<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1995
Registration No. 33-64541
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO.1
TO
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. [_]
<PAGE>
---------------
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 29, 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 28, 1995, the last reported sale price of the Common Stock on the
Nasdaq National Market was $29.00.
-----------
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.
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.
4
<PAGE>
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, all but one of
the Company's Pennsylvania-based bank subsidiaries had deposit market shares
of between 10% and 21% in their respective principal market areas.
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 of June 30, 1994, the latest
date for which information is available, the Company's Maryland-based bank
subsidiary had a deposit market share in excess of 20% in this market area. 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, trust service and mortgage banking 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
39% 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 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.
5
<PAGE>
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 mortgage lending
(20%). 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 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
6
<PAGE>
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 "Senior Notes"). The net proceeds of such
offering (the "Senior Note Offering"), which is expected to be consummated in
December 1995 or the first quarter of 1996, will be used to fund the remaining
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 Senior Note 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 28, 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 28, 1995 was $29.00 per share. On November 20, 1995
Susquehanna paid a dividend of $.29 per share to shareholders of record on
October 31, 1995.
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.
7
<PAGE>
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 or on the completion of the Senior Note Offering. 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.
CAPITALIZATION
The following table sets forth the consolidated capitalization of
Susquehanna, as of September 30, 1995, (i) on a historical basis as reported,
(ii) as adjusted on a pro forma basis to reflect the Senior Note Offering and
the offering of the shares of Common Stock contemplated 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 such
offerings 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>
8
<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)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
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
Income per common share
before extraordinary
item and cumulative
effect of a change in
accounting principle... 1.62 1.47 1.96 1.96 1.99 1.91 1.69
Net income per common
share.................. 1.62 1.41 1.90 2.05 1.99 1.91 1.69
Average common shares
outstanding............ 11,638 11,634 11,634 11,331 11,169 11,161 11,153
</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 on April 1, 1995, 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.
9
<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 on April 1, 1995, 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.
10
<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 (together with the Common
Stock offering contemplated hereby and the Senior Note Offering) 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
----------------- -------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA AND
RATIOS)
<S> <C> <C>
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
Net income per common share................... 1.61 2.25
Average common shares outstanding............. 13,138 13,134
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.
11
<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."
12
<PAGE>
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:
<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 (annualized)................................ 0.24% 0.16%
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.
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
13
<PAGE>
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>
SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ ------------------
BALANCE PERCENT BALANCE PERCENT
---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<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>
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.
14
<PAGE>
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 FAIR AMORTIZED FAIR
COST 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:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994 SEPTEMBER 30, 1994
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- ---------- -------
(DOLLARS IN THOUSANDS)
<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.
15
<PAGE>
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.
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.
16
<PAGE>
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 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.
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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 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,
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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 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
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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," "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
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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.
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
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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.
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.
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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.
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 an exhibit 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
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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.
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
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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 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).
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 in the Senior Note Offering
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.
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PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SUSQUEHANNA FAIRFAX FOR FAIRFAX SUSQUEHANNA
AS REPORTED AS REPORTED* ACQUISITION PRO FORMA
----------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS)
<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 Notes 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).
26
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS SUSQUEHANNA ADJUSTMENTS
FOR PRO FORMA FOR FAIRFAX FOR
SUSQUEHANNA REISTERSTOWN REISTERSTOWN REISTERSTOWN AS FAIRFAX SUSQUEHANNA
AS REPORTED AS REPORTED* ACQUISITION ACQUISITION REPORTED** ACQUISITION PRO FORMA
----------- ------------ ------------ ------------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $138,997 $7,137 $(326)[A] $145,808 $26,014 $171,822
Interest expense........ 60,427 3,490 286 [B] 64,203 14,101 $ 1,182 [B] 79,486
-------- ------ ----- -------- ------- ------- --------
Net interest income..... 78,570 3,647 (612) 81,605 11,913 (1,182) 92,336
Provision for loan and
lease losses........... 3,711 -- 3,711 45 3,756
-------- ------ ----- -------- ------- ------- --------
Net interest income
after provision........ 74,859 3,647 (612) 77,894 11,868 (1,182) 88,580
Investment losses....... (46) (46) (46)
Other income............ 11,788 565 12,353 2,207 14,560
Salaries and benefits... 31,264 1,089 32,353 4,657 37,010
Other expense........... 28,285 1,174 62 [C] 29,581 4,036 34,647
60 [D] 1,030 [C]
-------- ------ ----- -------- ------- ------- --------
Income before taxes..... 27,052 1,949 (734) 28,267 5,382 (2,212) 31,437
Taxes................... 8,184 843 (237)[E] 8,790 1,966 (414)[E] 10,342
-------- ------ ----- -------- ------- ------- --------
Net income from
operations............. $ 18,868 $1,106 $(497) $ 19,477 $ 3,416 $(1,798) $ 21,095
======== ====== ===== ======== ======= ======= ========
Earnings per share...... $ 1.62 N/A $ 1.67 N/A $ 1.61
Average shares
outstanding............ 11,638 N/A 11,638 N/A 1,500 [F] 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.
27
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS SUSQUEHANNA PRO FORMA
FOR PRO FORMA FOR ADJUSTMENTS
SUSQUEHANNA REISTERSTOWN REISTERSTOWN REISTERSTOWN FAIRFAX AS FOR FAIRFAX SUSQUEHANNA
AS REPORTED AS REPORTED* ACQUISITION ACQUISITION REPORTED* ACQUISITION PRO FORMA
----------- ------------ ------------ ------------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $150,633 $22,499 $ 27 [A] $173,159 $27,731 $200,890
Interest expense........ 56,488 11,392 2,578 [B] 70,458 13,681 $ 1,576 [B] 85,715
-------- ------- ------- -------- ------- ------- --------
Net interest income..... 94,145 11,107 (2,551) 102,701 14,050 (1,576) 115,175
Provision for loan and
lease losses........... 3,987 127 4,114 (111) 4,003
-------- ------- ------- -------- ------- ------- --------
Net interest income
after provision........ 90,158 10,980 (2,551) 98,587 14,161 (1,576) 111,172
Investment gains........ 999 141 1,140 1,923 3,063
Other income............ 14,099 3,374 17,473 5,459 22,932
Salaries and benefits... 36,227 3,237 39,464 5,805 45,269
Other expense........... 36,483 3,288 251 [C] 40,262 4,680 46,315
240 [A] 1,373 [C]
-------- ------- ------- -------- ------- ------- --------
Income before taxes..... 32,546 7,970 (3,042) 37,474 11,058 (2,949) 45,583
Taxes................... 9,718 3,385 (983)[D] 12,120 4,457 (552)[D] 16,025
-------- ------- ------- -------- ------- ------- --------
Net income from
operations............. $ 22,828 $ 4,585 $(2,059) $ 25,354 $ 6,601 $(2,397) $ 29,558
======== ======= ======= ======== ======= ======= ========
Earnings per share...... $ 1.96 N/A $ 2.18 N/A $ 2.25
Average shares
outstanding............ 11,634 N/A 11,634 N/A 1,500 [E] 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.
28
<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 has agreed that it will not issue or sell, and each director and
executive officer of the Company has also agreed not to sell, or otherwise
dispose of, directly or indirectly, any equity securities of the Company (or
any securities convertible into or exercisable or exchangeable for equity
securities of the Company) for a period of 120 days after the date of this
Prospectus without the prior written consent of the Representatives, except
for the Common Stock offered hereby and the issuance of Common Stock by the
Company pursuant to certain existing option and dividend reinvestment plans.
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.
29
<PAGE>
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.
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.
30
<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 AU-
THORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CON-
STITUTE 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............................................................. 8
Selected Financial Data.................................................... 9
Unaudited Selected Pro Forma Financial Data................................ 11
Financial Overview......................................................... 12
Regulatory Matters......................................................... 16
Description of Capital Stock............................................... 22
Unaudited Pro Forma Financial Statements................................... 25
Underwriting............................................................... 29
Experts.................................................................... 30
Legal Matters.............................................................. 30
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,500,000 SHARES
SUSQUEHANNA BANCSHARES, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
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>
- --------------------
* Filed herewith.
** Previously filed.
(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
amendment to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Lititz, Commonwealth of
Pennsylvania, on November 30, 1995.
SUSQUEHANNA BANCSHARES, INC.
By: /s/ Robert S. Bolinger
------------------------------------
ROBERT S. BOLINGER
President and Chief Executive Officer
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert S. Bolinger President and Chief Executive November 30, 1995
- -------------------------- Officer and a Director
ROBERT S. BOLINGER
/s/ J. Stanley Mull, Jr. Vice President and Treasurer November 30, 1995
- -------------------------- (Principal Financial and
J. STANLEY MULL, JR. Accounting Officer)
/s/ Richard M. Cloney Vice President, Secretary and November 30, 1995
- -------------------------- a Director
RICHARD M. CLONEY
* Director November 30, 1995
- --------------------------
JOHN M. DENLINGER
* Director November 30, 1995
- --------------------------
HENRY H. GIBBEL
* Director November 30, 1995
- --------------------------
GEORGE J. MORGAN
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
* Director November 30, 1995
- --------------------------
JAMES G. APPLE
* Director November 30, 1995
- --------------------------
EDWARD W. HELFRICK
* Director November 30, 1995
- --------------------------
ROGER V. WIEST
* Director November 30, 1995
- --------------------------
T. MAX HALL
* Director November 30, 1995
- --------------------------
RAYMOND M. O'CONNELL
* Director November 30, 1995
- --------------------------
MARLEY R. GROSS
* Director November 30, 1995
- --------------------------
C. WILLIAM HETZER, JR.
* Director November 30, 1995
- --------------------------
ROBERT C. REYMER, JR.
* Director November 30, 1995
- --------------------------
RICHARD E. FUNKE
* By /s/ Richard M. Cloney
----------------------
RICHARD M. CLONEY
Attorney-in fact
</TABLE>
S-2
<PAGE>
EXHIBIT 1.1
SUSQUEHANNA BANCSHARES, INC.
1,500,000 Shares
Common Stock
UNDERWRITING AGREEMENT
December __, 1995
OPPENHEIMER & CO., INC.
LEGG MASON WOOD WALKER, INCORPORATED
KEEFE, BRUYETTE & WOODS, INC.
c/o OPPENHEIMER & CO., INC.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto
Ladies and Gentlemen:
Susquehanna Bancshares, Inc., a Pennsylvania corporation (the "Company"),
proposes to sell to you and the other underwriters named on Schedule I to this
Agreement (the "Underwriters") for whom you are acting as Representatives, an
aggregate of 1,500,000 shares (the "Firm Shares") of the Company's Common Stock,
$2.00 par value (the "Common Stock"). In addition, the Company proposes to
grant to the Underwriters an option to purchase up to an additional 225,000
shares (the "Option Shares") of Common Stock from it for the purpose of covering
over-allotments in connection with the sale of the Firm Shares. The Firm Shares
and the Option Shares are together called the "Shares."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-64541) and a related
preliminary prospectus for the registration of the Shares under the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
thereunder (the "Securities Act Regulations"). The Company has prepared and
filed such amendments thereto, if any, and such amended preliminary
prospectuses, if any, as may have been required to the date hereof, and will
file such additional amendments thereto and such amended prospectuses as may
hereafter be required. The registration statement has been declared effective
under the Securities Act by the Commission. The registration statement as
amended at the time it became effective (including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act and
all information deemed to be a part of the registration statement at the time it
became effective pursuant to Rule 430A(b) of the Securities Act Regulations) is
hereinafter called the "Registration Statement," except that, if the Company
files a post-effective amendment to such registration statement which becomes
<PAGE>
2
effective prior to any Closing Date (as defined below), "Registration Statement"
shall refer to such registration statement as so amended. Each prospectus
included in the registration statement, or amendments thereof, before it became
effective under the Securities Act and any prospectus filed with the Commission
by the Company with the consent of the Representatives pursuant to Rule 424(a)
of the Securities Act Regulations (including the documents incorporated by
reference therein) is hereinafter called the "Preliminary Prospectus." The term
"Prospectus" means the final prospectus (including the documents incorporated by
reference therein), as first filed with the Commission pursuant to paragraph (1)
or (4) of Rule 424(b) of the Securities Act Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary Prospectus.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the date the Registration Statement becomes effective and the date of this
Agreement as the Underwriters deem advisable. The Company hereby confirms that
the Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).
SECTION 1. Representations and Warranties. (a) The Company
------------------------------
represents and warrants to each Underwriter as follows:
(i) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements thereto will, when they become
effective or are filed with the Commission, as the case may be, conform, in
all material respects with the requirements of the Securities Act and the
Securities Act Regulations thereunder; the Registration Statement did not,
and any amendment thereto will not, in each case as of the applicable
effective date, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; and the Prospectus and any amendment
or supplement thereto will not, as of the applicable filing date and at
each Closing Date (as hereinafter defined), contain an untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company by the Representatives
on behalf of the several Underwriters in writing expressly for use in the
Registration Statement or Prospectus.
(ii) The documents incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3 under the Securities Act, at the time they
were filed with the Commission, complied as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement of
<PAGE>
3
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(iii) The Company meets the requirements for the use of Form
S-3 under the Securities Act.
(iv) To the knowledge of the Company, the independent certified
public accountants who certified the financial statements included or
incorporated by reference in the Prospectus are independent public
accountants as required by the Securities Act and the Securities Act
Regulations.
(v) The financial statements, including the notes thereto and
the supporting schedules, included or incorporated by reference in the
Prospectus present fairly, in all material respects, the financial position
of the entities purported to be shown thereby, in each case at the dates
indicated, and the results of their operations for the periods specified;
and said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
except as otherwise stated therein. The pro forma financial statements and
selected pro forma financial data included in the Prospectus comply in all
material respects with the applicable requirements of Regulation S-X of the
Commission and reflect all adjustments necessary to summarize fairly, in
all material respects, the pro forma financial position and results of
operations of the entities purported to be shown thereby at the dates
indicated and for the periods specified.
(vi) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, of the Company and its subsidiaries
considered as one enterprise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (B)
to the knowledge of the Company, there has been no adverse change in the
condition (financial or other), earnings, business affairs or business
prospects of Fairfax (as such term is defined in the Registration Statement
and the Prospectus) or any of its subsidiaries which would, either
individually or in the aggregate, be material and adverse to the Company,
its subsidiaries and such other company considered as one enterprise,
unless in the event that the Company shall have elected to terminate the
merger agreement for such acquisition, (C) there have been no material
transactions entered into by the Company or its subsidiaries other than
those in the ordinary course of business, (D) the Company has not sustained
any material loss or interference with its assets, businesses or properties
(whether owned or leased) from fire, explosion, earthquake, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
any court or legislative or other governmental action, order or decree, and
(E) there has not been any change in the capital stock of the Company.
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania with corporate power and authority to own and
lease its properties and to conduct its
<PAGE>
4
business as described in the Prospectus and to enter into and perform its
obligations under this Agreement and to issue and sell the Shares; the
Company is duly qualified as a foreign corporation to transact business and
is in good standing in each jurisdiction, if any, in which its ownership or
leasing of properties or the conduct of its business requires such
qualification, except where the failure to so qualify would not have a
material adverse effect on the conduct of the business, condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; and the
Company is duly registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended.
(viii) Each of the subsidiaries of the Company has been duly
incorporated or organized and is validly existing as a corporation or
association under the laws of its jurisdiction of incorporation or
organization and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction, if any, in which its
ownership or leasing of properties or the conduct of its business requires
such qualification, except where the failure to so qualify would not have a
material adverse effect on the conduct of the business, condition
(financial or otherwise), earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise; and the
deposit accounts of each bank or thrift subsidiary of the Company are
insured by the Bank Insurance Fund or the Savings Association Insurance
Fund, as appropriate, of the Federal Deposit Insurance Corporation ("FDIC")
to the fullest amount permitted by law and the rules and regulations of the
FDIC, and no proceedings for the termination of such insurance are pending
or threatened.
(ix) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus, and all of the issued shares
of capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable (subject, however,
to the provisions of Section 55 of Title 12 of the United States Code and
any comparable provision of Maryland or Pennsylvania law) and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(x) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued, fully paid and non-assessable and not subject to
any pre-emptive or similar rights. Except as disclosed in the Registration
Statement and the Prospectus, there is no outstanding option, warrant or
other right calling for the issuance of, and there is no commitment, plan
or arrangement to issue, any share of stock of the Company or any security
convertible into, or exercisable or exchangeable for, such stock. The
Shares will conform to the description thereof contained in the Prospectus.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
<PAGE>
5
(xii) Neither the Company nor any of its subsidiaries is in
violation of its charter or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party or by which it or any of its properties
may be bound and which is material to the Company and its subsidiaries
considered as one enterprise; and the execution and delivery of this
Agreement, the issuance and sale of the Shares, the compliance by the
Company with the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or constitute a
breach of, or default under, the articles of incorporation or by-laws of
the Company or a breach or default under any contract, indenture, mortgage,
loan agreement, note, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of its properties may
be bound and which is material to the Company and its subsidiaries
considered as one enterprise nor (assuming compliance by the Underwriters
with all applicable state securities or blue sky laws) will such action
result in any violation on the part of the Company or its subsidiaries of
any applicable law or regulation or of any applicable administrative,
regulatory or court decree.
(xiii) There are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject which are
required to be disclosed in the Registration Statement and are not so
disclosed or which the Company has reasonable cause to believe would
individually or in the aggregate have a material adverse effect on the
consolidated financial position of the Company and its subsidiaries,
considered as one enterprise; and to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(xiv) No approval, authorization, consent, registration,
qualification or other order of any public board or body is required in
connection with the execution and delivery of this Agreement or the
issuance and sale of the Shares or the consummation by the Company of the
other transactions contemplated by this Agreement, except such as have been
obtained, or will have been obtained at each Closing Date, under the
Securities Act and such as may be required under the blue sky or securities
laws of various states in connection with the offering of the Shares.
(xv) The Company and its subsidiaries possess all material
licenses, certificates, authorities or permits issued by the appropriate
State or Federal regulatory agencies or bodies necessary to conduct their
businesses as described in the Prospectus, and neither the Company nor its
subsidiaries have received any notice of proceedings relating to the
revocation or modification of any such license, certificate, authority or
permit which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
effect on the conduct of the business, condition (financial or otherwise),
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise. Neither the Company nor any of
its subsidiaries is party to or otherwise the subject of any consent
decree, memorandum of understanding, written commitment or other
<PAGE>
6
supervisory agreement with the Board of Governors of the Federal Reserve
Board or any Federal Reserve Bank (the "Federal Reserve"), the FDIC, the
Office of the Comptroller of the Currency, or any other federal or state
authority or agency responsible for the supervision, regulation or
insurance of depository institutions or their holding companies.
(xvi) There are no contracts or other documents which are
required to be filed as exhibits to the Registration Statement by the
Securities Act or by the Securities Act Regulations which have not been
filed as exhibits to the Registration Statement.
(xvii) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement. Each
director and executive officer of the Company has delivered to the
Representatives his enforceable written agreement that he will not, for a
period of 120 days after the date of the Prospectus, offer for sale, sell,
distribute, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, or exercise any registration rights with respect
to, any shares of Common Stock (or any securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock) owned by him,
without the prior written consent of the Representatives.
(xviii) The Shares have been duly authorized for quotation on
the National Association of Securities Dealers Automated Quotation
("Nasdaq") National Market, subject to official notice of issuance.
(xix) The Agreement and Plan of Affiliation relating to the
Fairfax Merger (as such term is defined in the Registration Statement and
Prospectus) is in full force and effect and has not been amended, modified
in any material respect or terminated (except as otherwise disclosed in the
Registration Statement and Prospectus), nor has any party thereto taken any
action for that purpose. No action has been taken by the Federal Reserve,
the Office of Thrift Supervision or any other federal or state governmental
agency, authority or body to disapprove, enjoin or prohibit the
transactions contemplated by the Fairfax Merger, and to the best knowledge
of the Company no such action is threatened or contemplated.
(b) Any certificate signed by any officer of the Company and delivered
to you or to your counsel shall be deemed a representation and warranty by the
Company to you as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth:
<PAGE>
7
(a) The Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at $____ per share (the "Initial Price"), the
number of Firm Shares set forth opposite the name of such Underwriter on
Schedule I to this Agreement, plus any additional Shares which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) The Company grants to the several Underwriters an option to
purchase, severally and not jointly, all or any part of the Option Shares
at the Initial Price. The number of Option Shares to be purchased by each
Underwriter shall be the same percentage (adjusted by the Underwriters to
eliminate fractions) of the total number of Option Shares to be purchased
by the Underwriters as such Underwriter is purchasing of the Firm Shares.
Such option may be exercised only to cover over-allotments in the sales of
the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time on or before 12:00 noon, New York City time, on the
business day before the Firm Shares Closing Date (as defined below), and
only once thereafter within 30 days after the date of this Agreement, in
each case upon written or telegraphic notice, or verbal or telephonic
notice confirmed by written or telegraphic notice, by the Underwriters to
the Company no later than 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date or at least two business days
before the Option Shares Closing Date (as defined below), as the case may
be, setting forth the number of Option Shares to be purchased and the time
and date (if other than the Firm Shares Closing Date) of such purchase.
Payment of the purchase price for, and delivery of, the Shares shall
take place at the offices of Oppenheimer & Co., Inc., at Oppenheimer Tower,
World Financial Center, New York, New York 10281, or at such other place as
shall be agreed upon by the Representatives and the Company, at 10:00 A.M., New
York City time, on the [third][fourth] business day (unless postponed in
accordance with the provisions of Section 10) following the date of this
Agreement, or such other time as shall be agreed upon by the Representatives and
the Company (such time and date of payment and delivery being herein called the
"Firm Shares Closing Date"). Payment shall be made to the Company by certified
or official bank check or checks payable in New York Clearing House (next days)
funds, against delivery to the Underwriters of the Shares to be purchased by
them.
In the event the option with respect to the Option Shares is
exercised, delivery by the Company of the Option Shares to Oppenheimer & Co. for
the respective accounts of the Representatives and payment of the purchase price
by certified or official bank check or checks payable in New York Clearing House
(next day) funds to the Company shall take place at the offices of Oppenheimer &
Co., Inc. specified above at the time and on the date (which may be the same
date as, but in no event shall be earlier than, the Firm Shares Closing Date)
specified in the notice referred to in Section 2(b) above (such time and date of
delivery and payment are called the "Option Shares Closing Date"). The Firm
Shares Closing Date and the Option Shares Closing Date are called, individually,
a "Closing Date" and, together, the "Closing Dates."
<PAGE>
8
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section 2 hereof and shall be made available to the Representatives for checking
and packaging, at such place as is designated by the Representatives, on the
full business day before the Firm Shares Closing Date (or the Option Shares
Closing Date in the case of the Option Shares).
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Underwriter as follows:
(a) The Company will prepare the Prospectus in a form approved by the
Representatives and will file such Prospectus with the Commission pursuant
to subparagraph (1) or (4) of Rule 424(b) not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement. The Company will notify the Representatives
immediately, and confirm the notice in writing, (i) of the effectiveness of
the Registration Statement and any amendment thereto (including any post-
effective amendment), and of the filing of the Prospectus pursuant to Rule
424(b), (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any Preliminary Prospectus or
the Prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, or of the initiation or threatening
of any proceeding for any such purpose. The Company will make every
reasonable effort to prevent the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus or suspending any such qualification and, if any such order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) The Company will give the Representatives notice of its intention
to prepare or file any amendment to the Registration Statement relating to
the Shares (including any post-effective amendment) or any amendment or
supplement to the Prospectus (including documents deemed to be incorporated
by reference into the Prospectus and including any revised prospectus which
the Company proposes for use by the Underwriters in connection with the
offering of the Shares which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to
Rule 424(b) of the Securities Act Regulations), will furnish the
Representatives and counsel for the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which the Representatives or
counsel for the Underwriters shall reasonably object.
<PAGE>
9
(c) The Company will deliver to each Representative one manually
executed copy of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated by reference into the
Prospectus), such number of conformed copies of the Registration Statement
as originally filed and of each amendment thereto (including documents
incorporated by reference into the Prospectus but without exhibits) as such
Representative may reasonably request and copies of each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus.
(d) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the
Securities Act, such number of copies of the Prospectus (as amended or
supplemented, if applicable) as you may reasonably request for the purposes
contemplated by the Securities Act or the Securities Act Regulations.
(e) If any event shall occur as a result of which it is necessary, in
the reasonable opinion of counsel for the Underwriters, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
the light of the circumstances existing at the time it is delivered to a
purchaser, the Company will forthwith amend or supplement the Prospectus by
preparing and furnishing to the Underwriters a reasonable number of copies
of an amendment of or supplement to the Prospectus (in form and substance
satisfactory to counsel for the Underwriters) so that, as so amended or
supplemented, the Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances existing at the
time it is delivered to a purchaser, not misleading.
(f) The Company, during the period when the Prospectus is required to
be delivered under the Securities Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15
of the Exchange Act subsequent to the time the Registration Statement
becomes effective.
(g) The Company will endeavor, in cooperation with the
Representatives, to qualify the Shares for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Representatives may designate, and will maintain such
qualifications in effect for as long as may be required for the
distribution of the Shares, except that the Company shall not be required
in connection therewith to qualify as a foreign corporation or to execute a
general consent to service of process in any state or other jurisdiction.
The Company will file such statements and reports as may be required by the
laws of each jurisdiction in which the Shares have been qualified as above
provided.
(h) The Company will make generally available to its security holders
as soon as practicable after the effective date of the Registration
Statement an earning statement (in form complying with the provisions of
Rule 158 under the Securities Act) covering a twelve-month period beginning
after the date of this Agreement.
<PAGE>
10
(i) Without the prior written consent of the Representatives, for a
period of 120 days after the date of the Prospectus, the Company shall not
issue or sell, or otherwise dispose of, directly or indirectly, any equity
securities of the Company (or any securities convertible into or
exercisable or exchangeable for equity securities of the Company), except
for the issuance of the Shares pursuant to the Registration Statement, the
grant of awards and options pursuant to option or bonus plans existing on
the date hereof, the issuance of shares pursuant to the Company's existing
stock option plan or bonus plan and the issuance of shares of Common Stock
in connection with the Company's existing dividend reinvestment plan.
(j) For a period of five years (but not beyond any such date on which
no Shares shall be outstanding) after the Firm Shares Closing Date, the
Company will furnish to each Underwriter copies of all reports and
communications delivered to the Company's shareholders or to holders of the
Shares as a class and will also furnish copies of all reports (excluding
exhibits) filed with the Commission on forms 8-K, 10-Q and 10-K, and all
other reports and information furnished to its shareholders generally, not
later than the time such reports are first furnished to its shareholders
generally.
(k) On or before completion of this offering, the Company shall make
all filings required under applicable securities laws (including any
required registration under the Exchange Act) and all filings required to
be made in order to include the Shares for quotation on the Nasdaq National
Market.
SECTION 4. Payment of Expenses. The Company is responsible for
-------------------
paying all expenses incident to the performance of its obligations under this
Agreement (except for the fees and disbursements of the counsel for the
Underwriters other than pursuant to (iv) of this Section 4), including (i) the
printing and filing of the Registration Statement as originally filed and any
amendments and exhibits thereto, (ii) the preparation, issuance and delivery of
certificates for the Shares to the Underwriters, (iii) the fees and
disbursements of the Company's counsel and accountants, (iv) the expenses in
connection with the qualification of the Shares under state securities laws in
accordance with the provisions of Section 3(g), including filing fees and the
reasonable fees and disbursements of counsel to the Underwriters in connection
therewith and in connection with the preparation of the Blue Sky and Legal
Investment Surveys, (v) the printing and delivery to the Underwriters of copies
of the Registration Statement and all amendments thereto, of any Preliminary
Prospectuses and of the Prospectus and any amendments or supplements thereto,
(vi) the printing and delivery to the Underwriters of copies of the Blue Sky and
Legal Investment Surveys, (vii) all fees and expenses relating to the inclusion
of the Shares for quotation on the Nasdaq National Market and (viii) all
transfer taxes, if any, with respect to the sale and delivery of the Shares by
the Company to the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations
---------------------------------------
of the Underwriters to purchase and pay for the Shares are subject to the
accuracy of the representations and warranties of the Company herein contained
at and as of the date hereof
<PAGE>
11
and each Closing Date, to the performance by the Company of its obligations
hereunder, and to the following further conditions:
(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 3(a); and at such Closing Date, no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued under the Securities Act or proceedings
therefor initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus shall have been complied with and there shall
not have come to the attention of any Underwriter any facts that would
cause such Underwriter to believe that the Prospectus, at the time it was
required to be delivered to a purchaser of the Shares, contained an untrue
statement of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in light of the circumstances
existing at such time, not misleading.
(b) At each Closing Date you shall have received:
(1) The favorable opinion, dated as of such Closing Date, of Morgan,
Lewis & Bockius LLP, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Commonwealth of Pennsylvania.
(ii) The Company has the corporate power and authority to
own and lease its properties and to conduct its business as described
in the Prospectus and to enter into and perform its obligations under
this Agreement; and the Company is duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended.
(iii) Each of the bank subsidiaries of the Company and
each of the other subsidiaries of the Company, if any, which either
individually or in the aggregate constitute a "significant subsidiary"
as defined in Rule 405 of the Securities Act Regulations
(collectively, the "Significant Subsidiaries"), has been duly
incorporated and is validly existing as a corporation or national
banking association, as the case may be, under the laws of its
jurisdiction of incorporation or organization.
(iv) The Company has authorized, issued and outstanding
capital stock as set forth in the Registration Statement and the
Prospectus; the certificates evidencing the Shares are in due and
proper legal form and have been duly authorized for issuance by the
Company; all of the issued and outstanding shares of Common Stock of
the Company have been duly and validly authorized and issued and are
fully paid and nonassessable and none of them was issued in violation
of any preemptive or other similar right. To the best of such
counsel's knowledge, except as disclosed in the Registration
<PAGE>
12
Statement and the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any share of stock of the Company or any
security convertible into, exercisable for, or exchangeable for stock
of the Company. The Common Stock conforms to the description thereof
contained in the Registration Statement and the Prospectus.
(v) This Agreement has been duly authorized, executed
and delivered by the Company.
(vi) The Shares to be issued and sold by the Company to
the Underwriters hereunder have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein,
will be duly and validly issued, fully paid and non-assessable and not
subject to any pre-emptive or similar rights under the Pennsylvania
Business Corporation Law, the Company' articles of incorporation or
bylaws, or any agreement or other instrument known to us; and the
Shares will conform to the description thereof contained in the
Prospectus.
(vii) The Registration Statement was declared effective
under the Securities Act as of the date specified in such opinion and,
to the best of such counsel's knowledge and information, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the Securities Act and no proceedings therefor have been
initiated or threatened by the Commission.
(viii) The Registration Statement and the Prospectus and
any amendment or supplement thereto made by the Company prior to such
Closing Date (other than the financial statements and financial and
statistical data included therein, as to which no opinion need be
rendered), when it or they became effective or were filed with the
Commission, as the case may be, and in each case at such Closing Date,
complied as to form in all material respects with the requirements of
the Securities Act and the applicable rules and regulations thereunder
and the documents incorporated by reference into the Prospectus (other
than the financial statements and financial and statistical data
included therein, as to which no opinion need be rendered) complied
when filed with the Commission as to form in all material respects
with the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and such counsel have no
reason to believe that the Registration Statement, at the time it
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading or
that the Prospectus, at the time it was transmitted to the Commission
for filing or at such Closing Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements contained
therein, in the light of the circumstances under which they were made,
not misleading.
<PAGE>
13
(ix) To the best of their knowledge and information, there
are no legal or governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which are required
to be disclosed in the Registration Statement and are not so disclosed
or which, if adversely determined, would individually or in the
aggregate have a material adverse effect on the consolidated financial
position of the Company and its subsidiaries, considered as one
enterprise or which would affect the consummation of the transactions
contemplated in this Agreement or the issuance of the Shares; and to
the best of their knowledge and information, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others.
(x) The information in the Prospectus under the captions
"Regulatory Matters" and "Description of Capital Stock," to the extent
that it constitutes matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed by
them and is correct in all material respects.
(xi) To the best of their knowledge and information, there
are no contracts, indentures, mortgages, loan agreements, notes,
leases or other instruments required to be described in the
Registration Statement or to be filed as exhibits thereto other than
those described therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof in the Registration
Statement are correct in all material respects.
(xii) No approval, authorization, consent, registration,
qualification or other order of any public board or body is required
in connection with the execution and delivery of this Agreement or the
issuance and sale of the Shares or the consummation by the Company of
the other transactions contemplated by this Agreement, except such as
have been obtained under the Securities Act or such as may be required
under the blue sky or securities laws of various states in connection
with the offering and sale of the Shares (as to which such counsel
need express no opinion).
(xiii) The execution and delivery of this Agreement, the
issue and sale of the Shares, the compliance by the Company with the
provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or constitute a breach of,
or default under, the articles of incorporation or by-laws of the
Company or a breach or default under any contract, indenture,
mortgage, loan agreement, note, lease or other instrument known to
such counsel to which either the Company or any of its subsidiaries is
a party or by which any of them or any of their respective properties
may be bound except for such breaches as would not have a material
adverse effect, individually or in the aggregate, on the conduct of
the business, condition (financial or otherwise), earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, nor will such action (assuming
compliance by the Underwriters with all applicable state securities or
<PAGE>
14
blue sky laws) result in a violation on the part of the Company or any
of its subsidiaries of any applicable law or regulation or of any
administrative, regulatory or court decree known to such counsel.
In rendering their opinion, such counsel may rely, as to matters of
fact relating to the Company, upon certificates or representations of
officers of the Company relating to such facts.
(2) The favorable opinion, dated as such Closing Date, of
your counsel, Simpson Thacher & Bartlett, with respect to the matters
set forth in (i), (vi), (vii) and, solely as it relates to the
information set forth under the caption "Description of Capital Stock"
in the Prospectus, (x), of subsection (b)(1) of this Section. In
rendering their opinion, Simpson Thacher & Bartlett may rely as to
matters of Pennsylvania law upon the opinion of Morgan, Lewis &
Bockius LLP.
(c) At each Closing Date there shall not have been, since the
respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial or
otherwise, of the Company and its subsidiaries considered as one
enterprise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and you shall have received
a certificate of the President or the Vice President and Secretary of the
Company and the principal financial or accounting officer of the Company,
dated as of each such Closing Date, to the effect that there has been no
such material adverse change and to the effect that the other
representations and warranties of the Company contained in Section 1 are
true and correct with the same force and effect as though expressly made at
and as of such Closing Date and that the Company has complied with all its
agreements contained herein and that they have examined the Registration
Statement and the Prospectus and that, in their opinion, as of the
Effective Date and as of such Closing Date, the Registration Statement and
the Prospectus did not include any untrue statement of a material fact and
did not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(d) At the time of the execution of this Agreement, the
Representatives shall have received from Coopers & Lybrand L.L.P. a letter
dated such date, in form and substance satisfactory to the Representatives,
to the effect that (i) they are independent public accountants as required
by the Securities Act and the Securities Act Regulations; (ii) it is their
opinion that the financial statements included or incorporated by reference
in the Registration Statement and covered by their opinion therein comply
as to form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the applicable
rules and regulations thereunder; (iii) based upon limited procedures set
forth in detail in such letter, nothing has come to their attention which
causes them to believe that (A) the unaudited pro forma financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of Rule 11-02
of Regulation S-X or, after making inquiries of certain officials of the
Company
<PAGE>
15
as to the basis for their determination of the pro forma adjustments, that
the pro forma adjustments in such unaudited pro forma financial statements
have not been properly applied to the historical amounts in the unaudited
pro forma consolidated financial statements, (B) the unaudited financial
statements of the Company and its subsidiaries included in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 do
not comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the rules and regulations
of the Commission thereunder or are not fairly presented in conformity with
generally accepted accounting principles applied on a basis consistent in
all material respects with the audited financial statements included in the
Registration Statement, or (C) during the period from September 30, 1995 to
a specified date not more than five days prior to the date of this
Agreement, there has been any change in the capital stock or long-term
debt of the Company or its subsidiaries or any decrease in consolidated
total assets or shareholder's equity of the Company and its subsidiaries as
compared with the amounts shown in the September 30, 1995 consolidated
balance sheet incorporated by reference in the Registration Statement, or
any decrease, as compared with the corresponding period in the preceding
year, in net interest income or in the total or per share amounts of net
income of the Company and its subsidiaries on a consolidated basis, except
in each case as set forth or contemplated in the Registration Statement;
(iv) they have read in the Registration Statement the information in the
table under the caption "Capitalization" and the notes thereto and certain
dollar amounts, percentages and other financial information specified by
the Representatives which is included or incorporated by reference in the
Registration Statement and have performed the procedures set forth in
detail in such letter and have found such amounts, percentages or other
financial information to be in agreement with the relevant accounting and
financial records of the Company and its subsidiaries.
(e) At the time of the execution of this Agreement, the
Representatives shall have received letters dated such date, in form and
substance satisfactory to the Representatives from KPMG Peat Marwick LLP,
to the effect set forth in clauses (i), (ii) and (iii)(C) of paragraph (d)
above with respect to the financial statements of Fairfax incorporated by
reference in the Registration Statement.
(f) At each Closing Date the Representatives shall have received from
Coopers & Lybrand L.L.P. a letter, dated as of such Closing Date, to the
effect that they reaffirm the statements made in the letter furnished
pursuant to paragraph (d) of this Section, except that the "specified date"
referred to shall be a date not more than five days prior to such Closing
Date.
(g) At each Closing Date counsel for the Underwriters shall have been
furnished with such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Shares as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Shares as herein contemplated shall be
satisfactory in form and substance to you and your counsel.
<PAGE>
16
(h) The Nasdaq National Market shall have approved the Shares for
inclusion, subject to official notice of issuance.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representatives by notice to the Company at any time at or prior to such
Closing Date, and such termination shall be without liability of any party to
any other party except as provided in Section 9 and except that Sections 6 and 7
hereof shall survive such termination.
SECTION 6. Indemnification.
---------------
(a) The Company agrees to indemnify each Underwriter and hold each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act harmless as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission, if such settlement is effected with the
written consent of the Company, which shall not be unreasonably withheld;
and
(iii) against any and all expense whatsoever (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel
chosen by such Underwriter) reasonably incurred in investigating, preparing
or defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that the Company shall not be liable under this paragraph
- --------
6(a) in any case for any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by any Representative on behalf of the Underwriters
expressly for use in the Registration Statement (or any amendment thereto) or
any Preliminary Prospectus or the Prospectus (or any amendment or supplement
<PAGE>
17
thereto); and provided further that as to any Preliminary Prospectus this
----------------
indemnity agreement shall not inure to the benefit of any Underwriter or any
person controlling that Underwriter on account of any loss, liability, claim,
damage or expense arising from the sale of Shares to any person by that
Underwriter if that Underwriter failed to send or give a copy of the Prospectus,
as amended or supplemented at that time, to that person within the time required
by the Securities Act, and the untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact in such
Preliminary Prospectus was corrected in the Prospectus as so amended or
supplemented, unless such failure to deliver the Prospectus resulted from non-
compliance by the Company with paragraph 3(d) hereof. For purposes of the last
proviso to the immediately preceding sentence, the term "Prospectus" shall not
be deemed to include the documents incorporated therein by reference, and no
Underwriter shall be obligated to send or give any supplement or amendment to
any document incorporated by reference in any Preliminary Prospectus or the
Prospectus to any person other than a person to whom such Underwriter had
delivered such incorporated document or documents in response to a written
request therefor.
In case of any notice to the Company under this indemnity agreement with respect
to any loss, liability, claim, damage or expense with respect to any claim made
against any Underwriter or any person controlling such Underwriter, the Company
shall be entitled to participate at its own expense in the defense, or if it so
elects within a reasonable time after receipt of such notice, to assume the
defense of any suit brought to enforce any such claim, but if it so elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
reasonably satisfactory to such Underwriter or any person or persons controlling
such Underwriter, defendant or defendants in any suit so brought. In the event
that the Company elects to assume the defense of any such suit and retain such
counsel, such Underwriter or such controlling person or persons, defendant or
defendants in the suit, shall bear the fees and expenses of any additional
counsel thereafter retained by such Underwriter or such controlling person or
persons; provided, however, that, subject to Section 6(c) hereof, any
Underwriter shall have the right to employ counsel to represent such Underwriter
or any person who controls such Underwriter who may be subject to liability
arising out of any action in respect of which indemnity may be sought against
the Company if, in the reasonable judgment of counsel for such Underwriter,
representation of such Underwriter and the Company by the same counsel would be
inappropriate because there may be one or more legal defenses available to such
Underwriter or any such controlling person or persons which are different from
or additional to those available to the Company, in which event the fees and
expenses of appropriate separate counsel shall be borne by the Company.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, each of its officers who signed
the Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, but only arising out of untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any Preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by the
Representatives by or on behalf of such
<PAGE>
18
Underwriter expressly for use in the Registration Statement (or any amendment
thereto) or such Preliminary Prospectus or the Prospectus (or any amendment or
supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action threatened or commenced against it in respect
of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement except to the extent that
the indemnifying party has been prejudiced in any material respect by such
failure. An indemnifying party may participate at its own expense in the
defense of such action. In no event shall an indemnifying party be liable for
the fees and expenses of more than one counsel (in addition to local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(d) The provisions of this Section 6 shall apply only to losses,
liabilities, claims, damages and expenses arising out of the types of untrue
statements or alleged untrue statements or omissions or alleged omissions
described in paragraphs 6(a) and 6(b), respectively. The obligations of the
Company and the Underwriters under this Section 6 shall be in addition to any
liability which the Company or the Underwriters may otherwise have.
SECTION 7. Contribution. If the indemnification provided for in
------------
Section 6 shall for any reason be held to be unenforceable by the indemnified
party under Section 6(a) or 6(b), although applicable in accordance with its
terms, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other with
respect to such offering shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Underwriters, the intent of the
parties and their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
<PAGE>
19
result of the loss, claim damage or liability, or action in respect thereof,
referred to above in this Section 7 shall be deemed to include, for purposes of
this Section 7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 7 are several in proportion to their
respective underwriting obligations and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
- --------
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, although speaking only as of the dates at which such
representations, warranties and agreements are made, shall remain operative and
in full force and effect, regardless of any investigation made by or on behalf
of the Underwriters or by or on behalf of any person controlling the
Underwriters, or by or on behalf of the Company, and shall survive delivery of
the Shares to the Underwriters.
SECTION 9. Termination of Agreement. The Representatives may also
------------------------
terminate this Agreement with respect to the Shares to be purchased on a Closing
Date, by notice to the Company, at any time at or prior to such Closing Date (i)
if there has been, since the respective dates as of which information is given
in the Registration Statement, any material adverse change in the condition,
financial or otherwise, of the Company and its subsidiaries considered as one
enterprise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, (ii) if there has occurred any new
outbreak of hostilities or escalation of any existing hostilities or other
calamity or crisis the effect of which on the financial markets of the United
States is such as to make it, in the reasonable professional judgment of the
Representatives, impracticable to market the Shares or to enforce contracts for
the sale of the Shares, (iii) if there shall have occurred such a material
adverse change in general financial, political or economic conditions or the
effect of international conditions on the financial markets in the United States
is such as to make it, in the professional judgment of the Representatives,
impracticable to market the Shares or to enforce contracts for the sale of the
Shares, or (iv) if trading in the securities of the Company has been suspended
by the Commission or if trading or quotation generally on either the New York
Stock Exchange, the American Stock Exchange, or the Nasdaq National Market has
been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of said
Exchanges or the Nasdaq National Market or by order of the Commission or any
other governmental authority, or if a banking moratorium has been declared by
either federal, Pennsylvania or Maryland authorities.
<PAGE>
20
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the Company, except that (y) if this Agreement
is terminated by the Representatives or the Underwriters (i) because of any
failure, refusal or inability on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement or (ii) in
accordance with the provisions of clause (i) of the first paragraph of this
Section 9, the Company will reimburse the Underwriters for all out-of-pocket
expenses (including the reasonable fees and disbursements of their counsel)
incurred by them in connection with the proposed purchase and sale of the Shares
or in contemplation of performing their obligations hereunder and (z) no
Underwriter who shall have failed or refused to purchase the Shares agreed to be
purchased by it under this Agreement, without some reason sufficient hereunder
to justify cancellation or termination of its obligations under this Agreement,
shall be relieved of liability to the Company or to the other Underwriters for
damages occasioned by its failure or refusal.
SECTION 10. Default by An Underwriter. If one of the Underwriters
-------------------------
shall fail on any Closing Date to purchase the Shares which it is obligated to
purchase under this Agreement on such Closing Date (the "Defaulted Shares"), the
non-defaulting Underwriters shall have the right, within 24 hours thereafter, to
purchase, or make arrangements for any other underwriters to purchase, all, but
not less than all, of the Defaulted Shares in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the non-defaulting
Underwriters shall not have completed such arrangements within such 24-hour
period following such Closing Date, then:
(a) if the total number of Defaulted Shares does not exceed 10% of the
total number of Shares that all the Underwriters are obligated to purchase
on such Closing Date then the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 2 be increased pursuant to this Section 10 by
more than one-ninth of such number of Shares without the written consent of
such Underwriter, or
(b) if the total number of Defaulted Shares exceeds 10% of the total
number of Shares that all the Underwriters are obligated to purchase on
such Closing Date, this Agreement shall terminate without liability on the
part of the non-defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of such default which does not result in a termination of
this Agreement, either the non-defaulting Underwriters or the Company shall have
the right to postpone such Closing Date for a period not exceeding seven days in
order to effect any required changes in the Prospectus or in any other documents
or arrangements.
SECTION 11. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any
<PAGE>
21
standard form of telecommunication. Notices to the Underwriters shall be
directed to Oppenheimer & Co., Inc., Oppenheimer Tower, World Financial Tower,
New York, New York 10281, Attention of [Michael McClintock]; and notices to the
Company shall be directed to it at 26 North Cedar Street, Lititz, Pennsylvania
17543, Attention of Richard M. Cloney, Vice President and Secretary.
SECTION 12. Parties. This Agreement shall inure to the benefit of
-------
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties hereto and their respective successors, and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Shares from an Underwriter shall be deemed to be a successor by
reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. SPECIFIED TIMES OF DAY REFER
TO NEW YORK CITY TIME.
<PAGE>
22
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
SUSQUEHANNA BANCSHARES, INC.
By:_______________________________
Name:
Title:
Confirmed:
OPPENHEIMER & CO., INC.
LEGG MASON WOOD WALKER, INCORPORATED
KEEFE, BRUYETTE & WOODS, INC.
___________________________________
Acting severally on behalf of themselves
and as representatives of the several
Underwriters named in Schedule I annexed
hereto.
By OPPENHEIMER & CO., INC.
By___________________________________
Name:
Title:
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of Firm
Shares to be
Name of Underwriter Purchased
- ------------------- --------------
<S> <C>
Oppenheimer & Co., Inc. .............................
Legg Mason Wood Walker, Incorporated.................
Keefe, Bruyette & Woods, Inc. .......................
--------------
Total
==============
</TABLE>
<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
