<PAGE>
As filed with the Securities and Exchange Commission on November 22, 1995
Registration No. 33-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
Susquehanna Bancshares, Inc.
(Exact name of registrant as specified in charter)
Pennsylvania 23-2201716
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26 North Cedar Street
Lititz, Pennsylvania 17543
(717) 626-4721
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RICHARD M. CLONEY
Vice President and Secretary
26 North Cedar Street
Lititz, Pennsylvania 17543
(717) 626-4721
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
JAMES H. CARROLL, ESQ. LEE MEYERSON, ESQ.
Morgan, Lewis & Bockius LLP Simpson Thacher & Bartlett
One Commerce Square 425 Lexington Avenue
417 Walnut Street New York, New York 10017
Harrisburg, PA 17101 (212) 455-2000
(717) 237-4036
Approximate date of commencement of proposed sale to public: As soon
as practicable after the Registration Statement becomes effective.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate
Title of Each Class of to be Price Offering Amount of
Securities to be Registered Registered Per Unit (1) Price (1) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $2.00 per share........... 1,725,000 shares $29.625 $51,103,125 $17,622
========================================================================================================================
</TABLE>
<PAGE>
(1) Based upon the average of the high and low prices of the Common Stock as
reported on the Nasdaq National Market on November 20, 1995, estimated
solely for the purpose of calculating the registration fee in accordance
with Rule 457(c) under the Securities Act of 1933, as amended.
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED NOVEMBER 22, 1995
1,500,000 Shares
SUSQUEHANNA BANCSHARES, INC.
Common Stock
----------------
The Common Stock of Susquehanna Bancshares, Inc. ("Susquehanna" or the
"Company") is listed on the Nasdaq National Market under the symbol "SUSQ". On
November 20, 1995, the last reported sale price of the Common Stock on the
Nasdaq National Market was $30.00.
--------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $ $ $
- --------------------------------------------------------------------------------
Total(3)........................... $ $ $
================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other information.
(2) Before deducting expenses of the offering estimated at $250,000 payable by
the Company.
(3) The Company has granted the Underwriters an option, exercisable within 30
days from the date hereof, to purchase up to 225,000 additional shares of
Common Stock at the Price to Public per share less the Underwriting
Discount, for the purpose of covering over-allotments, if any. If the
Underwriters exercise such option in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
---------------
The shares of Common Stock are offered by the Underwriters when, as and if
delivered to and accepted by them, subject to their right to withdraw, cancel or
reject orders in whole or in part and subject to certain other conditions. It is
expected that delivery of certificates representing the shares will be made
against payment on or about , 1995 at the office of Oppenheimer & Co., Inc.,
Oppenheimer Tower, World Financial Center, New York, New York 10281.
---------------
Oppenheimer & Co., Inc.
Legg Mason Wood Walker
Incorporated
Keefe, Bruyette & Woods, Inc.
The date of this Prospectus is , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
accordingly, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission are available for
inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of such documents may also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Company's Common Stock is authorized for quotation on the National Association
of Securities Dealers Automated Quotation System ("Nasdaq") National Market.
Such materials and other information concerning the Company, therefore, can also
be inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C.
The Company has filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), a Registration Statement on Form S-3
(including all amendments and exhibits thereto, the "Registration Statement")
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. The Registration Statement, including any amendments and exhibits
thereto, is available for inspection and copying as set forth above. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
2
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
Certain documents previously filed by the Company with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this
Prospectus as follows:
(1) the Annual Report on Form 10-K for the year ended December 31,
1994;
(2) the Quarterly Reports on Form 10-Q for the quarters ended March
31, 1995, June 30, 1995 and September 30, 1995;
(3) the Current Report on Form 8-K dated March 31, 1995, as amended
by Form 8-K/A-1 dated May 26, 1995, which Report contains audited
consolidated financial information for Atlanfed Bancorp, Inc. as
of March 31, 1995 and 1994 and for the years ended March 31,
1995, 1994 and 1993;
(4) the Current Report on Form 8-K dated April 21, 1995, as amended
by Form 8-K/A-1 dated May 24, 1995, which Report contains audited
consolidated financial information for Reisterstown Holdings,
Inc. as of March 31, 1995 and September 30, 1994, and for the six
months ended March 31, 1995 and for the years ended September 30,
1994 and 1993;
(5) the Current Report on Form 8-K dated November 20, 1995, which
Report contains audited consolidated financial information of the
Company as of December 31, 1994 and 1993 and for the years ended
December 31, 1994, 1993 and 1992, which information has been
restated to reflect the acquisition of Atlanfed Bancorp, Inc.,
accounted for as a pooling of interests; and
(6) the Current Report on Form 8-K dated November 21, 1995, which
Report contains audited consolidated financial information of
Fairfax Financial Corporation as of September 30, 1995 and 1994
and for the years ended September 30, 1995, 1994 and 1993.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
thereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. All information
appearing in this Prospectus should be read in conjunction with, and is
qualified in its entirety by, the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference, except to the extent set forth in the immediately preceding
statement.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the documents referred to above (not including exhibits
thereto, unless such exhibits are specifically incorporated by reference
therein). Such requests should be directed to the Secretary, Susquehanna
Bancshares, Inc., 26 North Cedar Street, Lititz, Pennsylvania 17543, telephone
number (717) 626-4721.
3
<PAGE>
All information contained in this Prospectus is qualified in its
entirety by reference to the more detailed financial information and financial
statements, including notes thereto, appearing elsewhere in this Prospectus or
incorporated by reference herein. Unless otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
SUSQUEHANNA BANCSHARES, INC.
General
Susquehanna Bancshares, Inc. ("Susquehanna" or the "Company") is a
bank holding company headquartered in Lititz, Pennsylvania. The Company operates
as a super-community bank holding company with six banks, two thrifts and two
non-bank subsidiaries. These subsidiaries provide banking and banking-related
services from 99 branches in central and south central Pennsylvania and west and
central Maryland. Based on total assets at March 31, 1995, Susquehanna is the
twelfth largest bank holding company headquartered in Pennsylvania. The
Company's two non-bank subsidiaries provide leasing and insurance services. As
of September 30, 1995, Susquehanna had assets of $2.5 billion, net loans of $1.7
billion, deposits of $2.1 billion and shareholders' equity of $234 million.
The following table lists, as of September 30, 1995, each bank and
thrift subsidiary, the location of its principal office, its number of branches,
and (in millions of dollars) its total assets and deposits:
<TABLE>
<CAPTION>
Location of Number of Total Total
Principal Office Branches Assets Deposits
---------------- --------- ------ --------
<S> <C> <C> <C> <C>
Farmers First Bank (1)..................................... Lititz, PA 32 $777 $650
Farmers & Merchants Bank and Trust (1)..................... Hagerstown, MD 27 486 425
First National Trust Bank (2).............................. Sunbury, PA 10 255 222
Williamsport National Bank (2)............................. Williamsport, PA 10 225 194
Citizens National Bank of Southern PA (2).................. Greencastle, PA 6 167 147
Spring Grove National Bank (2)............................. Spring Grove, PA 3 63 55
Reisterstown Federal Savings Bank (3)...................... Reisterstown, MD 2 262 220
Atlantic Federal Savings Bank (3).......................... Baltimore, MD 9 250 175
</TABLE>
- ----------------------------
(1) State chartered bank.
(2) Nationally chartered bank.
(3) Federally chartered stock savings bank.
As a "super-community" bank holding company, the Company's strategy
has been to manage its banking subsidiaries on a decentralized basis, allowing
each subsidiary operating in different markets to retain its name and board of
directors as well as substantial autonomy in its day to day operations. The
Company feels such a strategy permits each subsidiary greater flexibility to
better serve its markets and be responsive to local customer needs. Susquehanna
continues, however, to implement consolidations in selected businesses,
operations and support functions in order to achieve greater economies of scale
and cost savings. The Company has commenced a full consolidation of back office
data processing operations of its six bank subsidiaries which is expected to be
completed by mid-1996. The Company further anticipates integrating its trust and
mortgage banking operations. Susquehanna also provides its banking subsidiaries
guidance in the areas of credit policy and administration, strategic planning,
investment portfolio management and other financial and administrative services.
Susquehanna was incorporated in Pennsylvania in 1982. Its executive
offices are located at 26 North Cedar Street, Lititz, Pennsylvania 17543, and
its telephone number is (717) 626-4721.
4
<PAGE>
Market Areas
Susquehanna's market is increasingly geographically and economically
diversified with access to both rural markets and the more affluent markets of
Lancaster, York, Sunbury, Williamsport and Baltimore.
Susquehanna's Pennsylvania franchise is centered in Lancaster County
and also includes Lycoming, Franklin, Snyder, Northumberland, Columbia and York
Counties. The Company's market area, near the Pennsylvania state capital of
Harrisburg, has a diverse economic base which includes farming and farm-related
industry, light and heavy manufacturing, government activities, tourism,
educational facilities and natural resources.
In Pennsylvania, Susquehanna operates 61 branches (including three
branches located in supermarkets) and 44 ATMs connected to the MAC network. As
of June 30, 1994, the latest date for which information is available, the
Company ranked second in terms of deposit market share in Lancaster County and
either first or second in all but one of the other Pennsylvania counties in
which it operates.
The Company's Maryland franchise includes Baltimore County, Baltimore
City, Carroll County, Harford County, Cecil County and Anne Arundel County in
central Maryland, and Allegany and Washington Counties in western Maryland.
Susquehanna's market in Allegany and Washington Counties is economically similar
to the Company's Pennsylvania market. As part of its strategy to reinforce and
expand its Maryland franchise, in the first half of 1995 Susquehanna completed
the acquisition of two Maryland thrift holding companies, Reisterstown Holdings,
Inc. ("Reisterstown") and Atlanfed Bancorp, Inc. ("Atlanfed"), totalling $512
million in assets. The acquisition of a third thrift holding company, Fairfax
Financial Corporation ("Fairfax"), totalling $476 million in assets at September
30, 1995, is expected to close in December 1995 or during the first quarter of
1996 and will add Wicomico and Worcester Counties to Susquehanna's Maryland
franchise. These Maryland thrift acquisitions have expanded Susquehanna's market
into the more urban Baltimore banking market, providing the Company with
attractive commercial and consumer lending and trust service growth
opportunities.
Including the Fairfax acquisition, in Maryland the Company operates 47
branches and 27 ATMs connected to the MAC and MOST networks. Given the market
overlap of the three Maryland thrifts, upon completion of the Fairfax
acquisition, it is management's intention to consolidate the thrifts into a
single Maryland thrift subsidiary.
Business
Susquehanna provides a wide range of retail and commercial banking
services. Susquehanna's strategy for its retail banking businesses is to expand
its deposit and other product market share through a high level of customer
service, new product offerings, application of new technologies and delivery
systems, and selective acquisitions. The Company operates an extensive branch
network and has a strong market presence in its primary markets in Pennsylvania
and Maryland. As a result of the development of broad banking relations with its
customers, the Company's lending and investing activities are funded almost
entirely by core deposits.
The Company's retail banking services include checking and savings
accounts, money market accounts, certificates of deposits, individual retirement
accounts, Christmas clubs, mutual funds, annuities, home equity lines of credit,
residential mortgage loans, home improvement loans, student loans, automobile
loans and personal loans. In general, the maximum unsecured consumer loan the
Company will extend is $15,000. Including home equity loans, consumer loans
accounted for 19% and residential mortgage loans accounted for 41% of the
Company's portfolio at September 30, 1995.
Prior to year-end 1995, Susquehanna plans to introduce six automatic
lending machines ("ALM"), three in its Maryland franchise and three in its
Pennsylvania franchise. ALMs represent a relatively new development in bank
services delivery systems and will afford consumers the convenience of 24 hour
credit up to a maximum loan amount of $5,000.
The Company is also initiating a credit card offering. Using
experience and resources developed in a pilot program operated through one of
its Pennsylvania bank subsidiaries, the credit card program has now been
5
<PAGE>
expanded to include similar offerings through other Susquehanna subsidiaries.
The program targets existing customers and selected prospects in Susquehanna's
market areas. Susquehanna expects to begin offering a debit card some time in
1996.
Through employees of Invest Financial Corporation based in Company
offices, Susquehanna offers its customers mutual funds and other financial
products.
In 1994, Susquehanna established a Marketing Customer Information File
("MCIF") system to provide instant access to customer and market data.
Management can quickly manipulate and analyze data to update ongoing strategic
planning processes. Examples of MCIF applications include measurement of product
usage by branch, profitability by product, and product customer usage and market
penetration. The MCIF has significantly improved the Company's speed, efficiency
and cost-effectiveness in cross-selling its retail products.
Through its subsidiary, Susque-Bancshares Life Insurance Co., the
Company additionally offers certain credit related insurance products.
The acquisition of the Maryland thrifts substantially enhances
Susquehanna's mortgage origination and mortgage banking capabilities. The
consolidation of the resources that are available throughout its system, planned
for 1996, will facilitate an expansion of Susquehanna's mortgage banking
operations in its Maryland and Pennsylvania markets.
The Company's subsidiary banks and thrifts focus their commercial
lending efforts on small and mid-size companies. Virtually all commercial loans
are secured by tangible assets.
Susquehanna's commercial lending operations include commercial,
financial and agricultural lending (11% of the total loan portfolio at September
30, 1995), real estate construction lending (10%), and commercial real estate
lending (17%). Loans originated by each subsidiary are subject to central review
and uniform Company credit standards. Nearly all of the Company's loans are
concentrated in the markets served by its subsidiary banks and thrifts.
Completed and Pending Acquisitions
Since 1972, Susquehanna has made 16 acquisitions totalling $1 billion
in assets, including the 1995 acquisitions in Maryland of Reisterstown and
Atlanfed totalling $512 million in assets. See "UNAUDITED SELECTED PRO FORMA
FINANCIAL DATA" and "UNAUDITED PRO FORMA FINANCIAL STATEMENTS." The Company
continues to selectively pursue the acquisition of strategically located branch
offices and whole institutions offering product expansion and/or geographic
expansion into nearby markets. The Company believes that attractive acquisition
opportunities could exist in central Pennsylvania, Maryland, Delaware, Virginia
and West Virginia.
The acquisition of Fairfax is anticipated to close in December 1995 or
during the first quarter of 1996. Fairfax is the holding company for Fairfax
Savings, FSB ("Fairfax Savings"), a federally chartered stock savings bank
which, as of September 30, 1995, had assets of $476 million and operated nine
banking offices located in metropolitan Baltimore and Carroll, Wicomico and
Worcester Counties in Maryland. Susquehanna currently anticipates that the
purchase price for the Fairfax acquisition will be approximately $63 million in
cash (subject to a closing book value adjustment) (the "Fairfax Merger").
Consummation of the Fairfax Merger is subject to the approval of the
Board of Governors of the Federal Reserve System ("Federal Reserve Board") and
the Director of the Office of Thrift Supervision ("OTS"). The required approvals
have been applied for, and management of Susquehanna believes that all required
regulatory approvals will be obtained by December 31, 1995. The Fairfax Merger
is also subject to satisfaction
6
<PAGE>
of various other conditions specified in the acquisition agreement. All
shareholder approvals required for the consummation of the Fairfax Merger have
been obtained.
Management of Susquehanna believes that the Fairfax Merger will be
consummated in December 1995 or during the first quarter of 1996. There is no
assurance, however, that the Fairfax Merger will be consummated, or that it will
not extend beyond such time period or be consummated on terms different than
those described herein. The merger agreement relating to the Fairfax Merger may
be terminated after December 31, 1995, unless the respective parties agree to
extend the time period by which the closing of such transactions must occur;
Susquehanna management believes that such expiration date will be extended (if
necessary) until March 31, 1996.
Financing Activities
Susquehanna intends to use the proceeds of the Common Stock offered
hereby to fund a portion of the estimated $63 million cash consideration
required to consummate the Fairfax Merger. See "USE OF PROCEEDS." In addition,
Susquehanna presently intends to raise an additional $30 million through a
public offering of senior debt securities. The net proceeds of such debt
offering, which is expected to be consummated in December 1995 or the first
quarter of 1996, will be used to fund a portion of the cash consideration
required in connection with the Fairfax Merger and for other general corporate
purposes. The offering of the Common Stock contemplated hereby and the
anticipated debt offering are both reflected in the pro forma financial
information contained in this Prospectus. See "UNAUDITED PRO FORMA FINANCIAL
STATEMENTS."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 1,500,000 shares
Common Stock to be outstanding after the offering..... 13,140,549 shares
Common Stock dividends................................ Currently paid at the
rate of $1.16 per
share annually
Nasdaq National Market symbol......................... SUSQ
</TABLE>
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
The Common Stock is traded in the over-the-counter market and quoted
on the Nasdaq National Market under the symbol "SUSQ." As of November 20, 1995,
there were 11,640,549 shares outstanding and approximately 5,750 shareholders of
record. Set forth below are the high and low sales prices of the Common Stock as
reported on the Nasdaq National Market for the period October 1 through November
20, 1995, the first three quarters of 1995, and the four quarters of 1994 and
1993. Also set forth below are the cash dividends declared during such periods.
All amounts have been adjusted to reflect the five-for-four stock split issued
on August 27, 1993.
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
Market Dividends Market Dividends Market Dividends
Price Declared Price Declared Price Declared
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $21.50-24.25 $.27 $23.75-28.00 $.25 $22.00-24.20 $.224
2nd Quarter $22.50-24.00 $.27 $23.75-25.00 $.25 $24.20-27.80 $.224
3rd Quarter $23.25-28.25 $.27 $23.50-24.25 $.25 $24.80-28.75 $.224
4th Quarter $26.50-30.25 $.29 $21.25-24.75 $.27 $26.75-28.75 $.250
</TABLE>
The last reported sale price for the Common Stock on the Nasdaq
National Market on November 20, 1995 was $30.00 per share. On November 20, 1995
Susquehanna paid a dividend of $.29 per share to shareholders of record on
October 31, 1995.
7
<PAGE>
It is the current policy of the Board of Directors to pay quarterly
dividends on the Common Stock. The payment of future dividends, however, is
dependent upon the earnings and financial condition of the Company and its
subsidiaries, the ability of the Company's subsidiaries to pay dividends to the
Company and other relevant factors. Payment of dividends by the Company's
banking and thrift subsidiaries is subject to a number of regulatory
restrictions. See "REGULATORY MATTERS--Limits on Dividends and Other Payments."
Each of Susquehanna's banking subsidiaries is presently permitted to pay
dividends without prior approval under such regulatory requirements; at
September 30, 1995, an aggregate of $23 million was available for the payment of
dividends to the Company without such prior regulatory approval.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the
Common Stock to fund a portion of the cash consideration for the Fairfax Merger.
The issuance of the Common Stock is not conditioned on the closing of the
Fairfax Merger. In the event that the Fairfax Merger is not consummated, the net
proceeds will be used for general corporate purposes, which may include funding
possible future acquisitions and increasing investments in the Company's banking
subsidiaries.
8
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of
Susquehanna, as of September 30, 1995, (i) on a historical basis as reported,
and (ii) as adjusted on a pro forma basis to reflect the issuance of senior
notes and the shares of Common Stock offered hereby (assuming no exercise of the
Underwriters' overallotment option) and (iii) as further adjusted on a pro forma
basis to reflect the use of the net proceeds from the offerings contemplated
hereby to fund the cash consideration for the Fairfax Merger. The pro forma
capitalization is based on, and is subject to, the assumptions set forth in the
notes to the Unaudited Pro Forma Financial Statements appearing elsewhere in
this Prospectus. The information presented should be read in conjunction with
such pro forma financial statements and the notes thereto.
<TABLE>
<CAPTION>
September 30, 1995
----------------------------------------------
As Adjusted
As for the Pro Forma for
Reported Offerings Fairfax Merger
---------- ---------------- ---------------
(In thousands, except ratios and share data)
<S> <C> <C> <C>
Long Term Debt:
Debt of parent............... $ 50,000 $ 50,000 $ 50,000
Debt of subsidiaries......... 41,979 41,979 54,179
Senior Note offering......... --- 30,000 30,000
-------- -------- --------
Total Long Term Debt....... 91,979 121,979 134,179
Shareholders' Equity:
Common stock: $2.00 par
value; 32,000,000 shares
authorized; 11,682,880,
13,182,880 and 13,182,880
shares issued; 11,640,549,
13,140,549 and 13,140,549
shares outstanding.......... 23,366 26,366 26,366
Surplus...................... 43,014 81,264 81,264
Retained earnings............ 168,436 168,436 168,436
Unrealized gains and losses
for available-for-sale
securities, net of tax
effects..................... (287) (287) (280)
Less: Treasury stock (42,331
shares at cost)............. 323 323 323
-------- -------- --------
Total shareholders' equity. 234,206 275,456 275,463
-------- -------- --------
Total capitalization....... $326,185 $397,435 $409,642
======== ======== ========
Capital Ratios:
Tier 1 risk-based capital
ratio....................... 11.86% 14.03% 11.09%
Total risk-based capital
ratio....................... 15.89 18.04 14.71
Leverage ratio............... 8.57 10.23 7.98
</TABLE>
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth certain selected consolidated
historical financial information for Susquehanna which has been derived from and
should be read in conjunction with, and is qualified in its entirety by, the
consolidated financial statements of Susquehanna, including the notes thereto,
incorporated by reference in this Prospectus. Interim unaudited data for the
nine month periods ended September 30, 1995 and 1994 reflect, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the periods ended
September 30, 1995 and 1994 are not necessarily indicative of results which may
be expected for any other period or for the fiscal year as a whole.
Balance Sheet and Income Statement Data
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------------- ----------------------------------------------------------------------
1995(1) 1994(2) 1994(2) 1993(2) 1992(2) 1991(2) 1990(2)
------------- ------------- ------------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(Unaudited)
(In thousands)
Balance Sheet Data:
Average assets................ $2,399,570 $2,089,519 $2,123,294 $1,965,863 $1,920,166 $1,859,874 $1,787,212
Average loans and leases,
net of unearned income....... 1,614,875 1,360,363 1,382,111 1,287,078 1,275,431 1,277,676 1,242,327
Average investment
securities................... 588,276 554,382 565,395 491,210 469,019 407,444 359,513
Average deposits.............. 1,992,814 1,762,360 1,785,782 1,669,427 1,631,472 1,574,316 1,513,274
Average shareholders'
equity....................... 224,771 217,027 217,206 202,383 186,629 173,712 162,625
Income Statement Data:
Net interest income........... $ 78,570 $ 69,004 $ 94,145 $ 87,027 $ 83,761 $ 77,898 $ 73,049
Provision for loan and lease
losses....................... 3,711 2,989 3,987 5,130 4,721 4,869 5,021
Net interest income after
provision for loan and
lease losses................. 74,859 66,015 90,158 81,897 79,040 73,029 68,028
Other income.................. 11,742 11,894 15,098 15,816 15,284 13,262 10,244
Other expense................. 59,549 53,402 72,710 66,004 63,611 58,489 54,435
Income before income taxes,
extraordinary item and
cumulative effect of a
change in accounting
principle.................... 27,052 24,507 32,546 31,709 30,713 27,802 23,837
Provision for income
taxes........................ 8,184 7,374 9,718 9,527 8,541 6,515 4,995
Income before extraordinary
item and cumulative effect
of a change in accounting
principle.................... 18,868 17,133 22,828 22,182 22,172 21,287 18,842
Extraordinary item............ --- (732) (732) --- --- --- ---
Cumulative effect of a
change in accounting
principle.................... --- --- --- 1,023 --- --- ---
Net income.................... 18,868 16,401 22,096 23,205 22,172 21,287 18,842
</TABLE>
- --------------------------
(1) Data for the nine months ended September 30, 1995 reflect the acquisition
of Reisterstown on April 21, 1995, accounted for as a purchase and the
acquisition of Atlanfed, accounted for as a pooling of interests.
(2) Data for the nine months ended September 30, 1994 and for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 have been restated to reflect
the acquisition of Atlanfed, accounted for as a pooling of interests.
10
<PAGE>
Financial Ratios
<TABLE>
<CAPTION>
At or for the Nine
Months Ended
September 30, At or for the Year Ended December 31,
------------------------- ----------------------------------------------------------------------
1995(1) 1994(2) 1994(2) 1993(2) 1992(2) 1991(2) 1990(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Performance
Ratios: (3)
Return on average total
assets before extraordinary
item and cumulative
effect of a change in
accounting principle......... 1.05% 1.10% 1.08% 1.13% 1.15% 1.14% 1.05%
Return on average common
shareholders' equity before
extraordinary item and
cumulative effect of a
change in accounting
principle.................... 11.22 10.55 10.51 10.96 11.88 12.25 11.59
Net interest margin........... 4.90 4.90 4.90 4.90 4.90 4.80 4.70
Asset Quality Ratios: (3)
Allowance for loan and
lease losses to total loans
and leases................... 1.65% 1.61% 1.63% 1.66% 1.41% 1.28% 1.16%
Allowance for loan and
lease losses to
nonperforming loans and
leases....................... 84.75 90.86 98.71 119.96 113.76 101.49 92.65
Net loans and leases
charged off to average
loans and leases............. .24 .16 .13 .15 .25 .25 .37
Nonperforming assets to
total loans and leases and
other real estate owned...... 2.30 2.31 2.00 2.05 2.06 1.91 1.88
Nonperforming loans and
leases to net loans and
leases....................... 1.95 1.77 1.65 1.38 1.24 1.26 1.26
Capital Ratios:
Average shareholders'
equity to average total
assets....................... 9.37% 10.39% 10.23% 10.29% 9.72% 9.34% 9.10%
Tier 1 risk-based capital
ratio........................ 11.86 13.55 14.20 15.23 13.88 13.02 12.12
Total risk-based capital
ratio........................ 15.89 14.80 15.45 16.48 15.13 14.21 13.21
Leverage ratio................ 8.57 9.34 9.89 10.32 9.49 9.51 8.95
</TABLE>
- -------------------
(1) Data for the nine months ended September 30, 1995 reflect the acquisition
of Reisterstown on April 21, 1995, accounted for as a purchase and the
acquisition of Atlanfed, accounted for as a pooling of interests.
(2) Data for the nine months ended September 30, 1994 and for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990 have been restated to reflect
the acquisition of Atlanfed, accounted for as a pooling of interests.
(3) Annualized where applicable.
11
<PAGE>
UNAUDITED SELECTED PRO FORMA FINANCIAL DATA
The following tables set forth unaudited selected pro forma data for
Susquehanna which gives effect to the Atlanfed acquisition, accounted for as a
pooling of interests, and each of the Fairfax Merger and the Reisterstown
acquisition, accounted for as purchases, all as if they had been consummated as
of January 1, 1994. The selected pro forma data is not necessarily indicative of
the results that would have been achieved had such transactions been consummated
on such dates and should not be construed as representative of future
operations. This presentation is subject to the assumptions set forth in the
notes to the Unaudited Pro Forma Financial Statements appearing elsewhere in
this Prospectus. The information presented should be read in conjunction with
such pro forma financial statements, and the notes thereto, and the historical
consolidated financial statements, including the notes thereto, of Susquehanna,
Atlanfed, Fairfax and Reisterstown incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
At or for the At or for the
Nine Months Ended Year Ended
September 30, December 31,
1995 1994
------------------ -----------------
<S> <C> <C>
(Dollars in thousands, except ratios)
Balance Sheet Data:
Average assets.......................... $2,976,423 $2,812,381
Average loans and leases, net of
unearned income........................ 2,099,105 1,921,820
Average investment securities........... 626,126 635,513
Average deposits........................ 2,442,068 2,336,176
Average shareholders' equity............ 266,021 258,456
Income Statement Data:
Net interest income..................... $ 92,336 $ 115,175
Provision for loan and lease losses..... 3,756 4,003
Other income............................ 14,514 25,995
Other expense........................... 71,657 91,584
Income before income taxes.............. 31,437 45,583
Net income from operations.............. 21,095 29,558
Earnings Performance Ratios: (1)
Return on average total assets.......... 0.95% 1.05%
Return on average common shareholders'
equity................................. 10.60 11.44
Net interest margin..................... 4.59 4.56
Asset Quality Ratios: (1)
Allowance for loan and lease losses to
total loans and leases................. 1.51% 1.52%
Allowance for loan and lease losses to
nonperforming loans and
leases................................ 86.77 112.86
Net loans and leases charged off to
average loans and leases............... 0.19 0.11
Nonperforming assets to total loans and
leases and other real
estate owned.......................... 2.15 1.82
Nonperforming loans and leases to net
loans and leases....................... 1.74 1.35
- -------------------------
</TABLE>
(1) Annualized where applicable.
12
<PAGE>
FINANCIAL OVERVIEW
The following should be read in conjunction with Susquehanna's
Consolidated Financial Statements for the year ended December 31, 1994, and for
the nine months ended September 30, 1995, including the related Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in Susquehanna's Current Report on Form 8-K dated November 20, 1995,
and Quarterly Report on Form 10-Q for the quarter ended September 30, 1995,
respectively, which are incorporated herein by reference. See "INCORPORATION OF
DOCUMENTS BY REFERENCE."
Earnings for the Nine Months Ended September 30, 1995 vs 1994
Net income for the nine months ending September 30, 1995 was $18.9
million compared to $16.4 million for the nine months ending September 30, 1994
or a 15% increase. Net income before extraordinary item for the nine months
ending September 30, 1994 was $17.1 million compared with $18.9 million in 1995
or an increase of $1.7 million or 10%. Earnings per share for the first nine
months before and after extraordinary item increased from $1.47 and $1.41 per
share, respectively, in 1994 to $1.62 per share for both before and after
extraordinary item in 1995. The increase in net income before extraordinary item
for the nine months is due primarily to an increase in net interest income of
$9.6 million offset by increases in operating expenses, loan loss provision and
income taxes of $6.1 million, $0.7 million and $0.8 million, respectively.
For the nine months ended September 30, 1995, return on average assets
was 1.05% which did not change from the comparable period in 1994, while return
on average equity was 11.22% for the first nine months of 1995 compared to
10.10% for 1994. Book value per share increased to $20.12 per share at September
30, 1995 from $18.66 per share at December 31, 1994 and from $18.65 per share at
September 30, 1994.
Net Interest Income
Susquehanna's major source of operating revenue is net interest income
which increased $9.6 million, 14%, over the comparable nine month period of
1994. The net interest margin, on a tax equivalent basis, for the nine month
periods ended September 30, 1995 and 1994 was 4.9%. Average yields on earning
assets were 8.4% for the nine month period ending September 30, 1995 compared to
7.7% in the comparable period of 1994. Average funding costs increased to 4.3%
for the nine months ended September 30, 1995 from 3.3% in the comparable period
in 1994. Therefore, the increase in net interest income was due to the growth in
earning assets primarily resulting from the acquisition of the Allegany branch
offices in July 1994 and Reisterstown in April 1995 and the $50 million
subordinated debt offering in February 1995.
An additional positive influence on the ability of Susquehanna to
maintain a net interest margin at or near 5.0% has been the increase in non-
interest-bearing demand deposits and earnings retention. While Susquehanna's
interest margin has generally remained at or near the 5.0% level, variances do
occur as an exact repricing match of assets and liabilities is not possible. See
"--Interest Rate Sensitivity."
Provision and Allowance for Losses on Loans and Leases
The following table summarizes the Company's provision and allowance
for loan and lease losses for the nine month periods ended September 30, 1995
and 1994:
13
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1995 1994
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Balance-Beginning of period.......................... $ 23,845 $ 21,717
Allowance acquired in business combination......... 3,323 __
Change in fiscal year.............................. (8) __
Additions charged to operating expenses............ 3,711 2,989
---------- ----------
30,871 24,706
---------- ----------
Charge-offs........................................ (3,694) (2,387)
Recoveries 771 795
---------- ----------
Net charge-offs.................................. (2,923) (1,592)
---------- ----------
Balance - Period end................................. $ 27,948 $ 23,114
========== ==========
Net charge-offs as a percent of average loans and
leases 0.24% 0.16%
(annualized).......................................
Allowance as a percent of period-end loans and leases 1.65% 1.61%
Average loans and leases............................. $1,614,875 $1,360,363
Period-end loans and leases.......................... 1,692,790 1,435,731
</TABLE>
As indicated by the table, the provision for losses on loans and
leases for the nine months ended September 30, 1995 was $3.7 million compared to
$3.0 million for the nine months ended September 30, 1994. This increase
resulted primarily from the rapid deterioration of one borrower. Susquehanna
performs quarterly reviews of the adequacy of the allowance for loan and lease
losses to determine the appropriate provision to be charged in that period.
Non-Interest Income
Non-interest income, recorded as other income, consists of service
charges on deposit accounts, commissions, fees received for travelers' check
sales and money orders, fees for trust services, premium income generated from
reinsurance activities, gains and losses on securities transactions, net gains
on sales of mortgages, net gains on sales of other real estate owned and other
miscellaneous income, such as safe deposit box rents. Other income as a
percentage of net interest income and other income was 13% and 15% for the nine
months ended September 30, 1995 and 1994, respectively.
Non-interest income for the first nine months decreased from $11.9
million in 1994 to $11.7 million in 1995 primarily due to net investment
security gains of $1.0 million in 1994 offset by the $0.6 million gain on sale
of student loans in September 1995.
14
<PAGE>
Non-Interest Expense
Non-interest expenses are categorized into five main groupings:
employee-related expenses, which include salaries, fringe benefits, and
employment taxes; occupancy expenses, which include depreciation, rents,
maintenance, utilities, and insurance; equipment expenses, which include
depreciation, rents and maintenance; FDIC insurance premiums on deposits; and
other expenses incurred in operating Susquehanna's business.
Non-interest expenses for the first nine months increased $6.1 million
from $53.4 million in 1994 to $59.5 million in 1995. This increase was primarily
due to salaries and employee benefits, an increase of $4.3 million and other
operating expenses, an increase of $2.0 million offset by a decline in FDIC
insurance premiums of $0.5 million. These increases and the decline were
significantly affected by the purchases of Reisterstown in April 1995 and the
Allegany branch offices in July 1994 and by the Bank Insurance Fund refund of
$1.0 million in September 1995. See "REGULATORY MATTERS--Federal Deposit
Insurance Corporation Improvement Act of 1991" and "--Proposed Legislation
Regarding SAIF Assessments."
Loan Portfolio
Loans and leases, net of unearned income, at September 30, 1995 and
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
December 31,
September 30, 1995 1994
-------------------- --------------------
(Dollars in thousands)
Balance Percent Balance Percent
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial, financial, and
agricultural.............. $ 192,502 11% $ 186,013 13%
Real estate - construction. 175,682 10 84,886 6
Residential mortgage....... 655,252 39 557,969 38
Commercial mortgage........ 330,883 20 294,673 20
Home equity................ 104,039 6 102,715 7
Consumer................... 216,250 13 223,963 15
Leases..................... 18,182 1 15,967 1
---------- --- ---------- ---
Total loans and
leases............. $1,692,790 100% $1,466,186 100%
========== === ========== ===
</TABLE>
Loans at September 30, 1995 were $1.7 billion compared to $1.4 billion
at September 30, 1994 and accounted for 67% of period-end assets in 1995
compared to 65% in 1994. Most of this growth is attributable to the Reisterstown
acquisition in April 1995. Average loans represented 72% and 69% of average
earning assets for the nine month periods in 1995 and 1994, respectively.
Asset Quality
The following table summarizes Susquehanna's risk assets at September
30, 1995, December 31, 1994 and September 30, 1994:
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
-------------- ------------- --------------
(Dollars in thousands)
<S> <C> <C> <C>
Nonperforming assets:
Nonaccrual loans and leases... $26,216 $17,215 $18,462
Restructured accrual loans.... 6,760 6,941 6,976
Other real estate owned....... 6,022 5,341 7,838
------- ------- -------
Total nonperforming assets...... $38,998 $29,497 $33,276
======= ======= =======
As a percent of period-end
loans and leases and
other real estate owned....... 2.30% 2.00% 2.31%
Loans and leases contractually
past due 90 days
and still accruing............ $ 4,402 $14,450 $ 7,387
</TABLE>
15
<PAGE>
Non-performing assets at September 30, 1995 were $39.0 million
compared to $33.3 million at September 30, 1994. This increase was primarily due
to one hotel loan with a principal balance of approximately $7 million that went
on nonaccrual status in March 1995. This loan is now current for principal and
interest and has been removed from nonaccrual status. Non-performing assets as a
percentage of total loans and other real estate owned was 2.30% at September 30,
1995 compared to 2.31% at September 30, 1994. The allowance for loan losses as a
percentage of non-performing loans was 85% at September 30, 1995 compared to 91%
at September 30, 1994. Net charge-offs annualized as a percentage of average
loans and leases equaled 0.24% at September 30, 1995 and 0.16% at September 30,
1994. Virtually all non-performing assets are secured by property having
substantial value, principally in the form of real estate. Property included in
the category of other real estate owned is carried at the lower of cost or fair
value.
Investment Securities
The following table summarizes the Company's investment portfolio at
September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
----------------------- ---------------------
Amortized Amortized Fair
cost Fair value cost value
----------- ---------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
Available-for-sale:
U.S. Treasury............ $161,946 $162,134 $189,461 $184,494
U.S. Government agencies. 52,538 52,153 22,042 20,932
Mortgage-backed.......... 113,701 112,451 70,797 68,505
Corporates............... 73,225 73,451 89,629 84,989
Equities................. 16,748 17,536 14,443 15,125
-------- -------- -------- --------
Total available-for-
sale.................. 418,158 417,725 386,372 374,045
-------- -------- -------- --------
Held-to-maturity:
U.S. Treasury............ $ 9,962 $ 10,180 $ 9,948 $ 9,655
U.S. Governmental
agencies................ 19,973 20,105 29,506 28,169
State & municipal........ 106,270 107,543 120,582 118,677
Mortgage-backed.......... 19,526 19,694 44,913 42,310
Corporates............... 19,025 19,249 19,002 18,224
-------- -------- -------- --------
Total held-to-maturity. 174,756 176,771 223,951 217,035
-------- -------- -------- --------
Total investment
securities.......... $592,914 $594,496 $610,323 $591,080
======== ======== ======== ========
</TABLE>
The investment security portfolio at September 30, 1995 totaled $593
million of which $418 million was classified as available-for-sale. The held-to-
maturity portfolio was $175 million at September 30, 1995 with a fair value of
$177 million. U.S. Treasury and U.S. government agency obligations accounted for
41% of the total investment security portfolio; state and municipal bonds, 18%;
corporate bonds, 16%; and mortgage-backed securities, 22%. The tax equivalent
yield for the nine months ended September 30, 1995 was 6.3% compared to 6.0% for
the same period of 1994.
Deposits
The following table summarizes the Company's deposits at September 30,
1995, December 31, 1994 and September 30, 1994:
16
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1995 1994 1994
------------- ------------ -------------
(Dollars in thousands)
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Demand................... $ 255,191 12% $ 261,045 14% $ 248,984 13%
Interest-bearing demand.. 471,909 23 464,052 25 475,060 26
Savings.................. 388,331 19 398,423 21 414,257 22
Time..................... 882,796 42 697,406 37 681,377 37
Time of $100 or more..... 89,814 4 45,404 3 39,961 2
---------- --- ---------- --- ---------- ---
Total deposits......... $2,088,041 100% $1,866,330 100% $1,859,639 100%
========== === ========== === ========== ===
</TABLE>
Susquehanna's core deposit base is its primary funding source.
Deposits are the primary funding source for earning assets. The deposit base
increased over the past year primarily through the Reisterstown acquisition.
Total deposits as of September 30, 1995 were $2.1 billion compared to $1.9
billion as of September 30, 1994. The deposit base consists primarily of in-
market deposits and there are no brokered deposits. Certificates of deposit of
$100,000 or more represent 4.3% of the total deposits.
Capital Adequacy
Susquehanna's total shareholders' equity at September 30, 1995 was
$234 million compared to $217 million at September 30, 1994. To date, the growth
of the equity account has been achieved through the retention of earnings. At
September 30, 1995, the Tier 1 risk-based capital, the total risk-based capital
and the leverage ratios were 11.86%; 15.89%; and 8.57%; respectively.
Interest Rate Sensitivity
Susquehanna employs a variety of methods to monitor interest rate
sensitivity and limit net interest income exposure. 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 analysis to evaluate rate sensitivity at a given point in time.
An institution with more assets repricing than liabilities over a
given time frame is considered asset sensitive, and one with more liabilities
repricing than assets is considered liability sensitive. An asset sensitive
institution will generally benefit from rising rates, and a liability sensitive
institution will generally benefit from declining rates. While Susquehanna has
had and will into the foreseeable future experience a negative gap position
(liability sensitive), the impact of a rapid rise in interest rates, as occurred
in 1994, did not have a significant effect on the net interest margin of
Susquehanna, which has consistently remained at or near the 5.0% level.
17
<PAGE>
REGULATORY MATTERS
The Company is a bank holding company subject to supervision and
regulation by the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended (the "BHC Act"). In general, the BHC Act and regulations
promulgated by the Federal Reserve Board limit the business of bank holding
companies to owning or controlling banks and engaging in such other activities
as the Federal Reserve Board may determine to be so closely related to banking
or managing or controlling banks as to be a proper incident thereto. With
certain exceptions, the BHC Act prohibits bank holding companies from acquiring
direct or indirect ownership or control of more than 5% of any class of voting
shares in any company, including any bank, without the prior approval of the
Federal Reserve Board. Since consummation of the Atlanfed and Reisterstown
acquisitions, the Company has also been subject to supervision and regulation by
the Office of Thrift Supervision ("OTS") as a savings and loan holding company.
Susquehanna's banking subsidiaries include four national banks, a
Maryland state-chartered bank, a Pennsylvania state-chartered bank and two
federally-chartered savings banks. These subsidiaries, therefore, are subject to
regulation and supervision by various regulatory agencies, including the state
banking authorities of Pennsylvania and Maryland, the Federal Reserve Board, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation (the
"FDIC") and the OTS. Various consumer laws and regulations also affect the
operations of the Company's subsidiaries.
Limits on Dividends and Other Payments
Susquehanna's ability to pay dividends is largely dependent upon the
receipt of dividends from its banking subsidiaries. Both federal and state laws
impose restrictions on the ability of these banking subsidiaries to pay
dividends. In addition to the specific restrictions discussed below, bank
regulatory agencies, in general, also have the ability to prohibit proposed
dividends by a bank or savings institution which would otherwise be permitted
under applicable regulations if the regulatory body determines that such
distribution would constitute an unsafe or unsound practice.
The Federal Reserve Board and the FDIC have issued policy statements
which provide that, as a general matter, insured banks and bank holding
companies may pay dividends only out of current operating earnings.
For national banks, the approval of the Comptroller of the Currency is
required for the payment of dividends in any calendar year by a national bank
subsidiary if the total of all dividends declared by such bank in a calendar
year exceeds the current year's net income combined with the retained net income
of the two preceding years. "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for that
period. Moreover, no dividends may be paid by a national bank in excess of its
undivided profits account.
Dividends payable by a Pennsylvania state-chartered bank are
restricted due to the requirement that such bank set aside to a surplus fund
each year at least 10% of its net earnings until such surplus equals the amount
of its capital. Furthermore, the payment of a dividend may not be made if it
results in the reduction of the surplus available to the bank.
For a Maryland state-chartered bank, dividends may be paid out of
undivided profits or, with the approval of the Maryland Bank Commissioner, from
surplus in excess of 100% of required capital stock. If, however, the surplus of
a Maryland bank is less than 100% of its required capital stock, cash dividends
may not be paid in excess of 90% of net earnings.
Federal regulations impose restrictions on dividend payments by
savings institutions, like Atlantic Federal Savings Bank and Reisterstown
Federal Savings Bank, which converted from mutual to stock ownership and were
federally insured at the time of the conversion. Upon conversion, these
regulations require that a "liquidation
18
<PAGE>
account" be established by restricting a portion of net capital for the benefit
of eligible savings account holders who maintain their savings accounts with the
institution after conversion. In the event of complete liquidation (and only in
such event), each savings account holder who continues to maintain a savings
account will be entitled to receive a distribution from the liquidation account
after payment to all creditors, but before any liquidation distribution with
respect to capital stock. This account is proportionately reduced for any
decreases in the eligible holder's savings accounts. Under federal regulations,
Atlantic Federal Savings Bank and Reisterstown Federal Savings Bank may not
declare or pay a cash dividend on common stock if the dividend would cause the
institution's capital to be reduced below the amount required for the
liquidation account or, as to all savings institutions, below the capital
requirements imposed by the OTS under the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), and regulations promulgated
thereunder.
Savings institution holding companies are required to give the OTS 30
days' prior notice of any proposed declaration of dividends to the holding
company.
Under OTS regulations, a savings institution that, immediately prior
to, and on a pro forma basis after giving effect to, a proposed dividend or
other capital distribution, has total capital (as defined by OTS regulation)
that is equal to or greater than the amount of its fully phased-in capital
requirements (a "Tier 1 Institution") generally is permitted without OTS
approval to make capital distributions during a calendar year in an aggregate
amount equal to the greater of (i) up to 100% of its net income to date during
the calendar year plus an amount that would reduce by one-half the amount by
which its total capital exceeded its fully phased-in risk-based capital
requirement at the beginning of the calendar year or (ii) up to 75% of its net
income for the previous four quarters. A savings institution with total capital
in excess of current minimum capital requirements but not in excess of the fully
phased-in requirements (a "Tier 2 Institution") is permitted, depending on the
institution's level of capital, to make capital distributions without OTS
approval of up to 25%, 50% or 75% of its net income for the previous four
quarters, less dividends already paid for such period, depending on the savings
institution's level of risk-based capital. A savings institution that fails to
meet current minimum capital requirements (a "Tier 3 Institution") is prohibited
from making any capital distributions without the prior approval of the OTS.
Tier 1 Institutions that have been notified by the OTS that they are in need of
more than normal supervision will be treated as either a Tier 2 or Tier 3
Institution. As of September 30, 1995, each of Atlantic Federal Savings Bank,
Reisterstown Federal Savings Bank and Fairfax Savings satisfied the requirements
of a Tier 1 Institution.
Savings institutions are further prohibited from making any capital
distributions if after making the distribution, an institution would have: (i) a
total risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based
capital ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%.
In accordance with the above regulatory restrictions, each of
Susquehanna's banking subsidiaries currently has the ability to pay dividends
and at September 30, 1995, an aggregate of $23 million was available for the
payment of dividends to Susquehanna without prior regulatory approval.
There are also statutory limits on the transfer of funds to the
Company and its nonbanking subsidiaries by its banking subsidiaries whether in
the form of loans or other extensions of credit, investments or asset purchases.
Such transfers by any banking subsidiary to the Company or to any such
nonbanking subsidiary generally are limited in amount to 10% of such bank's
capital and surplus, or 20% in the aggregate. Furthermore, such loans and
extensions of credit are required to be collateralized in specified amounts.
Holding Company Structure
Under Federal Reserve Board policy, a bank holding company is expected
to act as a source of financial strength to its subsidiary banks and to make
capital injections into a troubled subsidiary bank, and the Federal Reserve
Board may charge the bank holding company with engaging in unsafe and unsound
practices for failure to commit resources to a subsidiary bank when required. A
required capital injection may be called for at a time when the Company does not
have the resources to provide it. Any capital loans by the Company to its
subsidiary
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<PAGE>
bank would be subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank.
In addition, under FIRREA, depository institutions insured by the FDIC
can be held liable for any losses incurred by, or reasonably anticipated to be
incurred by, the FDIC after August 9, 1989 in connection with (i) the default of
a commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver and "in danger of default" is defined
generally as the existence of certain conditions indicating that a "default" is
likely to occur in the absence of regulatory assistance. Accordingly, in the
event that any insured subsidiary of the Company causes a loss to the FDIC,
other insured subsidiaries of the Company could be required to compensate the
FDIC by reimbursing it for the estimated amount of such loss.
For a description of certain other requirements relating to capital
distributions between depository institutions and bank holding companies and the
potential obligation of a bank holding company to guarantee the capital
restoration plans of any of its undercapitalized depository institution
subsidiaries, see "--Federal Deposit Insurance Corporation Improvement Act of
1991."
Capital Requirements
Bank holding companies are required to comply with risk-based capital
guidelines established by the Federal Reserve Board. The guidelines, which were
fully phased in at the end of 1992, establish a framework that is intended to
make regulatory capital requirements more sensitive to differences in risk
profiles among banking organizations and take off-balance sheet exposures into
explicit account in assessing capital adequacy. The risk-based ratios are
determined by allocating assets and specified off-balance sheet commitments into
four risk-weight categories, with higher levels of capital being required for
categories perceived as representing greater risk. Susquehanna's banking
subsidiaries are subject to substantially similar capital requirements.
Generally, under the applicable guidelines, a banking organization's
capital is divided into two tiers. "Tier 1", or core capital, includes common
equity, perpetual preferred stock (excluding auction rate issues) and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
other intangibles, subject to certain exceptions. "Tier 2", or supplementary
capital, includes, among other things, limited-life preferred stock, hybrid
capital instruments, mandatory convertible securities, qualifying subordinated
debt, and the allowance for loan and lease losses, subject to certain
limitations and less required deductions. "Total capital" is the sum of Tier 1
and Tier 2 capital. The Tier 1 component must comprise at least 50% of
qualifying total capital.
Banking organizations that are subject to the guidelines are required
to maintain a ratio of Tier 1 capital to risk-weighted assets of at least 4% and
a ratio of total capital to risk-weighted assets of at least 8%. The appropriate
regulatory authority may set higher capital requirements when an organization's
particular circumstances warrant.
The Federal Reserve Board and the FDIC have also adopted leverage
capital guidelines to which the Company and its banking subsidiaries are
subject. The guidelines provide for a minimum leverage ratio (Tier 1 capital to
adjusted total assets) of 3% for financial institutions that have the highest
regulatory examination ratings and are not experiencing or anticipating
significant growth. Financial institutions not meeting these criteria are
required to maintain leverage ratios of at least one to two percentage points
higher.
On December 15, 1994, the federal banking agencies adopted amendments
to their respective risk-based capital requirements that explicitly identify
concentration of credit risk and certain risks arising from nontraditional
activities and the management of such risks, as important factors to consider in
assessing an institution's overall capital adequacy. The amendments do not,
however, mandate any specific adjustments to the risk-based capital calculations
as a result of such factors. On August 2, 1995, the federal banking agencies
20
<PAGE>
published amendments to their risk-based capital rules that include interest-
rate risk as a qualitative factor to be considered in assessing capital
adequacy. Concurrent with the publication of the amendments, the federal banking
agencies proposed a system for measuring interest rate risk and announced their
intention, after a trial period to evaluate the reliability and accuracy of the
proposed system, to initiate a rulemaking process for the purpose of amending
the risk-based capital rules to include an explicit capital charge for interest-
rate risk that will be based upon the level of a bank's measured interest-rate
risk exposure.
On July 14, 1995, the federal banking regulators issued a proposal to
amend their risk-based capital rules to incorporate a measure for market risk in
foreign exchange and commodity activities and in the trading of debt and equity
instruments. Under the proposal, banks with relatively large trading activities
would calculate their capital charges for market risk using their own internal
value-at-risk models (subject to parameters set by the regulators) or,
alternatively, risk management techniques developed by the regulators. The
effect of the proposed rules would be that, in addition to existing capital
requirements for credit risk, certain institutions would be required to hold
capital based on the measure of their market risk exposure. These institutions
would be able to satisfy this additional requirement, in part, by issuing short-
term subordinated debt that qualifies as Tier 3 capital. The proposed rule would
go into effect at the end of 1997.
Failure to meet applicable capital guidelines could subject a banking
organization to a variety of enforcement actions, including limitations on its
ability to pay dividends, the issuance by the applicable regulatory authority of
a capital directive to increase capital and, in the case of depository
institutions, the termination of deposit insurance by the FDIC, as well as to
the measures described under "--Federal Deposit Insurance Corporation
Improvement Act of 1991" below, as applicable to undercapitalized institutions.
As of September 30, 1995 the Company's ratios of Tier 1 and total
capital to risk-weighted assets were 11.86% and 15.89%, respectively, and its
leverage ratio as of such date was 8.57%. As of September 30, 1995, each of the
Company's banking subsidiaries had capital in excess of all such requirements.
Federal Deposit Insurance Corporation Improvement Act of 1991
In December, 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), which substantially revised the
bank regulatory and funding provisions of the Federal Deposit Insurance Act and
made significant revisions to several other federal banking statutes. FDICIA
provides for, among other things, (i) a recapitalization of the Bank Insurance
Fund of the FDIC (the "BIF") by increasing the FDIC's borrowing authority and
providing for adjustments in its assessment rates; (ii) annual on-site
examinations of federally-insured depository institutions by banking regulators;
(iii) publicly available annual financial condition and management reports for
financial institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more scrutiny
and restrictions placed on depository institutions with lower levels of capital;
(vi) additional grounds for the appointment of a conservator or receiver; (vii)
a requirement that the FDIC use the least-cost method of resolving cases of
troubled institutions in order to keep the costs to insurance funds at a
minimum; (viii) more comprehensive regulation and examination of foreign banks;
(ix) consumer protection provisions including a Truth-in-Savings Act; (x) a
requirement that the FDIC establish a risk-based deposit insurance assessment
system; (xi) restrictions or prohibitions on accepting brokered deposits, except
for institutions which significantly exceed minimum capital requirements; and
(xii) certain additional limits on deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal
banking agencies take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. Pursuant to FDICIA,
the federal bank regulatory authorities have adopted regulations setting forth a
five-tiered system for measuring the capital adequacy of the depository
institutions that they supervise. Under these regulations, a depository
institution is classified in one of the following capital categories: "well
capitalized,"
21
<PAGE>
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." A depository institution is "well
capitalized" if it has (i) a total risk-based capital ratio of 10% or greater,
(ii) a Tier 1 risk-based capital ratio of 6% or greater, (iii) a leverage ratio
of 5% or greater and (iv) is not subject to any order, regulatory agreement or
written directive to meet and maintain a specific capital level for any capital
measure. An "adequately capitalized" institution is defined as one that has (i)
a total risk-based capital ratio of 8% or greater, (ii) a Tier 1 risk-based
capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater (or
3% or greater in the case of a bank with a composite CAMEL rating of 1). A
depository institution is considered (i) "undercapitalized" if it has (A) a
total risk-based capital ratio of less than 8%, (B) a Tier 1 risk-based capital
ratio of less than 4% or (C) a leverage ratio of less than 4% (or 3% in the case
of an institution with a CAMEL rating of 1), (ii) "significantly
undercapitalized" if it has (A) a total risk-based capital ratio of less than
6%, (B) a Tier 1 risk-based capital ratio of less than 3% or (C) a leverage
ratio of less than 3% and (iii) "critically undercapitalized" if it has a ratio
of tangible equity to total assets equal to or less than 2%. An institution may
be deemed by the regulators to be in a capitalization category that is lower
than is indicated by its actual capital position if, among other things, it
receives an unsatisfactory examination rating with respect to asset quality,
management, earnings or liquidity.
FDICIA generally prohibits a depository institution from making any
capital distribution (including payment of a cash dividend) or paying any
management fees to its holding company if the depository institution would
thereafter be undercapitalized. Undercapitalized depository institutions are
subject to growth limitations and are required to submit capital restoration
plans. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the parent
holding company in respect of any capital restoration plan is limited to the
lesser of (i) an amount equal to 5% of the depository institution's total assets
at the time it became undercapitalized and (ii) the amount which is necessary
(or would have been necessary) to bring the institution into compliance with all
capital standards applicable with respect to such institution as of the time it
fails to comply with the plan. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject
to a number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and stop accepting deposits from correspondent banks. Critically
undercapitalized institutions are subject to the appointment of a receiver or
conservator, generally within 90 days of the date such institution is determined
to be critically undercapitalized.
FDICIA also provides for increased funding of the FDIC insurance
funds. Under the FDIC's risk-based insurance premium assessment system, each
bank whose deposits are insured by the BIF is assigned one of the nine risk
classifications based upon certain capital and supervisory measures and,
depending upon its classification, is assessed premiums ranging from .04% to
.31% of domestic deposits. On November 14, 1995, the FDIC board of directors
voted to lower the BIF premium range to zero to .27% effective January 1996. The
rate schedule for deposits which are insured by the Savings Association
Insurance Fund ("SAIF") ranges from .23% to .31% of domestic deposits. All or a
portion of the deposits of several of Susquehanna's subsidiaries are SAIF-
insured. The rate schedule is subject to future adjustments by the FDIC. In
addition, the FDIC has authority to impose special assessments from time to
time. See "REGULATORY MATTERS--Proposed Legislation Regarding SAIF Assessments."
FDICIA provides the federal banking agencies with significantly
expanded powers to take enforcement action against institutions which fail to
comply with capital or other standards. Such action may include the termination
of deposit insurance by the FDIC or the appointment of a receiver or conservator
for the institution. FDICIA also limits the circumstances under which the FDIC
is permitted to provide financial assistance to an insured institution before
appointment of a conservator or receiver.
22
<PAGE>
Interstate Banking Legislation
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 ("Interstate Banking Act") was enacted into law on September 29, 1994. The
law eliminated substantially all state law barriers to the acquisition of banks
by out-of-state bank holding companies as of September 29, 1995. The law will
also permit interstate branching by banks effective as of June 1, 1997, subject
to the ability of states to opt-out completely or to set an earlier effective
date.
In response to the Interstate Banking Act, in April 1995 Maryland
adopted legislation permitting the acquisition of banks primarily subject to
Maryland banking laws by any out-of-state bank holding companies. The Maryland
legislation permits branching in Maryland prior to June 1, 1997 by out-of-state
banks as long as their home state reciprocates by allowing Maryland banks to
open branches there; after June 1, 1997 there are no reciprocity-based
restrictions. On July 6, 1995 Pennsylvania adopted legislation permitting
out-of-state bank holding companies unrestricted access to acquire Pennsylvania
banks. The Pennsylvania legislation permits out-of-state banks to set up
branches in Pennsylvania so long as their home state reciprocates by allowing
Pennsylvania banks to open branches there. The Company anticipates that the
effect of these new laws will be to increase competition within the markets in
which the Company now operates, although the Company cannot predict the extent
to which competition will increase in such markets or the timing of such
increase.
Proposed Legislation Regarding SAIF Assessments
The Seven-Year Balanced Budget Reconciliation Act of 1995 presently
before Congress includes provision for funding of the FDIC's SAIF at levels
mandated under current law. Known as the "Thrift Fund Bailout", the proposed
legislation would impose a one-time assessment between 77 and 85 basis points
per $100 of thrift deposits, including thrift deposits held by commercial banks.
Without the assessment it is believed that premiums paid by thrifts for federal
deposit insurance would be higher than premiums paid by banks for the
foreseeable future.
If enacted, the one-time assessment would be levied on January 1,
1996, and would affect several Susquehanna subsidiaries as follows (assuming an
assessment of 85 basis points on the deposit base at June 30, 1995):
Reisterstown Federal Savings Bank which paid a SAIF premium of $498,000 in 1995
but is expected to pay $1,934,000 in 1996 as the result of the one-time
assessment and $148,000 in 1997 by reason of the stabilization of the SAIF and
the concurrent reduction in premium; Atlantic Federal Savings Bank, which paid a
SAIF premium of $412,000 in 1995 but is expected to pay $1,527,000 in 1996 and
$117,000 in 1997 by reason of the stabilization of the SAIF and the concurrent
reduction in premium; and Farmers First Bank which paid a SAIF premium of
$138,000 in 1995 (by virtue of its acquisition by merger of a thrift in 1993)
but is expected to pay $509,000 in 1996 and $39,000 in 1997 by reason of
stabilization of the SAIF and the concurrent reduction in premium.
Fairfax Savings also would be subject to the assessment. In 1995,
Fairfax Savings paid $807,000 in SAIF premiums but is expected to pay $3,297,000
in 1996 as a result of the assessment and $252,000 in 1997 by reason of
stabilization of the SAIF and the concurrent reduction in premium. Whether the
Fairfax Merger is consummated in December 1995 or in the first quarter of 1996,
it is expected that Susquehanna will pay all, or substantially all, of the
assessment.
Payment of the 1996 one-time assessments is not expected to have
a material adverse effect upon the financial condition of Susquehanna, although
such assessments may have a material adverse effect upon results of operations
for 1995 if such legislation is enacted in 1995.
23
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The Company is authorized to issue 32,000,000 shares of Common Stock,
par value $2.00 per share, and 5,000,000 shares of preferred stock, without par
value ("Preferred Stock").
As of November 20, 1995, the Company had outstanding 11,640,549 shares
of Common Stock. No shares of Preferred Stock are currently outstanding.
Common Stock
Dividends
Holders of Common Stock are entitled to receive such dividends as may
be declared by the Company's Board of Directors out of funds legally available
therefor. Since the Company is a holding company, the funds required by the
Company to enable it to pay dividends are derived predominantly from the
dividends paid to the Company by its subsidiaries. The Company's ability to pay
dividends, therefore, is dependent upon the earnings, financial condition and
ability to pay dividends of the Company's subsidiaries, principally its banking
subsidiaries. Payment of dividends by the banking subsidiaries is subject to a
number of regulatory restrictions. See "REGULATORY MATTERS--Limits on Dividends
and Other Payments." Each of the Company's banking subsidiaries is presently
permitted to pay dividends without prior approval under such regulatory
requirements; at September 30, 1995, an aggregate of $23 million was available
for the payment of dividends to the Company.
Liquidation
In the event of liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of Preferred
Stock, if any, then outstanding.
Voting
Holders of Common Stock are entitled to one vote for each share held
by them at all meetings of the shareholders and are not entitled to cumulate
their votes for the election of directors.
No Preemptive Rights
Holders of Common Stock do not have any preemptive rights.
Transfer Agent and Registrar
Farmers First Bank, a subsidiary of the Company, is the transfer agent
and registrar for the Company's Common Stock.
Preferred Stock
The Company's Board of Directors has authority, without further vote
or action by the shareholders, to issue the Preferred Stock in one or more
series and to fix and determine the relative rights and preferences of each such
series.
24
<PAGE>
Pennsylvania Anti-Takeover Law Provisions
The Company is subject to various statutory "anti-takeover" provisions
of the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"),
including Subchapters 25E, F, G and H of the BCL.
Subchapter 25E (relating to control transactions) provides that if any
person or group acquires 20% or more of the voting power of a covered
corporation, the remaining shareholders may demand from such person or group the
fair value of their shares, including a proportionate amount of any control
premium.
Subchapter 25F (relating to business combinations) delays for five
years and imposes conditions upon "business combinations" between an "interested
shareholder" and the corporation. The term "business combination" is defined
broadly to include various transactions utilizing a corporation's assets for
purchase price amortization or refinancing purposes. An "interested shareholder"
is defined generally as the beneficial owner of at least 20% of a corporation's
voting shares.
Subchapter 25G (relating to control-share acquisitions) prevents a
person who has acquired 20% or more of the voting power of a covered corporation
from voting such shares unless the "disinterested" shareholders approve such
voting rights. Failure to obtain such approval exposes the owner to the risk of
a forced sale of the shares to the issuer. If shareholder approval is obtained,
the corporation is also subject to Subchapters 25I and J of the BCL. Subchapter
25I provides for a minimum severance payment to certain employees terminated
within two years of the approval. Subchapter 25J prohibits the abrogation of
certain labor contracts prior to their stated date of expiration.
Subchapter 25H (relating to disgorgement) applies in the event that
(1) any person or group publicly discloses that the person or group may acquire
control of the corporation or (2) a person or group acquires (or publicly
discloses an offer or intent to acquire) 20% or more of the voting power of the
corporation and, in either case, sells shares within 18 months thereafter. Any
profits from sales of equity securities of the corporation by the person or
group during the 18-month period belong to the corporation if the securities
that were sold were acquired during the 18-month period or within 24 months
prior thereto.
Subchapters 25E, F, G and H contain a wide variety of transactional
and status exemptions, exclusions and safe harbors. The foregoing descriptions
are qualified in their entirety by reference to the statutory provisions which
are filed as Exhibit 4.1 to the Registration Statement and incorporated herein
by reference.
In addition, the BCL permits an amendment of the corporation's
articles or other corporate action, if approved by shareholders generally, to
provide mandatory special treatment for specified groups of nonconsenting
shareholders of the same class by providing, for example, that shares of common
stock held only by designated shareholders of record, and no other shares of
common stock, shall be cashed out at a price determined by the corporation,
subject to applicable dissenters' rights.
The BCL also provides that directors may, in discharging their duties,
consider the interests of a number of different constituencies, including
shareholders, employees, suppliers, customers, creditors and the communities in
which the corporation is located. Directors are not required to consider the
interests of shareholders to a greater degree than other constituencies'
interests. The BCL expressly provides that directors do not violate their
fiduciary duties solely by relying on poison pills or the anti-takeover
provisions of the BCL.
Provisions in the Company's Articles of Incorporation and Bylaws
Certain provisions of the Company's articles of incorporation and
bylaws may have the effect of making more difficult non-negotiated tender or
exchange offers or other attempts to take over or acquire the Company's
business. These provisions may discourage some potential acquirors from
attempting such a transaction on terms which some shareholders might favor.
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<PAGE>
Currently, the Company has 5 million shares of authorized but unissued
shares of Preferred Stock and approximately 20 million shares of authorized but
unissued shares of Common Stock. Following the offering contemplated hereby, the
Company would have approximately 19 million shares of authorized but unissued
shares of Common Stock. As a general matter, the existence of unissued and
unreserved shares of capital stock provides a board of directors with the
ability to cause the issuance of shares of capital stock under circumstances
that might prevent or render more difficult or costly the completion of a
takeover. In addition, the rights and preferences of Preferred Stock as may be
established by the Company's Board of Directors could have the effect of
impeding a takeover of the Company.
The Company's bylaws provide that the number of directors shall be
fixed by the Board of Directors, and that the directors shall be divided into
three classes as nearly equal as possible, with each class serving for staggered
three year terms. Directors may be removed, with or without cause, by the vote
of the holders of 75% of the Company's outstanding shares entitled to vote for
directors generally.
The Company's bylaws establish advance notice procedures with regard
to the nomination, other than by management, of candidates for election as
directors. The Company's shareholders may act only at a shareholders' meeting or
by unanimous written consent.
The Board of Directors is authorized to amend the bylaws, subject to
the right of the shareholders to change such action by vote of 75% of the
Company's outstanding shares entitled to vote.
Article 10 of the Company's articles of incorporation authorizes the
Board of Directors to use defensive measures to oppose acquisition transactions
that it determines are not in the best interests of the Company, and permits the
Board of Directors to consider a broad range of factors in deciding whether to
oppose an acquisition transaction, including effects on employees, depositors,
customers and the communities served by the Company. Article 10 may not be
amended without the vote of 75% of the Company's outstanding shares entitled to
vote.
Article 11 of the Company's articles of incorporation, in general,
prohibits the Company from engaging in a broad range of business combinations
with any person or group having beneficial ownership of 20% or more of the
Company's shares entitled to vote generally for the election of directors unless
such business combination (i) was approved by the Board of Directors prior to
the time such person or group acquired more than 10% of the Company's voting
shares, (ii) is approved by 75% of the Company's voting shares where the
transaction satisfies specified fair price criteria and the 20% shareholder has
complied with specified procedural requirements, or (iii) is approved by 85% of
the Company's voting shares. In addition, where no 20% shareholder is involved,
Article 11 requires a merger or consolidation of the Company or a significant
sale or disposition of securities or assets of the Company or its subsidiaries
to be approved by 66 2/3% of the Company's outstanding shares entitled to vote
on such matter. Article 11 may only be amended by vote of 85% of the Company's
voting shares (75% if the amendment is approved by 85% of a board consisting
only of "continuing directors" as such term is defined in Article 11).
Article 14 of the Company's articles of incorporation limits the
voting rights of any person or group acquiring more than 10% of the Company's
outstanding voting shares. The voting rights limitations of Article 14, when
taken together with the provisions of Article 11, render it extremely unlikely
that a person or group subject to its provisions will be able to determine the
outcome of a vote on any transaction covered by Article 11. Shares held by such
person or group in excess of 10% of any class or series of Susquehanna stock are
entitled to only 1/10 of a vote per share, and all shares held by such person or
group may not cast more than 35% of the total number of votes which all holders
of a class or series of the Company's shares are entitled to cast with respect
to a particular matter. These provisions limiting voting rights may not be
waived or rendered inapplicable by the Board of Directors. Because the voting
rights limitations are imposed on persons or groups owning more than 10% of the
Company's outstanding voting shares (rather than the owners of more than 10% of
the outstanding voting power), the Board of Directors could issue shares of
Preferred Stock with enhanced voting rights that would permit a person to
exercise more than 10% of the voting power while owning 10% or
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<PAGE>
less of the outstanding voting shares. These voting rights limitations do not
apply to a person or group that consummates a tender offer which was an offer to
acquire all outstanding shares of Common Stock and which tender offer complied
with specified procedural and fair price requirements. Article 14 may only be
amended by vote of 85% of the votes entitled to be cast by all of the Company's
outstanding voting shares (two-thirds if the amendment is first approved by two-
thirds of a board consisting only of "continuing directors" as such term is
defined in Article 14).
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<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following tables set forth certain pro forma combined condensed
financial information of Susquehanna giving effect, as of January 1, 1994, to
(i) the Atlanfed acquisition, accounted for as a pooling of interests, (ii) the
Reisterstown acquisition, accounted for as a purchase, (iii) the issuance of
additional shares of Common Stock in the offering contemplated hereby and the
proposed issuance of senior notes to fund the cash consideration for the Fairfax
Merger, and (iv) the Fairfax Merger, accounted for as a purchase.
The information in the following tables is not necessarily indicative
of the results that would have been achieved had such transactions been
consummated on such dates and should not be construed as representative of
future operations. Such information is subject to the assumptions set forth in
the notes to these Unaudited Pro Forma Financial Statements. The information
presented should be read in conjunction with such notes and with the historical
financial statements, including the notes thereto, of Susquehanna, Atlanfed,
Fairfax and Reisterstown incorporated by reference in this Prospectus.
28
<PAGE>
Pro Forma Combined Condensed Balance Sheet
As of September 30, 1995
Unaudited
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Susquehanna Fairfax For Fairfax Susquehanna
As Reported As Reported* Acquisition Pro Forma
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks..................... $ 80,665 $ 2,942 $ 83,607
Short-term investments...................... 70,068 6,776 $ 71,000 [A] 84,844
(63,000) [B]
Investment securities....................... 592,481 22,861 615,342
Loans and leases, net of unearned income.... 1,692,790 424,648 2,117,438
Allowance for loan and lease losses......... 27,948 3,968 31,916
---------- -------- ----------
Net loans and leases........................ 1,664,842 420,680 2,085,522
Intangible assets[C]........................ 20,659 20,589 [D] 41,248
Other assets................................ 93,410 17,028 250 [A] 110,688
---------- -------- -------- ----------
Total Assets........................ $2,522,125 $470,287 $ 28,839 $3,021,251
========== ======== ======== ==========
LIABILITIES
Deposits.................................... $2,088,041 $386,247 $2,474,288
Short-term borrowings....................... 76,266 20,036 96,302
Long-term debt.............................. 91,979 12,200 $ 30,000 [A] 134,179
Other liabilities........................... 31,633 9,386 41,019
---------- -------- -------- ----------
Total Liabilities................... 2,287,919 427,869 30,000 2,745,788
EQUITY
Common stock................................ 23,366 150 3,000 [A] 26,366
(150) [E]
Surplus..................................... 43,014 195 38,250 [A] 81,264
(195) [E]
Retained earnings........................... 168,436 42,066 (42,066) [E] 168,436
Unrealized gain(loss) on securities
available-for-sale, net of tax............ (287) 7 (280)
Less: Treasury stock........................ 323 323
---------- -------- -------- ----------
Total Equity........................ 234,206 42,418 (1,161) 275,463
---------- -------- -------- ----------
Total Liabilities & Equity.. $2,522,125 $470,287 $ 28,839 $3,021,251
========== ======== ======== ==========
</TABLE>
*Fairfax information is as of June 30, 1995
[A] To record the issuance of 1.5 million shares of common stock at an assumed
public offering price of $29 per share and $30 million of senior debt at an
assumed interest rate of 7% for the acquisition of Fairfax and for other
general corporate purposes.
[B] To record the purchase of Fairfax for cash.
[C] Includes only those intangibles which are excluded from Tier 1 capital.
[D] To record excess purchase price (goodwill) for Fairfax.
[E] To eliminate the equity of Fairfax in consolidation (purchase accounting).
29
<PAGE>
Pro Forma Combined Condensed Statement of Income
Nine Months Ended September 30, 1995
Unaudited
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Susquehanna Adjustments
For Pro Forma for Fairfax For
Susquehanna Reisterstown Reisterstown Reisterstown As Fairfax
As Reported As Reported* Acquisition Acquisition Reported** Acquisition
----------- ------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $138,997 $7,137 $(326) [A] $145,808 $26,014
Interest expense........... 60,427 3,490 286 [B] 64,203 14,101 $ 1,182 [B]
-------- ------ ----- -------- ------- -------
Net interest income........ 78,570 3,647 (612) 81,605 11,913 (1,182)
Provision for loan
and lease losses........ 3,711 --- 3,711 45
-------- ------ ----- -------- ------- -------
Net interest income
after provision......... 74,859 3,647 (612) 77,894 11,868 (1,182)
Investment losses.......... (46) (46)
Other income.............. 11,788 565 12,353 2,207
Salaries and benefits...... 31,264 1,089 32,353 4,657
Other expense.............. 28,285 1,174 62 [C] 29,581 4,036
60 [D] 1,030 [C]
-------- ------ ----- -------- ------- -------
Income before taxes........ 27,052 1,949 (734) 28,267 5,382 (2,212)
Taxes...................... 8,184 843 (237) [E] 8,790 1,966 (414) [E]
-------- ------ ----- -------- ------- -------
Net income from operations. $ 18,868 $1,106 $(497) $ 19,477 $ 3,416 $(1,798)
======== ====== ===== ======== ======= =======
Earnings per share......... $1.62 N/A $1.67 N/A
Average shares outstanding. 11,638 N/A 11,638 N/A 1,500 [F]
<CAPTION>
Susquehanna
Pro Forma
---------
<S> <C>
Interest income............ $171,822
Interest expense........... 79,486
--------
Net interest income........ 92,336
Provision for loan
and lease losses........ 3,756
--------
Net interest income
after provision......... 88,580
Investment losses.......... (46)
Other income.............. 14,560
Salaries and benefits...... 37,010
Other expense.............. 34,647
--------
Income before taxes........ 31,437
Taxes...................... 10,342
--------
Net income from operations. $21,095
=======
Earnings per share......... $1.61
Average shares outstanding. 13,138
- ---------------------
</TABLE>
* Reisterstown information is for the three months ended December 31, 1994 and
the first 21 days of April 1995.
** Fairfax information is for the nine months ended June 30, 1995.
[A] Reduction of interest income to exclude use of proceeds prior to
Reisterstown purchase.
[B] Increase in interest expense regarding purchase price borrowings of $28,640
for Reisterstown and $22,000 for Fairfax.
[C] Goodwill amortization adjustment.
[D] Amortization of fair value purchase accounting adjustments.
[E] Tax effect on adjustments.
[F] Common stock issued to satisfy part of Fairfax purchase price.
30
<PAGE>
Pro Forma Combined Condensed Statement of Income
Year Ended December 31, 1994
Unaudited
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments Susquehanna Pro Forma
For Pro Forma For Adjustments
Susquehanna Reisterstown Reisterstown Reisterstown Fairfax As For Fairfax
As Reported As Reported* Acquisition Acquisition Reported* Acquisition
----------- ------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $150,633 $22,499 $ 27 [A] $173,159 $27,731
Interest expense........... 56,488 11,392 2,578 [B] 70,458 13,681 $ 1,576 [B]
-------- ------- ------- -------- ------- -------
Net interest income........ 94,145 11,107 (2,551) 102,701 14,050 (1,576)
Provision for loan
and lease losses......... 3,987 127 4,114 (111)
-------- ------- ------- -------- ------- -------
Net interest income
after provision.......... 90,158 10,980 (2,551) 98,587 14,161 (1,576)
Investment gains........... 999 141 1,140 1,923
Other income............... 14,099 3,374 17,473 5,459
Salaries and benefits...... 36,227 3,237 39,464 5,805
Other expense.............. 36,483 3,288 251 [C] 40,262 4,680
240 [A] 1,373 [C]
-------- ------- ------- -------- ------- -------
Income before taxes........ 32,546 7,970 (3,042) 37,474 11,058 (2,949)
Taxes...................... 9,718 3,385 (983) [D] 12,120 4,457 (552) [D]
-------- ------- ------- -------- ------- -------
Net income from operations. $ 22,828 $ 4,585 $(2,059) $ 25,354 $ 6,601 $(2,397)
======== ======= ======= ======== ======= =======
Earnings per share......... $1.96 N/A $2.18 N/A
Average shares outstanding. 11,634 N/A 11,634 N/A 1,500 [E]
<CAPTION>
Susquehanna
Pro Forma
---------
<S> <C>
Interest income............ $200,890
Interest expense........... 85,715
--------
Net interest income........ 115,175
Provision for loan
and lease losses......... 4,003
--------
Net interest income
after provision.......... 111,172
Investment gains........... 3,063
Other income............... 22,932
Salaries and benefits...... 45,269
Other expense.............. 46,315
--------
Income before taxes........ 45,583
Taxes...................... 16,025
--------
Net income from operations. $ 29,558
========
Earnings per share......... $2.25
Average shares outstanding. 13,134
- ----------------------
</TABLE>
* Reisterstown and Fairfax information is for the fiscal year ended
September 30, 1994.
[A] Amortization of fair value purchase accounting adjustments.
[B] Increase in interest expense regarding purchase price borrowings of $28,640
for Reisterstown and $22,000 for Fairfax.
[C] Goodwill amortization adjustment.
[D] Tax effect on adjustments.
[E] Common stock issued to satisfy part of Fairfax purchase price.
31
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement among the Company and the underwriters named below (the
"Underwriters"), for whom Oppenheimer & Co., Inc., Legg Mason Wood Walker,
Incorporated and Keefe, Bruyette & Woods, Inc. are acting as representatives
(the "Representatives"), each of the Underwriters has severally agreed to
purchase from the Company, and the Company has agreed to sell to the
Underwriters, the respective number of shares set forth opposite their names
below:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Oppenheimer & Co., Inc. ......................................
Legg Mason Wood Walker, Incorporated .........................
Keefe, Bruyette & Woods, Inc. ................................
---------
Total................................................ 1,500,000
=========
</TABLE>
The Underwriters are committed to purchase and pay for all such shares
if any are purchased.
The Company has been advised by the Representatives that the
Underwriters propose to offer the shares of Common Stock directly to the public
at the offering price set forth on the cover page of this Prospectus and to
certain selected dealers at such price less a concession of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the initial public offering of
the shares, the public offering price, concession and reallowance to dealers may
be changed by the Underwriters.
The Company has granted to the Underwriters an option exercisable
during a 30-day period after the date of this Prospectus to purchase up to
225,000 additional shares of Common Stock, solely to cover over-allotments, if
any, at the public offering price less the underwriting discount, as set forth
on the cover page of this Prospectus. To the extent the Underwriters exercise
such option, the Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 1,500,000 shares of Common Stock offered.
The Company and certain of its executive officers and directors have
agreed that they will not sell, contract to sell or otherwise dispose of any
equity securities of the Company for a period of 120 days after the date of this
Prospectus without the written consent of the Representatives, except for, in
the case of the Company, the securities offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, losses and expenses, including liabilities under the Securities
Act, or to contribute to payments that the Underwriters may be required to make
in respect thereof.
Certain of the Underwriters may in the ordinary course of business
engage in transactions with and perform services for the Company which may
include, among other things, investment banking transactions and services.
In connection with the offering contemplated hereby, certain
underwriters and selling group members (if any) or their respective affiliates
who are qualified registered market makers on the Nasdaq National Market may
engage in passive market making transactions in the Common Stock on the Nasdaq
National Market in accordance with Rule 10b-6A under the Exchange Act during the
two business day period before commencement of offers of sales of the Common
Stock. The passive market making transactions must comply with applicable volume
and price limits and be identified as such. In general, a passive market maker
may display its bid at a price not in excess of the highest independent bid for
the security; however if all independent bids are lowered below the passive
market maker's bid, such bid must be lowered when certain purchase limits are
exceeded.
32
<PAGE>
EXPERTS
Susquehanna
The consolidated balance sheets of Susquehanna as of December 31, 1994
and 1993 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994, incorporated by reference in this Prospectus, have been
incorporated herein in reliance on the report, which includes an explanatory
paragraph relating to the change in method of accounting for investments and
income taxes in 1993, of Coopers & Lybrand L.L.P., independent accountants to
Susquehanna, given upon the authority of said firm as experts in accounting and
auditing.
Atlanfed
The consolidated statements of financial condition of Atlanfed as of
March 31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 1995, incorporated by reference in this Prospectus, have
been incorporated herein in reliance on the report of KPMG Peat Marwick LLP,
independent accountants to Atlanfed, given upon the authority of said firm as
experts in accounting and auditing.
Fairfax
The consolidated financial statements of Fairfax and subsidiaries as
of September 30, 1995 and 1994 and the related consolidated statements of
income, stockholders' equity and cash flows for each of the years in the three-
year period ended September 30, 1995, incorporated by reference in this
registration statement, have been incorporated herein in reliance on the report
of KPMG Peat Marwick LLP, independent accountants, and upon the authority of
said firm as experts in accounting and auditing. Such report refers to the
Company's adoption in 1995 of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Reisterstown
The consolidated balance sheets of Reisterstown as of March 31, 1995
and September 30, 1994, and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the six months ended March
31, 1995 and each of the two years in the period ended September 30, 1994,
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report, which includes an explanatory paragraph relating to the
change in method of accounting for income taxes in 1993 and accounting for
certain debt and equity securities in 1995, of Coopers & Lybrand L.L.P.,
independent accountants to Reisterstown, given upon the authority of said firm
as experts in accounting and auditing.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon by
Morgan, Lewis & Bockius LLP, Harrisburg, Pennsylvania. Certain legal matters
will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Simpson Thacher & Bartlett will rely as to all matters of Pennsylvania law upon
the opinion of Morgan, Lewis & Bockius LLP.
33
<PAGE>
================================================================================
No dealer, salesperson or any other individual has been authorized to
give any information or make any representations not contained in this
Prospectus in connection with the offer covered by this Prospectus. If given or
made, such information or representations must not be relied upon as having been
authorized by the Company or by the Underwriters. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Stock in any jurisdiction where, or to any person to whom, it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has not been any change in the facts set forth in this Prospectus or in
the affairs of the Company since the date hereof.
____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................................................... 2
Incorporation of Documents
by Reference........................................................... 3
Susquehanna Bancshares, Inc. ............................................ 4
The Offering............................................................. 7
Dividends and Price Range of
Common Stock........................................................... 7
Use of Proceeds.......................................................... 8
Capitalization........................................................... 9
Selected Financial Data.................................................. 10
Unaudited Selected Pro Forma
Financial Data......................................................... 12
Financial Overview....................................................... 13
Regulatory Matters....................................................... 18
Description of Capital Stock............................................. 24
Unaudited Pro Forma Financial Statements................................. 28
Underwriting............................................................. 32
Experts.................................................................. 33
Legal Matters............................................................ 33
</TABLE>
================================================================================
================================================================================
1,500,000 Shares
Susquehanna Bancshares, Inc.
Common Stock
_____________________
P R O S P E C T U S
_____________________
Oppenheimer & Co., Inc.
Legg Mason Wood Walker
Incorporated
Keefe, Bruyette & Woods, Inc.
, 1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses to be incurred
in connection with this offering other than underwriting discounts and
commissions:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee.. $ 17,622
Nasdaq listing filing fee............................ 17,500
Printing............................................. 40,000
Accountants' fees and expenses....................... 100,000
Attorneys' fees and expenses......................... 60,000
Blue Sky fees and expenses........................... 12,500
Miscellaneous........................................ 2,378
--------
Total...................................... $250,000
========
</TABLE>
Item 15. Indemnification of Directors and Officers
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL"), provide that a business corporation may indemnify
directors and officers against liabilities they may incur as such provided that
the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In the case of actions against a director or
officer by or in the right of the corporation, the power to indemnify extends
only to expenses (not judgments and amounts paid in settlement) and such power
generally does not exist if the person otherwise entitled to indemnification
shall have been adjudged to be liable to the corporation unless it is judicially
determined that, despite the adjudication of liability but in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnification for specified expenses. Under Section 1743 of the BCL, the
corporation is required to indemnify directors and officers against expenses
they may incur in defending actions against them in such capacities if they are
successful on the merits or otherwise in the defense of such actions. Under
Section 1745 of the BCL, a corporation may pay the expenses of a director or
officer incurred in defending an action or proceeding in advance of the final
disposition thereof upon receipt of an undertaking from such person to repay the
amounts advanced unless it is ultimately determined that such person is entitled
to indemnification from the corporation. Article XIV of Susquehanna's Bylaws
provides indemnification of directors, officers and other agents of Susquehanna
and advancement of expenses to the extent otherwise permitted by Sections 1741,
1742 and 1745 of the BCL.
Section 1746 of the BCL grants a corporation broad authority to
indemnify its directors, officers and other agents for liabilities and expenses
incurred in such capacity, except in circumstances where the act or failure to
act giving rise to the claim for indemnification is determined by a court to
have constituted willful misconduct or recklessness. Pursuant to the authority
of Section 1746 of the BCL, Susquehanna has also entered into employment
agreements with certain principal officers which also provide for
indemnification in connection with the performance of their offices.
Article XIV conditions any indemnification or advancement of expenses
upon a determination, made in accordance with the procedures specified in
Section 1744 of the BCL, by Susquehanna's directors or shareholders that
indemnification or advancement of expenses is proper because the director or
officer met the standard of conduct set forth in Section 1741 or 1742 of the
BCL, as applicable.
As authorized by Section 1747 of the BCL and Article XIV, Susquehanna
maintains, on behalf of its directors and officers, insurance protection against
certain liabilities arising out of the discharge of their duties, as well as
insurance covering Susquehanna for indemnification payments made to its
directors and officers for certain liabilities. The premiums for such insurance
are paid by Susquehanna.
II-1
<PAGE>
Item 16. List of Exhibits.
The exhibits filed as part of this registration statement are as
follows:
<TABLE>
<CAPTION>
Exhibit
Number Document
- ------ --------
<S> <C>
1.1* Form of Underwriting Agreement
2.1 Agreement and Plan of Affiliation dated as of April 8, 1994, by and
among Susquehanna, Susquehanna Bancshares South II, Inc., Fairfax and
Fairfax Savings (1) (Exhibit 2(b)).
4.1 Articles of Incorporation of Susquehanna (2) (Attachment E).
4.2 By-laws of Susquehanna (2) (Attachment E).
4.3 Subchapters 25E, 25F, 25G, 25H of the Pennsylvania Business
Corporation Law of 1988, as amended. (3) (Exhibit 4.1)
5.1** Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1)
23.2** Consent of Coopers & Lybrand L.L.P. regarding Susquehanna
23.3** Consent of KPMG Peat Marwick LLP regarding Atlanfed
23.4** Consent of KPMG Peat Marwick LLP regarding Fairfax
23.5** Consent of Coopers & Lybrand L.L.P. regarding Reisterstown
24.1 Powers of Attorney are included on the signature page of this
Registration Statement
</TABLE>
- --------------------
* To be filed by amendment.
** Filed herewith.
(1) Exhibit incorporated herein by reference to the Registrant's Current
Report on Form 8-K dated May 5, 1994.
(2) Exhibit incorporated herein by reference to the Registrant's
Registration Statement on Form S-4 (registration no. 33-53608) filed
October 22, 1992.
(3) Exhibit incorporated herein to the Registrant's Registration Statement
on Form S-4 (registration no. 33-84966) filed October 11, 1994.
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the prospectus filed as part of this
registration statement in reliance upon Rule 430A
II-2
<PAGE>
and contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Lititz, Commonwealth of Pennsylvania, on
November 22, 1995.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Robert S. Bolinger
------------------------------------
ROBERT S. BOLINGER
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below in so signing also makes, constitutes and appoints
Robert S. Bolinger and Richard M. Cloney, and each of them acting alone, his
true and lawful attorney-in-fact, with full power of substitution, for him in
any and all capacities, to execute and cause to be filed with the Securities and
Exchange Commission any or all amendments and post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, and hereby ratifies and confirms all that said attorney-in-fact or
his substitute or substitutes may do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert S. Bolinger President and Chief Executive November 22, 1995
- -------------------------- Officer and a Director
ROBERT S. BOLINGER
/s/ J. Stanley Mull, Jr. Vice President and Treasurer November 22, 1995
- -------------------------- (Principal Financial and
J. STANLEY MULL, JR. Accounting Officer)
/s/ Richard M. Cloney Vice President, Secretary and November 22, 1995
- -------------------------- a Director
RICHARD M. CLONEY
/s/ John M. Denlinger Director November 22, 1995
- --------------------------
JOHN M. DENLINGER
/s/ Henry H. Gibbel Director November 22, 1995
- --------------------------
HENRY H. GIBBEL
/s/ George J. Morgan Director November 22, 1995
- --------------------------
GEORGE J. MORGAN
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ James G. Apple Director November 22, 1995
- --------------------------
JAMES G. APPLE
/s/ Edward W. Helfrick Director November 22, 1995
- --------------------------
EDWARD W. HELFRICK
/s/ Roger V. Wiest Director November 22, 1995
- --------------------------
ROGER V. WIEST
/s/ T. Max Hall Director November 22, 1995
- --------------------------
T. MAX HALL
/s/ Raymond M. O'Connell Director November 22, 1995
- --------------------------
RAYMOND M. O'CONNELL
/s/ Marley R. Gross Director November 22, 1995
- --------------------------
MARLEY R. GROSS
/s/ C. William Hetzer, Jr. Director November 22, 1995
- --------------------------
C. WILLIAM HETZER, JR.
/s/ Robert C. Reymer, Jr. Director November 22, 1995
- --------------------------
ROBERT C. REYMER, JR.
/s/ Richard E. Funke Director November 22, 1995
- --------------------------
RICHARD E. FUNKE
</TABLE>
S-2
<PAGE>
EXHIBIT 5.1
-----------
MORGAN, LEWIS & BOCKIUS LLP
ONE COMMERCE SQUARE
417 WALNUT STREET
HARRISBURG PA 17101
TEL: (717) 237-4000
FAX: (717) 237-4004
November 22, 1995
Susquehanna Bancshares, Inc.
26 North Cedar Street
P.O. Box 1000
Lititz, PA 17543
Re: Susquehanna Bancshares, Inc.
Registration Statement on Form S-3
----------------------------------
Gentlemen:
We have acted as counsel for Susquehanna Bancshares, Inc., a Pennsylvania
corporation (the "Company"), in connection with the preparation of the
subject registration statement, as amended (the "Registration Statement"),
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), to register the public
offering of up to 1,725,000 shares of the common stock, par value $2.00 per
share, of the Company (the "Common Stock"), including a maximum of 225,000
shares subject to an over-allotment option, pursuant to an underwriting
agreement (the "Underwriting Agreement") to be entered into between the
Company and Oppenheimer & Co., Inc., Keefe, Bruyette & Woods, Inc. and Legg
Mason Wood Walker, Incorporated, as representatives of the several
underwriters named therein (the "Underwriters"). In this connection, we
have reviewed (a) the Registration Statement; (b) the Company's Articles of
Incorporation, as amended, and Bylaws; and (c) certain records of the
Company's corporate proceedings as reflected in its minute books. In our
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity with the original of all documents submitted to us as copies
thereof.
In our opinion, the shares of Common Stock to be sold by the Company as
described in the Registration Statement (when and to the extent purchased
by the Underwriters in accordance with the Underwriting Agreement) will be
legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement and to all references to our firm in the
Registration Statement. In giving such consent, we do not thereby admit
that we are acting within the category of persons whose consent is required
under Section 7 of the Act and the rules and regulations of the Securities
and Exchange Commission thereunder.
Very truly yours,
MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement on
Form S-3 of our reports, which include explanatory paragraphs relating to the
change in method of accounting for investments and income taxes in 1993, on our
audits of the financial statements of Susquehanna Bancshares, Inc. prior to the
pooling with Atlanfed Bancorp, Inc., dated February 13, 1995, and as restated
for the pooling, dated February 13, 1995, except for note 2 as to which the date
is April 1, 1995. We also consent to the reference to our firm under the caption
"Experts".
COOPERS & LYBRAND L.L.P.
Harrisburg, PA
November 22, 1995
<PAGE>
EXHIBIT 23.3
------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Susquehanna Bancshares, Inc.
Lititz, Pennsylvania:
We consent to the use of our report dated May 5, 1995 on the financial
statements of Atlanfed Bancorp, Inc. incorporated herein by reference to the
Susquehanna Bancshares, Inc. Form 8-K/A-1 dated May 26, 1995 and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
November 22, 1995
<PAGE>
EXHIBIT 23.4
------------
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Fairfax Financial Corporation
Baltimore, Maryland:
We consent to incorporation by reference in the registration statement on Form
S-3 (Registration Statement) of Susquehanna Bancshares, Inc. (Susquehanna) of
our report dated November 14, 1995, relating to the consolidated statements of
financial condition of Fairfax Financial Corporation and subsidiaries (the
Company) as of September 30, 1995 and 1994, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the years
in the three-year ended September 30, 1995, which appears in Appendix A to
Susquehanna's Form 8-K dated November 21, 1995. Our report refers to the
Company's adoption in 1995 of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
We also consent to the reference to our firm under the heading "Experts" in the
Registration Statement.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
November 22, 1995
<PAGE>
EXHIBIT 23.5
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CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Susquehanna Bancshares, Inc. on Form S-3 of our report, which includes an
explanatory paragraph relating to the change in method of accounting for income
taxes in 1993 and of accounting for certain debt and equity securities in 1995,
dated April 12, 1995, on our audits of the consolidated financial statements of
Reisterstown Holdings, Inc. as of March 31, 1995 and September 30, 1994 and for
the six months ended March 31, 1995 and for the years ended September 30, 1994
and 1993. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Baltimore, MD
November 22, 1995
