		$	24,529		$	16,827		$	10,048
Real estate - construction		7,225		7,428			11,695			13,230			16,497
Real estate secured - residential		23,653		24,740			23,189			23,365			27,878
Real estate secured - commercial		54,484		53,687			47,950			46,147			45,906
Consumer		40		43			46			47			177
Leases		983		919			999			1,199			1,470
Total nonaccrual loans and leases	$	109,506	$	105,609		$	108,408		$	100,815		$	101,976
	Restructured Loans
	09/30/14		06/30/14			03/31/14			12/31/13			09/30/13
Commercial, financial, and agricultural	$	4,044	$	4,228		$	5,264		$	6,885		$	9,609
Real estate - construction		319		322			325			615			331
Real estate secured - residential		20,231		18,414			16,168			31,623			26,848
Real estate secured - commercial		16,780		16,903			16,681			31,295			31,766
Consumer		1,044		1,071			1,117			1,715			1,421
Total restructured loans	$	42,418	$	40,938		$	39,555		$	72,133		$	69,975
	Net Charge-offs (Recoveries)
	3Q 2014		2Q 2014			1Q 2014			4Q 2013			3Q 2013
Commercial, financial, and agricultural	$	8,069	$	7,274		$	3,182		$	(480	)	$	3,731
Real estate - construction		776		(457	)		(91	)		(3,312	)		6,504
Real estate secured - residential		2,549		2,453			2,796			2,724			3,524
Real estate secured - commercial		3,827		730			2,134			11,060			2,007
Consumer		614		1,013			855			330			726
Leases		778		418			582			810			362
Total net charge-offs	$	16,613	$	11,431		$	9,458		$	11,132		$	16,854

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													Nine Months Ended
	September 30,		June 30,			March 31,			December 31,			September 30,		September 30,
	2014		2014			2014			2013			2013		2014		2013
Interest Income:
Loans and leases, including deferred costs and fees	$	147,761	$	148,002		$	149,538		$	151,907		$	155,596	$	445,301	$	475,926
Securities:
Taxable		8,459		9,104			9,648			10,406			10,641		27,211		30,584
Tax-exempt		3,383		3,439			3,501			3,511			3,527		10,323		10,682
Dividends		2,108		2,134			1,765			1,649			1,297		6,007		3,609
Short-term investments		24		23			19			21			16		66		87
Total interest income		161,735		162,702			164,471			167,494			171,077		488,908		520,888
Interest Expense:
Deposits:
Interest-bearing demand and savings		4,256		4,031			3,962			4,202			4,190		12,249		13,604
Time		10,803		10,246			9,628			9,597			10,229		30,677		33,115
Federal Home Loan Bank short-term borrowings		4,554		4,597			4,621			4,449			3,915		13,772		10,738
Other short-term borrowings		2,091		2,031			2,100			2,146			2,242		6,222		6,548
Federal Home Loan Bank long-term borrowings		247		243			245			254			284		735		888
Other long-term debt		3,319		(140	)		3,851			4,158			4,268		7,030		12,743
Total interest expense		25,270		21,008			24,407			24,806			25,128		70,685		77,636
Net interest income	$	136,465	$	141,694		$	140,064		$	142,688		$	145,949	$	418,223	$	443,252
Provision for loan and lease losses		9,000		3,000			6,000			2,000			5,000		18,000		29,000
Net interest income, after provision for loan and lease losses		127,465		138,694			134,064			140,688			140,949		400,223		414,252
Noninterest Income:
Service charges on deposit accounts		9,561		9,294			9,000			9,456			9,514		27,855		27,533
Vehicle origination and servicing fees		1,691		2,915			2,968			3,057			2,907		7,574		8,668
Wealth management commissions and fees		13,199		12,669			12,719			13,048			12,606		38,587		38,285
Commissions on property and casualty insurance sales		3,992		4,214			5,666			4,023			3,872		13,872		12,774
Other commissions and fees		5,689		5,401			5,035			5,077			4,885		16,125		13,940
Income from bank-owned life insurance		1,634		1,672			1,637			1,492			1,493		4,943		4,521
Mortgage banking revenue		2,432		3,004			2,410			2,483			2,237		7,846		10,345
Capital markets revenue		1,593		877			1,240			3,216			111		3,710		4,269
Net realized gain (loss) on sales of securities		0		3,293			(8	)		(1,343	)		2		3,285		(51	)
Realized gain on sale of branch properties		0		0			0			4,945			0		0		0
Other		4,826		2,010			1,422			5,212			3,716		8,258		12,779
Total noninterest income		44,617		45,349			42,089			50,666			41,343		132,055		133,063
Noninterest Expenses:
Salaries and employee benefits		68,042		68,325			65,581			70,837			61,879		201,948		191,381
Occupancy		12,089		11,914			13,847			11,727			11,352		37,850		33,721
Furniture and equipment		4,043		4,058			3,944			3,865			3,661		12,045		10,986
Professional and technology services		6,168		7,189			6,070			6,404			7,173		19,427		18,733
Advertising and marketing		3,784		3,567			3,576			3,618			3,319		10,927		9,084
FDIC insurance		5,038		4,925			5,121			6,118			5,421		15,084		13,760
Legal fees		1,699		1,656			1,527			1,968			1,774		4,882		5,454
Amortization of intangible assets		2,220		2,367			2,539			2,803			2,502		7,126		8,823
Vehicle lease disposal		2,222		2,215			2,251			1,216			1,193		6,688		3,796
Branch consolidation costs		0		0			0			6,603			0		0		0
Other		19,106		19,009			18,576			20,513			19,427		56,691		59,430
Total noninterest expenses		124,411		125,225			123,032			135,672			117,701		372,668		355,168
Income before income taxes		47,671		58,818			53,121			55,682			64,591		159,610		192,147
Provision for income taxes		14,203		15,324			15,959			14,341			20,300		45,486		59,809
Net Income	$	33,468	$	43,494		$	37,162		$	41,341		$	44,291	$	114,124	$	132,338
Earnings per common share:
Basic	$	0.18	$	0.23		$	0.20		$	0.22		$	0.24	$	0.61	$	0.71
Diluted	$	0.18	$	0.23		$	0.20		$	0.22		$	0.24	$	0.61	$	0.70
Cash dividends per common share	$	0.09	$	0.08		$	0.08		$	0.08		$	0.08	$	0.25	$	0.16
Average common shares outstanding:
Basic		184,985		187,637			187,455			187,186			187,096		186,683		186,840
Diluted		185,724		188,295			188,378			188,078			188,109		187,445		187,816

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							Nine Months Ended							Nine Months Ended
	September 30, 2014							June 30, 2014								September 30, 2013							September 30, 2014							September 30, 2013
	Average							Average								Average							Average							Average
	Balance			Interest			Rate (%)	Balance			Interest			Rate (%)		Balance			Interest			Rate (%)	Balance			Interest			Rate (%)	Balance			Interest			Rate (%)
Assets
Short-term investments	$	79,640		$	24		0.12	$	80,954		$	23		0.11		$	85,503		$	16		0.07	$	81,144		$	65		0.11	$	100,443		$	87		0.12
Investment securities:
Taxable(1)		1,915,888			10,567		2.19		2,013,166			11,238		2.24			2,191,743			11,937		2.16		2,014,934			33,219		2.20		2,166,932			34,193		2.11
Tax-exempt(1)(2)		377,414			5,205		5.47		382,524			5,291		5.55			392,469			5,450		5.51		382,597			15,882		5.55		396,930			16,515		5.56
Total investment securities		2,293,302			15,772		2.73		2,395,690			16,529		2.77			2,584,212			17,387		2.67		2,397,531			49,101		2.74		2,563,862			50,708		2.64
Loans and leases, (net):
Taxable(3)		13,067,543			144,248		4.38		13,154,917			144,471		4.40			12,888,591			152,275		4.69		13,119,323			434,798		4.43		12,695,055			465,689		4.90
Tax-exempt(2)(3)		432,143			5,405		4.96		434,616			5,432		5.01			401,922			5,133		5.07		434,984			16,158		4.97		416,270			15,830		5.08
Total loans and leases		13,499,686			149,653		4.40		13,589,533			149,903		4.42			13,290,513			157,408		4.70		13,554,307			450,956		4.45		13,111,325			481,519		4.91
Total interest-earning assets		15,872,628			165,449		4.14		16,066,177			166,455		4.16			15,960,228			174,811		4.35		16,032,982			500,122		4.17		15,775,630			532,314		4.51
Allowance for loan and lease losses		(144,674	)						(154,710	)							(177,853	)						(152,229	)						(180,652	)
Other non-earning assets		2,683,575							2,466,660								2,476,607							2,536,746							2,526,382
Total assets	$	18,411,529						$	18,378,127							$	18,258,982						$	18,417,499						$	18,121,360
Liabilities
Deposits:
Interest-bearing demand	$	6,165,175			3,970		0.26	$	5,998,086			3,726		0.25		$	5,936,693			3,904		0.26	$	6,065,751			11,371		0.25	$	5,938,605			12,746		0.29
Savings		1,131,551			286		0.10		1,134,421			305		0.11			1,075,734			286		0.11		1,122,088			878		0.10		1,068,446			858		0.11
Time		4,133,949			10,803		1.04		4,129,738			10,245		1.00			3,870,542			10,229		1.05		4,058,947			30,677		1.01		3,847,294			33,115		1.15
Other short-term borrowings		541,363			2,091		1.53		552,367			2,030		1.47			758,079			2,242		1.17		589,462			6,221		1.41		767,911			6,548		1.14
FHLB borrowings		961,483			4,801		1.98		1,174,611			4,840		1.65			1,285,276			4,199		1.30		1,172,846			14,508		1.65		1,161,305			11,626		1.34
Long-term debt(4)		358,502			3,319		3.67		396,367			(138	)	(0.14	)		475,655			4,268		3.56		401,706			7,030		2.34		493,358			12,743		3.45
Total interest-bearing liabilities		13,292,023			25,270		0.75		13,385,590			21,008		0.63			13,401,979			25,128		0.74		13,410,800			70,685		0.70		13,276,919			77,636		0.78
Demand deposits		1,964,572							1,869,372								1,911,053							1,888,758							1,913,701
Other liabilities		379,148							354,500								303,144							357,053							295,489
Total liabilities		15,635,743							15,609,462								15,616,176							15,656,611							15,486,109
Equity		2,775,786							2,768,665								2,642,806							2,760,888							2,635,251
Total liabilities & shareholders' equity	$	18,411,529						$	18,378,127							$	18,258,982						$	18,417,499						$	18,121,360
Net interest income / yield on average earning assets				$	140,179		3.50				$	145,447		3.63					$	149,683		3.72				$	429,437		3.58				$	454,678		3.85
Taxable equivalent adjustment					(3,714	)						(3,753	)							(3,734	)						(11,214	)						(11,426	)
Net interest income - as reported				$	136,465						$	141,694							$	145,949						$	418,223						$	443,252

(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																Nine Months Ended
(Dollars and share data in thousands)																September 30,
	3Q14			2Q14			1Q14			4Q13			3Q13			2014			2013
Efficiency Ratio
Other expense	$	124,411		$	125,225		$	123,032		$	135,672		$	117,701		$	372,668		$	355,168
Noninterest operating expense (numerator)	$	124,411		$	125,225		$	123,032		$	135,672		$	117,701		$	372,668		$	355,168
Taxable-equivalent net interest income	$	140,179		$	145,447		$	143,813		$	146,430		$	149,683		$	429,437		$	454,678
Other income		44,617			45,349			42,089			50,666			41,343			132,055			133,063
Noninterest operating income (denominator)	$	184,796		$	190,796		$	185,902		$	197,096		$	191,026		$	561,492		$	587,741
Efficiency ratio		67.32	%		65.63	%		66.18	%		68.84	%		61.62	%		66.37	%		60.43	%
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	$	2,751,260		$	2,796,392		$	2,755,199		$	2,717,587		$	2,679,348		$	2,751,260		$	2,679,348
Goodwill and other intangible assets (1)		(1,265,598	)		(1,265,846	)		(1,266,403	)		(1,264,839	)		(1,263,928	)		(1,265,598	)		(1,263,928	)
Tangible common equity (numerator)	$	1,485,662		$	1,530,546		$	1,488,796		$	1,452,748		$	1,415,420		$	1,485,662		$	1,415,420
Assets	$	18,583,327		$	18,506,626		$	18,439,682		$	18,473,489		$	18,481,150		$	18,583,327		$	18,481,150
Goodwill and other intangible assets (1)		(1,265,598	)		(1,265,846	)		(1,266,403	)		(1,264,839	)		(1,263,928	)		(1,265,598	)		(1,263,928	)
Tangible assets (denominator)	$	17,317,729		$	17,240,780		$	17,173,279		$	17,208,650		$	17,217,222		$	17,317,729		$	17,217,222
Tangible common ratio		8.58	%		8.88	%		8.67	%		8.44	%		8.22	%		8.58	%		8.22	%
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	$	33,468		$	43,494		$	37,162		$	41,341		$	44,291		$	114,124		$	132,338
Amortization of intangibles, net of taxes at 35%		1,443			1,539			1,650			1,822			1,626			4,632			5,735
Net tangible income (numerator)	$	34,911		$	45,033		$	38,812		$	43,163		$	45,917		$	118,756		$	138,073
Average balance sheet data
Shareholders' equity	$	2,775,786		$	2,768,665		$	2,726,465		$	2,679,242		$	2,642,806		$	2,760,888		$	2,635,251
Goodwill and other intangible assets		(1,303,275	)		(1,304,736	)		(1,306,298	)		(1,308,690	)		(1,310,155	)		(1,304,759	)		(1,311,682	)
Tangible common equity (denominator)	$	1,472,511		$	1,463,929		$	1,420,167		$	1,370,552		$	1,332,651		$	1,456,129		$	1,323,569
Return on equity (GAAP basis)		4.78	%		6.30	%		5.53	%		6.12	%		6.65	%		5.53	%		6.71	%
Effect of goodwill and other intangibles		4.63	%		6.04	%		5.55	%		6.37	%		7.02	%		5.37	%		7.24	%
Return on average tangible equity		9.41	%		12.34	%		11.08	%		12.49	%		13.67	%		10.90	%		13.95	%
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	$	2,751,260		$	2,796,392		$	2,755,199		$	2,717,587		$	2,679,348		$	2,751,260		$	2,679,348
Goodwill and other intangible assets		(1,302,602	)		(1,304,018	)		(1,305,742	)		(1,307,701	)		(1,309,105	)		(1,302,602	)		(1,309,105	)
Tangible common equity (numerator)	$	1,448,658		$	1,492,374		$	1,449,457		$	1,409,886		$	1,370,243		$	1,448,658		$	1,370,243
Common shares outstanding (denominator)		181,310			187,706			187,590			187,363			187,225			181,310			187,225
Tangible book value per common share	$	7.99		$	7.95		$	7.73		$	7.52		$	7.32		$	7.99		$	7.32
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
	3Q14		2Q14		1Q14		4Q13		3Q13
Net Interest Margin (excluding purchase accounting)
Reported net interest margin (GAAP basis)	3.50	%	3.63	%	3.61	%	3.60	%	3.72	%
Adjustments for purchase accounting:
Loans and leases	-0.10	%	-0.12	%	-0.17	%	-0.11	%	-0.13	%
Deposits	-0.02	%	-0.03	%	-0.03	%	-0.03	%	-0.04	%
Borrowings	-0.01	%	-0.10	%	-0.01	%	-0.01	%	-0.01	%
Net Interest Margin (excluding purchase accounting)	3.37	%	3.38	%	3.40	%	3.45	%	3.54	%

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.

CONTACT:
Susquehanna Bancshares, Inc.
INVESTOR RELATIONS CONTACT:
Jason H. Weber, Director of Investor Relations
717-626-9801
or
MEDIA RELATIONS CONTACT:
Stephen Trapnell, Director of Corporate Communications
717-625-6548