FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-10674
SUSQUEHANNA BANCSHARES, INC.
----------------------------
(Exact name of Registrant as specified in its Charter)
Pennsylvania 23-2201716
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
26 North Cedar Street
Lititz, Pennsylvania 17543
--------------------------
(Address of principal executive offices) (Zip Code)
(717) 626-4721
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports,) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of July 31, 2000 the Registrant had 39,254,239 shares of common stock
outstanding.
1
SUSQUEHANNA BANCSHARES, INC.
INDEX
SEQUENTIAL
PAGE
REFERENCE
PART I. FINANCIAL INFORMATION 3
Item 1. FINANCIAL STATEMENTS 3
Consolidated Balance Sheets - as of June 30, 2000 and 1999
and December 31, 1999 3
Consolidated Statements of Income - for the three months ended
and six months ended June 30, 2000 and 1999 4
Consolidated Statements of Cash Flow - for the six months
periods ended June 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6 - 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND
FINANCIAL CONDITION 10 - 19
PART II OTHER INFORMATION 20
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 20 - 21
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 21
SIGNATURES 21
EXHIBIT INDEX 22
2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Susquehanna Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------------------------------
June 30 December 31 June 30
(Dollars in thousands) 2000 1999 1999
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $122,897 $146,576 $107,319
Short-term investments 42,172 36,653 49,804
Investment securities available for sale 860,788 878,958 848,803
Investment securities held to maturity 25,662 33,090 49,127
(Fair values of $25,964; $33,461; and $49,800)
Loans and leases, net of unearned income 3,466,420 3,469,661 3,366,164
Less: Allowance for loan and lease losses 41,609 44,465 40,638
- --------------------------------------------------------------------------------------------------------
Net loans and leases 3,424,811 3,425,196 3,325,526
- --------------------------------------------------------------------------------------------------------
Premises and equipment (net) 56,769 55,429 56,499
Accrued income receivable 24,976 23,763 23,394
Bank-owned life insurance 110,952 108,105 50,195
Other assets 141,782 103,268 152,527
- --------------------------------------------------------------------------------------------------------
Total assets $4,810,809 $4,811,038 $4,663,194
========================================================================================================
- --------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand $476,964 $430,054 $420,229
Interest-bearing demand 887,436 951,904 962,605
Savings 415,631 421,012 456,348
Time 1,218,666 1,187,524 1,145,785
Time of $100 or more 204,992 190,026 174,617
- --------------------------------------------------------------------------------------------------------
Total deposits 3,203,689 3,180,520 3,159,584
- --------------------------------------------------------------------------------------------------------
Short-term borrowings 192,485 207,507 113,122
FHLB borrowings 413,789 372,414 367,567
Vehicle financing 411,884 482,104 462,299
Long-term debt 100,000 95,000 95,000
Accrued interest, taxes, and expenses payable 41,948 34,746 32,377
Other liabilities 20,826 23,725 17,928
- --------------------------------------------------------------------------------------------------------
Total liabilities 4,384,621 4,396,016 4,247,877
- --------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock
Authorized: 100,000,000 ($2.00 par value)
Issued: 39,398,190; 39,394,094; and 39,346,004, respectively 78,796 78,788 78,692
Surplus 57,861 57,873 57,058
Retained earnings 306,239 292,150 286,060
Accumulated other comprehensive income, net of taxes of ($7,651);
($6,961) and ($3,324), respectively (14,898) (13,616) (6,292)
Less: Treasury stock, (128,951; 11,641; and 13,527
common shares at cost, respectively) 1,810 173 201
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 426,188 415,022 415,317
- --------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $4,810,809 $4,811,038 $4,663,194
========================================================================================================
- --------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Susquehanna Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
- ------------------------------------------------------------------------ ---------------------------
Three Months Ended Six Months Ended
June 30 June 30
(Dollars in thousands, except per share ) 2000 1999 2000 1999
- ------------------------------------------------------------------------ ---------------------------
INTEREST INCOME
Interest and fees on loans and leases $72,950 $69,118 $144,416 $136,104
Interest on investment securities: Taxable 13,271 12,358 26,675 24,776
Tax-exempt 1,082 1,360 2,209 2,795
Interest on short-term investments 747 693 1,493 1,645
- ------------------------------------------------------------------------ ---------------------------
Total interest income 88,050 83,529 174,793 165,320
- ------------------------------------------------------------------------ ---------------------------
INTEREST EXPENSE
Interest on deposits:
Interest-bearing demand 6,877 6,793 14,065 13,993
Savings 1,814 2,041 3,677 4,195
Time 19,118 17,072 37,544 34,667
Interest on short-term borrowings 3,063 676 5,314 1,517
Interest on FHLB borrowings 5,802 4,691 11,032 8,974
Interest on vehicle financing 7,895 9,224 16,860 17,417
Interest on long-term debt 1,837 2,235 3,836 4,293
- ------------------------------------------------------------------------ ---------------------------
Total interest expense 46,406 42,732 92,328 85,056
- ------------------------------------------------------------------------ ---------------------------
Net interest income 41,644 40,797 82,465 80,264
Provision for loan and lease losses 643 1,856 1,507 3,933
- ------------------------------------------------------------------------ ---------------------------
Net interest income after provision for loan and
lease losses 41,001 38,941 80,958 76,331
- ------------------------------------------------------------------------ ---------------------------
OTHER INCOME
Service charges on deposit accounts 2,795 2,416 5,378 4,666
Vehicle origination and servicing fees 5,581 3,378 10,666 6,722
Other service charges, commissions, fees 5,288 998 10,149 2,070
Income from fiduciary-related activities 1,111 917 2,233 1,676
Gain on sale of mortgages 529 990 940 2,000
Income from bank-owned life insurance 1,405 913 2,845 1,636
Other operating income 1,782 1,584 3,342 3,104
Investment security gains/(losses) (15) 101 (14) 100
- ------------------------------------------------------------------------ ---------------------------
Total other income 18,476 11,297 35,539 21,974
- ------------------------------------------------------------------------ ---------------------------
OTHER EXPENSES
Salaries and employee benefits 17,010 15,181 33,822 28,895
Net occupancy expense 2,484 2,166 4,982 4,482
Furniture and equipment expense 2,044 1,950 4,012 3,923
Amortization of intangible assets 829 960 1,613 1,974
Vehicle expense 2,944 23 3,668 8
Restructuring charge (900) 0 (900) 0
Other operating expenses 15,282 11,244 30,084 21,819
- ------------------------------------------------------------------------ ---------------------------
Total other expenses 39,693 31,524 77,281 61,101
- ------------------------------------------------------------------------ ---------------------------
Income before income taxes 19,784 18,714 39,216 37,204
Provision for income taxes 6,133 5,706 12,157 11,606
- ------------------------------------------------------------------------ ---------------------------
NET INCOME $13,651 $13,008 $27,059 $25,598
======================================================================== ===========================
Per share information:
Basic earnings $0.35 $0.33 $0.69 $0.65
Diluted earnings $0.35 $0.33 $0.69 $0.65
Cash dividends $0.17 $0.15 $0.34 $0.30
Average shares outstanding: Basic 39,262 39,304 39,299 39,303
Diluted 39,326 39,491 39,375 39,502
- ------------------------------------------------------------------------ ---------------------------
The accompanying notes are an integral part of these financial statements.
Susquehanna Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Six months ended June 30 2000 1999
- ----------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $27,059 $25,598
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion 6,831 5,660
Provision for loan and lease losses 1,507 3,933
(Gain)/loss on securities transactions 14 (100)
(Gain)/loss on sale of loans (940) (2,000)
(Gain)/loss on sale of other real estate owned (32) 35
Mortgage loans originated for resale (61,324) (95,159)
Sale of mortgage loans originated for resale 62,408 102,618
Leases originated for resale (167,247) 0
Sale of leases originated for resale 144,834 0
(Increase)/decrease in accrued interest receivable (1,213) (620)
Increase/(decrease) in accrued interest payable (9,770) (711)
(Increase)/decrease in accrued expenses and taxes payable 16,972 551
Other, net (11,464) (3,188)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,635 36,617
- ----------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from the sale of available-for-sale securities 3,833 27,695
Proceeds from the maturity of investment securities 59,890 119,217
Purchase of available-for-sale securities (32,877) (112,403)
Purchase of held-to-maturity securities (7,887) 0
Net increase in loans and leases (2,463) (74,444)
Capital expenditures (4,659) (3,163)
Net cash and cash equivalents acquired/(paid) in acquisition (11,323) 0
Purchase of insurance products 0 (50,000)
- ----------------------------------------------------------------------------------------------------------
Net cash used for investing activities 4,514 (93,098)
- ----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase/(decrease) in deposits 23,169 (57,295)
Net (decrease)/increase in short-term borrowings (15,022) 8,591
Net increase/(decrease) in FHLB borrowings 41,375 59,346
Net increase/(decrease) in vehicle financing (70,220) 5,387
Proceeds from issuance of long-term debt 5,000 0
Repayment of long-term debt 0 (5,425)
Proceeds from issuance of common stock 389 798
Cash paid for treasury stock (2,030) (287)
Dividends paid (12,970) (11,083)
- ----------------------------------------------------------------------------------------------------------
Net cash provided from/(used for) financing activities (30,309) 32
- ----------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (18,160) (56,449)
Cash and cash equivalents at January 1 183,229 213,572
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30 $165,069 $157,123
==========================================================================================================
Cash and cash equivalents:
Cash and due from banks $122,897 $107,319
Short-term investments 42,172 49,804
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30 $165,069 $157,123
==========================================================================================================
Interest paid on deposits, short-term borrowings, and long-term debt was
$102,098 in 2000, and $88,103 in 1999. Income taxes paid were $135 in 2000, and
$5,246 in 1999. Amounts transferred to other real estate owned were $1,198 in
2000, and $4,533 in 1999.
The accompanying notes are an integral part of these financial statements.
Susquehanna Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE TREASURY TOTAL
Six Month Periods Ended June 30 STOCK SURPLUS EARNINGS INCOME STOCK EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - January 1, 1999 $78,655 $57,166 $271,545 $6,004 ($783) $412,587
Comprehensive income:
Net income 25,598 25,598
Change in unrealized gain/(loss) on securities,
net of taxes of ($6,549) and reclass-
ification adjustment of $100 (12,296) (12,296)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 25,598 (12,296) 13,302
Common stock issued under
employee benefit plans 37 (108) 869 798
Purchase/conversion of treasury stock (287) (287)
Cash dividends paid:
Per common share of $0.30 (11,083) (11,083)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 1999 $78,692 $57,058 $286,060 ($6,292) ($201) $415,317
====================================================================================================================================
Balance - January 1, 2000 $78,788 $57,873 $292,150 ($13,616) ($173) $415,022
Comprehensive income:
Net income 27,059 27,059
Change in unrealized gain/(loss) on securities,
net of taxes of ($690) and
reclassification adjustment of ($15) (1,282) (1,282)
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 319,209 (14,898) 25,777
Common stock issued under
employee benefit plans 8 (12) 393 389
Purchase/conversion of treasury stock (2,030) (2,030)
Cash dividends paid:
Per common share of $0.34 (12,970) (12,970)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 2000 $78,796 $57,861 $306,239 ($14,898) ($1,810) $426,188
====================================================================================================================================
ACCOUNTING POLICIES
The information contained in this report is unaudited and is subject to
year-end adjustments. However, in the opinion of management, the information
reflects all adjustments necessary for a fair statement of results for the
periods ended June 30, 2000 and 1999. All adjustments have been of a normal,
recurring nature.
The accounting policies of Susquehanna Bancshares, Inc. & Subsidiaries, as
applied in the consolidated interim financial statements presented herein, are
substantially the same as those followed on an annual basis as presented on
pages 30 through 32 of the Annual Report on Form 10-K for the fiscal year ended
December 31, 1999.
Susquehanna Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENT SECURITIES
- -----------------------------------------------------------------------------------------------------------------------------------
The amortized costs and fair values of securities are as follows:
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June 30, 2000 December 31, 1999
-------------------------- ----------------------------
Amortized cost Fair value Amortized cost Fair value
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Available-for-sale:
U.S. Treasury $9,999 $10,012 $16,658 $16,683
U.S. Government agencies 352,717 343,823 346,041 338,990
State & municipal 64,579 64,108 70,136 69,599
Mortgage-backed 403,416 388,835 414,317 399,428
Corporates 17,807 17,499 17,795 17,682
Equities 34,819 36,511 34,588 36,576
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883,337 860,788 899,535 878,958
- ----------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity:
U.S. Government agencies $0 $0 $0 $0
State & municipal 24,984 25,295 32,070 32,450
Mortgage-backed 678 669 1,020 1,011
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25,662 25,964 33,090 33,461
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Total investment securities $908,999 $886,752 $932,625 $912,419
==================================================================================================================================
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LOANS AND LEASES
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Loans and leases, net of unearned income at June 30, 2000 and December 31, 1999, were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Commercial, financial, and agricultural $370,034 $327,670
Real estate - construction 259,854 255,054
Real estate - mortgage 1,890,454 1,850,375
Consumer 392,952 381,556
Leases 553,126 655,006
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Total loans and leases $3,466,420 $3,469,661
==================================================================================================================================
Net investment in direct financing leases is as follows:
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Minimum lease payments receivable $178,904 $241,767
Estimated residual value of leases 435,590 495,309
Unearned income under lease contracts (61,368) (82,070)
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Total leases $553,126 $655,006
====================================================================================================================================
An analysis of impaired loans as of June 30, 2000 and December 31, 1999, is presented as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Impaired loans without a related reserve $7,771 $11,491
Impaired loans with a reserve 1,291 1,460
- ----------------------------------------------------------------------------------------------------------------------------------
Total impaired loans $9,062 $12,951
==================================================================================================================================
Reserve for impaired loans $235 $532
==================================================================================================================================
An analysis of impaired loans for the three and six month periods ended June 30, 2000 and 1999 is presented as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
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2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Average balance of impaired loans $10,359 $8,004 $11,888 $9,053
Interest income on impaired loans (cash-basis) 185 33 202 52
Susquehanna Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BORROWINGS
- ----------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2000 1999
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Short-term borrowings at June 30, 2000 and December 31, 1999, were as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Securities sold under repurchase agreements $178,441 $179,278
Treasury tax and loan notes 7,500 14,010
Federal funds purchased 6,544 14,219
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Total short-term borrowings $192,485 $207,507
==================================================================================================================================
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Long-term debt at June 30, 2000 and December 31, 1999, was as follows:
- ----------------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Term note due July, 2003 $15,000 $10,000
Parent:
Senior notes due February, 2003 35,000 35,000
Subordinated notes due February, 2005 50,000 50,000
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Total long-term debt $100,000 $95,000
==================================================================================================================================
EARNINGS-PER-SHARE
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The following tables sets forth the calculation of basic and diluted earnings per share for the periods ended June 30, 2000
- ----------------------------------------------------------------------------------------------------------------------------------
For the three months ended June 30,
------------------------------------------------------------------------------------
2000 1999
------------------------------------ ----------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
Basic Earnings per Share:
Income available to common stockholders $13,651 39,262 $0.35 $13,008 39,304 $0.33
Effect of Diluted Securities:
Incentive stock options outstanding 64 187
------- -------
Diluted Earnings per Share:
Income available to common stockholders
and assumed conversion $13,651 39,326 $0.35 $13,008 39,491 $0.33
==================================================================================================================================
------------------------------------------------------------------------------------
For the six months ended June 30,
------------------------------------------------------------------------------------
2000 1999
------------------------------------ ----------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------------------------------------------------------------------------------------
Basic Earnings per Share:
Income available to common stockholders $27,059 39,299 $0.69 $25,598 39,303 $0.65
Effect of Diluted Securities:
Incentive stock options outstanding 76 199
------- -------
Diluted Earnings per Share:
Income available to common stockholders
and assumed conversion $27,059 39,375 $0.69 $25,598 39,502 $0.65
==================================================================================================================================
COMPLETED ACQUISITIONS
- --------------------------------------------------------------------------------
On February 1, 2000, Susquehanna completed the acquisition of Boston
Service Company, Inc. (t/a Hann Financial Service Corporation) ("Hann"), a
closely-held consumer automobile financing company that services more than $800
million in lease receivables. Susquehanna issued 2,360,000 shares of common
stock to the shareholders of Hann for the outstanding common shares of Hann. The
acquisition was accounted for under the pooling-of-interests method of
accounting; accordingly, the consolidated financial statements have been
restated to include the consolidated accounts of Hann for all periods presented.
On March 3, 2000, Susquehanna completed the acquisition of Valley Forge
Asset Management Corp. ("VFAM"), a Pennsylvania asset management corporation
registered both as a broker/dealer and as an investment advisor, and Valley
Forge Investment Company, Inc. ("VFICO"), its parent corporation, in cash
transactions. The acquisition was accounted for under the purchase method of
accounting. Goodwill of $9.3 million was realized in the acquisition and will be
amortized to other operating expense on a straight-line basis over 25 years. In
this transaction, there are also contingent cash payments totalling $6.0
million. These contingent cash payments are based upon certain earnings targets
and will be recorded as goodwill if earned. No pro forma data is disclosed
because the acquisition is not material to Susquehanna.
Previously reported information has been restated as follows:
Three Months Ended June 30, 1999
- ----------------------------------------------------------------------------------------------------------------
Susquehanna Hann Susquehanna
As Reported As Reported Restated
- ----------------------------------------------------------------------------------------------------------------
Net interest income $40,668 $129 $40,797
Provision for loan and lease losses 1,294 562 1,856
Other income 7,919 3,378 11,297
Other expense 29,902 1,622 31,524
- ----------------------------------------------------------------------------------------------------------------
Income before taxes 17,391 1,323 18,714
Taxes 5,176 530 5,706
- ----------------------------------------------------------------------------------------------------------------
Net income $12,215 $793 $13,008
================================================================================================================
Earnings per share: Basic $0.33 $0.33
Diluted $0.33 $0.33
Average shares outstanding: Basic 36,944 2,360 39,304
Diluted 37,131 2,360 39,491
Six Months Ended June 30, 1999
- ----------------------------------------------------------------------------------------------------------------
Susquehanna Hann Susquehanna
As Reported As Reported Restated
- ----------------------------------------------------------------------------------------------------------------
Net interest income $79,998 $266 $80,264
Provision for loan and lease losses 2,718 1,215 3,933
Other income 15,252 6,722 21,974
Other expense 58,021 3,080 61,101
- ----------------------------------------------------------------------------------------------------------------
Income before taxes 34,511 2,693 37,204
Taxes 10,526 1,080 11,606
- ----------------------------------------------------------------------------------------------------------------
Net income $23,985 $1,613 $25,598
================================================================================================================
Earnings per share: Basic $0.65 $0.65
Diluted $0.65 $0.65
Average shares outstanding: Basic 36,943 2,360 39,303
Diluted 37,142 2,360 39,502
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
Management's discussion and analysis of the significant changes in the
consolidated results of operations, financial condition, and cash flows of
Susquehanna Bancshares, Inc. ("Susquehanna") is set forth below for the periods
indicated. All prior period financial data presented has been restated for the
acquisition of Boston Service Company, Inc. (t/a Hann Financial Service
Corporation) ("Hann").
Certain statements in this document may be considered to be
"forward-looking statements" as that term is defined in the U.S. Private
Securities Litigation Reform Act of 1995. These statements include the words
"expect", "estimate", "project", "anticipate", "should", "intend",
"probability", "risk", "target", "objective" and similar expressions or
variations on such expressions. These statements are subject to certain risks
and uncertainties. For example, certain market risk disclosures are dependent on
choices about key model characteristics and assumptions and are subject to
various limitations. By their nature, certain market risk disclosures are only
estimates and could be materially different from what actually occurs in the
future. As a result, actual income gains and losses could materially differ from
those that have been estimated. Other factors that could cause actual results to
differ materially from those estimated by the forward-looking statements
contained in this document include, but are not limited to: general economic
conditions in market areas which Susquehanna has significant business activities
or investments; the monetary and interest rate policies of the Board of
Governors of the Federal Reserve System; inflation; deflation; unanticipated
turbulence in interest rates; changes in laws, regulations and taxes; changes in
competition and pricing environments; natural disasters; the inability to hedge
certain risks economically; the adequacy of loss reserves; acquisitions or
restructuring; technological changes; changes in consumer spending and saving
habits and the success of Susquehanna in managing the risks involved in the
foregoing.
10
On January 4, 1999, Susquehanna completed the acquisition of First
Capitol Bank ("First Capitol"), a Pennsylvania state-chartered bank. On February
1, 2000, Susquehanna completed the acquisition of Hann, a New Jersey automobile
leasing company. Since these transactions were accounted for under the
pooling-of-interests method of accounting, all financial results reported
include First Capitol and Hann.
On March 3, 2000, Susquehanna completed the acquisition of Valley Forge
Asset Management Corp. ("VFAM"), a Pennsylvania asset management corporation
registered both as a broker/dealer and as an investment advisor, and Valley
Forge Investment Company, Inc. ("VFICO") in cash transactions. Since this
acquisition was accounted for under the purchase method of accounting, the
results of operation for VFAM are included with Susquehanna from March 3, 2000
forward.
Earnings Summary
----------------
Susquehanna's net income for the second quarter of 2000 was $13.7
million, a 5% increase over the net income of $13.0 million reported in the
second quarter of 1999. For the six months ended June 30, 2000 net income of
$27.1 million was 6% higher than the $25.6 million achieved in the first six
months of 1999. Susquehanna's earnings performance was enhanced by significant
improvements in fee income.
Diluted earnings per share ("EPS") increased 6% from $0.33 per share
for the second quarter of 1999 to $0.35 per share for the second quarter of
2000. Return on average assets ("ROA") and return on average equity ("ROE")
finished at 1.15% and 13.18%, respectively, in the second quarter of 2000,
compared with 1.13% and 12.51% in the second quarter of 1999. For the second
quarter of 2000, tangible EPS, ROA and ROE were $0.37, 1.23%, and 15.47%,
respectively. Diluted EPS increased 6% from $0.65 per share for the first six
months of 1999 to $0.69 per share for the first six months of 2000. ROA and ROE
finished at 1.14% and 13.20%, in the first six months of 2000 compared with
1.13% and 12.45% in the first six months of 1999. For the six months ended June
30, 2000, tangible EPS, ROA and ROE were $0.73, 1.21%, and 15.32%, respectively.
Total assets at June 30, 2000 of $4.8 billion increased 3% over the
June 30, 1999 levels. Loans totaled $3.5 billion at June 30, 2000 compared to
$3.4 billion at June 30,1999. Deposits
11
remained at $3.2 billion. Equity capital was $426 million at June 30, 2000, or
$10.85 per share compared to $415 million, or $10.56 per share at June 30, 1999.
Net Interest Income
-------------------
The major source of operating revenues is net interest income, which
rose to a level of $41.6 million in the second quarter of 2000 compared to $40.8
million for the same period in 1999. For the six months ended June 30, 2000, net
interest income was $82.5 million compared with $80.3 million for the same
period of 1999. Net interest income is the income which remains after deducting,
from total income generated by earning assets, the interest expense attributable
to the acquisition of the funds required to support earning assets. Income from
earning assets includes income from loans, investment securities and short-term
investments. The amount of interest income is dependent upon many factors,
including the volume of earning assets, the general level of interest rates, the
dynamics of the change in interest rates, and levels of non-performing assets.
The cost of funds varies with the amount of funds necessary to support earning
assets, the rates paid to attract and hold deposits, rates paid on borrowed
funds, and the levels of non-interest bearing demand deposits and equity
capital.
Table 1 presents average balances, taxable equivalent interest income
and expenses and yields earned or paid on the assets and liabilities of
Susquehanna. For purposes of calculating taxable equivalent interest income,
tax-exempt interest has been adjusted using a marginal tax rate of 35% in order
to equate the yield to that of taxable interest rates. Net interest income as a
percentage of net interest income and other income was 69% for the quarter
ended, and 70% for the six months ended June 30, 2000, and was 78% for the
quarter ended and 79% for the six months ended June 30, 1999, respectively.
Net interest income for the second quarter 2000 increased $0.8 million
compared to the second quarter of 1999. This improvement was due to an increase
in average earning assets of $121 million offset by a decline in the net
interest margin from 3.91% in the second quarter of 1999 to 3.88% in the second
quarter of 2000. This decline in margin was due to a 22 basis point increase in
the cost of funds that was partially offset by a 21 basis point increase in the
earning asset yield.
Net interest income for the six months ended June 30, 2000 increased
$2.2 million over the same period of 1999. An increase in average earning assets
of $161 million was offset by a
12
decline in the net interest margin from 3.89% in the first half of 1999 to 3.83%
during the comparable period of 2000. This decline in margin was due to a 15
basis point increase in the cost of funds, partially offset by an 11 basis point
increase in the yield on earning assets. These increases in asset yield and cost
of funds are due to a rising interest rate environment.
Other Income
------------
Non-interest income increased $7.2 million, or 64%, from $11.3 million
in the second quarter of 1999, to $18.5 million in the second quarter of 2000.
This increase resulted primarily from an increase in vehicle origination and
servicing fees of $2.2 million and an increase in other service charges,
commissions and fees of $4.3 million, of which $2.1 million is attributable to
VFAM and $2.0 million is attributable to an increase in merchant credit card
fees. Other increases were bank-owned life insurance income, $0.5 million;
service charges on deposit accounts, $0.4 million; and, trust income, $0.2
million. Gain on sale of mortgages decreased $0.5 million in 2000 compared with
1999 as mortgages sold declined to $35.6 million compared with $47.8 million,
respectively.
For the first six months of 2000, non-interest income of $35.5 million
was $13.6 million more than the same period of 1999. Other service charges,
commissions and fees increased $8.1 million, while vehicle origination and
servicing fees increased $3.9 million. The increase in other service charges,
commissions and fees was primarily attributable to VFAM ($2.6 million) and
merchant credit card fees ($5.2 million). Also contributing to the six month
increase were income from bank-owned life insurance, $1.2 million; trust
activities, $0.6 million; and service charges on deposit accounts, $0.7 million.
Partially offsetting these increases was a decrease in gain on sale of
mortgages, which declined by $1.1 million. Mortgages sold for the first six
months of 2000 totaled $62.4 million versus $102.6 million in 1999.
Other income as a percentage of net interest income and other income,
was 31% for the quarter, and 30% for the six months ended June 30, 2000, and was
22% and 21% for the comparable periods of 1999.
13
Other Expenses
--------------
Total non-interest expenses increased $8.2 million from $31.5 million
in the second quarter of 1999 to $39.7 million in the second quarter of 2000.
For the six months ended June 30, 2000, total non-interest expenses increased
$16.2 million from the same period in 1999.
The quarter-to-quarter increase was primarily due to increases in
salaries and benefits of $1.8 million, vehicle expenses of $2.9 million, and
other expense of $4.0 million. The increase in salaries and benefits was
primarily due to the acquisition of VFAM, normal annual salary increases, and
the staffing of central sites for loans, deposits, administration and finance
regarding the back office consolidation project. Corresponding reductions at the
affiliates will not occur until the fourth quarter of 2000. Anticipated savings
from the reduction in workforce will be approximately $1.0 million in the fourth
quarter of 2000 and $6.0 million in the year 2001 and beyond. The increase in
vehicle expense is due to residual value losses on vehicles coming off lease.
These losses related primarily to large class sport utility vehicles. The
reserve associated with residual value losses at June 30, 2000 is considered
adequate, but a further deterioration in the secondary vehicle market could
result in similar expense levels during the second half of 2000. The increase in
other expense was primarily due to increases in merchant credit card expense
($1.8 million) and back office consolidation project expenses ($1.4 million).
Offsetting the above noted increases was a credit of $0.9 million to the
restructure charge. This credit represents a reduction in the severance accrual
recorded in December 1999 as more employees than anticipated, who were eligible
for severance, have left prior to their severance date as of June 30, 2000.
The six month increase in expenses was primarily due to increases in
salaries and benefits of $4.9 million, vehicle expense of $3.7 million and other
expense of $8.3 million. The increases in salaries and benefits and vehicle
expense, as well as the $0.9 million credit to the restructure charge were for
the same reasons as described above for the quarter. The increase in other
expense was primarily due to increases in merchant credit card expense ($5.0
million) and back office consolidation project expenses ($1.4 million).
In December 1999, Susquehanna incurred a special, one-time charge of
$7.4 million relating to the consolidation of back office operations.
Susquehanna will continue to pay these
14
costs with cash obtained from normal operating activities. The current status of
the $7.4 million restructure charge recorded in the fourth quarter of 1999 is as
follows:
Remaining
Original Incurred Accrual Accrual
Item Accrual to-Date Reversal at 06/30/00
---- ------- ------- -------- -----------
Employee severance benefits $3,170 $0 ($900) $2,270
Professional fees 2,850 2,850 0 0
Employment services 660 332 0 328
Asset disposals 732 732 0 0
---------- ----------- ---------- -----------
Total $7,412 $3,914 ($900) $2,598
========== =========== ========== ===========
Income Taxes
------------
Susquehanna's effective tax rate decreased from 31.20% for the first
six months of 1999 to 31.00% for the first six months of 2000 due to an increase
in tax-advantaged income.
Risk Assets
-----------
Table 2 shows a decrease in non-accrual loans and leases from $22.8
million at December 31, 1999 to $17.5 million at June 30, 2000, while
non-performing assets to period-end loans and OREO declined from 0.79% at
December 31, 1999 to 0.61% at June 30, 2000. Loan loss reserve to non-performing
loans at June 30, 2000 was 238% compared with 195% at December 31, 1999.
Provision and Allowance for Loan and Lease Losses
-------------------------------------------------
As illustrated in Table 3, the provision was $0.6 million in the second
quarter of 2000, a decline of $1.2 million from the same time period in 1999.
For the six months ended June 30, 2000, the provision was $2.4 million lower
than one year ago. Net charge-offs were $4.4 million for the six month period in
2000 versus the 1999 amount of $2.7 million while second quarter 2000 net
charge-offs were $2.2 million compared to $1.7 million for 1999.
The reduction in the provision resulted from a declining vehicle lease
portfolio in the first half of 2000 compared with a growing vehicle lease
portfolio in the first half of 1999. The decline in 2000 is due to origination's
being sold to various third parties.
15
The allowance at June 30, 2000 was 1.20% of period-end loans and leases
compared to 1.21% at June 30, 1999.
Capital Resources
-----------------
Capital elements for Susquehanna are segmented into two tiers. Tier I
capital represents shareholders' equity reduced by most intangible assets, while
total capital includes certain allowable long-term debt and the general portion
of the allowance for loan and lease losses limited to 1.25% of risk-adjusted
assets. The minimum Tier I capital ratio is 4%; Susquehanna's ratio at June 30,
2000 was 10.78%. The minimum total capital (Tier II) ratio is 8%; Susquehanna's
ratio at, June 30, 2000 was 12.99%. The minimum leverage ratio is 4%;
Susquehanna's leverage ratio at June 30, 2000 was 8.47%.
Market Risks
------------
The types of market risk exposures generally faced by banking entities
include interest rate risk, liquidity risk, equity market price risk, foreign
currency risk, and commodity price risk. Due to the nature of its operations,
only interest rate and liquidity risks are significant to Susquehanna.
Liquidity and interest rate risk are related but distinctly different
from one another. The maintenance of adequate liquidity -- the ability to meet
the cash requirements of its customers and other financial commitments -- is a
fundamental aspect of Susquehanna's asset/liability management strategy.
Susquehanna's policy of diversifying its funding sources -- purchased funds,
repurchase agreements, and deposit accounts -- allows it to avoid undue
concentration in any single financial market and also to avoid heavy funding
requirements within short periods of time. At June 30, 2000, Susquehanna's
subsidiary banks and its savings bank have unused lines of credit available to
them from the Federal Home Loan Bank totaling approximately $515 million.
However, liquidity is not entirely dependent on increasing
Susquehanna's liability balances. Liquidity can also be generated from maturing
or readily marketable assets. The carrying value of investment securities
maturing within one year amounted to $53 million at June 30, 2000. These
maturing investments represent 6% of total investment securities. Short-term
16
investments amounted to $42 million and represent additional sources of
liquidity. Consequently, Susquehanna's exposure to liquidity risk is not
considered significant.
Closely related to the management of liquidity is the management of
interest rate risk, which focuses on maintaining stability in the net interest
margin, an important factor in earnings growth. Interest rate sensitivity is the
matching or mismatching of the maturity and rate structure of the
interest-bearing assets and liabilities. Management's objective is to control
the difference in the timing of the rate changes for these assets and
liabilities to preserve a satisfactory net interest margin. In doing so,
Susquehanna endeavors to maximize earnings in an environment of changing
interest rates. However, there is a lag in maintaining the desired matching
because the repricing of products does occur at varying time intervals.
Susquehanna employs a variety of methods to monitor interest rate risk.
By dividing the assets and liabilities into three groups -- fixed rate, floating
rate and those which reprice only at management's discretion -- strategies are
developed which are designed to minimize exposure to interest rate fluctuations.
Management also utilizes gap and interest rate shock analyses to evaluate
interest rate sensitivity.
Susquehanna's policy, as approved by its Board of Directors, is for
Susquehanna to experience no more than a 15% decline in net interest income and
no more than a 25% decline in economic equity for a 200 basis point shock
(immediate change) in interest rates. The assumptions used for the interest rate
shock analysis are reviewed and updated on a periodic basis. Based upon the most
recent interest rate shock analysis, Susquehanna was well within the policy
limits.
17
Susquehanna Bancshares, Inc. and Subsidiaries
TABLE 1 - DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
Interest rates and interest differential - taxable equivalent basis
- -----------------------------------------------------------------------------------------------------------------------------------
For the Three Month Period Ended For the Three Month Period Ended For the Six Month Period Ended
June 30, 2000 June 30, 1999 June 30, 2000
- ----------------------------- ------------------------------------------------------------------ -------------------------------
Average Average Average
(Dollars in thousands) Balance Interest Rate (%) Balance Interest Rate (%) Balance Interest Rate(%)
- ------------------------------------------------------------------------------------------------- -------------------------------
Assets
Short - term investments $51,849 $747 5.79 $60,887 $693 4.57 $52,301 $1,493 5.74
Investment securities:
Taxable 818,555 13,271 6.52 806,761 12,358 6.14 822,455 26,675 6.52
Tax - advantaged 92,690 1,656 7.19 120,543 2,092 6.94 96,390 3,398 7.09
- ------------------------------------------------------------------------------------------------- -------------------------------
Total investment securities 911,245 14,927 6.59 927,304 14,450 6.25 918,845 30,073 6.58
- ------------------------------------------------------------------------------------------------- -------------------------------
Loans and leases, (net):
Taxable 3,405,645 72,147 8.52 3,266,074 68,372 8.40 3,416,540 142,864 8.41
Tax - advantaged 55,703 1,231 8.89 49,244 1,148 9.35 54,104 2,388 8.88
- ------------------------------------------------------------------------------------------------- -------------------------------
Total loans and leases 3,461,348 73,378 8.53 3,315,318 69,520 8.41 3,470,644 145,252 8.42
- ------------------------------------------------------------------------------------------------- -------------------------------
Total interest - earning
assets 4,424,442 $89,052 8.10 4,303,509 $84,663 7.89 4,441,790 $176,818 8.01
================= =================
Allowance for loan and lease
losses (42,266) (40,714) (43,470)
Other non - earning assets 403,429 347,328 393,416
- --------------------------------------- ---------- ----------
Total assets $4,785,605 $4,610,123 $4,791,736
======================================= ========== ==========
Liabilities
Deposits:
Interest - bearing demand $907,722 $6,877 3.05 $966,978 $6,793 2.82 $928,690 $14,065 3.05
Savings 419,611 1,814 1.74 453,922 2,041 1.80 421,092 3,677 1.76
Time 1,413,231 19,118 5.44 1,313,837 17,072 5.21 1,404,950 37,544 5.37
Short - term borrowings 192,730 3,063 6.39 93,779 676 2.89 191,786 5,314 5.57
FHLB borrowings 393,358 5,802 5.93 345,778 4,691 5.44 380,026 11,032 5.84
Long - term debt 100,000 1,837 7.39 95,047 2,235 9.43 98,200 3,836 7.86
Vehicle financing 434,595 7,895 7.31 452,167 9,224 8.18 456,379 16,860 7.43
- ------------------------------------------------------------------------------------------------- -------------------------------
Total interest - bearing
liabilities 3,861,247 $46,406 4.83 3,721,508 $42,732 4.61 3,881,123 $92,328 4.78
================= ================= =================
Demand deposits 446,518 424,063 437,714
Other liabilities 61,308 47,495 60,766
- --------------------------------------- ---------- ----------
Total liabilities 4,369,073 4,193,066 4,379,603
- --------------------------------------- ---------- ----------
Equity 416,532 417,057 412,133
- --------------------------------------- ---------- ----------
Total liabilities & stockholders'
equity $4,785,605 $4,610,123 $4,791,736
======================================= ========== ==========
Net interest income / yield on
average earning assets $42,646 3.88 $41,931 3.91 $84,490 3.83
================= ================= =================
-----------------------------------
For the Six Month Period Ended
June 30, 1999
-----------------------------------
Average
Balance Interest Rate (%)
-----------------------------------
Assets
Short - term investments $72,805 $1,645 4.56
Investment securities:
Taxable 812,115 24,776 6.15
Tax - advantaged 122,504 4,300 7.02
-----------------------------------
Total investment securities 934,619 29,076 6.27
-----------------------------------
Loans and leases, (net):
Taxable 3,224,128 134,637 8.42
Tax - advantaged 49,610 2,257 9.17
-----------------------------------
Total loans and leases 3,273,738 136,894 8.43
-----------------------------------
Total interest - earning asset 4,281,162 $167,615 7.90
======================
Allowance for loan and lease losses (40,353)
Other non - earning assets 336,391
---------
Total assets $4,577,200
==========
Liabilities
Deposits:
Interest - bearing demand $977,395 $13,993 2.89
Savings 450,368 4,195 1.88
Time 1,323,163 34,667 5.28
Short - term borrowings 94,904 1,517 3.22
FHLB borrowings 330,747 8,974 5.47
Long - term debt 95,024 4,293 9.11
Vehicle financing 429,879 17,417 8.17
-----------------------------------
Total interest - bearing liabilities 3,701,480 $85,056 4.63
======================
Demand deposits 413,877
Other liabilities 47,194
---------
Total liabilities 4,162,551
----------
Equity 414,649
----------
Total liabilities & stockholders'
equity $4,577,200
==========
Net interest income / yield on
average earning assets $82,559 3.89
======================
For purposes of calculating loan yields, the average loan volume includes
non-accrual loans. For purposes of calculating yields on non-taxable interest
income, the taxable equivalent adjustment is made to equate non-taxable interest
on the same basis as taxable interest. The marginal tax rate is 35%.
Susquehanna Bancshares, Inc., and Subsidiaries
TABLE 2 - RISK ASSETS
- -------------------------------------------------------------------------------------------------------------------
June 30, December 31, June 30,
(Dollars in thousands) 2000 1999 1999
- -------------------------------------------------------------------------------------------------------------------
Nonperforming assets:
Nonaccrual loans and leases $17,480 $22,770 $16,454
Restructured accrual loans 0 0 0
Other real estate owned 3,719 4,703 5,236
- -------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $21,199 $27,473 $21,690
===================================================================================================================
As a percent of period-end loans and leases and
other real estate owned 0.61% 0.79% 0.64%
Loans and leases contractually
past due 90 days and still accruing $7,668 $10,360 $10,323
- -------------------------------------------------------------------------------------------------------------------
TABLE 3 - ALLOWANCE FOR LOAN AND LEASE LOSSES
- -------------------------------------------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------------------
Balance - Beginning of period $43,211 $40,496 $44,465 $39,440
Additions charged to operating expenses 643 1,856 1,507 3,933
- -------------------------------------------------------------------------------------------------------------------
43,854 42,352 45,972 43,373
- -------------------------------------------------------------------------------------------------------------------
Charge-offs (2,629) (2,300) (5,284) (3,672)
Recoveries 384 586 921 937
- -------------------------------------------------------------------------------------------------------------------
Net charge-offs (2,245) (1,714) (4,363) (2,735)
- -------------------------------------------------------------------------------------------------------------------
Balance - Period end $41,609 $40,638 $41,609 $40,638
===================================================================================================================
Net charge-offs as a percent of average loans and
leases (annualized) 0.26% 0.21% 0.25% 0.17%
Allowance as a percent of period-end loans and leases 1.20% 1.21% 1.20% 1.21%
Average loans and leases $3,461,348 $3,315,318 $3,470,644 $3,273,738
Period-end loans and leases 3,466,420 3,366,164 3,466,420 3,366,164
PART II. OTHER INFORMATION
-----------------
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Annual Meeting of Shareholders was held on May 26, 2000. Proxies of
the meeting were solicited by management; there was no solicitation in
opposition to management's nominees for directors set forth in the Proxy
Statement and all such nominees were elected.
a). The following details the voting results with respect to each nominee
for office, including the number of shares not voted at all (Not Present)
and the proxies that brokers did not vote in full (Broker Non-voted). The
terms of office of James G. Apple, Richard M. Cloney, Trudy B. Cunningham,
John M. Denlinger, Owen O. Freeman, Marley R. Gross, T. Max Hall, C. William
Hetzer, Guy W. Miller, Jr., and Clyde R. Morris, and William J. Reuter
continued after the meeting. Edward W. Helfrick retired from the Board
effective May 26, 2000.
NOMINEE COMMON STOCK
------- ------------
Robert S. Bolinger
For 29,884,316
Withhold / abstain 2,253,640
Not present 6,978,757
Broker non-voted 151,290
Henry H. Gibbel
For 31,539,488
Withhold / abstain 598,468
Not present 6,978,757
Broker non-voted 151,290
George J. Morgan
For 31,475,295
Withhold / abstain 662,661
Not present 6,978,757
Broker non-voted 151,290
Roger V. Wiest
For 31,649,953
Withhold / abstain 488,003
Not present 6,978,757
Broker non-voted 151,290
20
Michael J. Wimmer
For 31,705,918
Withhold / abstain 432,038
Not present 6,978,757
Broker non-voted 151,290
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a). Exhibits
--------
3.1 Registrant's Articles of Incorporation.
3.2 Registrant's By-laws.
3.3 Articles of Amendment to Registrant's Articles of
Incorporation.
10.1 Material Contract
27.1 Financial Data Schedule.
b). Report on Form 8 - K NONE
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUSQUEHANNA BANCSHARES, INC.
August 4, 2000
/s/ Robert S. Bolinger
-------------------------------------
Robert S. Bolinger
Chairman and Chief Executive Officer
August 4, 2000
/s/ Drew K. Hostetter
-------------------------------------
Drew K. Hostetter
Senior Vice President, Treasurer,
and Chief Financial Officer
21
Exhibit Index
-------------
Exhibit Description Method
- ------- ----------- ------
3.1 Articles of Incorporation. Previously filed.Incorporated by
reference to Attachment E to the
Registrant's Joint Proxy Statement
/ Prospectus on Registrant's
Registration Statement on Form S-4,
Registration No. 33-76319.
3.2 By-laws. Previously filed. Incorporated by
reference to Exhibit (3)(b) of
Registrant's Annual Report on Form
10-K for the fiscal year ended
December 31, 1994.
3.3 Amendment of June 1, 1998 Previously filed. Incorporated
to Registrant's Articles of by reference to Exhibit 3.3 of
Incorporation. Registrant's Quarterly Report
on Form 10-Q for the quarterly
period ended June 30, 1998.
10.1 Material Contract Employment agreement between
Registrant and Robert S. Bolinger,
dated October 1, 1984, as amended
July 25, 2000.
27.1 Financial Data Schedule. Submitted electronically to
the Securities and Exchange
Commission for information
only and not filed.
22
Susquehanna Bancshares, Inc.
26 North Cedar Street, P.O. Box 1000
Lititz, PA 17543-7000
(717) 626-4721
July 25, 2000
Robert S. Bolinger
Susquehanna Bancshares, Inc.
26 North Cedar Street
Lititz, PA 17543
Re: Amendment to Employment Agreement
Dear Bob:
This letter serves to confirm that your Employment Agreement with Susquehanna
Bancshares, Inc. (the "Company"), dated October 1, 1984, a copy of which is
attached (the "Agreement"), has been amended to provide that through the
remainder of the Agreement's current term, your title and position with the
Company is Chairman of the Board of Directors and Chief Executive Officer, and
that your title and position with Farmers First Bank, a wholly-owned subsidiary
of the Company, is Chairman of the Board of Directors.
All other terms and provisions of the Agreement shall remain in full force and
effect through the remainder of the Agreement's current term.
Very truly yours,
/s/ Gregory A. Duncan
Gregory A. Duncan
Executive Vice President
ACCEPTED AND AGREED TO by the undersigned as of this 25th day of July, 2000.
/s/ Robert S. Bolinger
- ----------------------
Robert S. Bolinger
EMPLOYMENT AGREEMENT BETWEEN
ROBERT S. BOLINGER AND
SUSQUEHANNA BANCSHARES, INC.
CONTENTS
--------
PAGE
----
1. Position 1
2. Duties 2
3. Period of Employment 2
4. Compensation 3
5. Employee Expenses 4
6. Vacations 5
7. Benefits 5
8. Confidential Information 8
9. Property Rights 8
10. Termination 9
11. Records 14
12. Prohibited Assignment 14
13. Indemnification 15
14. Survival 16
15. Miscellaneous 16