Susquehanna Bancshares — Q2 2014 Earnings Presentation
46 slides from Susquehanna Bancshares's earnings presentation, Aug 11, 2014
Slide 1: Susquehanna Bancshares, Inc. Investor Presentation 3rd Quarter 2014
Exhibit 99.1 Exhibit Susquehanna Investor 3rd Quarter 99.1 Presentation 2014 Bancshares, Inc.
Slide 2: Forward-Looking Statements
Forward-Looking During income differ projected consolidation inquiries off-balance Susquehanna’s quarter Susquehanna 2For more materially ended the and and information, include, course sheet earnings. the assumes and June operating from results transactions; development Statements but of30, this Inv
Slide 3: Why Invest in Susquehanna
13 profile Why Business Grow Commercial Enhance Invest Return Management Deep Interests term Valuation (“ROTCE”) Very Long-Term power Potential Stronger risk incentives attractive Susquehanna knowledge deposits to of excess Based aligned fee balance enhance P/E Strategy Susquehanna Trade Upside inco
Slide 4: Table of Contents
Table of Contents Susquehanna Financial Business “Community Valuation 4QuarterlyStrategy: Review: Financial andBank” Overview Long-Term Second Regional Supplement Delivery 5 Upside Quarter Bank Model 3027 With 2014a10 Customer-Focused 14
Slide 5: Susquehanna Overview
5Susquehanna Overview
Slide 6: Susquehanna Corporate Overview
Susquehanna Corporate Regional headquartered –Experienced Selected Assets: Deposits: Loans Assets and Market Average Institutional Dividend 6321NASDAQ: Wealth Vehicle Insurance Commercial Over Based administration: & under the cap1: $on daily Data Leases: management bank 18.5 yield3: leasing $Overvi
Slide 7: Uniquely Positioned Regional Bank Deposit Rank
Uniquely Deposit Rank 98654321Count 10 11 12 13 14 15 Total Source: Note: Counties Proven Largest –Ample 74.9% Wells Toronto-Dominion Top PNC Bank M&T Royal Susquehanna Fulton Banco 10%+ Increasing BB&T National Beneficial Citi First Customers (1-15) (1-239) would Institution Regulatory 3Market 5393
Slide 8: Attractive Maryland Market Demographics
18 Maryland Leading Attractive Better –Market SUSQ 31% % 32% with Source: June of 25% #1 21% 18% 30, Deposits positioned Peers presence Rank SNL Reflects Competitive 2013. Market $59,179 34% Market market SUSQ Financial. Income1 in21% in Counties weighted with Share Demographics $51,799 12 includes
Slide 9: Positioned for Small Business Growth
Positioned Small Pennsylvania 115 Foundation Delaware markets 69 Maryland 61 Growth Source: The 9“Quarterly branches branches 16Business counties Bank opportunities Valley Market for Financial forMarket Intelligence. Further growth Density comprising Market Supplement” fueled Growth with Complements
Slide 10: Financial Review: Second Quarter 2014
Financial Review: Second Quarter 2014 10
Slide 11: Second Quarter 2014 Highlights
Second GAAP Disciplined Construction Residential Reclassified Strong Interest-bearing Fee by Service Focused ROATE1 Solid and 1Tangible 11Non-GAAP Seasonality Income Capital Credit Deposit EPS Quarter charges on common ofreal Ratios Returns Loan of Impacted 12.34% Quality ~$265 loans based $0.23 Ins
Slide 12: Second Quarter Net Interest Margin and Purchase Accounting
Second Accounting Total forward roll accounting Non-purchase -in Net 1Note: 12 2Q14 Non-GAAP 1Q14 Interest interest purchase Additional included Quarter margin, Impact Margin based accounting Purchase 9information bps (FTE) excluding financial gainbenefit from on measures; purchase purchase trust wa
Slide 13: 2Q14 Solid Performance
213 2Q14 Susquehanna ROAA ROATCE1 Net Loans Loan Deposit C&I Checking of Efficiency NPAs Foreclosed NCOs Leverage Solid Comments Focus Working Fee Credit 1Source: 543 Non-GAAP Total Interest Income income %Growth profitability Performance %on % quality Please0.95% of SNL DepositsEPS2,3 Growth Cost P
Slide 14: Business Strategy: Regional Bank With Customer-Focused Community Bank Delivery Model
Business Strategy: Regional Customer-Focused 14 “Community BankBank” With Delivery a Model
Slide 15: Strategic Objective: Customer Focus
Strategic OBJECTIVE: 1. –Focus Evaluating 2. Hiring Employee Building 3. Structure 15 Employee Customer Service Marketing Pricing Products Shiftfocused Hiring Redesigned individuals incapabilities Focus: and Incentives delivery Model engagement new experience engagement Talent Transition Incentive o
Slide 16: Investing for Growth: Aligning Risk and Focus
Investing Aligning Growth Focus Fee Risk Customer Service Business — Investments 16 ATMs Branch Product Commercial income management ondelivery into Infrastructure demand Scalable for experience relocation software activities Focused for today Top Tomorrow Banking Business 50 drives near-term Invest
Slide 17: Investing in Talent: Aligning Incentives
217 Investing WILLIAM Chairman 39 including ANDREW Bank Credit 29 years President GREGORY Chief Officer years banking in 23 and Approximately –Aligning Short-term Long-term SAMUEL REUTER Administrative 30 23 Talent years Operating with with CEO and DUNCANexperience, experience with Susquehanna CEO o
Slide 18: Business Strategic Focus
Business Strategic Focus Deposits Take Complements Optimize Balance Small Customer Experience –and Engagement Enterprise Risk Enhancing Capital Management 18Product Growing Incentives Employee complexity, share business onManaging Sheet Significant Priorities Strategy Helps Focus offerings Deliverin
Slide 19: Strategic Focus: Rationale and Initiatives
Focus: Rationale liquidity Strategic Initiatives Investing Sales Increasing Trade-Off benefits Loan 99.2 80.9 2Q12 SUSQ Source: Please 19 102.6 87.3 to training 3Q12 refer Peer Deposits SNL Deposit will and Enhanced in Ample Focus Desire marketing Median to 4Q12 people be interest Financial. and the
Slide 20: Strong Organic Deposit Growth
TotalMM $8.9 14% 31% Organic Deposit 32% 6.4% Demand 15% 44% 8% Savings Time Strong Positive 20 Billion 15% 17% 16% Deposits ofDeposit < $100K CAGR: $100K Non-Time results & deposits Interest-bearing $13.3 12/31/2007 Growth in or9% mobile more Billion Momentum deposit Total demand Deposits services
Slide 21: Deposit Strategic Initiatives
Deposit Innovative Strategic Exiting Lowered Streamlined Three Customer-Centric balances card –Digital 21 Total 31% Driving E-statements usage retail from online channel non-strategic Initiatives and than deposit Building new Deposit checking new Focused $888,000 converted banking fee up incost cust
Slide 22: Disciplined Loan Growth Focus
Disciplined Focus 12/31/2007 $8.8 20% 15% 5% CAGR: 25% 30% Real Commercial, Leases Consumer Slowing Rotating Commercial yield 22 Organic Billion estate 18% 10% Real inon2Q14 3.7% Loan assets Commercial estate—construction 5% secured—commercial secured—residential Asset 6/30/2014 $13.7 Loan loan fina
Slide 23: Net Interest Margin
0.31% 0.40% 0.37% 0.15% 0.18% 0.34% 3.73% 3.61% 3.45% 2Q12 SUSQ Net Compression Deposit Source: “Quarterly 23 Interest interest 3Q12 NIM, 0.35% 0.21% 3.66% 3.62% 3.40% SNL growth Financial margin margin, Margin 4Q12 ex Financial. is 0.25% 3.54% 3.38% and Purchase primarily 1Q13 of strategic excludin
Slide 24: Non-Interest Income Focus: Diversifying Fee Income
Non-Interest Focus –Diversifying Fee 27.7% 2Q12 20.1% 22.9% SUSQ Non-interest 2Q13 Service Wealth Mortgage As peer 24 Assets Approximately Closing Deposits Increased reported Income companies. 3Q12 4Q13 on Peer 27.4% management Management Charges under cross-sell the banking Banking and 24.6% Median
Slide 25: Expense Management and Efficiency Ratio
Expense $215 $175 $195 (in $155 65.63% 2Q13 $75 $95 $115 59.57% $135 Total Targeted Efficiency Note: 25 millions) 68.84% 66.18% Revenue Efficiency 3Q13Management long-term ratio is4Q13 61.62% a part Total reflects ratio 1Q14 of efficiency Noninterest our is expenses a2Q14 culture; non-GAAP ratio Exp
Slide 26: 3Q14 Outlook
3Q14 Strategic Net pressures Range Average Assets Focus Credit EPS$0.92 Expenses EPS Measured Launched improvements, Fee mortgage and 26 Interest Income capital Outlook on $0.92 of Commercial Earning Priorities 3.32%—3.36% rotating on business Expenses comprehensive investments quarters markets Marg
Slide 27: Valuation and Long Term Upside
Valuation and Long Term Upside 27
Slide 28: Attractive Valuation and Dividend Yield
128Close Dividend Valuation 2.0% 3.5% 0.68x 1.22x 1.28x 1.70x Price SUSQ 12.6x 14.3x –Execution Attractive Source: Please/ refer Peer Tangible Book Forward the SNL Based Yield1 dividend ofP/E Median toValue strategy Financial. the on discount Earnings Book current “Quarterly yield could Value Price
Slide 29: Capital Management and Tangible Common Equity
Tangible At Equity1 Susquehanna Target Capital Management –Recent share The 29On June tangible July 7.50% capital Position generation 30, RWA Tier 16, 23, 2014 common Minimum believes 8.88% 18.00% 2014, Leverage actions Common has Susquehanna 11.03% 6.00% that represent equity benefited Risk-Based S
Slide 30: Quarterly Financial Supplement
Quarterly Financial Supplement 30
Slide 31: Susquehanna Bank Market Footprint
Susquehanna Pennsylvania Adams, Berks, Centre, Cumberland, Dauphin, Lancaster, Lebanon, Lehigh, Luzerne, Lycoming, Northampton, Northumberland, Schuylkill, Snyder, Union, York, 31 PA PA PA PA PA PA PA Anne PA Baltimore, PA Worcester, Allegany, Franklin, Fulton, Bedford, Carroll, PA Bank Market Berkl
Slide 32: Peer Companies
Peer National Associated BancorpSouth City Commerce Cullen/Frost F.N.B. First FirstMerit Fulton 32 Companies Horizon Niagara Financial Corp. Corp. Bancshares Banc-Corp Bankers TCF Financial Nat’l Corp. Inc. Webster Corp. Financial IBERIABANK Corp. People’s Inc. Hancock Wintrust Prosperity Group Fina
Slide 33: Loan Originations and Average Balance
Loan Average Origina- ($ tions Real Tax-Free Commercial Consumer VIE Total *Byin 156 collateral Estate Millions) tions Loans andBalance* Origina- — 420 Lease Loans Leases tions –122 $13,112 $2,005 Leases Const 1-4 Commercial HELOC 2type. Balance 402 Originations tions — 853 Family Origina- 698 2Q13
Slide 34: Loan Average Balance and Yield
Loan Average ($ INT 1-4 Real Tax-Free Commercial Consumer VIE Total *ByinFamily % 156 collateral Estate Millions) Loans Mix QTR Balance* 4.34% 420 &Loans Leases Res –$13,112 $2,005 Leases Yield Const 2,262 Commercial HELOC 5.09% type. 2Q13 122 853 698 4.82% 34 & 300 5.03% 4.92% 402 4.95% 3Q13 4.52%
Slide 35: CRE Composition
CRE and Industrial/Manufacturing, Recreational, Farmland, Commercial Multi- 4% Family, Land, Warehouse, Other, Mixed Hotels—Motels, Retail, Residential, Service, 35 2Q14 5% 14% Office, Use, 14% 5% 12% Construction 0% 6% 7% Construction, 2% 16% 7% Composition 2%
Slide 36: Asset Quality
Asset Net 0.65% 0.15% 0.38% 0.34% NPAs Foreclosed 1.26% 1.50% 0.85% 150% 2Q12 117% 137% SUSQ Positive ALLL Excluding Originated Source: 1Please 36Non-GAAP Charge-Offs 3Q12 Quality /165% /Average refer Peer 0.95% Loans Nonaccrual Loans SNL credit purchased Loans Real Median to 4Q12 Financial based &
Slide 37: Asset Quality: Non-Accruals and TDRs
Asset ($ Non $105 $108 $102 $40 $64 $70 $72 TDRs 2Q13 New Cure/Exits/Other Gross Transfer NPL’s 37 in$41 Accruals Millions) Non $106 $101 3Q13 Quality Charge-Offs Beginning End toAccruals of OREO 4Q13 Period (13.4) of 1Q14 (3.5) (5.0) 23.6 Period $ 105.1 (12.6) (4.7) 23.1 2Q14 (8.9) $ $103.4 29.4 (3
Slide 38: Asset Quality: OAEM and Substandard
Asset ($ $346 $370 $425 $446 OAEM $495 $525 Substandard $445 $476 $39 $57 $68 $37 Past $9 $10 2Q13 $7 38 in $9 $40 Due Millions) $340 $502 3Q13 Quality $9 90 30-89 4Q13 Days Days or 1Q14 More 2Q14
Slide 39: Investment Portfolio
Investment EOP ($ QTR Total Duration Yield Unrealized 2Q14 4% 18% 30% Corporate 0% 44% 1% CMO Municipal All 39 inAgency securities CMO(Float) MBS(Fixed) Muni 1% Balance Millions) Yield Investment 2.61% Portfolio (Fixed) andMBS (years) MBS (Fixed) (Float) portfolio 2Q13 Gain/(Loss) Securities (Fixed)
Slide 40: Deposit Average Balance and Cost
Deposit Average ($ INT Demand Interest Savings Certificates Total Non-CD Loans(excluding 40 in % Millions) Interest-Bearing QTR Bearing Mix 1,080 Balance $1,912 Deposits/Total of2Q13 &0.11% Deposits Cost 0.00% Demand VIE)/Deposits 3Q13 1,076 Deposits $1,911 3,892 69.8% 4Q13 5,984 0.11% 1.20% 0.00% 6
Slide 41: Borrowing Average Balance and Cost
Borrowing Average ($ INT Short-Term FHLB Long Off Total 41 inBalance %Millions) Borrowing Borrowings Term Advances QTR Balance Mix Debt Borrowings Sheet 2Q13 &Cost 496 1,042 /$2,266 Cost Swap 3Q13 Total 3.32% 1.80% 0.36% $728 Assets Impact 4Q13 0.98% 476 1.68% 0.26% 1,285 1Q14 12.5% 927 $2,519 3.45%
Slide 42: Purchased Loans Fair Value Marks Rollforward
Purchase Fair 2Q14 Purchased Discount Beginning Charge-offs Accretion Ending Non-Purchased Unpaid Remaining Carrying Total Tower’s PCI Non-PCI loan If Predicting 42 a loan marks Value compared Unpaid Carrying 1Q14 Period Principal purchased prepays/refinances, Amount Accounting Rollforward fair 2,61
Slide 43: Non-GAAP Reconciliation: Allowance Ratio
Non-GAAP ($ 2Q14 Loans Less: Originated Allowance Allocated Our difference purchased loans results 43 inratio thousands, allocated purchased and 1Q14 and of of our leases. leases Allowance allowance by loans leases loans /for 4Q13 the Reconciliation loans allowance total credit to allocated unless l
Slide 44: Non-GAAP Reconciliation: Efficiency and Tangible Equity Ratios
(1) Non-GAAP ($ Taxable-equivalent Other Noninterest Efficiency when End Shareholders’ Assets Goodwill Tangible The order by 44 in the efficiency tangible of thousands) to calculating expense income tangible $18,506,626 period calculate Net Common assets common and Ratio ratio operating Reconciliati
Slide 45: Non-GAAP Reconciliation: ROATCE and Tangible Book Value
Non-GAAP ($ 2Q14 Income Amortization Net Average Effect Return comparable intangible is capital End Shareholders’ Goodwill Common Tangible tangible outstanding. assess 45 consistent intangible income of thousands) 1Q14 of our ratios. period on statement equity book balance Book common book goodwill
Slide 46: Non-GAAP Reconciliation: Net Interest Margin
Non-GAAP 2Q14 Reported accounting) Adjustments Loans Deposits Borrowings purchase Net calculate earning measure measure, in 46 addition Interest interest 1Q14 and assets. is-0.03% net accounting) when net leases more to, margin Margin 4Q13 -0.10% Reconciliation interest for interest and Our taken pu
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