SUSQ

Susquehanna Bancshares, Inc. (SUSQ)

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Susquehanna Bancshares, Inc (SUSQ)

Q3 2010 Earnings Call

October 28, 2010 11:00 a.m. ET

Executives

Abram Koser - VP, IR

William Reuter - CEO

Drew Hostetter - EVP & CFO

Mike Quick - EVP & CCO

Analysts

Matthew Clark - KBW

Steven Alexopoulos - JPMorgan

Matt Schultheis - Boenning & Scattergood

Collyn Gilbert - Stifel Nicolaus

Andy Stapp - B. Riley & Company

Steve Moss - Janney Montgomery Scott

Mac Hodgson - Suntrust Robinson Humphrey

Frank Schiraldi - Sandler O'Neill

Presentation

[TECHINCAL DIFFICULT]

Operator

Good morning and welcome to the Susquehanna Bancshares Third Quarter 2010 Earnings Conference Call. Today's call is being recorded. At this time, participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). Thank you.

Mr. Koser, you may begin your conference.

Abram Koser

Thank you. Good morning and welcome. I'm Abe Koser, Vice President, Investor Relations at Susquehanna Bancshares. By now, you should all have received a copy of the press release about our financial results for the third quarter of 2010, which we made available yesterday. You can find this and our other financial releases in the Investor Relations section of our Web site at www.susquehanna.net.

Certain statements made during this conference call may be considered to be forward-looking statements. In particular, certain statements made on this call may include forward-looking statements relating to our repayment of TARP and impact on our capital ratios and 100% crack quality, impact of recently inactive (inaudible) legislation and accompanying regulations.

(inaudible) that may affect these statements and our financial performance might include but are not limited to continued levels of our loan and lease quality and origination volume, changes in consumer confidence, spending and savings habits, compliance with applicable laws and regulations, competition from other financial institutions in originating loans and attracting deposits, adverse changes in the economy generally, and in particular, adverse changes relating to the risks set forth in our SEC filings, including our most recent Annual Report on Form 10-K, as well as our 10-Q report for the second quarter of 2010, and our success in managing the risks involved in the foregoing.

Forward-looking statements speak only as of the date they are made. We do not intend to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made or to reflect the occurrence of unanticipated events, except as required by law.

I'll now turn the meeting over to your host, William J. Reuter, Chairman and Chief Executive Officer.

William Reuter

Thank you Abe and good morning everyone. Thank you joining us as we review Susquehanna's financial results for the third quarter of 2010. Those are participating in this morning's call will be Drew K Hostetter, Executive Vice President and Chief Financial Officer; and Michael M Quick, Executive Vice President and Chief Credit Officer.

(inaudible) an overview of the financial results we announced yesterday. For the third quarter we reported (inaudible) common shareholders of (inaudible) $0.04 per diluted share to compared to $2.7 million or $0.03 per share during the third quarter of 2009.

(inaudible) first nine months of the year were $6.5 million or $0.06 per share compared to a net loss of (inaudible) to the period last year. As we mentioned is previous calls, remember that the second quarter earnings this year were reduced by $4.8 million due to the acceleration of the accretion of the remaining discounts (inaudible) $200 million preferred stock issued under the capital purchase program which were redeemed in April.

(inaudible) continues to hold (inaudible) for which we paid $1.1 million dividend. They wonder about our timetable for regaining the remaining preferred shares. We are seeing positive trends in (inaudible) which I'll discuss later in the call. We will be closely watching (inaudible) during the fourth quarter this year with a nice award to retain the balance. As you know (inaudible) in the capital purchase program we have acted out of (inaudible) caution and we will continue to follow that same philosophy

I believe the current economic environment can best be characterized as a slow moving recovery. The slight occasional optimistic signs, businesses and consumer alike lack the confidence necessary to select stronger improvement.

With the national unemployment rate continuing at about 9.5% people are understandably unsure about job security and are therefore cautious with spending or taking on additional debt. This has an impact on business spending, depressing demand for loans. We have found that loan demand is particularly soft for small businesses but has remained somewhat more stable in middle market companies.

Our net loans and leases decreased 2% from the third quarter 2009. Commercial real estate loans were flat while construction, commercial loans and leases all declined on a year-over-year basis. The primary reason for this decrease was the fact that we intentionally reduced the construction loan portfolio by almost $300 million. Our goal is for construction loans to be 10% of our total portfolio which we now have accomplished. In a year-over-year result we see increase in consumer loans and residential real estate loans.

Comparing the third quarter of 2010 to second quarter, net loans and leases were down 1% and results -- and each category track much like did year-over-year. Construction and commercial loans and leases decreased while consumer and residential real estate grew.

Total deposits increased 3%, when compared to September 30th 2009. Time deposits were down, which is consistent with our strategy to reduce this portfolio while demand, money market and savings deposits increased. Excluding CD's core deposits were up 15% showing significant growth from third quarter of last year.

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