SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 2001
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
(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, 2001 the Registrant had 39,271,078 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, 2001 and 2000
and December 31, 2000 3
Consolidated Statements of Income - for the three months ended
and six months ended June 30, 2001 and 2000 4
Consolidated Statements of Cash Flow - for the six months
periods ended June 30, 2001 and 2000 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF
OPERATIONS AND FINANCIAL CONDITION 9 - 14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15 - 16
PART II OTHER INFORMATION 17
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 17 - 18
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 19
EXHIBIT INDEX 20
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) 2001 2000 2000
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and due from banks $ 119,013 $ 129,101 $ 122,897
Short-term investments - restricted 35,823 32,731 4,774
Short-term investments - unrestricted 39,282 26,304 37,398
Investment securities available for sale 954,562 882,285 860,788
Investment securities held to maturity
(Fair values of $1,865; $16,658; and $25,964) 1,865 16,319 25,662
Loans and leases, net of unearned income 3,481,729 3,433,610 3,466,420
Less: Allowance for loan and lease losses 38,407 37,187 41,609
- ---------------------------------------------------------------------------------------------------------------------
Net loans and leases 3,443,322 3,396,423 3,424,811
- ---------------------------------------------------------------------------------------------------------------------
Premises and equipment (net) 57,459 58,303 56,769
Accrued income receivable 22,688 26,775 24,976
Bank-owned life insurance 116,946 113,865 110,952
Other assets 116,589 110,750 141,782
- ---------------------------------------------------------------------------------------------------------------------
Total assets $4,907,549 $4,792,856 $4,810,809
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES
Deposits:
Demand $ 482,101 $ 462,297 $ 476,964
Interest-bearing demand 807,497 817,866 887,436
Savings 422,863 413,878 415,631
Time 1,304,432 1,303,297 1,218,666
Time of $100 or more 248,559 251,675 204,992
- ---------------------------------------------------------------------------------------------------------------------
Total deposits 3,265,452 3,249,013 3,203,689
- ---------------------------------------------------------------------------------------------------------------------
Short-term borrowings 210,968 205,336 192,485
FHLB borrowings 508,074 367,954 413,789
Vehicle financing 284,723 357,522 411,884
Long-term debt 100,000 100,000 100,000
Accrued interest, taxes, and expenses payable 48,327 42,382 41,948
Other liabilities 16,341 17,212 20,826
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 4,433,885 4,339,419 4,384,621
- ---------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock
Authorized: 100,000,000 ($2.00 par value)
Issued: 39,398,190 78,796 78,796 78,796
Surplus 57,766 57,872 57,861
Retained earnings 331,820 320,020 306,239
Accumulated other comprehensive income, net of taxes of $4,216;
($408) and ($7,651), respectively 7,462 (757) (14,898)
Less: Treasury stock, (133,112; 176,798; and 128,951
common shares at cost, respectively) 2,180 2,494 1,810
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 473,664 453,437 426,188
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' $4,907,549 $4,792,856 $4,810,809
equity
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
3
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 ) 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------- ------------------------------------
INTEREST INCOME
Interest and fees on loans and leases $71,526 $72,950 $143,687 $144,416
Interest on investment securities: Taxable 11,403 13,271 23,596 26,675
Tax-exempt 848 1,082 1,749 2,209
Interest on short-term investments 1,056 747 2,194 1,493
- ----------------------------------------------------------------------------------------- ------------------------------------
Total interest income 84,833 88,050 171,226 174,793
- ----------------------------------------------------------------------------------------- ------------------------------------
INTEREST EXPENSE
Interest on deposits:
Interest-bearing demand 4,830 6,877 10,647 14,065
Savings 1,703 1,814 3,593 3,677
Time 21,537 19,118 43,753 37,544
Interest on short-term borrowings 2,175 3,063 5,062 5,314
Interest on FHLB borrowings 4,692 5,802 9,357 11,032
Interest on vehicle financing 5,425 7,895 11,482 16,860
Interest on long-term debt 1,934 1,837 3,884 3,836
- ----------------------------------------------------------------------------------------- ------------------------------------
Total interest expense 42,296 46,406 87,778 92,328
- ----------------------------------------------------------------------------------------- ------------------------------------
Net interest income 42,537 41,644 83,448 82,465
Provision for loan and lease losses 1,833 643 3,679 1,507
- ----------------------------------------------------------------------------------------- ------------------------------------
Net interest income after provision for loan and lease losses 40,704 41,001 79,769 80,958
- ----------------------------------------------------------------------------------------- ------------------------------------
OTHER INCOME
Service charges on deposit accounts 3,269 2,795 6,271 5,378
Vehicle origination and servicing fees 6,277 5,581 12,052 10,666
Other service charges, commissions, fees 4,915 5,288 11,634 10,149
Income from fiduciary-related activities 1,313 1,111 2,531 2,233
Gain on sale of loans and leases 2,374 529 2,957 940
Income from bank-owned life insurance 1,574 1,405 3,080 2,845
Other operating income 1,469 1,782 3,185 3,342
Investment security gains/(losses) 0 (15) 0 (14)
- ----------------------------------------------------------------------------------------- ------------------------------------
Total other income 21,191 18,476 41,710 35,539
- ----------------------------------------------------------------------------------------- ------------------------------------
OTHER EXPENSES
Salaries and employee benefits 18,551 17,010 36,188 33,822
Net occupancy expense 2,734 2,484 5,760 4,982
Furniture and equipment expense 1,925 2,044 4,014 4,012
Amortization of intangible assets 861 829 1,759 1,613
Vehicle expense 1,243 2,944 2,544 3,668
Restructuring charge 0 (900) 0 (900)
Other operating expenses 15,973 15,282 32,229 30,084
- ----------------------------------------------------------------------------------------- ------------------------------------
Total other expenses 41,287 39,693 82,494 77,281
- ----------------------------------------------------------------------------------------- ------------------------------------
Income before income taxes 20,608 19,784 38,985 39,216
Provision for income taxes 6,400 6,133 12,281 12,157
- ----------------------------------------------------------------------------------------- ------------------------------------
NET INCOME $14,208 $13,651 $ 26,704 $ 27,059
- ----------------------------------------------------------------------------------------- ------------------------------------
Per share information:
Basic earnings $ 0.36 $ 0.35 $ 0.68 $ 0.69
Diluted earnings $ 0.36 $ 0.35 $ 0.68 $ 0.69
Cash dividends $ 0.19 $ 0.17 $ 0.38 $ 0.34
Average shares outstanding: Basic 39,224 39,262 39,223 39,299
Diluted 39,494 39,326 39,475 39,375
- ----------------------------------------------------------------------------------------- ------------------------------------
The accompanying notes are an integral part of these financial statements.
4
Susquehanna Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Six months ended June 30 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 26,704 $ 27,059
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization and accretion 6,629 6,831
Provision for loan and lease losses 2,909 1,507
(Gain)/loss on securities transactions (18) 14
Gain on sale of loans and leases (2,957) (940)
Gain on sale of other real estate owned (43) (32)
Mortgage loans originated for resale (52,416) (61,324)
Sale of mortgage loans originated for resale 56,308 62,408
Leases acquired/originated for resale (116,643) (167,247)
Sale of leases aquired/originated for resale 118,392 144,834
Decrease/(increase) in accrued interest receivable 4,087 (1,213)
Decrease in accrued interest payable (1,893) (9,770)
Decrease in accrued expenses and taxes payable 7,838 16,972
Other, net (16,377) (11,464)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 32,520 7,635
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Proceeds from the sale of available-for-sale securities - 3,833
Proceeds from the maturity of investment securities 354,259 59,890
Purchase of available-for-sale securities (399,834) (32,877)
Purchase of held-to-maturity securities 0 (7,887)
Net increase in loans and leases (53,996) (2,463)
Capital expenditures (1,664) (4,659)
Net cash and cash equivalents paid in acquisition (11,323)
Net (increase)/decrease in restricted short-term investments (3,092) 2,530
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (104,327) 7,044
- ---------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net increase in deposits 16,439 23,169
Net increase/(decrease) in short-term borrowings 5,632 (15,022)
Net increase in FHLB borrowings 140,120 41,375
Net decrease in vehicle financing (72,799) (70,220)
Proceeds from issuance of long-term debt 0 5,000
Proceeds from issuance of common stock 208 389
Cash paid for treasury stock 0 (2,030)
Dividends paid (14,904) (12,970)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided from/(used for) financing activities 74,696 (30,309)
- ---------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents 2,889 (15,630)
Cash and cash equivalents at January 1 155,405 175,925
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30 $ 158,294 $160,295
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents:
Cash and due from banks $ 119,012 $122,897
Short-term investments - unrestricted 39,282 37,398
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at June 30 $ 158,294 $160,295
- ---------------------------------------------------------------------------------------------------------------------------------
Interest paid on deposits, short-term borrowings, and long-term debt was
$89,670 in 2001, and $102,098 in 2000. Income taxes paid were $636 in 2001, and
$135 in 2000. Amounts transferred to other real estate owned were $2,498 in
2001, and $1,198 in 2000.
The accompanying notes are an integral part of these financial statements.
5
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, 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, 1999 $78,796 $57,861 $306,239 ($14,898) ($1,810) $426,188
====================================================================================================================================
Balance - January 1, 2001 $78,796 $57,872 $320,020 ($757) ($2,494) $453,437
Comprehensive income:
Net income 26,704 26,704
Change in unrealized gain/(loss) on securities, net of
taxes of $4,216 and reclassification adjustment of $0 8,219 8,219
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income 346,724 7,462 34,923
Common stock issued under
employee benefit plans (106) 314 208
Cash dividends paid:
Per common share of $0.38 (14,904) (14,904)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 2001 $78,796 $57,766 $331,820 $7,462 ($2,180) $473,664
====================================================================================================================================
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, 2001 and 2000. 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 37 through 39 of the Annual Report on Form 10-K for the fiscal year ended
December 31, 2000.
On July 20, 2001, the FASB issued Statements of Accounting Standards
No. 141 ( FAS 141), Business Combinations, and No. 142 (FAS 142), Goodwill and
Other Intangible Assets.
FAS 141 supercedes Accounting Principles Board Opinion No. 16 (APB 16),
Business Combinations. The most significant changes made by FAS 141 are : (1)
requiring that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, (2) establishing specific criteria
for the recognition of intangible assets separately from goodwill, and (3)
requiring unallocated negative goodwill to be written off immediately as an
extraordinary gain. Management has reviewed FAS 141 and has determined that the
statement has no effect on its current financial position or results of
operations.
FAS 142 supercedes APB 17, Intangible Assets. FAS 142 primarily addresses
the accounting for goodwill and intangible assets subsequent to their
acquisition. The most significant changes made by FAS 142 are: (1) goodwill and
indefinite lived intangible assets will no longer be amortized, (2) goodwill
will be tested for impairment at least annually at the reporting unit level, (3)
intangible assets deemed to have an indefinite life will be tested for
impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years. The provision
of FAS 142 will be effective for fiscal years beginning after December 15, 2001.
Management has not yet determined the effect of adopting FAS 142 and is unable
to anticipate its effect on the Company's financial condition or results of
operations. Management estimates amortization expense for the current year to be
approximately $3.9 million.
6
Susquehanna Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENT SECURITIES
- ------------------------------------------------------------------------------------------------------------------------------------
The amortized costs and fair values of securities are as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, 2001 December 31, 2000
--------------------------------- ----------------------------------
Amortized cost Fair value Amortized cost Fair value
- ------------------------------------------------------------------------------------------------------------------------------------
Available-for-sale:
U.S. Treasury $ 1,700 $ 1,792 $ 3,249 $ 3,307
U.S. Government agencies 131,695 133,751 360,276 359,773
State & municipal 69,048 70,607 63,674 63,922
Mortgage-backed 665,753 671,035 405,678 403,094
Corporates 38,129 38,889 16,499 16,641
Equities 36,560 38,488 34,074 35,548
- ------------------------------------------------------------------------------------------------------------------------------------
942,885 954,562 883,450 882,285
- ------------------------------------------------------------------------------------------------------------------------------------
Held-to-maturity
U.S. Government agencies $ 0 $ 0 $ 0 $ 0
State & municipal 1,865 1,865 15,833 16,176
Mortgage-backed 0 0 486 482
- ------------------------------------------------------------------------------------------------------------------------------------
1,865 1,865 16,319 16,658
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment securities $944,750 $ 956,427 $ 899,769 $898,943
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LOANS AND LEASES
- ------------------------------------------------------------------------------------------------------------------------------------
Loans and leases, net of unearned income at June 30, 2001 and December 31, 2000, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial, financial, and agricultural $ 411,075 $ 371,320
Real estate - construction 316,495 264,182
Real estate - mortgage 1,928,479 1,933,772
Consumer 334,142 350,707
Leases 491,538 531,629
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans and leases $3,481,729 $ 3,433,610
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment in direct financing leases is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum lease payments receivable $ 181,935 $ 172,775
Estimated residual value of leases 358,465 391,625
Unearned income under lease contracts (48,862) (50,771)
- ------------------------------------------------------------------------------------------------------------------------------------
Total leases $ 491,538 $ 531,629
- ------------------------------------------------------------------------------------------------------------------------------------
An analysis of impaired loans as of June 30, 2001 and December 31, 2000, is presented as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Impaired loans without a related reserve $ 8,280 $ 4,379
Impaired loans with a reserve 1,256 2,970
- ------------------------------------------------------------------------------------------------------------------------------------
Total impaired loans $ 9,536 $ 7,349
- ------------------------------------------------------------------------------------------------------------------------------------
Reserve for impaired loans $ 562 $ 866
- ------------------------------------------------------------------------------------------------------------------------------------
An analysis of impaired loans for the three and six month periods ended June 30, 2001 and 2000 is presented as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended June 30, Six months ended June 30,
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Average balance of impaired loans $ 10,047 $ 10,359 $ 10,773 $ 11,888
Interest income on impaired loans (cash-basis) 98 185 116 202
7
Susquehanna Bancshares, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BORROWINGS
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term borrowings at June 30, 2001 and December 31, 2000, were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Securities sold under repurchase agreements $ 193,125 $ 198,573
Treasury tax and loan notes 7,591 6,763
Federal funds purchased 10,252 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total short-term borrowings $ 210,968 $ 205,336
====================================================================================================================================
Long-term debt at June 30, 2001 and December 31, 2000, was as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiaries:
Term note due July, 2003 $ 15,000 $ 15,000
Parent:
Senior notes due February, 2003 35,000 35,000
Subordinated notes due February, 2005 50,000 50,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total long-term debt $ 100,000 $ 100,000
====================================================================================================================================
EARNINGS-PER-SHARE
- ------------------------------------------------------------------------------------------------------------------------------------
The following table sets forth the calculation of basic and diluted earnings per share for the periods ended June 30, 2001 and 2000:
- ------------------------------------------------------------------------------------------------------------------------------------
For the three months ended June 30,
-----------------------------------------------------------------------------------
2001 2000
--------------------------------------- --------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Earnings per Share:
Income available to common stockholders $14,208 39,224 $ 0.36 $13,651 39,262 $ 0.35
Effect of Diluted Securities:
Incentive stock options outstanding 270 64
-------- --------
Diluted Earnings per Share:
Income available to common stockholders
and assumed conversion $14,208 39,494 $ 0.36 $13,651 39,326 $ 0.35
====================================================================================================================================
-----------------------------------------------------------------------------------
For the six months ended June 30,
-----------------------------------------------------------------------------------
2001 2000
--------------------------------------- --------------------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
-----------------------------------------------------------------------------------
Basic Earnings per Share:
Income available to common stockholders $26,704 39,223 $ 0.68 $27,059 39,299 $ 0.69
Effect of Diluted Securities:
Incentive stock options outstanding 252 76
-------- --------
Diluted Earnings per Share:
Income available to common stockholders
and assumed conversion $26,704 39,475 $ 0.68 $27,059 39,375 $ 0.69
====================================================================================================================================
8
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.
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.
On March 3, 2000, Susquehanna completed the acquisition of Valley Forge
Asset Management Corp., a Pennsylvania asset management corporation registered
both as a broker/dealer and as an investment advisor, and Valley Forge
Investment Company, Inc., collectively ("VFAM"), in cash transactions. Since
this acquisition was accounted for under the purchase method of accounting for
business combinations, 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 2001 was $14.2 million,
a 4.1% increase from net income of $13.7 million in the second quarter of 2000.
For the first six months of 2001, net income declined 1.3% to $26.7 million from
$27.0 million for the same period during 2000. During the second quarter of
2001, Susquehanna's fee income continued to improve as it increased by 15% from
the second quarter of 2000 and represented over 33% of total revenues for the
second quarter of 2001. During the first six months of 2001, Susquehanna's fee
income increased by 17% from the comparable period of 2000 and represented over
33% of total revenues for the first six months of 2001. However, this
improvement in fee income was more than offset by increases in operating
expenses and the loan loss provision for the comparable six month periods.
Diluted earnings per share ("EPS") increased 2.9% from $0.35 per share for
the second quarter of 2000 to $0.36 per share for the second quarter of 2001.
Diluted EPS decreased 1.4%
9
for the six months ended June 30, 2001 to $.68 from $.69 for the same period in
2000. Return on average assets ("ROA") and return on average equity ("ROE")
finished at 1.20% and 12.15%, respectively, in the second quarter of 2001
compared with 1.15% and 13.18%, respectively, in the second quarter of 2000. ROA
and ROE were 1.14% and 11.67%, respectively, for the six months ended June 30,
2001 as compared to 1.14% and 13.20%, respectively, for the same period ended
June 30, 2000. For the second quarter of 2001, tangible EPS, ROA and ROE were
$0.38, 1.28%, and 14.19%, respectively, and for the six months ended June 30,
2001, tangible EPS, ROA and ROE were $.72, 1.22% and 13.69%, respectively.
Total assets at June 30, 2001 were $4.9 billion, compared with $4.8 billion
at June 30, 2000. Loans of $3.5 billion at June 30, 2001 remained consistent
with the June 30, 2000 levels, while deposits increased from $3.2 billion at
June 30, 2000 to $3.3 billion at June 30, 2001. Equity capital was $474 million
at June 30, 2001, or $12.06 per share compared to $426 million, or $10.85 per
share, at June 30, 2000.
Net Interest Income
- -------------------
The major source of operating revenues is net interest income, which rose
to a level of $42.5 million in the second quarter of 2001, compared to $41.6
million for the same period in 2000. For the six months ended June 30, 2001, net
interest income was $83.4 million compared with $82.5 million for the same
period of 2000. 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 67% for the quarter ended
June 30, 2001, and was 69% for the quarter ended June 30, 2000. For the six
month period ended June 30, 2001 and 2000, net interest income as a percentage
of net interest income and other income was 67% and 70%, respectively.
Net interest income for the second quarter 2001 increased $0.9 million
compared to the second quarter of 2000. This improvement was due to an increase
in net interest margin from 3.88% in the second quarter of 2000 to 3.97% in the
second quarter of 2001 offset by a decrease in average earning assets for the
same periods of $55 million. This increase in margin was due to a 31 basis point
decrease in the cost of funds offset by a 24 basis point decrease in the earning
asset yield as interest rates have been declining since the third quarter of
2000.
Net interest income for the six months ended June 30, 2001 increased $1.0
million compared to the same period in 2000. This improvement was due to an
increase in net interest margin from 3.83% in 2000 to 3.94% in 2001 for the
comparable six month periods offset by a decrease in average earning assets for
the same periods of $85 million. This increase in the interest margin was due to
a 7 basis point decrease in the cost of funds offset by a 1 basis point
10
decline in the earning asset yield as rates have been declining since the third
quarter of 2000.
Other Income
- ------------
Non-interest income increased $2.7 million, or 14.7%, from $18.5 million in
the second quarter of 2000, to $21.2 million in the second quarter of 2001 and
$6.2 million, or 17.4%, from $35.5 million to $41.7 million for the six months
ended June 30, 2001 and 2000, respectively. The quarter to quarter increase of
$2.7 million was primarily due to a $1.7 million pre-tax gain realized on the
repurchase and sale of $119 million of auto leases and increases in vehicle
origination and servicing fees of $0.7 million. The six month increase of $6.2
million was primarily due to the pre-tax gain noted above plus increases in
deposit service charges ($0.9 million), vehicle origination and servicing fees
($1.4 million), asset management fees ($1.0 million) and credit card merchant
fees ($0.6 million).
Other income as a percentage of net interest income and other income, was
33% for the quarter ended June 30, 2001 compared with 31% for the comparable
period of 2000. For the six months ended June 30, 2001 and 2000, other income as
a percentage of net interest income and other income was 33% and 30%,
respectively.
Other Expenses
- --------------
Total non-interest expenses increased $1.6 million from $39.7 million in
the second quarter of 2000 to $41.3 million in the second quarter of 2001. The
quarter-to-quarter increase was primarily due to increases in salaries and
benefits of $1.5 million resulting from normal annual salary increases, recent
branch openings, new revenue-producing positions and higher health benefit
costs. For the six month period ended June 30, 2001, total non-interest income
increased $5.2 million from $77.3 million for the corresponding period ended
June 30, 2000 to $82.5 million. This increase was primarily due to increases in
salaries and benefits ($2.4 million), occupancy expense ($0.8 million), the 2000
restructuring credit ($0.9 million), communications expense ($0.5 million) and
credit card merchant servicing expense ($0.5 million). The increase in salaries
and benefits is due to the same factors noted above while the increases in
occupancy and communications are due to recent branch openings and the central
processing sites from the back office consolidation which opened in the second
half of 2000.
Income Taxes
- ------------
Susquehanna's effective tax rate increased to 31.5% for the six months
ended June 30, 2001 from 31.0% for the six months ended June 30, 2000 due to a
decrease in tax-advantaged income.
Risk Assets
- -----------
Table 2 shows an increase in total non-performing assets from $20.6 million
at December 31, 2000 to $23.5 million at June 30, 2001. However, loans past due
90 days or more and still accruing decreased from $13.8 million at December 31,
2000 to $8.5 million at June 30, 2001. Non-performing assets to period-end loans
and OREO increased from 0.60% at December 31, 2000 to 0.67% at June 30, 2001.
Loan loss reserve to non-performing loans at June 30, 2001 was 205% compared
with 225% at December 31, 2000.
11
Provision and Allowance for Loan and Lease Losses
- -------------------------------------------------
As illustrated in Table 3, the provision was $1.8 million in the second
quarter of 2001, an increase of $1.2 million from the same period in 2000. Net
charge-offs were $1.3 million for the three-month period ended June 30, 2001
versus the 2000 corresponding amount of $2.2 million. For the six months ended
June 30, 2001, the provision was $3.7 million, an increase of $2.2 million from
the $1.5 million provision for the first six months of 2000, while net charge-
offs decreased from $4.4 million in 2000 to $2.5 million in 2001 for the
comparable six month periods. The increase in the provision resulted from a
lower provision in 2000 due to a reduction in automobile residual value exposure
during 2000. While charged-off loans are considerably lower in 2001 compared to
the same period in 2000, management will provide for potential losses based upon
the characteristics of our current loan portfolio and the current economic
environment. Despite the fact that interest rates have been lowered recently, a
slowdown of economic growth could occur which could increase the potential for
loan and lease losses.
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,
2001 was 10.93%. The minimum total capital (Tier II) ratio is 8%; Susquehanna's
ratio at June 30, 2001 was 12.71%. The minimum leverage ratio is 4%;
Susquehanna's leverage ratio at June 30, 2001 was 8.97%.
12
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
June 30, 2001 June 30, 2000
- ------------------------------------------------------------------------------------- --------------------------------------
Average Average
(Dollars in thousands) Balance Interest Rate (%) Balance Interest Rate (%)
- --------------------------------------------------------------------------------------------------------------------------------
Assets
Short - term investments $ 97,525 $ 1,056 4.34 $ 51,849 $ 747 5.79
Investment securities:
Taxable 724,971 11,403 6.31 818,555 13,271 6.52
Tax - advantaged 73,511 1,305 7.12 92,690 1,656 7.19
- -------------------------------------------------------------------------------------------------------------------------------
Total investment securities 798,482 12,708 6.38 911,245 14,927 6.59
- -------------------------------------------------------------------------------------------------------------------------------
Loans and leases, (net):
Taxable 3,430,843 70,953 8.30 3,405,645 72,147 8.52
Tax - advantaged 42,677 882 8.29 55,703 1,231 8.86
- -------------------------------------------------------------------------------------------------------------------------------
Total loans and leases 3,473,520 71,835 8.29 3,461,348 73,378 8.53
- -------------------------------------------------------------------------------------------------------------------------------
Total interest - earning assets 4,369,527 $85,598 7.86 4,424,442 $89,052 8.10
-------------------- ---------------------
Allowance for loan and lease losses (38,501) (42,266)
Other non - earning assets 422,523 403,429
- --------------------------------------------------------- ----------
Total assets $4,753,549 $4,785,605
- --------------------------------------------------------- ----------
Liabilities
Deposits:
Interest - bearing demand $ 811,649 $ 4,830 2.39 $ 907,722 $ 6,877 3.05
Savings 421,301 1,703 1.62 419,611 1,814 1.74
Time 1,554,427 21,537 5.56 1,413,231 19,118 5.44
Short - term borrowings 213,688 2,175 4.08 192,730 3,063 6.39
FHLB borrowings 348,472 4,692 5.40 393,358 5,802 5.93
Vehicle financing 305,629 5,425 7.12 434,595 7,895 7.31
Long-term debt 100,000 1,934 7.76 100,000 1,837 7.39
- -------------------------------------------------------------------------------------------------------------------------------
Total interest - bearing liabilities 3,755,166 $42,296 4.52 3,861,247 $46,406 4.83
------------------- -------------------
Demand deposits 464,800 446,518
Other liabilities 64,716 61,308
- --------------------------------------------------------- ----------
Total liabilities 4,284,682 4,369,073
- --------------------------------------------------------- ----------
Equity 468,865 416,532
- --------------------------------------------------------- ----------
Total liabilities & stockholders' equity $4,753,547 $4,785,605
- --------------------------------------------------------- ----------
Net interest income / yield on
average earning assets $43,302 3.97 $ 42,646 3.88
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------------------
For the Six Month Period Ended For the Six Month Period Ended
June 30, 2001 June 30, 2000
- --------------------------------------------------------------------------------------------------------------------------------
Average Average
(Dollars in thousands) Balance Interest Rate (%) Balance Interest Rate (%)
- ---------------------------------------------------------------------------------- ----------------------------------------
Assets
Short - term investments $ 91,504 $ 2,194 4.84 $ 52,301 $ 1,493 5.74
Investment securities:
Taxable 742,047 23,596 6.41 822,455 26,675 6.52
Tax - advantaged 75,721 2,691 7.17 96,390 3,398 7.09
- ---------------------------------------------------------------------------------- ---------------------------------------
Total investment securities 817,768 26,287 6.48 918,845 30,073 6.58
- ---------------------------------------------------------------------------------- ---------------------------------------
Loans and leases, (net):
Taxable 3,400,978 142,374 8.44 3,416,540 142,864 8.41
Tax - advantaged 46,969 2,020 8.67 54,104 2,388 8.88
- ---------------------------------------------------------------------------------- ---------------------------------------
Total loans and leases 3,447,947 144,394 8.45 3,470,644 145,252 8.42
- ---------------------------------------------------------------------------------- ---------------------------------------
Total interest - earning assets 4,357,219 $172,875 8.00 4,441,790 $176,818 8.01
------------------- ---------------------
Allowance for loan and lease losses (38,046) (43,470)
Other non - earning assets 411,794 393,416
- --------------------------------------------------------- ----------
Total assets $4,730,967 $4,791,736
- --------------------------------------------------------- ----------
Liabilities
Deposits:
Interest - bearing demand $ 813,050 $ 10,647 2.64 $ 928,690 $ 14,065 3.05
Savings 417,306 3,593 1.74 421,092 3,677 1.76
Time 1,556,755 43,753 5.67 1,404,950 37,544 5.37
Short - term borrowings 214,823 5,062 4.75 191,786 5,314 5.57
FHLB borrowings 338,495 9,357 5.57 380,026 11,032 5.84
Vehicle financing 320,464 11,482 7.23 456,379 16,860 7.43
Long-term debt 100,000 3,884 7.83 98,200 3,836 7.86
- ---------------------------------------------------------------------------------- ---------------------------------------
Total interest - bearing liabilities 3,760,893 $ 87,778 4.71 3,881,123 $ 92,328 4.78
--------------------- ---------------------
Demand deposits 449,111 437,714
Other liabilities 59,363 60,766
- --------------------------------------------------------- ---------------
Total liabilities 4,269,367 4,379,603
- --------------------------------------------------------- ---------------
Equity 461,602 412,133
- --------------------------------------------------------- ---------------
Total liabilities & stockholders' equity $4,730,969 $4,791,736
- --------------------------------------------------------- ---------------
Net interest income / yield on
average earning assets $ 85,097 3.94 $ 84,490 3.83
--------------------- ---------------------
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%.
13
Susquehanna Bancshares, Inc. and Subsidiaries
TABLE 2 - RISK ASSETS
- -----------------------------------------------------------------------------------------------------------------------
June 30, December 31, June 30,
(Dollars in thousands) 2001 2000 2000
- -----------------------------------------------------------------------------------------------------------------------
Nonperforming assets:
Nonaccrual loans and leases $ 18,696 $ 16,541 $ 17,480
Restructured accrual loans 0 0 0
Other real estate owned 4,824 4,039 3,719
- -----------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 23,520 $ 20,580 $ 21,199
- -----------------------------------------------------------------------------------------------------------------------
As a percent of period-end loans and leases and
other real estate owned 0.67% 0.60% 0.61%
Loans and leases contractually past due 90 days
and still accruing $ 8,494 $ 13,798 $ 7,668
- --------------------------------------------------------------------------------
TABLE 3 - ALLOWANCE FOR LOAN AND LEASE LOSSES
- --------------------------------------------------------------------------------
Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Baalance - Beginning of period $ 37,848 $ 43,211 $ 37,187 $ 44,465
Additions charged to operating expenses 1,833 643 3,679 1,507
- -----------------------------------------------------------------------------------------------------------------------
39,681 43,854 40,866 45,972
- -----------------------------------------------------------------------------------------------------------------------
Charge-offs (1,960) (2,629) (3,545) (5,284)
Recoveries 686 384 1,086 921
- -----------------------------------------------------------------------------------------------------------------------
Net charge-offs (1,274) (2,245) (2,459) (4,363)
- -----------------------------------------------------------------------------------------------------------------------
Balance - Period end $ 38,407 $ 41,609 $ 38,407 $ 41,609
- -----------------------------------------------------------------------------------------------------------------------
Net charge-offs as a percent of average loans and
leases (annualized) 0.15% 0.26% 0.14% 0.25%
Allowance as a percent of period-end loans and
leases 1.10% 1.20% 1.10% 1.20%
Average loans and leases $3,473,520 $3,461,348 $3,447,947 $3,470,644
Period-end loans and leases 3,481,729 3,466,420 3,481,729 3,466,420
14
Item 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES
- ----------------------------------------
ABOUT MARKET RISK
- -----------------
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 Risk
- --------------
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, 2001, Susquehanna's
subsidiary banks and its savings bank have unused lines of credit available to
them from the Federal Home Loan Bank totaling approximately $397 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 $76 million at June 30, 2001. These maturing investments
represent 8% of total investment securities. Unrestricted short-term investments
amounted to $39 million and represent additional sources of liquidity.
Consequently, Susquehanna's exposure to liquidity risk is not considered
significant.
Interest Rate Risk
- ------------------
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.
15
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.
At June 30, 2001, Susquehanna continues to be a slightly asset sensitive
institution. Consequently, a further decline in interest rates could have a
negative effect on Susquehanna's net interest income.
16
PART II. OTHER INFORMATION
-----------------
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Annual Meeting of Shareholders was held on May 25, 2001. 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 Robert S. Bolinger, Owen O. Freeman, Henry H. Gibbel, C.
William Hetzer, Guy W. Miller, Jr., George J. Morgan, William J. Reuter,
Roger Wiest, and Michael J. Wimmer continued after the meeting.
NOMINEE COMMON STOCK
------- ------------
Wayne E. Alter, Jr.
For 32,232,031
Withhold / abstain 536,997
Not present 6,296,724
Broker non-voted 157,360
James G. Apple
For 32,244,905
Withhold / abstain 524,123
Not present 6,296,724
Broker non-voted 157,360
John M. Denlinger
For 32,240,504
Withhold / abstain 528,524
Not present 6,296,724
Broker non-voted 157,360
Chloe R. Eichelberger
For 32,205,820
Withhold / abstain 563,208
Not present 6,296,724
Broker non-voted 157,360
17
T. Max Hall
For 32,099,806
Withhold / abstain 669,222
Not present 6,296,724
Broker non-voted 157,360
William B. Zimmerman
For 32,094,116
Withhold / abstain 674,912
Not present 6,296,724
Broker not voted 157,360
b) The following details the voting results with respect to the amendment to
Susquehanna's Equity Compensation Plan to increase total number of shares
of Susquehanna common stock for which awards may be granted under the plan
by 1,000,000 shares. The shares of common stock were voted as follows:
For 28,827,525
Against 3,513,578
Abstain 427,925
Not voted 6,296,724
Broker not voted 157, 360
c) The following details the voting results with respect to the amendment to
Susquehanna's Equity Compensation Plan to permit non-employee directors,
while serving in their capacities as directors, to receive annual grants of
non-qualified stock options to purchase 2,250 shares of Susquehanna common
stock each year during the entire term of the plan, rather than just during
the first five years. The shares of common stock were voted as follows:
For 28,829,783
Against 3,450,074
Abstain 489,171
Not voted 6,296,724
Broker not voted 157,360
18
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a). Exhibits - The exhibits required to be filed as part of this report
---------
pursuant to Item 601 of Regulation S-K are filed within or incorporated by
reference.
b). Report on Form 8 - K - On June 21, 2001, the Registrant filed a report
--------------------
on Form 8-K regarding management successions and executive appointments.
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 6, 2001
/s/ William J. Reuter
-------------------------------------
William J. Reuter
President and Chief Executive Officer
August 6, 2001
/s/ Drew K. Hostetter
-------------------------------------
Drew K. Hostetter
Executive Vice President, Treasurer,
and Chief Financial Officer
19
EXHIBIT INDEX
-------------
Exhibit Numbers Description and Method of Filing
- --------------- --------------------------------
(3) (i) Articles of Incorporation. Incorporated by reference to
Attachment E to the Registrant's Joint Proxy
Statement/Prospectus on the Registrant's Registration
Statement on form S-4, Registration No. 33-13276 and to
Exhibit 3.3 of the Registrant's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1998.
(ii) By-laws. Incorporated by reference to Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
(4) Instruments defining the rights of security holders including
indentures. The rights of the holders of the Registrant's common stock
and the rights of the Registrant's note holders are contained in the
following documents or instruments, which are incorporated herein by
reference.
(i) Articles of Incorporation. Incorporated by reference to
Attachment E to the Registrant's Joint Proxy
Statement/Prospectus on the Registrant's Registration
statement on for S-4, Registration No. 33-76319 and to
Exhibit 3.3 of the Registrant's Quarterly report on Form 10-
Q for the quarterly period ended June 30, 1998.
(ii) By-laws. Incorporated by reference to Exhibit 3 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000.
(iii) Form of Subordinated Note/Indenture incorporated by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-3, Registration No. 33-87624.
20