Moody's Cuts Susquehanna Bancshares Ratings

NEW YORK (AP) — Moody's Investors Service on Tuesday downgraded the debt ratings of Susquehanna Bancshares Inc. to junk status due to expectations for higher credit costs in the coming quarters.

The ratings service lowered the ratings on the bank's subordinated debt two notches to "Ba1" from "Baa2." A rating of "Ba1" is one notch below investment grade.

The rating on the bank's long-term bank deposits went to "Baa2" from "A3," and its bank financial strength rating went to "C-" from "C." The outlook on the ratings is negative.

Moody's said it is concerned by the bank's large commercial real estate portfolio.

"The sharp decline in real estate prices and anticipated deterioration in loan performance has led Moody's to considerably increase its loss expectations for commercial real estate, especially construction and land development," the ratings service said.

What's more, Moody's said the bank's capital levels are relatively low compared with peers, despite a $300 million investment from the government last fall.

After the market closed Thursday, the Lititz, Pa.-based bank said it expects to report first-quarter earnings below Wall Street's estimates, due in part to the need to set aside more money to cover loan losses.

Analysts, on average, are expecting earnings of 6 cents per share, according to a poll by Thomson Reuters.

Shares of the regional bank fell $1.32, or 13.6 percent, to close Tuesday at $8.42.