<PAGE>
$35,000,000
SUSQUEHANNA BANCSHARES, INC.
6.30% SENIOR NOTES DUE 2003
----------------
Susquehanna Bancshares, Inc. ("Susquehanna" or the "Company") is offering
$35,000,000 aggregate principal amount of its 6.30% Senior Notes Due 2003 (the
"Senior Notes"). Interest on the Senior Notes is payable semiannually on
February 1 and August 1 of each year commencing August 1, 1996. The Senior
Notes will be available for purchase in denominations of $1,000 or any
integral multiple thereof. The Senior Notes are not redeemable prior to
maturity and no sinking fund is provided for the Senior Notes. See
"DESCRIPTION OF SENIOR NOTES."
The Senior Notes will be represented by one or more Global Notes registered
in the name of a nominee of The Depository Trust Company, as depository (the
"Depository"). Beneficial interests in the Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Except as described under "DESCRIPTION OF
SENIOR NOTES--Global Notes," Senior Notes in definitive form will not be
issued and owners of beneficial interests in the Global Notes will not be
considered holders of the Senior Notes. Settlement will be made in immediately
available funds. The Senior Notes will trade in the Depository's Same-Day
Funds Settlement System until maturity, and secondary market trading activity
in the Senior Notes will therefore settle in immediately available funds. All
payments of principal and interest will be made by the Company in immediately
available funds. See "DESCRIPTION OF SENIOR NOTES--Same-Day Settlement and
Payment."
----------------
THE SENIOR NOTES 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.
THE SENIOR NOTES 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(1) DISCOUNT(2) COMPANY(1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note......................... 99.776% .75% 99.026%
Total................................... $34,921,600 $262,500 $34,659,100
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from January 29, 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "UNDERWRITING."
(3) Before deducting expenses payable by the Company estimated to be $138,000.
----------------
The Senior Notes are offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that the Senior Notes
will be delivered in book-entry form only through the facilities of the
Depository on or about January 29, 1996.
----------------
OPPENHEIMER & CO., INC. LEGG MASON WOOD WALKER
INCORPORATED
The date of this Prospectus is January 23, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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 contemplated hereby 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.
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 June 30, 1995, Susquehanna is
the ninth 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 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
5
<PAGE>
expanded to include similar offerings through other Susquehanna subsidiaries.
The program targets existing customers and selected prospects in Susquehanna's
market areas. Susquehanna expects to begin offering a debit card some time in
1996.
Through employees of Invest Financial Corporation based in Company offices,
Susquehanna offers its customers mutual funds and other financial products.
In 1994, Susquehanna established a Marketing Customer Information File
("MCIF") system to provide instant access to customer and market data.
Management can quickly manipulate and analyze data to update ongoing strategic
planning processes. Examples of MCIF applications include measurement of
product usage by branch, profitability by product, and product customer usage
and market penetration. The MCIF has significantly improved the Company's
speed, efficiency and cost-effectiveness in cross-selling its retail products.
Through its subsidiary, Susque-Bancshares Life Insurance Co., the Company
additionally offers certain credit related insurance products.
The acquisition of the Maryland thrifts substantially enhances Susquehanna's
mortgage origination and mortgage banking capabilities. The consolidation of
the resources that are available throughout its system, planned for 1996, will
facilitate an expansion of Susquehanna's mortgage banking operations in its
Maryland and Pennsylvania markets.
The Company's subsidiary banks and thrifts focus their commercial lending
efforts on small and mid-size companies. Virtually all commercial loans are
secured by tangible assets.
Susquehanna's commercial lending operations include commercial, financial
and agricultural lending (11% of the total loan portfolio at September 30,
1995), real estate construction lending (10%), and commercial 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 1982, 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 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"). All required approvals
have been received. 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.
6
<PAGE>
Management of Susquehanna believes that the Fairfax Merger will be
consummated 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 March 31, 1996, unless the respective parties agree to extend the time
period by which the closing of such transaction must occur.
FINANCING ACTIVITIES
In December 1995, Susquehanna completed a public offering of 1,495,000
additional shares of Common Stock (the "Common Stock Offering"). The net
proceeds of the Common Stock Offering (approximately $37.6 million) will be
used to fund a portion of the estimated $63 million cash consideration
required to consummate the Fairfax Merger. Susquehanna intends to use the
proceeds of the Senior Notes offered hereby to fund the remaining portion of
the cash consideration required to consummate the Fairfax Merger and for
general corporate purposes. See "USE OF PROCEEDS." The offering of the Senior
Notes contemplated hereby and the Common Stock Offering are both reflected in
the pro forma financial information contained in this Prospectus. See
"UNAUDITED PRO FORMA FINANCIAL STATEMENTS."
7
<PAGE>
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Senior
Notes to fund a portion of the cash consideration for the Fairfax Merger and
for general corporate purposes. The issuance of the Senior Notes is not
conditioned on the closing of the Fairfax Merger. In the event that the
Fairfax Merger is not consummated, all of 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 Common Stock Offering and
the offering of the Senior Notes contemplated hereby 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 AS ADJUSTED PRO FORMA FOR
REPORTED FOR THE 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.. -- 35,000 35,000
-------------- -------------- --------------
Total Long Term
Debt............... 91,979 126,979 139,179
Shareholders' Equity:
Common stock: $2.00
par value; 32,000,000
shares authorized;
11,682,880,
13,177,880 and
13,177,880 shares
issued; 11,640,549,
13,135,549 and
13,135,549 shares
outstanding.......... 23,366 26,356 26,356
Surplus............... 43,014 77,612 77,612
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............. 234,206 271,794 271,801
-------------- -------------- --------------
Total capitaliza-
tion............... $ 326,185 $ 398,773 $ 410,980
============== ============== ==============
Capital Ratios:
Tier 1 risk-based cap-
ital ratio........... 11.85% 13.82% 10.91%
Total risk-based capi-
tal ratio............ 15.87 17.82 14.52
Leverage ratio........ 8.57 10.08 7.85
</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 secu-
rities................. 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 af-
ter 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 ef-
fect of a change in ac-
counting 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 extraordi-
nary item and cumula-
tive effect of a change
in accounting princi-
ple.................... 18,868 17,133 22,828 22,182 22,172 21,287 18,842
Extraordinary item...... -- (732) (732) -- -- -- --
Cumulative effect of a
change in accounting
principle.............. -- -- -- 1,023 -- -- --
Net income.............. 18,868 16,401 22,096 23,205 22,172 21,287 18,842
</TABLE>
- --------
(1) Data for the nine months ended September 30, 1995 reflect the acquisition
of Reisterstown on April 21, 1995, accounted for as a purchase and the
acquisition of Atlanfed 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 RA-
TIOS:(3)
Return on average total
assets before extraor-
dinary item and cumula-
tive effect of a change
in accounting princi-
ple.................... 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 ef-
fect of a change in ac-
counting 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 capi-
tal ratio.............. 11.85 13.55 14.20 15.23 13.88 13.02 12.12
Total risk-based capital
ratio.................. 15.87 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
RATIOS OF EARNINGS TO
FIXED CHARGES:(4)
Excluding interest on
deposits............... 4.21x 7.17x 6.66x 7.75x 6.63x 5.22x 4.16x
Including interest on
deposits............... 1.44x 1.60x 1.57x 1.56x 1.44x 1.30x 1.24x
</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.
(4) For purposes of computing these ratios, earnings represent income before
income taxes, extraordinary item and cumulative effect of a change in
accounting principle plus fixed charges. Fixed charges, excluding
interest on deposits, include interest (other than on deposits), whether
expensed or capitalized, and that portion of rental expense (generally
one third) deemed representative of the interest factor. Fixed charges,
including interest on deposits, include all interest, whether expensed or
capitalized, and that portion of rental expense (generally one third)
deemed representative of the interest factor.
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, each of the Fairfax Merger (together with the Senior
Note offering contemplated hereby and the Common Stock 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
NINE MONTHS AT OR FOR THE
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......................... $ 2,977,761 $ 2,813,719
Average loans and leases, net of un-
earned 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........... 262,366 254,801
INCOME STATEMENT DATA:
Net interest income.................... $ 92,120 $ 114,887
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............. 31,221 45,295
Net income from operations............. 20,954 29,370
EARNINGS PERFORMANCE RATIOS:(1)
Return on average total assets......... 0.94% 1.04%
Return on average common shareholders'
equity................................ 10.68 11.53
Net interest margin.................... 4.58 4.54
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 av-
erage 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
RATIOS OF EARNINGS TO FIXED CHARGES:(2)
Excluding interest on deposits......... 3.67x 4.85x
Including interest on deposits......... 1.39x 1.52x
</TABLE>
- --------
(1) Annualized where applicable.
(2) For purposes of computing these ratios, earnings represent income before
income taxes plus fixed charges. Fixed charges, excluding interest on
deposits, include interest (other than on deposits), whether expensed or
capitalized, and that portion of rental expense (generally one third)
deemed representative of the interest factor. Fixed charges, including
interest on deposits, include all interest, whether expensed or
capitalized, and that portion of rental expense (generally one third)
deemed representative of the interest factor.
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--construc-
tion..................... 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 COST FAIR VALUE AMORTIZED COST FAIR 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 agen-
cies.................... 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 $ 10,948 $ 10,658
U.S. Governmental agen-
cies.................... 19,973 20,105 28,506 27,166
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-maturi-
ty.................... 174,756 176,771 223,951 217,035
-------- -------- -------- --------
Total investment se-
curities............ $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 de-
mand................... 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 11.85%; 15.87%; 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.
17
<PAGE>
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,
18
<PAGE>
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 11.85% and 15.87%, 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,
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among other things, (i) a recapitalization of the Bank Insurance Fund of the
FDIC (the "BIF") by increasing the FDIC's borrowing authority and providing
for adjustments in its assessment rates; (ii) annual on-site examinations of
federally-insured depository institutions by banking regulators; (iii)
publicly available annual financial condition and management reports for
financial institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more
scrutiny and restrictions placed on depository institutions with lower levels
of capital; (vi) additional grounds for the appointment of a conservator or
receiver; (vii) a requirement that the FDIC use the least-cost method of
resolving cases of troubled institutions in order to keep the costs to
insurance funds at a minimum; (viii) more comprehensive regulation and
examination of foreign banks; (ix) consumer protection provisions including a
Truth-in-Savings Act; (x) a requirement that the FDIC establish a risk-based
deposit insurance assessment system; (xi) restrictions or prohibitions on
accepting brokered deposits, except for institutions which significantly
exceed minimum capital requirements; and (xii) certain additional limits on
deposit insurance coverage.
A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. Pursuant to
FDICIA, the federal bank regulatory authorities have adopted regulations
setting forth a five-tiered system for measuring the capital adequacy of the
depository institutions that they supervise. Under these regulations, a
depository institution is classified in one of the following capital
categories: "well capitalized," "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
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reduce total assets and stop accepting deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator, generally within 90 days of the date such institution
is determined to be critically undercapitalized.
FDICIA also provides for increased funding of the FDIC insurance funds.
Under the FDIC's risk-based insurance premium assessment system, each bank
whose deposits are insured by the BIF is assigned one of the nine risk
classifications based upon certain capital and supervisory measures and,
depending upon its classification, is assessed premiums ranging from .04% to
.31% of domestic deposits. On November 14, 1995, the FDIC board of directors
voted to lower the BIF premium range to zero to .27% effective January 1996.
The rate schedule for deposits which are insured by the Savings Association
Insurance Fund ("SAIF") ranges from .23% to .31% of domestic deposits. All or
a portion of the deposits of several of Susquehanna's subsidiaries are SAIF-
insured. The rate schedule is subject to future adjustments by the FDIC. In
addition, the FDIC has authority to impose special assessments from time to
time. See "REGULATORY MATTERS--Proposed Legislation Regarding SAIF
Assessments."
FDICIA provides the federal banking agencies with significantly expanded
powers to take enforcement action against institutions which fail to comply
with capital or other standards. Such action may include the termination of
deposit insurance by the FDIC or the appointment of a receiver or conservator
for the institution. FDICIA also limits the circumstances under which the FDIC
is permitted to provide financial assistance to an insured institution before
appointment of a conservator or receiver.
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 being
negotiated by the Congressional leadership and President Clinton 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 85 and 90 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 as of 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
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stabilization of the SAIF and the concurrent reduction in premium; Atlantic
Federal Savings Bank, which paid a SAIF premium of $412,000 in 1995 but is
expected to pay $1,527,000 in 1996 and $117,000 in 1997 by reason of the
stabilization of the SAIF and the concurrent reduction in premium; and Farmers
First Bank which paid a SAIF premium of $138,000 in 1995 (by virtue of its
acquisition by merger of a thrift in 1993) but is expected to pay $509,000 in
1996 and $39,000 in 1997 by reason of stabilization of the SAIF and the
concurrent reduction in premium.
Fairfax Savings also would be subject to the assessment. In 1995, Fairfax
Savings paid $807,000 in SAIF premiums but is expected to pay $3,297,000 in
1996 as a result of the assessment and $252,000 in 1997 by reason of
stabilization of the SAIF and the concurrent reduction in premium. Susquehanna
has agreed to be responsible for the payment of Fairfax Savings' assessment if
the proposed legislation takes effect prior to the closing of the Fairfax
Merger.
If such legislation is enacted, 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 1996.
DESCRIPTION OF SENIOR NOTES
The following sets forth certain general terms and provisions of the Senior
Notes. The Senior Notes are to be issued under an indenture (the "Indenture")
between the Company and Mellon Bank, N.A., as Trustee (the "Trustee"). A copy
of the form of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. See "AVAILABLE INFORMATION." The
following summaries of certain provisions of the Senior Notes and the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all of the provisions of the Indenture
including the definition therein of certain terms, and the actual provisions
of the Senior Notes. Wherever particular sections or defined terms of the
Indenture are referred to, it is intended that such sections or defined terms
shall be incorporated herein by reference. Section references are to the
Indenture. Capitalized terms not defined herein have the meanings assigned to
such terms in the Indenture.
GENERAL
The Indenture does not limit the aggregate principal amount of indebtedness
which may be issued thereunder and provides that debt securities ("Debt
Securities") may be issued from time to time in one or more series. The Senior
Notes will be the first series of Debt Securities issued by the Company under
the Indenture. The Senior Notes will be unsecured obligations of the Company
and will rank pari passu with all outstanding senior indebtedness of the
Company.
The Senior Notes will mature on February 1, 2003, bear interest at the rate
of 6.30% per annum and be limited to $35,000,000 aggregate principal amount.
Interest on the Senior Notes will be payable semi-annually on February 1 and
August 1 of each year commencing August 1, 1996 to the Persons in whose names
the Senior Notes are registered at the close of business on the preceding
January 15 or July 15 as the case may be.
Principal of and interest on the Senior Notes will be payable, and the
transfer of Senior Notes will be registrable, through The Depository Trust
Company, as depository (the "Depository"). The Senior Notes will be issued
only in fully registered form without coupons in denominations of $1,000 and
integral multiples thereof.
The Senior Notes will not be redeemable by the Company, in whole or in part,
prior to stated maturity and do not provide for any sinking fund.
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The Indenture does not contain provisions which would protect the Holders
of, or owners of beneficial interests in, the Senior Notes against a sudden
decline in credit quality resulting from takeovers, recapitalizations or other
similar restructurings.
No service charge will be made for any transfer or exchange of the Senior
Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. (Section
3.5).
All moneys paid by the Company to the Trustee or any Paying Agent for the
payment of principal of and premium and interest on any Senior Note which
remain unclaimed for two years after such principal, premium or interest shall
have become due and payable may be repaid to the Company and thereafter the
Holder of such Senior Note shall look only to the Company for payment thereof.
(Section 10.3).
GLOBAL NOTES
The Senior Notes will be issued in the form of one or more fully registered
global notes ("Global Notes") which will be deposited with, or on behalf of,
the Depository and registered in the name of the Depository's nominee. Unless
and until it is exchangeable in whole or in part for Senior Notes in
definitive form, a Global Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or
any such nominee to a successor of such Depository or a nominee of such
successor. (Section 2.4).
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with the Depository or its nominee ("Participants")
or persons that may hold interests through Participants. The Company expects
that upon the issuance of a Global Note, the Depository will credit, on its
book-entry registration and transfer system, the Participants' accounts with
the respective principal amounts of the Senior Notes represented by such
Global Note. Ownership of beneficial interests in such Global Note will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the Depository (with respect to interests of
Participants) and on the records of Participants (with respect to interests of
persons held through Participants). The laws of some states may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in a Global Note.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, the Depository or such nominee, as the case may be, will be
considered the sole owner or Holder of the Senior Notes represented by such
Global Note for all purposes under the Indenture. (Section 3.8). Except as
provided below, owners of beneficial interests in a Global Note will not be
entitled to have the Senior Notes represented by such Global Note registered
in their names, will not receive or be entitled to receive physical delivery
of the Senior Notes in definitive form and will not be considered the owners
or Holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in such a Global Note must rely on the procedures of the
Depository and, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest, to exercise any
rights of a Holder under the Indenture. The Company understands that under
existing industry practices, in the event that the Company requests any action
of Holders or that an owner of a beneficial interest in such a Global Note
desires to take any action which a Holder is entitled to take under the
Indenture, the Depository would authorize the Participants holding the
relevant beneficial interests to take such action, and such Participants would
authorize beneficial owners owning through such Participants to take such
action or would otherwise act upon the instructions of beneficial owners
owning through them.
Payment of principal of, and premium and interest, if any, on, Senior Notes
registered in the name of the Depository or its nominee will be made to the
Depository or its nominee, as the case may be, as the registered owner of the
Global Note representing such Senior Notes. None of the Company, the Trustee,
any Paying Agent or any other agent of the Company or the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
for such
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Senior Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that upon receipt of any payment of principal of, or
premium or interest on, a Global Note, the Depository will immediately credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depository. Payments by Participants to owners of
beneficial interests in such Global Note held through such Participants will
be the responsibility of such Participants, as is now the case with securities
held for the accounts of customers registered in "street name."
If the Depository notifies the Company that it is unwilling or unable to
continue as depository or ceases to be a clearing agency registered under the
Exchange Act and a successor depository is not appointed by the Company within
ninety days after receiving such notice or becoming aware that the Depository
is no longer so registered, the Company will issue the Senior Notes in
definitive form upon registration of transfer of, or in exchange for, such
Global Note. In addition, the Company may at any time and in its sole
discretion determine not to have the Senior Notes represented by one or more
Global Notes and, in such event, will issue Senior Notes in definitive form in
exchange for all of the Global Notes representing such Senior Notes. (Section
3.5).
The Depository has advised the Company as follows: it is a limited-purpose
trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Exchange Act. The Depository was created
to hold securities for its participating organizations and to facilitate the
clearance and settlement of securities transactions between its participants
in such securities through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of securities
certificates. The Depository's participants include securities brokers and
dealers (including the Underwriters), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depository's
system is also available to others such as banks, brokers, dealers, and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
in the Depository may beneficially own securities held by the Depository only
through persons who are participants or who clear through or maintain a
custodial relationship with a participant.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Senior Notes will be made in immediately available funds.
All payments of principal and interest in respect of the Senior Notes will be
made by the Company in immediately available funds. The Senior Notes will
trade in the Depository's Same-Day Funds Settlement System until maturity, and
therefore the Depository will require secondary trading in the Senior Notes to
be settled in immediately available funds. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in clearing-
house or next-day funds. No assurance is given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Senior
Notes.
RESTRICTION ON SALE OR ISSUANCE OF CAPITAL STOCK OF PRINCIPAL SUBSIDIARY BANKS
The Indenture prohibits the sale, assignment, transfer or other disposition
of shares of, or securities convertible into, or options or warrants or rights
to subscribe for or purchase shares of, Voting Stock of a Principal Subsidiary
Bank, if after giving effect to any such transaction and to the issuance of
the maximum number of shares of Voting Stock of such Principal Subsidiary Bank
issuable upon the exercise of all such convertible securities, options,
warrants or rights, the Company would own, directly or indirectly, 80% or less
of the shares of Voting Stock of such Principal Subsidiary Bank. The Indenture
also prohibits the merger or consolidation of any Principal Subsidiary Bank
with or into any other corporation and the sale or other disposition of all or
substantially all of the assets of any Principal Subsidiary Bank, if (i) the
Company would own, directly or indirectly, 80% or less of the shares of Voting
Stock of such successor in merger or
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consolidation or the Person that acquires all or substantially all of its
assets or (ii) immediately after giving effect to such transaction, an Event
of Default or an event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing. (Section
10.6). The covenant will not prohibit sales or dispositions of Voting Stock:
(i) made in compliance with an order of a court or regulatory authority of
competent jurisdiction or made as a condition imposed by such court or
authority to the acquisition by the Company, directly or indirectly, of any
other corporation or entity; or (ii) when the proceeds are, within a
reasonable period of time, invested pursuant to an understanding or agreement
in principle reached at the time of sale, assignment or disposition in a
Controlled Subsidiary (including any Person which upon such investment becomes
a Controlled Subsidiary) engaged in a banking business or any other business
legally permissible for bank holding companies. (Section 10.7). "Principal
Subsidiary Bank" means any Banking Subsidiary of the Company whose
Consolidated Banking Assets constitute 10% or more of the Company's
Consolidated Banking Assets. Upon completion of the Fairfax acquisition, it is
anticipated that Farmers First Bank, Farmers & Merchants Bank & Trust and
Fairfax Savings, with Consolidated Banking Assets as of September 30, 1995 of
$1.74 billion, will be considered Principal Subsidiary Banks. Prior to the
Fairfax acquisition, First National Trust Bank, Reisterstown Federal Savings
Bank and Atlantic Federal Savings Bank would also be considered Principal
Subsidiary Banks. "Controlled Subsidiary" means a Subsidiary more than 80% of
the outstanding shares of Voting Stock of which is at the time owned directly
or indirectly by the Company or by one or more Controlled Subsidiaries or by
the Company and one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
With respect to the Senior Notes, the Indenture defines an Event of Default
as any one of the following events: (a) default for 30 days in the payment of
any interest upon any Senior Note when it becomes due and payable; (b) default
in the payment of the principal of (or premium, if any on) any Senior Note at
its maturity; (c) failure, subject to waiver, to observe and perform the
covenant referred to above under "--Restriction on Sale or Issuance of Capital
Stock of Principal Subsidiary Banks"; (d) default in the performance, or
breach, of any other covenant or warranty of the Company (other than a
covenant or warranty included in the Indenture solely for the benefit of a
series of Debt Securities other than the Senior Notes) which continues for 60
days after the holders of least 25% in principal amount of Outstanding Senior
Notes have given written notice as provided in the Indenture; (e) failure to
pay when due any indebtedness of the Company or any Principal Subsidiary Bank
in excess of $5,000,000, or acceleration of the maturity of any such
indebtedness in excess of such amount if acceleration results from a default
under the instrument giving rise to such indebtedness and is not rescinded,
annulled or cured within 30 days after due notice; or (f) certain events of
bankruptcy, insolvency or reorganization of the Company or a Principal
Subsidiary Bank. (Section 5.1) An Event of Default under one series of Debt
Securities will not necessarily be an Event of Default with respect to any
other series of Debt Securities.
If an Event of Default (other than an Event of Default specified in clause
(f) in the preceding paragraph) with respect to the Senior Notes at the time
Outstanding occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the Outstanding Senior Notes may
declare the principal amount of all the Senior Notes to be due and payable
immediately. If an Event of Default specified in clause (f) in the preceding
paragraph occurs, such principal amount shall automatically become immediately
due and payable without any declaration or other act on the part of the
Trustee or any Holder. At any time after a declaration of acceleration with
respect to Senior Notes has been made, but before a judgment or decree based
on acceleration has been obtained, the Holders of a majority in aggregate
principal amount of the Outstanding Senior Notes may, under certain
circumstances, rescind and annul such acceleration. (Section 5.2).
If a default in the payment of principal, premium, if any, or interest or in
the performance of any covenant or agreement in the Senior Notes or in the
Indenture occurs, the Trustee may, subject to certain limitations and
conditions, seek to enforce payment of such principal, premium, if any, or
interest on the Senior Notes, or the performance of such covenant or
agreement. (Section 5.3).
The Indenture provides that, subject to the duty of the Trustee during the
continuance of an Event of Default to act with the required standard of care,
the Trustee will be under no obligation to exercise any of its rights or
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powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable indemnity.
(Section 6.3). Subject to certain limitations, the Holders of a majority in
aggregate principal amount of the Outstanding Senior Notes will have the right
to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Senior Notes. (Section 5.12). The right of a
Holder of any Debt Security to institute a proceeding with respect to the
Indenture is subject to certain conditions precedent, but each Holder has an
absolute right to receive payment of principal, premium, if any, and interest
when due and to institute suit for the enforcement of any such payment.
(Sections 5.7 and 5.8).
The Company is required to furnish to the Trustee annually a statement as to
the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Sections 1.2 and 10.4).
The Trustee may withhold notice to Holders of any default (except in payment
of principal, premium, if any, or interest) if it in good faith determines
that it is in the interests of the Holders to do so.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company may, without the consent of any Holder of the Debt Securities,
merge or consolidate with any other corporation or sell or convey all or
substantially all of its assets to any corporation, provided that the
successor corporation (if other than the Company) shall be a corporation
organized and existing under the laws of the United States of America or a
State thereof or the District of Columbia and such corporation shall expressly
assume the Company's obligations under the Indenture and on the Debt
Securities, and the Company or such successor corporation, as the case may be,
shall not be in default in the performance of any covenant or condition of the
Indenture immediately after such merger, consolidation, sale or conveyance. In
addition, the Company may, without the consent of any Holder of the Debt
Securities, convey its assets substantially as an entirety to any Person in
connection with any transfer that is assisted by a federal bank regulatory
authority and in such case the Company's obligations under the Indenture need
not be assumed by the entity acquiring such assets. (Section 8.1).
MODIFICATIONS AND WAIVER
The Indenture provides that the Company and the Trustee may enter into a
supplemental indenture to amend the Indenture or the Debt Securities without
the consent of any Holder of any Outstanding Debt Security: (1) to evidence
the succession of another Person to the Company and the assumption by such
successor of the Company's obligations under the Indenture; (2) to add to the
covenants of the Company further covenants, restrictions or conditions for the
protection of the Holders of all or any particular series of Debt Securities;
(3) to add or change any of the provisions of the Indenture necessary to
facilitate the issuance of Debt Securities in bearer form; (4) to add,
eliminate or change any provision of the Indenture prior to the issuance of
the series that is entitled to the benefit of such provision; (5) to establish
the terms and conditions of Debt Securities of any series; (6) to provide for
the acceptance of appointment by a successor trustee or to add or change any
of the provisions of the Indenture necessary to provide for or facilitate the
administration of the trust by more than one Trustee; (7) to cure any
ambiguity, defect or inconsistency or to make such other provision in regard
to matters or questions arising under the Indenture which do not adversely
affect the interests of the Holders of the Debt Securities; (8) to secure the
Debt Securities; (9) to provide for the conversion or exchange of Debt
Securities of a particular series into or for other securities of the Company;
or (10) to add additional Events of Default. (Section 9.1).
In addition to the foregoing, modifications and amendments of the Indenture
may be made by the Company and the Trustee with the consent of the Holders of
a majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected by such modification or amendment; provided, however,
that no such modification or amendment may, without the consent of the Holder
of each Outstanding Debt Security affected thereby, (a) change the stated
maturity date of the principal of, or any premium or installment of interest,
if any, on any Debt Security, (b) reduce the principal amount of, or premium
or interest, if any, on, any Debt Security, (c) change the currency of payment
of principal of, or premium, if any, or interest on, any Debt Security,
26
<PAGE>
(d) impair the right to institute suit for the enforcement of any such payment
on or with respect to any Debt Security, or (e) reduce the percentage in
principal amount of Outstanding Debt Securities of any series the consent of
whose Holders is required for modification or amendment of the Indenture or
for any waiver. (Section 9.2).
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the
Indenture. (Section 10.8). The Holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of each series may, on behalf of all
Holders of Debt Securities of that series, waive any past default under the
Indenture with respect to Debt Securities of that series, except a default in
the payment of principal, or of premium, if any, or interest or in respect of
a provision which under the Indenture cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security of that series.
(Section 5.13).
GOVERNING LAW
The Indenture and the Senior Notes will be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
INFORMATION CONCERNING THE TRUSTEE
The Company and its subsidiaries maintain deposit accounts and conduct other
banking transactions with the Trustee in the ordinary course of business,
including long term borrowings. At present the Company and its subsidiaries
are indebted to the Trustee in the aggregate amount of $9 million. Mellon Bank
N.A. is trustee under an Indenture, dated as of February 1, 1995, for the
9.00% Subordinated Notes due 2005 of the Company.
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 the Senior Notes in the offering contemplated hereby and the issuance of
Common Stock in the Common Stock 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.
27
<PAGE>
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 $ 72,188 [A] 86,032
(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 17,028 400 [A] 110,838
---------- -------- -------- ----------
Total Assets........... $2,522,125 $470,287 $ 30,177 $3,022,589
========== ======== ======== ==========
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 $ 35,000 [A] 139,179
Other liabilities........ 31,633 9,386 41,019
---------- -------- -------- ----------
Total Liabilities...... 2,287,919 427,869 35,000 2,750,788
EQUITY
Common stock............. 23,366 150 2,990 [A] 26,356
(150)[E]
Surplus.................. 43,014 195 34,598 [A] 77,612
(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 (4,823) 271,801
---------- -------- -------- ----------
Total Liabilities &
Equity.............. $2,522,125 $470,287 $ 30,177 $3,022,589
========== ======== ======== ==========
</TABLE>
- --------
* Fairfax information is as of June 30, 1995
[A] To record the issuance of 1,495,000 shares of Common Stock at a public
offering price of $26.50 per share and $35 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).
28
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA SUSQUEHANNA PRO FORMA
ADJUSTMENTS PRO FORMA ADJUSTMENTS
FOR 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 $ 1,398 [B] 79,702
-------- ------ ----- -------- ------- ------- --------
Net interest income..... 78,570 3,647 (612) 81,605 11,913 (1,398) 92,120
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 (1,398) 88,364
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 (2,428) 31,221
Taxes................... 8,184 843 (237)[E] 8,790 1,966 (489)[E] 10,267
-------- ------ ----- -------- ------- ------- --------
Net income from
operations............. $ 18,868 $1,106 $(497) $ 19,477 $ 3,416 $(1,939) $ 20,954
======== ====== ===== ======== ======= ======= ========
Earnings per share...... $ 1.62 N/A $ 1.67 N/A $ 1.60
Average shares
outstanding............ 11,638 N/A 11,638 N/A 1,495 [F] 13,133
</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 $25,812 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.
29
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA SUSQUEHANNA
ADJUSTMENTS PRO FORMA PRO FORMA
FOR 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 $ 1,864 [B] 86,003
-------- ------- ------- -------- ------- ------- --------
Net interest income..... 94,145 11,107 (2,551) 102,701 14,050 (1,864) 114,887
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 (1,864) 110,884
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 (3,237) 45,295
Taxes................... 9,718 3,385 (983)[D] 12,120 4,457 (652)[D] 15,925
-------- ------- ------- -------- ------- ------- --------
Net income from
operations............. $ 22,828 $ 4,585 $(2,059) $ 25,354 $ 6,601 $(2,585) $ 29,370
======== ======= ======= ======== ======= ======= ========
Earnings per share...... $ 1.96 N/A $ 2.18 N/A $ 2.24
Average shares
outstanding............ 11,634 N/A 11,634 N/A 1,495 [E] 13,129
</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 $25,812 for Fairfax.
[C] Goodwill amortization adjustment.
[D] Tax effect on adjustments.
[E] Common Stock issued to satisfy part of Fairfax purchase price.
30
<PAGE>
UNDERWRITING
Oppenheimer & Co., Inc. and Legg Mason Wood Walker, Incorporated (the
"Underwriters") have severally agreed, subject to the terms and conditions of
the Underwriting Agreement (the "Underwriting Agreement") between the Company
and the Underwriters, to purchase from the Company, and the Company has agreed
to sell to each of the Underwriters, the principal amount of Senior Notes set
forth below opposite their respective names. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters will be obligated to purchase
all of the Senior Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- -----------
<S> <C>
Oppenheimer & Co., Inc....................................... $19,250,000
Legg Mason Wood Walker, Incorporated......................... 15,750,000
-----------
Total...................................................... $35,000,000
===========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Senior Notes to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of .40% of the principal amount. The Underwriters may
allow, and such dealers may reallow, a discount not in excess of .25% of the
principal amount of the Senior Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.
The Senior Notes are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that they intend to
make a market in the Senior Notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Senior Notes.
The Underwriters and their affiliates may engage in transactions with and
perform services for the Company in the ordinary course of business,
including, among other things, investment banking transactions and services.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
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.
31
<PAGE>
FAIRFAX
The consolidated statements of financial condition 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 Senior Notes 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.
32
<PAGE>
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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 SENIOR
NOTES 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
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 Senior Notes................................................ 22
Unaudited Pro Forma Financial Statements................................... 27
Underwriting............................................................... 31
Experts.................................................................... 31
Legal Matters.............................................................. 32
</TABLE>
- -------------------------------------------------------------------------------
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$35,000,000
SUSQUEHANNA BANCSHARES, INC.
6.30% SENIOR NOTES DUE 2003
----------------
PROSPECTUS
----------------
OPPENHEIMER & CO., INC.
LEGG MASON WOOD WALKER
INCORPORATED
JANUARY 23, 1996
- -------------------------------------------------------------------------------
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