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8-K - FORM 8-K - SANDY SPRING BANCORP INCv332749_8k.htm

 

 

 

 

 

News release

   

FOR IMMEDIATE RELEASE

 

SANDY SPRING BANCORP REPORTS NET INCOME OF $9.9 MILLION FOR

FOURTH QUARTER OF 2012 AND $36.6 MILLION FOR FULL YEAR

 

OLNEY, MARYLAND, January 24, 2013 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced net income for the fourth quarter of 2012 of $9.9 million ($.40 per diluted share) compared to net income of $7.3 million ($0.30 per diluted share) for the fourth quarter of 2011 and net income of $11.0 million ($0.44 per diluted share) for the third quarter of 2012.

 

Net income for the year ended December 31, 2012 totaled $36.6 million ($1.48 per diluted share), compared to net income of $34.1 million ($1.41 per diluted share) for the prior year, an increase of 7%.

 

“The solid results for the fourth quarter and the full year were a result of the combination of increased loan growth and continued improvement to our funding mix, “said Daniel J. Schrider, President and Chief Executive Officer. “Looking back on 2012, we benefited from two full quarters of the accretive effect on the net interest margin from the CommerceFirst acquisition combined with a stellar year in income from our mortgage banking activities.”

 

“We are committed to providing outstanding value to our clients via quality financial products delivered through a consistently high level of service that they have come to expect,” said Schrider. “Together with our strong capital and liquidity positions and improved credit quality, we believe we are well positioned for continued growth during the coming year.”

 

Fourth Quarter Highlights:

 

·Pre-tax pre-provision income, a non-GAAP measure, was $15.7 million for the fourth quarter of 2012, a 26% increase over the fourth quarter of 2011 and a 7% decrease compared to the third quarter of 2012.

 

·The net interest margin was 3.53% for the fourth quarter of 2012, compared to 3.51% for the fourth quarter of 2011 and 3.67% for the third quarter of 2012. The decrease compared to the prior quarter was due primarily to the accrual status of specific commercial loans together with declining yields in the residential construction and mortgage portfolios.

 

·Non-interest income increased 8% for the quarter compared to the prior year quarter and remained virtually level compared to the third quarter of 2012. The increase over the prior year quarter was due primarily to higher income from mortgage banking activities.

 

 
 

 

·Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. The coverage ratio of the allowance for loan and lease losses to non-performing loans increased to 74% at December 31, 2012 compared to a ratio of 62% at December 31, 2011 and 72% at September 30, 2012.

 

·Total loans, excluding those acquired in the CommerceFirst acquisition, reflected a 6% increase over the prior year quarter due primarily to growth in commercial business, investor real estate and residential mortgage loans.

 

 

Review of Balance Sheet and Credit Quality

 

Total assets increased 7% to $4.0 billion at December 31, 2012 as compared to December 31, 2011. During the same period, total loans and leases increased 13% to $2.5 billion compared to the prior year end. This increase consisted of $155.0 million in loans from the acquisition of CommerceFirst and $136.4 million of internally-generated loan growth, primarily in the commercial loan and residential mortgage portfolios.

 

Customer funding sources, which include deposits and other short-term borrowings from customers, increased 9% compared to December 31, 2011. This increase was due primarily to a 25% increase in noninterest-bearing and interest-bearing checking accounts. The Company considers the growth in checking accounts to be an especially valuable metric as such accounts typically are the primary drivers of growth in multiple product banking relationships with clients. Excluding the deposits acquired in the CommerceFirst acquisition, total customer funding sources increased 5% while certificates of deposit declined 17% at December 31, 2012 compared to balances at December 31, 2011, as the Company managed its deposit mix to maintain the net interest margin.

 

Tangible common equity totaled $384.2 million at December 31, 2012 compared to $351.3 million at December 31, 2011 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.68% at December 31, 2011 to 9.94% at December 31, 2012. This increase was due primarily to net income earned during 2012. At December 31, 2012, the Company had a total risk-based capital ratio of 15.40%, a tier 1 risk-based capital ratio of 14.15% and a tier 1 leverage ratio of 10.98%.

 

Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. Overall credit quality continued to improve as a result of resolution of existing problem credits and limited migration of new credits to non-performing status.

 

The provision for loan and lease losses was $1.2 million for the fourth quarter of 2012 compared to $2.3 million for the fourth quarter of 2011 and $0.2 million for the third quarter of 2012. The decrease in the provision for the fourth quarter of 2012 compared to the fourth quarter of 2011 was due primarily to a decline in both historical losses and the impact of non-performing loans at December 31, 2012. The increase in the provision for the fourth quarter of 2012 compared to the third quarter of 2012 was largely due to an increase in the overall size of the loan portfolio together with an increase in specific reserves on selected loans.

 

 
 

  

Loan charge-offs, net of recoveries, totaled $0.8 million for the fourth quarter of 2012 compared to net charge-offs of $2.6 million for the fourth quarter of 2011 and net charge-offs of $2.9 million for the third quarter of 2012. The allowance for loan and lease losses represented 1.70% of outstanding loans and leases and 74% of non-performing loans at December 31, 2012 compared to 2.21% of outstanding loans and leases and 62% of non-performing loans at December 31, 2011 and 1.73% of outstanding loans and leases and 72% of non-performing loans at September 30, 2012. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

 

Income Statement Review

 

Net interest income for the fourth quarter of 2012 increased by $2.5 million or 9% compared to the fourth quarter of 2011 due to an increase in average interest-earning assets from the CommerceFirst transaction and organic growth. Combined with a lower cost deposit mix, these factors resulted in an increase in the net interest margin to 3.53% for the fourth quarter of 2012 compared to 3.51% for the fourth quarter of 2011.

 

Non-interest income increased $0.8 million or 8% to $12.2 million for the fourth quarter of 2012 compared to $11.4 million for the fourth quarter of 2011. This increase was driven by growth in income from mortgage banking activities of $0.9 million due to higher loan origination volumes and higher average gains on sales, both due to historically low interest rates during the quarter.

 

Non-interest expenses remained virtually level at $27.2 million for the fourth quarter of 2012 compared to $27.3 million in the fourth quarter of 2011. This was driven by decreases in benefits expenses, commissions on sales of investment products and incentive compensation which largely offset a 5% increase in salaries. The non-GAAP efficiency ratio improved to 60.5% for the fourth quarter of 2012 compared to 65.1% for the fourth quarter of 2011.

 

Net interest income for the year ended December 31, 2012 increased by $8.3 million or 7% compared to the year ended December 31, 2011 due to an increase in average earning assets resulting from organic loan growth, loans acquired in the CommerceFirst acquisition and an increased level of noninterest-bearing deposits, which more than offset lower earning asset yields. These factors, together with a decline in the cost of funds, resulted in an increase in the net interest margin to 3.60% for 2012 compared to 3.57% for 2011.

 

Non-interest income increased $3.5 million or 8% to $47.0 million for 2012 as compared to $43.5 million for 2011. This increase was due primarily to an increase of $2.8 million or 87% in income from mortgage banking activities due to higher volumes and increased average gains from refinancing activity. Revenue from wealth management services increased $0.3 million or 2% due primarily to higher assets under management while Visa check fees increased $0.3 million or 7% due to an increased volume of electronic transactions.

 

Non-interest expenses were $109.9 million for 2012 compared to $105.1 million for 2011, an increase of $4.8 million or 5%. Excluding one-time merger expenses of $2.5 million in 2012, non-interest expenses increased 2% over the prior year. This increase was driven by a 4% increase in salaries and benefits expense, excluding merger expenses, due to merit salary increases, a larger staff and higher cost of health benefits. These expenses were partially offset by a 19% decrease in FDIC insurance premiums due to a change in calculation of such premiums effective in the third quarter of 2011. The non-GAAP efficiency ratio was 60.9% for 2012 compared to 63.8% for 2011.

 

 
 

  

Conference Call

 

The Company’s management will host a conference call to discuss its fourth quarter and full year results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations’ section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 1-888-317-6016. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) February 25, 2013. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10023201.

 

About Sandy Spring Bancorp/Sandy Spring Bank

 

With $4.0 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 49 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George’s counties in Maryland, and Arlington, Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of insurance and investment management services. Visit www.sandyspringbank.com to locate an ATM near you or for more information about Sandy Spring Bank.

 

For additional information or questions, please contact:

Daniel J. Schrider, President & Chief Executive Officer, or

Philip J. Mantua, E.V.P. & Chief Financial Officer

Sandy Spring Bancorp

17801 Georgia Avenue

Olney, Maryland 20832

1-800-399-5919

Email:DSchrider@sandyspringbank.com

PMantua@sandyspringbank.com

Web site: www.sandyspringbank.com

 

Forward-Looking Statements

 

Sandy Spring Bancorp makes forward-looking statements in this news release and in the conference call regarding this news release. These forward-looking statements may include: statements of goals, intentions, earnings expectations, and other expectations; estimates of risks and of future costs and benefits; assessments of probable loan and lease losses; assessments of market risk; and statements of the ability to achieve financial and other goals.

 

 
 

  

Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Sandy Spring Bancorp does not assume any duty and does not undertake to update its forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that Sandy Spring Bancorp anticipated in its forward-looking statements and future results could differ materially from historical performance.

 

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2011, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov.

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                 
FINANCIAL HIGHLIGHTS - UNAUDITED                 
                         
                         
   Three Months Ended       Twelve Months Ended     
   December 31,   %   December 31,   % 
(Dollars in thousands, except per share data)  2012   2011   Change   2012   2011   Change 
Results of Operations:                        
Net interest income  $30,920   $28,452    9%  $121,219   $112,946    7%
Provision for loan and lease losses   1,168    2,282    (49)   3,649    1,428    156 
Non-interest income   12,247    11,370    8    46,956    43,500    8 
Non-interest expenses   27,219    27,323    -    109,927    105,071    5 
Income before income taxes   14,780    10,217    45    54,599    49,947    9 
Net income   9,881    7,258    36    36,554    34,102    7 
                               
Pre-tax pre-provision pre-merger expense income  $15,740   $12,499    26   $60,748   $51,375    18 
                               
Return on average assets   1.01%   0.79%        0.97%   0.95%     
Return on average common equity   8.14%   6.54%        7.85%   8.07%     
Net interest margin   3.53%   3.51%        3.60%   3.57%     
Efficiency ratio - GAAP (1)   63.06%   68.61%        65.36%   67.16%     
Efficiency ratio - Non-GAAP (1)   60.54%   65.10%        60.94%   63.75%     
                               
Per share data:                              
Basic net income  $0.40   $0.30    33%  $1.49   $1.42    5%
Diluted net income  $0.40    0.30    33    1.48    1.41    5 
Average fully diluted shares   24,971,249    24,141,084    3    24,657,149    24,149,205    2 
Dividends declared per share  $0.14    0.10    40   $0.48    0.34    41 
Book value per share   19.41    18.52    5    19.41    18.52    5 
Tangible book value per share   15.43    14.58    6    15.43    14.58    6 
Outstanding shares   24,905,392    24,091,042    3    24,905,392    24,091,042    3 
                               
Financial Condition at period-end:                              
Investment securities  $1,075,032   $1,164,699    (8)%  $1,075,032   $1,164,699    (8)%
Loans and leases   2,531,128    2,239,692    13    2,531,128    2,239,692    13 
Interest-earning assets   3,669,175    3,452,214    6    3,669,175    3,452,214    6 
Assets   3,955,206    3,711,370    7    3,955,206    3,711,370    7 
Deposits   2,913,034    2,656,520    10    2,913,034    2,656,520    10 
Interest-bearing liabilities   2,592,606    2,590,165    -    2,592,606    2,590,165    - 
Stockholders' equity   483,512    446,109    8    483,512    446,109    8 
                               
Capital ratios:                              
Tier 1 leverage   10.98%   10.84%        10.98%   10.84%     
Tier 1 capital to risk-weighted assets   14.15%   14.57%        14.15%   14.57%     
Total regulatory capital to risk-weighted assets   15.40%   15.83%        15.40%   15.83%     
Tangible common equity to tangible assets (2)   9.94%   9.68%        9.94%   9.68%     
Average equity to average assets   12.35%   12.07%        12.32%   11.80%     
                               
Credit quality ratios:                              
Allowance for loan and lease losses to loans and leases   1.70%   2.21%        1.70%   2.21%     
Non-performing loans to total loans   2.29%   3.53%        2.29%   3.53%     
Non-performing assets to total assets   1.61%   2.25%        1.61%   2.25%     
Allowance for loan and lease losses to non-performing loans   74.18%   62.46%        74.18%   62.46%     
Annualized net charge-offs to average loans and leases (3)   0.13%   0.47%        0.42%   0.66%     

 

(1)The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; securities gains (losses) from non-interest income; OTTI; and the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
(2)The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and other comprehensive gains (losses). See the Reconciliation Table included with these Financial Highlights.
(3)Calculation utilizes average loans and leases, excluding residential mortgage loans held-for-sale.

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                
RECONCILIATION TABLE - UNAUDITED                
                 
   Three Months Ended   Twelve Months Ended 
   December 31,   December 31, 
(Dollars in thousands)  2012   2011   2012   2011 
Pre-tax pre-provision pre-merger expense income:                    
Net income  $9,881   $7,258   $36,554   $34,102 
Plus non-GAAP adjustment:                    
Merger expenses   (208)   -    2,500    - 
Income taxes   4,899    2,959    18,045    15,845 
Provision for loan and lease losses   1,168    2,282    3,649    1,428 
Pre-tax pre-provision pre-merger expense income  $15,740   $12,499   $60,748   $51,375 
                     
GAAP efficiency ratio:                    
Non-interest expenses  $27,219   $27,323   $109,927   $105,071 
                     
Net interest income plus non-interest income  $43,167   $39,822   $168,175   $156,446 
                     
GAAP Efficiency ratio   63.06%   68.61%   65.36%   67.16%
                     
                     
Non-GAAP efficiency ratio:                    
Non-interest expenses  $27,219   $27,323   $109,927   $105,071 
Less non-GAAP adjustment:                    
Amortization of intangible assets   478    461    1,881    1,845 
Merger expenses   (208)   -    2,500    - 
Non-interest expenses - as adjusted  $26,949   $26,862   $105,546   $103,226 
                     
Net interest income plus non-interest income  $43,167   $39,822   $168,175   $156,446 
Plus non-GAAP adjustment:                    
Tax-equivalent income   1,334    1,448    5,374    5,602 
Less non-GAAP adjustments:                    
Securities gains   -    9    459    292 
OTTI recognized in earnings   (14)   -    (109)   (160)
Net interest income plus non-interest income - as adjusted  $44,515   $41,261   $173,199   $161,916 
                     
Non-GAAP Efficiency ratio   60.54%   65.10%   60.94%   63.75%
                     
Tangible common equity ratio:                    
Total stockholders' equity  $483,512   $446,109   $483,512   $446,109 
Accumulated other comprehensive income   (11,312)   (13,248)   (11,312)   (13,248)
Goodwill   (84,808)   (76,816)   (84,808)   (76,816)
Other intangible assets, net   (3,163)   (4,734)   (3,163)   (4,734)
Tangible common equity  $384,229   $351,311   $384,229   $351,311 
                     
Total assets  $3,955,206   $3,711,370   $3,955,206   $3,711,370 
Goodwill   (84,808)   (76,816)   (84,808)   (76,816)
Other intangible assets, net   (3,163)   (4,734)   (3,163)   (4,734)
Tangible assets  $3,867,235   $3,629,820   $3,867,235   $3,629,820 
                     
Tangible common equity ratio   9.94%   9.68%   9.94%   9.68%
                     
Outstanding common shares   24,905,392    24,091,042    24,905,392    24,091,042 
Tangible book value per common share  $15.43   $14.58   $15.43   $14.58 

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries        
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED        
         
   December 31, 
(Dollars in thousands)  2012   2011 
Assets          
Cash and due from banks  $59,540   $49,832 
Federal funds sold   466    1,006 
Interest-bearing deposits with banks   26,400    21,476 
Cash and cash equivalents   86,406    72,314 
Residential mortgage loans held for sale (at fair value)   36,149    25,341 
Investments available-for-sale (at fair value)   825,582    951,301 
Investments held-to-maturity -- fair value of $222,024 and $184,167 at December 31, 2012 and 2011, respectively   215,814    178,465 
Other equity securities   33,636    34,933 
Total loans and leases   2,531,128    2,239,692 
Less: allowance for loan and lease losses   (42,957)   (49,426)
Net loans and leases   2,488,171    2,190,266 
Premises and equipment, net   48,326    48,483 
Other real estate owned   5,926    4,431 
Accrued interest receivable   12,392    12,898 
Goodwill   84,808    76,816 
Other intangible assets, net   3,163    4,734 
Other assets   114,833    111,388 
Total assets  $3,955,206   $3,711,370 
           
Liabilities          
Noninterest-bearing deposits  $847,415   $650,377 
Interest-bearing deposits   2,065,619    2,006,143 
Total deposits   2,913,034    2,656,520 
Securities sold under retail repurchase agreements and federal funds purchased   86,929    143,613 
Advances from FHLB   405,058    405,408 
Subordinated debentures   35,000    35,000 
Accrued interest payable and other liabilities   31,673    24,720 
Total liabilities   3,471,694    3,265,261 
           
Stockholders' Equity          
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 24,905,392 and 24,091,042 at December 31, 2012 and 2011, respectively   24,905    24,091 
Additional paid in capital   191,689    177,828 
Retained earnings   255,606    230,942 
Accumulated other comprehensive income   11,312    13,248 
Total stockholders' equity   483,512    446,109 
Total liabilities and stockholders' equity  $3,955,206   $3,711,370 

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

  

   Three Months Ended   Twelve Months Ended 
   December 31,   December 31, 
(Dollars in thousands, except per share data)  2012   2011   2012   2011 
Interest Income:                    
Interest and fees on loans and leases  $29,410   $26,758   $115,574   $107,355 
Interest on loans held for sale   254    189    841    577 
Interest on deposits with banks   28    15    111    77 
Interest and dividends on investment securities:                    
Taxable   4,142    5,314    17,951    22,096 
Exempt from federal income taxes   2,368    2,431    9,392    9,363 
Interest on federal funds sold   -    1    1    2 
Total interest income   36,202    34,708    143,870    139,470 
Interest Expense:                    
Interest on deposits   1,650    2,329    7,357    11,002 
Interest on retail repurchase agreements and federal funds purchased   46    57    204    212 
Interest on advances from FHLB   3,359    3,628    14,131    14,397 
Interest on subordinated debt   227    242    959    913 
Total interest expense   5,282    6,256    22,651    26,524 
Net interest income   30,920    28,452    121,219    112,946 
Provision for loan and lease losses   1,168    2,282    3,649    1,428 
Net interest income after provision for loan and lease losses   29,752    26,170    117,570    111,518 
Non-interest Income:                    
Investment securities gains   -    9    459    292 
Total other-than-temporary impairment ("OTTI") losses   (14)   -    (109)   (178)
Portion of OTTI losses recognized in other comprehensive income, before taxes   -    -    -    18 
Net OTTI recognized in earnings   (14)   -    (109)   (160)
Service charges on deposit accounts   2,197    2,394    8,910    9,527 
Mortgage banking activities   1,738    824    6,032    3,228 
Wealth management income   4,000    4,041    15,949    15,646 
Insurance agency commissions   1,334    1,473    4,490    4,650 
Income from bank owned life insurance   662    674    2,616    2,636 
Visa check fees   1,043    927    3,887    3,637 
Other income   1,287    1,028    4,722    4,044 
Total non-interest income   12,247    11,370    46,956    43,500 
Non-interest Expenses:                    
Salaries and employee benefits   15,405    15,433    62,509    59,625 
Occupancy expense of premises   3,115    2,802    12,010    11,519 
Equipment expenses   1,189    1,292    4,871    4,705 
Marketing   827    727    2,651    2,389 
Outside data services   836    1,092    5,019    4,159 
FDIC insurance   601    698    2,573    3,187 
Amortization of intangible assets   478    461    1,881    1,845 
Other expenses   4,768    4,818    18,413    17,642 
Total non-interest expenses   27,219    27,323    109,927    105,071 
Income before income taxes   14,780    10,217    54,599    49,947 
Income tax expense   4,899    2,959    18,045    15,845 
Net income  $9,881   $7,258   $36,554   $34,102 
                     
Net Income Per Share Amounts:                    
Basic net income per share  $0.40   $0.30   $1.49   $1.42 
Diluted net income per share  $0.40   $0.30   $1.48   $1.41 
Dividends declared per share  $0.14   $0.10   $0.48   $0.34 

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                         
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED       
                                 
   2012   2011 
(Dollars in thousands, except per share data)  Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1 
Profitability for the quarter:                                        
Tax-equivalent interest income  $37,536   $38,819   $36,898   $35,991   $36,156   $36,424   $36,435   $36,057 
Interest expense   5,282    5,710    5,749    5,910    6,256    6,674    6,854    6,740 
Tax-equivalent net interest income   32,254    33,109    31,149    30,081    29,900    29,750    29,581    29,317 
Tax-equivalent adjustment   1,334    1,324    1,340    1,376    1,448    1,420    1,427    1,307 
Provision for loan and lease losses   1,168    232    1,585    664    2,282    (3,520)   1,151    1,515 
Non-interest income   12,247    12,242    11,493    10,974    11,370    11,336    10,802    9,992 
Non-interest expenses   27,219    27,167    28,858    26,683    27,323    25,848    25,838    26,062 
Income before income taxes   14,780    16,628    10,859    12,332    10,217    17,338    11,967    10,425 
Income tax expense   4,899    5,638    3,652    3,856    2,959    6,081    3,671    3,134 
Net income  $9,881   $10,990   $7,207   $8,476   $7,258   $11,257   $8,296   $7,291 
Financial performance:                                        
Pre-tax pre-provision pre-merger expense income  $15,740   $16,996   $14,642   $13,370   $12,499   $13,818   $13,118   $11,940 
Return on average assets   1.01%   1.13%   0.78%   0.94%   0.79%   1.24%   0.93%   0.84%
Return on average common equity   8.14%   9.22%   6.34%   7.60%   6.54%   10.42%   8.03%   7.26%
Net interest margin   3.53%   3.67%   3.62%   3.56%   3.51%   3.53%   3.58%   3.65%
Efficiency ratio - GAAP (1)   63.06%   61.70%   69.87%   67.25%   68.61%   65.16%   66.33%   68.58%
Efficiency ratio - Non-GAAP (1)   60.54%   58.91%   61.54%   63.88%   65.10%   62.02%   62.82%   65.09%
Per share data:                                        
Basic net income per share  $0.40   $0.44   $0.30   $0.35   $0.30   $0.47   $0.34   $0.30 
Diluted net income per share   0.40   $0.44   $0.30   $0.35   $0.30   $0.47   $0.34   $0.30 
Average fully diluted shares   24,971,249    24,949,205    24,423,236    24,180,501    24,141,084    24,142,137    24,130,357    24,115,906 
Dividends declared per common share  $0.14   $0.12   $0.12   $0.10   $0.10   $0.08   $0.08   $0.08 
Non-interest income:                                        
Securities gains  $-   $296   $90   $73   $9   $231   $32   $20 
Net OTTI recognized in earnings   (14)   (23)   (8)   (64)   -    (76)   (43)   (41)
Service charges on deposit accounts   2,197    2,230    2,283    2,200    2,394    2,444    2,437    2,252 
Mortgage banking activities   1,738    1,981    1,288    1,025    824    1,141    808    455 
Wealth management income   4,000    3,858    4,034    4,057    4,041    3,937    4,023    3,645 
Insurance agency commissions   1,334    1,020    934    1,202    1,473    1,044    953    1,180 
Income from bank owned life insurance   662    660    660    634    674    662    654    646 
Visa check fees   1,043    984    962    898    927    927    949    834 
Other income   1,287    1,236    1,250    949    1,028    1,026    989    1,001 
Total non-interest income  $12,247   $12,242   $11,493   $10,974   $11,370   $11,336   $10,802   $9,992 
Non-interest expense:                                        
Salaries and employee benefits  $15,405   $15,476   $15,927   $15,701   $15,433   $14,892   $14,676   $14,624 
Occupancy expense of premises   3,115    3,106    2,943    2,846    2,802    2,784    2,790    3,143 
Equipment expenses   1,189    1,237    1,255    1,190    1,292    1,143    1,128    1,142 
Marketing   827    764    565    495    727    468    709    485 
Outside data services   836    1,076    1,828    1,279    1,092    1,073    999    995 
FDIC insurance   601    667    653    652    698    709    736    1,044 
Amortization of intangible assets   478    476    466    461    461    461    462    461 
Professional fees   1,584    1,282    2,156    1,287    1,414    1,314    1,088    1,126 
Other real estate owned expenses   316    174    351    64    604    383    726    699 
Other expenses   2,868    2,909    2,714    2,708    2,800    2,621    2,524    2,343 
Total non-interest expense  $27,219   $27,167   $28,858   $26,683   $27,323   $25,848   $25,838   $26,062 

 

 

(1)The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                   
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED       
                                 
   2012   2011 
(Dollars in thousands)  Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1 
Balance sheets at quarter end:                                        
Residential mortgage loans  $523,364   $499,806   $472,426   $465,204   $448,662   $440,606   $445,605   $444,519 
Residential construction loans   120,314    128,606    130,791    122,841    108,699    90,727    81,425    84,939 
Commercial ADC loans   151,933    133,007    151,620    149,814    160,946    141,576    149,215    151,135 
Commercial investor real estate loans   456,888    447,536    443,237    392,626    371,948    357,358    353,749    355,967 
Commercial owner occupied real estate loans   571,510    579,711    579,812    525,022    522,076    519,837    511,271    509,215 
Commercial business loans   346,708    322,087    334,040    253,827    260,327    226,528    225,624    231,448 
Leasing   3,421    4,233    5,618    5,843    6,954    8,484    10,200    12,477 
Consumer loans   356,990    353,999    357,534    356,215    360,080    360,287    360,831    360,349 
Total loans and leases   2,531,128    2,468,985    2,475,078    2,271,392    2,239,692    2,145,403    2,137,920    2,150,049 
Allowance for loan and lease losses   (42,957)   (42,618)   (45,265)   (45,061)   (49,426)   (49,720)   (55,246)   (58,918)
Investment securities   1,075,032    1,074,918    1,006,743    1,067,462    1,164,699    1,174,180    1,128,589    1,087,620 
Interest-earning assets   3,669,175    3,614,310    3,584,480    3,416,136    3,452,214    3,370,360    3,322,317    3,283,819 
Total assets   3,955,206    3,887,427    3,855,177    3,668,273    3,711,370    3,626,043    3,612,016    3,549,533 
Noninterest-bearing demand deposits   847,415    818,674    763,566    685,770    650,377    643,169    648,605    619,905 
Total deposits   2,913,034    2,880,262    2,852,055    2,681,075    2,656,520    2,640,324    2,657,861    2,599,634 
Customer repurchase agreements   51,929    58,306    64,779    73,130    63,613    79,529    65,214    75,516 
Total interest-bearing liabilities   2,592,606    2,560,040    2,593,501    2,508,756    2,590,164    2,517,180    2,515,053    2,495,916 
Total stockholders' equity   483,512    481,810    471,464    451,917    446,109    440,791    423,684    409,076 
Quarterly average balance sheets:                                        
Residential mortgage loans  $542,095   $510,475   $488,644   $474,149   $463,754   $453,645   $455,803   $458,329 
Residential construction loans   125,640    133,236    125,582    116,630    99,983    89,128    84,144    85,891 
Commercial ADC loans   137,679    142,870    151,374    159,769    153,598    145,835    149,773    149,071 
Commercial investor real estate loans   453,074    445,012    410,258    377,072    353,975    350,925    352,668    340,008 
Commercial owner occupied real estate loans   577,693    580,994    539,590    518,763    521,212    515,185    509,273    500,875 
Commercial business loans   322,501    332,364    284,271    258,099    231,773    225,041    225,646    236,949 
Leasing   3,773    4,858    5,528    6,325    7,671    9,269    11,154    14,009 
Consumer loans   356,452    357,135    359,008    358,783    361,888    360,875    362,098    367,261 
Total loans and leases   2,518,907    2,506,945    2,364,255    2,269,590    2,193,854    2,149,903    2,150,559    2,152,393 
Investment securities   1,072,278    1,038,586    1,052,502    1,086,295    1,173,418    1,168,712    1,121,325    1,054,740 
Interest-earning assets   3,639,605    3,599,715    3,453,590    3,389,843    3,392,773    3,355,937    3,305,059    3,237,556 
Total assets   3,908,479    3,863,951    3,708,622    3,637,674    3,647,291    3,610,219    3,566,278    3,500,807 
Noninterest-bearing demand deposits   824,188    774,215    699,638    641,477    655,381    631,192    607,092    582,441 
Total deposits   2,891,120    2,857,523    2,714,980    2,642,634    2,658,676    2,640,729    2,607,854    2,548,117 
Customer repurchase agreements   60,941    62,693    66,674    65,195    74,267    72,646    70,313    79,067 
Total interest-bearing liabilities   2,571,937    2,587,815    2,526,541    2,523,394    2,525,128    2,524,728    2,519,114    2,485,451 
Total stockholders' equity   482,621    474,231    457,338    448,406    440,154    428,511    414,624    407,007 
Financial Measures                                        
Average equity to average assets   12.35%   12.27%   12.33%   12.33%   12.07%   11.87%   11.63%   11.63%
Investment securities to earning assets   29.30%   29.74%   28.09%   31.25%   33.74%   34.84%   33.97%   33.12%
Loans to earnings assets   68.98%   68.31%   69.05%   66.49%   64.88%   63.66%   64.35%   65.47%
Loans to assets   63.99%   63.51%   64.20%   61.92%   60.35%   59.17%   59.19%   60.57%
Loans to deposits   86.89%   85.72%   86.78%   84.72%   84.31%   81.26%   80.44%   82.71%
Capital measures:                                        
Tier 1 leverage   10.98%   10.99%   11.21%   11.05%   10.84%   10.79%   10.64%   10.63%
Tier 1 capital to risk-weighted assets   14.15%   14.31%   14.12%   14.89%   14.57%   14.96%   14.75%   14.21%
Total regulatory capital to risk-weighted assets   15.40%   15.56%   15.36%   16.14%   15.83%   16.21%   16.01%   15.48%
Book value per share  $19.41   $19.35   $18.94   $18.72   $18.52   $18.31   $17.58   $16.99 
Tangible book value per common share   0.00    0.00    0.00    0.00    14.58    14.35    13.93    13.64 
Outstanding shares   24,905,392    24,896,136    24,886,724    24,143,985    24,091,042    24,079,204    24,095,123    24,084,423 

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                                      

LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

 

    2012     2011  
(Dollars in thousands)   December 31,     September 30,     June 30,     March 31,     December 31,     September 30,     June 30,     March 31,  
Non-Performing Assets:                                                
Loans and leases 90 days past due:                                                                
Commercial business   $ 24     $ 44     $ 70     $ 40     $ -     $ -     $ -     $ -  
Commercial real estate:                                                                
Commercial AD&C     -       -       342       -       -       -       -       -  
Commercial investor real estate     -       -       -       -       -       -       -       -  
Commercial owner occupied real estate     209       -       -       -       -       -       -       -  
Leasing     -       127       96       -       2       63       20       24  
Consumer     14       18       5       89       165       373       337       169  
Residential real estate:                                                                
Residential mortgage     -       116       91       167       167       2,291       3,820       4,616  
Residential construction     -       -       -       -       243       -       -       2,367  
Total loans and leases 90 days past due     247       305       604       296       577       2,727       4,177       7,176  
Non-accrual loans and leases:                                                                
Commercial business     4,611       4,919       4,583       6,542       7,226       8,038       8,288       9,649  
Commercial real estate:                                                                
Commercial AD&C     6,332       8,957       13,055       14,303       18,702       24,481       26,133       28,310  
Commercial investor real estate     11,843       12,345       13,327       13,893       16,963       16,118       2,975       2,519  
Commercial owner occupied real estate     13,681       13,742       15,146       16,295       14,709       11,847       13,019       12,304  
Leasing     865       834       872       858       853       956       1,017       1,529  
Consumer     2,410       1,607       1,651       1,700       1,786       1,478       590       720  
Residential real estate:                                                                
Residential mortgage     4,681       3,644       2,600       4,818       5,722       6,081       6,295       6,652  
Residential construction     3,125       3,236       4,333       4,929       5,719       5,034       5,701       5,222  
Total non-accrual loans and lease     47,548       49,284       55,567       63,338       71,680       74,033       64,018       66,905  
Total restructured loans - accruing     10,110       9,277       8,285       8,547       6,881       6,088       8,299       14,266  
Total non-performing loans and leases     57,905       58,866       64,456       72,181       79,138       82,848       76,494       88,347  
Other assets and real estate owned (OREO)     5,926       9,291       9,553       4,834       4,431       7,938       6,951       7,960  
Total non-performing assets   $ 63,831     $ 68,157     $ 74,009     $ 77,015     $ 83,569     $ 90,786     $ 83,445     $ 96,307  
                                                                 
      For the quarter ended,    
      December 31,       September 30,       June 30,       March 31,       December 31,       September 30,       June 30,       March 31,   
(Dollars in thousands)     2012       2012       2012       2012       2011       2011       2011       2011  
Analysis of Non-accrual Loan and Lease Activity:                                                                
Balance at beginning of period   $ 49,284     $ 55,567     $ 63,338     $ 71,680     $ 74,033     $ 64,018     $ 66,905     $ 63,327  
Non-accrual balances transferred to OREO     (400 )     (232 )     (2,131 )     -       (511 )     (142 )     (791 )     (535 )
Non-accrual balances charged-off     (979 )     (3,697 )     (1,663 )     (4,965 )     (2,758 )     (1,375 )     (2,112 )     (2,701 )
Net payments or draws     (3,852 )     (6,342 )     (4,149 )     (5,061 )     (6,724 )     (4,839 )     (8,016 )     (2,531 )
Loans placed on non-accrual     5,023       3,988       1,261       1,809       8,640       17,226       8,032       9,526  
Non-accrual loans brought current     (1,528 )     -       (1,089 )     (125 )     (1,000 )     (855 )     -       (181 )
Balance at end of period   $ 47,548     $ 49,284     $ 55,567     $ 63,338     $ 71,680     $ 74,033     $ 64,018     $ 66,905  
                                                                 
Analysis of Allowance for Loan Losses:                                                                
Balance at beginning of period   $ 42,618     $ 45,265     $ 45,061     $ 49,426     $ 49,720     $ 55,246     $ 58,918     $ 62,135  
Provision for loan and lease losses     1,168       232       1,585       664       2,282       (3,520 )     1,151       1,515  
Less loans charged-off, net of recoveries:                                                                
Commercial business     (76 )     (225 )     (185 )     (39 )     (65 )     397       769       790  
Commercial real estate:                                                                
Commercial AD&C     (248 )     1,983       (59 )     1,076       275       151       253       (137 )
Commercial investor real estate     110       123       140       3,219       335       30       504       (4 )
Commercial owner occupied real estate     -       653       484       -       329       45       113       -  
Leasing     -       (17 )     (3 )     5       181       85       455       333  
Consumer     384       111       228       348       352       375       713       1,091  
Residential real estate:                                                                
Residential mortgage     508       253       713       420       792       751       1,319       2,095  
Residential construction     151       (2 )     63       -       377       172       697       564  
Net charge-offs     829       2,879       1,381       5,029       2,576       2,006       4,823       4,732  
Balance at end of period   $ 42,957     $ 42,618     $ 45,265     $ 45,061     $ 49,426     $ 49,720     $ 55,246     $ 58,918  
                                                                 
Asset Quality Ratios:                                                                
Non-performing loans to total loans     2.29 %     2.38 %     2.60 %     3.18 %     3.53 %     3.86 %     3.58 %     4.11 %
Non-performing assets to total assets     1.61 %     1.75 %     1.92 %     2.10 %     2.25 %     2.50 %     2.31 %     2.71 %
Allowance for loan losses to loans     1.70 %     1.73 %     1.83 %     1.98 %     2.21 %     2.32 %     2.58 %     2.74 %
Allowance for loan losses to non-performing loans     74.18 %     72.40 %     70.23 %     62.43 %     62.46 %     60.01 %     72.22 %     66.69 %
Net charge-offs in quarter to average loans     0.13 %     0.46 %     0.23 %     0.89 %     0.47 %     0.37 %     0.90 %     0.89 %

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                        

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED              

 

     Three Months Ended December 31,  
     2012     2011  
                 Annualized                  Annualized  
    Average     (1)     Average     Average     (1)      Average  
(Dollars in thousands and tax-equivalent)   Balances     Interest     Yield/Rate     Balances     Interest     Yield/Rate  
Assets                                    
Residential mortgage loans (2)   $ 542,095     $ 5,278       3.93 %   $ 463,754     $ 5,224       4.53 %
Residential construction loans     125,640       1,076       3.41       99,983       962       3.82  
Commercial ADC loans     137,679       1,866       5.39       153,598       2,006       5.18  
Commercial investor real estate loans     453,074       6,242       5.48       353,975       4,977       5.53  
Commercial owner occupied real estate loans     577,693       7,514       5.26       521,212       7,511       5.75  
Commercial business loans     322,501       4,523       5.43       231,773       2,851       4.88  
Leasing     3,773       54       5.62       7,671       131       6.83  
Consumer loans     356,452       3,111       3.50       361,888       3,285       3.62  
Total loans and leases (3)     2,518,907       29,664       4.71       2,193,854       26,947       4.89  
Taxable securities     768,412       4,493       2.34       902,211       5,661       2.51  
Tax-exempt securities (4)     303,866       3,351       4.41       271,207       3,532       5.21  
Interest-bearing deposits with banks     47,954       28       0.22       24,374       15       0.25  
Federal funds sold     466       -       0.22       1,127       1       0.12  
Total interest-earning assets     3,639,605       37,536       4.11       3,392,773       36,156       4.24  
                                                 
Less: allowance for loan and lease losses     (42,741 )                     (51,126                
Cash and due from banks     48,803                       46,121                  
Premises and equipment, net     48,626                       48,800                  
Other assets     214,186                       210,723                  
Total assets   $ 3,908,479                     $ 3,647,291                  
                                                 
Liabilities and Stockholders' Equity                                                
Interest-bearing demand deposits   $ 400,175       88       0.09 %   $ 352,244       86       0.10 %
Regular savings deposits     220,814       44       0.08       188,877       41       0.09  
Money market savings deposits     900,991       472       0.21       871,923       682       0.31  
Time deposits     544,952       1,046       0.76       590,250       1,520       1.02  
Total interest-bearing deposits     2,066,932       1,650       0.32       2,003,294       2,329       0.46  
Other borrowings     64,908       46       0.28       81,387       57       0.27  
Advances from FHLB     405,097       3,359       3.30       405,447       3,628       3.55  
Subordinated debentures     35,000       227       2.59       35,000       242       2.77  
Total interest-bearing liabilities     2,571,937       5,282       0.82       2,525,128       6,256       0.98  
                                                 
Noninterest-bearing demand deposits     824,188                       655,381                  
Other liabilities     29,733                       26,628                  
Stockholders' equity     482,621                       440,154                  
Total liabilities and stockholders' equity   $ 3,908,479                     $ 3,647,291                  
                                                 
Net interest income and spread           $ 32,254       3.29 %           $ 29,900       3.26 %
Less: tax-equivalent adjustment             1,334                       1,448          
Net interest income           $ 30,920                     $ 28,452          
                                                 
Interest income/earning assets                     4.11                     4.24
Interest expense/earning assets                     0.58                       0.73  
Net interest margin                     3.53 %                     3.51 %

 

(1)Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.4 million in 2012 and 2011, respectively.
(2)Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3)Non-accrual loans are included in the average balances.
(4)Includes only investments that are exempt from federal taxes.

 

 
 

 

Sandy Spring Bancorp, Inc. and Subsidiaries                        

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED              

 

   Twelve Months Ended December 31, 
   2012    2011  
           Annualized           Annualized 
   Average   (1)   Average   Average   (1)   Average 
(Dollars in thousands and tax-equivalent)  Balances   Interest   Yield/Rate   Balances   Interest   Yield/Rate 
Assets                        
Residential mortgage loans (2)  $503,963   $21,281    4.22%  $457,886   $21,971    4.80%
Residential construction loans   125,295    4,581    3.66    89,823    3,410    3.80 
Commercial ADC loans   147,881    7,721    5.22    149,571    6,819    4.56 
Commercial investor real estate loans   421,505    23,167    5.50    349,447    20,213    5.78 
Commercial owner occupied real estate loans   554,397    30,236    5.45    511,692    30,197    5.90 
Commercial business loans   299,462    16,511    5.51    229,825    11,344    4.94 
Leasing   5,117    326    6.36    10,505    707    6.73 
Consumer loans   357,839    12,592    3.52    363,010    13,271    3.68 
Total loans and leases (3)   2,415,459    116,415    4.82    2,161,759    107,932    5.00 
Taxable securities   774,030    19,254    2.49    885,023    23,471    2.65 
Tax-exempt securities (4)   288,347    13,463    4.67    244,958    13,590    5.55 
Interest-bearing deposits with banks   42,668    111    0.26    30,270    77    0.25 
Federal funds sold   724    1    0.18    1,337    2    0.14 
Total interest-earning assets   3,521,228    149,244    4.24    3,323,347    145,072    4.37 
                               
Less: allowance for loan and lease losses   (46,260)             (56,770)          
Cash and due from banks   46,588              45,721           
Premises and equipment, net   48,875              49,047           
Other assets   209,653              220,221           
Total assets  $3,780,084             $3,581,566           
                               
Liabilities and Stockholders' Equity                              
Interest-bearing demand deposits  $385,004    344    0.09%  $340,110    364    0.11%
Regular savings deposits   212,659    199    0.09    184,050    183    0.10 
Money market savings deposits   877,546    1,943    0.22    859,608    3,547    0.41 
Time deposits   566,658    4,871    0.86    611,192    6,908    1.13 
Total interest-bearing deposits   2,041,867    7,357    0.36    1,994,960    11,002    0.55 
Other borrowings   70,477    204    0.29    78,207    212    0.27 
Advances from FHLB   405,227    14,131    3.49    405,577    14,397    3.55 
Subordinated debentures   35,000    959    2.74    35,000    913    2.61 
Total interest-bearing liabilities   2,552,571    22,651    0.89    2,513,744    26,524    1.06 
                               
Noninterest-bearing demand deposits   735,231              619,260           
Other liabilities   26,563              25,881           
Stockholders' equity   465,719              422,681           
Total liabilities and stockholders' equity  $3,780,084             $3,581,566           
                               
Net interest income and spread       $126,593    3.35%       $118,548    3.31%
Less: tax-equivalent adjustment        5,374              5,602      
Net interest income       $121,219             $112,946      
                               
Interest income/earning assets             4.24%             4.37%
Interest expense/earning assets             0.64              0.80 
Net interest margin             3.60%             3.57%

 

(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $5.4 million and $5.6 million in 2012 and 2011, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3) Non-accrual loans are included in the average balances.
(4) Includes only investments that are exempt from federal taxes.