News release

 

FOR IMMEDIATE RELEASE

 

SANDY SPRING BANCORP REPORTS NET INCOME OF $7.0 MILLION FOR THE SECOND QUARTER

 

OLNEY, MARYLAND, July 17, 2014 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today reported net income for the second quarter of 2014 of $7.0 million ($0.28 per diluted share) compared to net income of $12.2 million ($0.49 per diluted share) for the second quarter of 2013 and net income of $10.9 million ($0.43 per diluted share) for the first quarter of 2014.

 

For the six-months ended June 30, 2014, net income was $17.9 million ($0.71 per diluted share) compared to net income of $22.7 million ($0.91 per diluted share) for the same period of the prior year.

 

“Exclusive of the impact of the litigation expenses incurred during the second quarter, our pre-tax pre-provision income increased from the prior year. This core performance was evidenced in a stable margin, controlled expense growth and continued strength in our wealth management and card based businesses,” said Daniel J. Schrider, President and Chief Executive Officer.

 

“Our underlying performance in the second quarter was also driven by the impact of balanced loan growth and the resulting increase in interest income. This more than offset the decline in mortgage banking revenues as originations were lower than prior year levels,” said Schrider.

 

Second Quarter Highlights:

 

·

Total loans increased 12% compared to the second quarter of 2013 and 3% compared to the first quarter of 2014 due to significant loan growth in the commercial investor real estate portfolio and due to the retention of a greater portion of mortgage originations over the past year.

 

·

The provision for loan and lease losses for the second quarter of 2014 was a charge of $0.2 million compared to a credit of $2.9 million for the second quarter of 2013 and a credit of $1.0 million for the first quarter of 2014. The current quarter’s provision reflects the stability in the credit quality of the loan portfolio as outstanding loans continued to grow from the prior year.

 

·

The net interest margin was 3.48% for the second quarter of 2014, compared to 3.51% for the second quarter of 2013 and 3.47% for the first quarter of 2014. The decline compared to the prior year was the result of declining loan yields during the period that exceeded the reduction in rates paid on interest-bearing liabilities.

 

 

·

Non-interest income decreased 4% for the quarter compared to the prior year quarter due to the decline in income from mortgage banking caused by a significantly lower volume of saleable mortgage loan originations. During this same period wealth management income increased 5%.

 

·

Non-performing loans totaled $41.7 million at June 30, 2014 compared to $46.2 million at June 30, 2013 and $38.7 million at March 31, 2014. The coverage ratio of the allowance for loan and lease losses to non-performing loans was 91% at June 30, 2014 compared to a coverage ratio of 84% at June 30, 2013 and 98% at March 31, 2014.

 

·

Litigation expenses of $6.1 million were accrued during the quarter as a result of an adverse jury verdict associated with the actions of a former employee of CommerceFirst Bank which was acquired in 2012.

 

Review of Balance Sheet and Credit Quality

 

Total assets grew 4% to $4.2 billion at June 30, 2014 compared to $4.1 billion at June 30, 2013. This growth was driven by a 12% increase in the loan portfolio as total loans and leases ended the period at $2.9 billion. As previously noted, solid increases occurred in the residential mortgage and commercial investor real estate portfolios.

 

Deposits and certain other short-term borrowings that comprise all the funding sources derived from customers, increased 4% compared to June 30, 2013. An important performance metric involves checking accounts as they are considered to be primary drivers of growth in multiple-product banking relationships with clients. At June 30, 2014, the combined noninterest-bearing and interest-bearing checking account balances increased 10% compared to the balances at June 30, 2013.

 

Tangible common equity totaled $427.1 million at June 30, 2014 compared to $401.7 million at June 30, 2013, resulting in an increase in the ratio of tangible common equity to tangible assets to 10.29% at June 30, 2014 from 10.08% at June 30, 2013. This increase in tangible common equity occurred during the period that dividends per common share were raised from $0.30 per share to $0.36 per common share, a 20% increase. At June 30, 2014, the Company had a total risk-based capital ratio of 15.66%, a tier 1 risk-based capital ratio of 14.48% and a tier 1 leverage ratio of 11.37%.

 

Non-performing loans totaled $41.7 million at June 30, 2014 compared to $46.2 million at June 30, 2013 and $38.7 million at March 31, 2014. The level of non-performing loans to total loans decreased to 1.43% at June 30, 2014 compared to 1.77% at June 30, 2013. This improvement in credit quality has occurred concurrent with the year-over-year 12% growth in the loan portfolio.

 

Net loan charge-offs totaled $0.2 million for the second quarter of 2014 compared to net recoveries of $0.6 million for the second quarter of 2013 and net loan recoveries of $0.2 million for the first quarter of 2014. The allowance for loan and lease losses represented 1.30% of outstanding loans and leases and 91% of non-performing loans at June 30, 2014 compared to 1.50% of outstanding loans and leases and 84% of non-performing loans at June 30, 2013. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

 

 

Income Statement Review

 

Net interest income for the second quarter of 2014 increased 4% compared to the second quarter of 2013. This increase was due to the impact of the growth in average loans and a reduction in funding costs despite a modest decline in loan yields. This activity resulted in a net interest margin of 3.48% for the second quarter of 2014 compared to 3.51% for the second quarter of 2013.

 

The provision for loan and lease losses was $0.2 million for the second quarter of 2014 compared to a credit of $2.9 million for the second quarter of 2013 and a credit of $1.0 million for the first quarter of 2014. The current quarter’s provision reflects the stability in the credit quality of the loan portfolio as outstanding loans continued to grow from the prior year. The credits to the provision for loan and lease losses in prior quarters reflected the impact of declining charge-offs and improved credit metrics in the loan portfolio over the past 12 months that more than offset the effects of the loan growth during the past year.

 

Non-interest income decreased 4% to $11.7 million for the second quarter of 2014 compared to $12.2 million for the second quarter of 2013. This decrease was driven by a reduction in mortgage banking income due primarily to lower mortgage origination volumes and a decline in client refinancing activity. This decrease was partially offset by a 5% increase in wealth management income due to higher assets under management.

 

Non-interest expenses increased 24% to $34.1 million for the second quarter of 2014 compared to $27.5 million in the second quarter of 2013. The current quarter included $6.1 million in the previously mentioned litigation expenses. Exclusive of these costs, non-interest expense would have been $28.0 million, an increase of 2% from the second quarter of 2013. This increase was driven by increased staffing costs. The non-GAAP efficiency ratio was 61.30% for the second quarter of 2014 compared to 60.92% for the second quarter of 2013.

 

Net interest income for the first six months of 2014 increased 3% compared to the first six months of 2013 due to an increase in average loans and lower funding costs. The net interest margin decreased to 3.48% for the first six months of 2014 compared to 3.55% for the first six months of 2013 due largely to the factors cited previously with respect to the second quarter of 2014.

 

The provision for loan and lease losses was a credit of $0.8 million for the first six months of 2014 compared to a credit of $2.8 million for first six months of 2013. The change in the provision for the period was driven by a decline in historical losses, a lower level of problem loans and loan recoveries during the period whose impact more than offset the effect of loan growth over the same period.

 

Non-interest income decreased 7% to $22.9 million for the first six months of 2014 compared to $24.6 million for the first six months of 2013. This decrease was driven primarily by a 68% decrease in income from mortgage banking activities due to the decline in loan origination volumes. The impact of this decrease was partially mitigated by increases in wealth management income that increased 7% due to higher assets under management while insurance agency commissions increased 9%. Other non-interest income decreased 14% due to a decline in gains on sales and dispositions of loans compared to the prior year and last year’s inclusion of a non-recurring legal settlement.

 

 

Non-interest expenses increased to $61.7 million for the first six months of 2014 compared to $55.3 million in the first six months of 2013 due to the aforementioned impact of the litigation expenses. Excluding the impact of the litigation expenses, non-interest expense for the six months ended June 30, 2014 was $55.6 million compared to $55.3 million for the six months ended June 30, 2013. The non-GAAP efficiency ratio was 61.45% for the first six months of 2014 compared to 60.86% for the first six months of 2013.

 

Conference Call

 

The Company’s management will host a conference call to discuss its second quarter 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) July 31, 2014. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10048612.

 

About Sandy Spring Bancorp, Inc.

 

With $4.2 billion in assets, Sandy Spring Bancorp, Inc. 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 46 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 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, 2013, 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												Six Months Ended
		June 30,								%				June 30,								%
(Dollars in thousands, except per share data)		2014				2013				Change				2014				2013				Change
Results of Operations:
Net interest income		$	32,309			$	30,932				4	%		$	63,901			$	62,258				3	%
Provision for loan and lease losses			158				(2,876	)			(105	)			(824	)			(2,798	)			(71	)
Non-interest income			11,694				12,215				(4	)			22,943				24,634				(7	)
Non-interest expenses			34,141				27,508				24				61,690				55,331				11
Income before income taxes			9,704				18,515				(48	)			25,978				34,359				(24	)
Net income			6,982				12,162				(43	)			17,910				22,720				(21	)
Pre-tax pre-provision income		$	15,990			$	15,639				2			$	31,282			$	31,561				(1	)
Return on average assets			0.67	%			1.23	%							0.87	%			1.16	%
Return on average common equity			5.47	%			9.98	%							7.11	%			9.42	%
Net interest margin			3.48	%			3.51	%							3.48	%			3.55	%
Efficiency ratio - GAAP basis (1)			77.59	%			63.75	%							71.04	%			63.68	%
Efficiency ratio - Non-GAAP basis (1)			61.30	%			60.92	%							61.45	%			60.86	%
Per share data:
Basic net income		$	0.28			$	0.49				(43	)%		$	0.72			$	0.91				(21	)%
Diluted net income		$	0.28			$	0.49				(43	)		$	0.71			$	0.91				(22	)
Average fully diluted shares			25,127,036				25,009,092				-				25,126,369				25,006,161				-
Dividends declared per share		$	0.18			$	0.16				13			$	0.36			$	0.30				20
Book value per share			20.63				19.45				6				20.63				19.45				6
Tangible book value per share			17.04				16.09				6				17.04				16.09				6
Outstanding shares			25,069,700				24,967,558				-				25,069,700				24,967,558				-
Financial Condition at period-end:
Investment securities		$	980,530			$	1,102,209				(11	)%		$	980,530			$	1,102,209				(11	)%
Loans and leases			2,910,944				2,605,458				12				2,910,944				2,605,458				12
Interest-earning assets			3,945,643				3,802,682				4				3,945,643				3,802,682				4
Assets			4,234,342				4,072,617				4				4,234,342				4,072,617				4
Deposits			3,038,670				2,926,650				4				3,038,670				2,926,650				4
Interest-bearing liabilities			2,698,887				2,678,490				1				2,698,887				2,678,490				1
Stockholders' equity			517,269				485,643				7				517,269				485,643				7
Capital ratios:
Tier 1 leverage (4)			11.37	%			11.28	%							11.37	%			11.28	%
Tier 1 capital to risk-weighted assets (4)			14.48	%			14.30	%							14.48	%			14.30	%
Total regulatory capital to risk-weighted assets (4)			15.66	%			15.55	%							15.66	%			15.55	%
Tangible common equity to tangible assets (2)			10.29	%			10.08	%							10.29	%			10.08	%
Average equity to average assets			12.31	%			12.35	%							12.29	%			12.30	%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases			1.30	%			1.50	%							1.30	%			1.50	%
Non-performing loans to total loans			1.43	%			1.77	%							1.43	%			1.77	%
Non-performing assets to total assets			1.03	%			1.25	%							1.03	%			1.25	%
Allowance for loan and lease losses to non-performing loans			90.99	%			84.46	%							90.99	%			84.46	%
Annualized net charge-offs to average loans and leases (3)			0.03	%			(0.10	)%							-	%			0.09	%

 

(1)

The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional efficiency ratio - non-GAAP basis excludes intangible asset amortization 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.

(4)

Estimated ratio at June 30, 2014

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

RECONCILIATION TABLE - UNAUDITED

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Dollars in thousands)		2014				2013				2014				2013
Pre-tax pre-provision income:
Net income		$	6,982			$	12,162			$	17,910			$	22,720
Plus non-GAAP adjustment:
Litigation expenses			6,128				-				6,128				-
Income taxes			2,722				6,353				8,068				11,639
Provision (credit) for loan and lease losses			158				(2,876	)			(824	)			(2,798	)
Pre-tax pre-provision income		$	15,990			$	15,639			$	31,282			$	31,561
Efficiency ratio - GAAP basis:
Non-interest expenses		$	34,141			$	27,508			$	61,690			$	55,331
Net interest income plus non-interest income		$	44,003			$	43,147			$	86,844			$	86,892
Efficiency ratio - GAAP basis			77.59	%			63.75	%			71.04	%			63.68	%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses		$	34,141			$	27,508			$	61,690			$	55,331
Less non-GAAP adjustment:
Amortization of intangible assets			224				461				594				922
Litigation expenses			6,128				-				6,128				-
Non-interest expenses - as adjusted		$	27,789			$	27,047			$	54,968			$	54,409
Net interest income plus non-interest income		$	44,003			$	43,147			$	86,844			$	86,892
Plus non-GAAP adjustment:
Tax-equivalent income			1,331				1,312				2,613				2,623
Less non-GAAP adjustments:
Securities gains			-				62				-				118
OTTI recognized in earnings			-				-				-				-
Net interest income plus non-interest income - as adjusted		$	45,334			$	44,397			$	89,457			$	89,397
Efficiency ratio - Non-GAAP basis			61.30	%			60.92	%			61.45	%			60.86	%
Tangible common equity ratio:
Total stockholders' equity		$	517,269			$	485,643			$	517,269			$	485,643
Accumulated other comprehensive (income) loss			(5,233	)			2,425				(5,233	)			2,425
Goodwill			(84,171	)			(84,171	)			(84,171	)			(84,171	)
Other intangible assets, net			(737	)			(2,241	)			(737	)			(2,241	)
Tangible common equity		$	427,128			$	401,656			$	427,128			$	401,656
Total assets		$	4,234,342			$	4,072,617			$	4,234,342			$	4,072,617
Goodwill			(84,171	)			(84,171	)			(84,171	)			(84,171	)
Other intangible assets, net			(737	)			(2,241	)			(737	)			(2,241	)
Tangible assets		$	4,149,434			$	3,986,205			$	4,149,434			$	3,986,205
Tangible common equity ratio			10.29	%			10.08	%			10.29	%			10.08	%
Outstanding common shares			25,069,700				24,967,558				25,069,700				24,967,558
Tangible book value per common share		$	17.04			$	16.09			$	17.04			$	16.09

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED

 

		June 30,				December 31,				June 30,
(Dollars in thousands)		2014				2013				2013
Assets
Cash and due from banks		$	65,674			$	46,755			$	41,525
Federal funds sold			474				475				475
Interest-bearing deposits with banks			44,653				27,197				65,507
Cash and cash equivalents			110,801				74,427				107,507
Residential mortgage loans held for sale (at fair value)			9,042				8,365				29,033
Investments available-for-sale (at fair value)			720,885				751,284				838,440
Investments held-to-maturity — fair value of $224,313, $216,007 and 220,838 at June 30, 2014, December 31, 2013 and June 30, 2013, respectively			223,518				224,638				226,457
Other equity securities			36,127				40,687				37,312
Total loans and leases			2,910,944				2,784,266				2,605,458
Less: allowance for loan and lease losses			(37,959	)			(38,766	)			(39,015	)
Net loans and leases			2,872,985				2,745,500				2,566,443
Premises and equipment, net			45,296				45,916				46,901
Other real estate owned			1,967				1,338				4,831
Accrued interest receivable			12,271				12,532				13,071
Goodwill			84,171				84,171				84,171
Other intangible assets, net			737				1,330				2,241
Other assets			116,542				115,912				116,210
Total assets		$	4,234,342			$	4,106,100			$	4,072,617
Liabilities
Noninterest-bearing deposits		$	984,700			$	836,198			$	877,891
Interest-bearing deposits			2,053,970				2,041,027				2,048,759
Total deposits			3,038,670				2,877,225				2,926,650
Securities sold under retail repurchase agreements and federal funds purchased			72,917				53,842				54,731
Advances from FHLB			537,000				615,000				540,000
Subordinated debentures			35,000				35,000				35,000
Accrued interest payable and other liabilities			33,486				25,670				30,593
Total liabilities			3,717,073				3,606,737				3,586,974
Stockholders' Equity
Common stock — par value $1.00; shares authorized 50,000,000; shares issued and outstanding 25,069,700, 24,990,021 and 24,967,558 at June 30, 2014, December 31, 2013 and June 30, 2013, respectively			25,070				24,990				24,968
Additional paid in capital			194,252				193,445				192,327
Retained earnings			292,714				283,898				270,773
Accumulated other comprehensive income (loss)			5,233				(2,970	)			(2,425	)
Total stockholders' equity			517,269				499,363				485,643
Total liabilities and stockholders' equity		$	4,234,342			$	4,106,100			$	4,072,617

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Dollars in thousands, except per share data)		2014				2013				2014				2013
Interest Income:
Interest and fees on loans and leases		$	30,706			$	29,212			$	60,440			$	58,858
Interest on loans held for sale			71				309				130				662
Interest on deposits with banks			22				24				42				43
Interest and dividends on investment securities:
Taxable			3,876				3,919				7,992				7,853
Exempt from federal income taxes			2,316				2,315				4,637				4,642
Total interest income			36,991				35,779				73,241				72,058
Interest Expense:
Interest on deposits			1,193				1,396				2,377				2,851
Interest on retail repurchase agreements and federal funds purchased			37				38				75				87
Interest on advances from FHLB			3,233				3,189				6,451				6,412
Interest on subordinated debt			219				224				437				450
Total interest expense			4,682				4,847				9,340				9,800
Net interest income			32,309				30,932				63,901				62,258
Provision (credit) for loan and lease losses			158				(2,876	)			(824	)			(2,798	)
Net interest income after provision (credit) for loan and lease losses			32,151				33,808				64,725				65,056
Non-interest Income:
Investment securities gains			-				62				-				118
Service charges on deposit accounts			2,089				2,150				4,061				4,219
Mortgage banking activities			570				1,237				886				2,764
Wealth management income			4,741				4,532				9,207				8,574
Insurance agency commissions			961				1,036				2,601				2,385
Income from bank owned life insurance			608				623				1,206				1,235
Bank card fees			1,169				1,079				2,147				2,036
Other income			1,556				1,496				2,835				3,303
Total non-interest income			11,694				12,215				22,943				24,634
Non-interest Expenses:
Salaries and employee benefits			16,474				16,163				32,829				32,509
Occupancy expense of premises			3,274				2,996				6,746				6,178
Equipment expenses			1,262				1,227				2,518				2,476
Marketing			802				755				1,344				1,270
Outside data services			1,216				1,114				2,432				2,266
FDIC insurance			573				581				1,093				1,177
Amortization of intangible assets			224				461				594				922
Litigation expenses			6,128				-				6,128				-
Other expenses			4,188				4,211				8,006				8,533
Total non-interest expenses			34,141				27,508				61,690				55,331
Income before income taxes			9,704				18,515				25,978				34,359
Income tax expense			2,722				6,353				8,068				11,639
Net income		$	6,982			$	12,162			$	17,910			$	22,720
Net Income Per Share Amounts:
Basic net income per share		$	0.28			$	0.49			$	0.72			$	0.91
Diluted net income per share		$	0.28			$	0.49			$	0.71			$	0.91
Dividends declared per share		$	0.18			$	0.16			$	0.36			$	0.30

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED

 

										2013
(Dollars in thousands, except per share data)		Q2				Q1				Q4				Q3				Q2				Q1
Profitability for the quarter:
Tax-equivalent interest income		$	38,322			$	37,532			$	38,434			$	41,524			$	37,091			$	37,590
Interest expense			4,682				4,658				4,759				4,874				4,847				4,953
Tax-equivalent net interest income			33,640				32,874				33,675				36,650				32,244				32,637
Tax-equivalent adjustment			1,331				1,282				1,325				1,344				1,312				1,311
Provision for loan and lease losses			158				(982	)			586				1,128				(2,876	)			78
Non-interest income			11,694				11,249				11,654				11,223				12,215				12,419
Non-interest expenses			34,141				27,549				29,300				26,893				27,508				27,823
Income before income taxes			9,704				16,274				14,118				18,508				18,515				15,844
Income tax expense			2,722				5,346				4,505				6,419				6,353				5,286
Net income		$	6,982			$	10,928			$	9,613			$	12,089			$	12,162			$	10,558
Financial performance:
Pre-tax pre-provision income		$	15,990			$	15,292			$	14,704			$	19,636			$	15,639			$	15,922
Return on average assets			0.67	%			1.08	%			0.93	%			1.19	%			1.23	%			1.08	%
Return on average common equity			5.47	%			8.80	%			7.71	%			9.91	%			9.98	%			8.85	%
Net interest margin			3.48	%			3.47	%			3.53	%			3.88	%			3.51	%			3.59	%
Efficiency ratio - GAAP basis (1)			77.59	%			64.31	%			66.59	%			57.80	%			63.75	%			63.60	%
Efficiency ratio - Non-GAAP basis (1)			61.30	%			61.60	%			63.62	%			55.21	%			60.92	%			60.80	%
Per share data:
Basic net income per share		$	0.28			$	0.44			$	0.38			$	0.48			$	0.49			$	0.42
Diluted net income per share		$	0.28			$	0.43			$	0.38			$	0.48			$	0.49			$	0.42
Average fully diluted shares			25,127,036				25,124,206				25,108,109				25,070,506				25,009,092				25,002,612
Dividends declared per common share		$	0.18			$	0.18			$	0.18			$	0.16			$	0.16			$	0.14
Non-interest income:
Securities gains (losses)		$	-			$	-			$	(3	)		$	-			$	62			$	56
Service charges on deposit accounts			2,089				1,972				2,143				2,171				2,150				2,069
Mortgage banking activities			570				316				356				(26	)			1,237				1,527
Wealth management income			4,741				4,466				4,508				4,503				4,532				4,042
Insurance agency commissions			961				1,640				1,243				1,193				1,036				1,349
Income from bank owned life insurance			608				598				635				629				623				612
Bank card fees			1,169				978				1,052				1,077				1,079				957
Other income			1,556				1,279				1,720				1,676				1,496				1,807
Total non-interest income		$	11,694			$	11,249			$	11,654			$	11,223			$	12,215			$	12,419
Non-interest expense:
Salaries and employee benefits		$	16,474			$	16,355			$	16,707			$	16,382			$	16,163			$	16,346
Occupancy expense of premises			3,274				3,472				3,844				3,149				2,996				3,182
Equipment expenses			1,262				1,256				1,264				1,200				1,227				1,249
Marketing			802				542				897				713				755				515
Outside data services			1,216				1,216				1,162				1,152				1,114				1,152
FDIC insurance			573				520				445				678				581				596
Amortization of intangible assets			224				370				461				462				461				461
Litigation expenses			6,128				-				-				-				-				-
Professional fees			1,292				914				1,386				511				1,332				1,250
Other real estate owned expenses			9				-				91				(150	)			(281	)			37
Other expenses			2,887				2,904				3,043				2,796				3,160				3,035
Total non-interest expense		$	34,141			$	27,549			$	29,300			$	26,893			$	27,508			$	27,823

 

(1)

The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, efficiency ratio - non-GAAP basis excludes intangible asset amortization 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

 

										2013
(Dollars in thousands)		Q2				Q1				Q4				Q3				Q2				Q1
Balance sheets at quarter end:
Residential mortgage loans		$	668,536			$	640,939			$	618,381			$	595,180			$	565,282			$	538,346
Residential construction loans			149,321				143,109				129,177				118,316				116,736				122,698
Commercial ADC loans			178,972				163,343				160,696				158,739				163,309				150,599
Commercial investor real estate loans			577,813				573,634				552,178				518,029				497,365				487,802
Commercial owner occupied real estate loans			581,795				582,472				592,823				569,350				563,258				565,820
Commercial business loans			357,472				348,180				356,651				332,670				334,979				344,489
Leasing			260				439				703				962				1,415				1,974
Consumer loans			396,775				380,697				373,657				368,764				363,114				353,341
Total loans and leases			2,910,944				2,832,813				2,784,266				2,662,010				2,605,458				2,565,069
Allowance for loan and lease losses			(37,959	)			(38,026	)			(38,766	)			(39,422	)			(39,015	)			(41,246	)
Investment securities			980,530				997,584				1,016,609				1,077,951				1,102,209				1,008,693
Interest-earning assets			3,945,643				3,891,223				3,836,912				3,771,825				3,802,682				3,660,809
Total assets			4,234,342				4,168,998				4,106,100				4,052,969				4,072,617				3,932,026
Noninterest-bearing demand deposits			984,700				882,169				836,198				890,319				877,891				832,679
Total deposits			3,038,670				2,959,195				2,877,225				2,916,466				2,926,650				2,919,208
Customer repurchase agreements			72,917				67,038				53,842				53,177				54,731				50,302
Total interest-bearing liabilities			2,698,887				2,748,064				2,744,869				2,634,324				2,678,490				2,576,831
Total stockholders' equity			517,269				510,386				499,363				493,882				485,643				488,947
Quarterly average balance sheets:
Residential mortgage loans		$	659,172			$	633,160			$	614,698			$	593,335			$	579,899			$	575,889
Residential construction loans			145,968				134,261				125,744				120,676				119,197				120,283
Commercial ADC loans			168,063				162,544				156,558				158,557				160,483				148,749
Commercial investor real estate loans			575,283				557,168				522,085				499,896				485,630				474,062
Commercial owner occupied real estate loans			579,953				584,155				580,808				566,366				561,249				567,723
Commercial business loans			348,597				349,734				357,455				331,374				337,843				347,569
Leasing			352				567				817				1,152				1,644				2,510
Consumer loans			390,076				377,822				373,017				366,562				360,842				357,366
Total loans and leases			2,867,464				2,799,411				2,731,182				2,637,918				2,606,787				2,594,151
Investment securities			991,135				1,012,701				1,055,432				1,097,643				1,047,726				1,051,769
Interest-earning assets			3,893,843				3,845,513				3,817,033				3,770,855				3,692,215				3,677,444
Total assets			4,157,559				4,105,225				4,082,839				4,039,069				3,959,907				3,946,578
Noninterest-bearing demand deposits			899,287				825,968				872,532				862,046				838,502				797,926
Total deposits			2,965,329				2,876,641				2,901,814				2,903,926				2,892,704				2,860,451
Customer repurchase agreements			68,880				62,864				57,682				56,766				55,941				52,622
Total interest-bearing liabilities			2,716,537				2,749,459				2,679,812				2,659,406				2,599,704				2,631,198
Total stockholders' equity			511,738				503,851				494,779				483,811				489,014				483,664
Financial Measures
Average equity to average assets			12.31	%			12.27	%			12.12	%			11.98	%			12.35	%			12.26	%
Investment securities to earning assets			24.85	%			25.64	%			26.50	%			28.58	%			28.99	%			27.55	%
Loans to earning assets			73.78	%			72.80	%			72.57	%			70.58	%			68.52	%			70.07	%
Loans to assets			68.75	%			67.95	%			67.81	%			65.68	%			63.98	%			65.24	%
Loans to deposits			95.80	%			95.73	%			96.77	%			91.28	%			89.03	%			87.87	%
Capital measures:
Tier 1 leverage (1)			11.37	%			11.43	%			11.32	%			11.29	%			11.28	%			11.07	%
Tier 1 capital to risk-weighted assets (1)			14.48	%			14.64	%			14.42	%			14.45	%			14.30	%			14.23	%
Total regulatory capital to risk-weighted assets (1)			15.66	%			15.85	%			15.65	%			15.70	%			15.55	%			15.48	%
Book value per share		$	20.63			$	20.38			$	19.98			$	19.77			$	19.45			$	19.59
Outstanding shares			25,069,700				25,043,482				24,990,021				24,985,146				24,967,558				24,954,892

 

(1) Estimated ratio at June 30, 2014

 

  

Sandy Spring Bancorp, Inc. and Subsidiaries

LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

 

		2014								2013
(Dollars in thousands)		June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
Non-Performing Assets:
Loans and leases 90 days past due:
Commercial business		$	1			$	-			$	-			$	-			$	15			$	-
Commercial real estate:
Commercial AD&C			-				-				-				-				-				-
Commercial investor real estate			-				-				-				-				-				-
Commercial owner occupied real estate			-				-				-				-				-				-
Leasing			-				-				-				-				-				-
Consumer			3				-				1				10				-				54
Residential real estate:
Residential mortgage			-				-				-				-				-				-
Residential construction			-				-				-				-				-				-
Total loans and leases 90 days past due			4				-				1				10				15				54
Non-accrual loans and leases:
Commercial business			4,309				3,272				3,400				4,050				4,483				4,012
Commercial real estate:
Commercial AD&C			3,739				4,133				4,127				5,086				5,885				5,826
Commercial investor real estate			6,731				7,284				6,802				6,877				11,741				12,353
Commercial owner occupied real estate			10,868				7,150				5,936				4,202				5,413				5,346
Leasing			-				-				-				-				-				-
Consumer			2,058				2,115				2,259				2,004				2,305				2,388
Residential real estate:
Residential mortgage			4,501				5,025				5,735				5,643				5,581				5,393
Residential construction			2,143				2,304				2,315				2,327				2,558				3,258
Total non-accrual loans and leases			34,349				31,283				30,574				30,189				37,966				38,576
Total restructured loans - accruing			7,364				7,411				9,459				8,054				8,213				10,839
Total non-performing loans and leases			41,717				38,694				40,034				38,253				46,194				49,469
Other assets and real estate owned (OREO)			1,967				1,619				1,338				1,662				4,831				5,250
Total non-performing assets		$	43,684			$	40,313			$	41,372			$	39,915			$	51,025			$	54,719

 

		For the quarter ended,
		June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2014				2014				2013				2013				2013				2013
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period		$	31,283			$	30,574			$	30,189			$	37,966			$	38,576			$	47,548
Non-accrual balances transferred to OREO			(390	)			(281	)			(365	)			(723	)			(1,426	)			(92	)
Non-accrual balances charged-off			(357	)			(513	)			(922	)			(4,995	)			(668	)			(2,175	)
Net payments or draws			(1,580	)			(1,073	)			(971	)			(13,547	)			(3,560	)			(11,768	)
Loans placed on non-accrual			5,393				2,576				3,546				11,488				5,044				5,493
Non-accrual loans brought current			-				-				(903	)			-				-				(430	)
Balance at end of period		$	34,349			$	31,283			$	30,574			$	30,189			$	37,966			$	38,576
Analysis of Allowance for Loan Losses:
Balance at beginning of period		$	38,026			$	38,766			$	39,422			$	39,015			$	41,246			$	42,957
Provision (credit) for loan and lease losses			158				(982	)			586				1,128				(2,876	)			78
Less loans charged-off, net of recoveries:
Commercial business			28				(768	)			384				1				(32	)			1,744
Commercial real estate:
Commercial AD&C			-				-				85				(616	)			(1,444	)			(1,020	)
Commercial investor real estate			(23	)			(5	)			23				1,243				123				31
Commercial owner occupied real estate			265				-				(82	)			(284	)			100				81
Leasing			-				-				-				(6	)			(4	)			-
Consumer			11				331				488				169				490				508
Residential real estate:
Residential mortgage			(27	)			203				347				216				22				447
Residential construction			(29	)			(3	)			(3	)			(2	)			100				(2	)
Net charge-offs			225				(242	)			1,242				721				(645	)			1,789
Balance at end of period		$	37,959			$	38,026			$	38,766			$	39,422			$	39,015			$	41,246
Asset Quality Ratios:
Non-performing loans to total loans			1.43	%			1.37	%			1.44	%			1.44	%			1.77	%			1.93	%
Non-performing assets to total assets			1.03	%			0.97	%			1.01	%			0.98	%			1.25	%			1.39	%
Allowance for loan losses to loans			1.30	%			1.34	%			1.39	%			1.48	%			1.50	%			1.61	%
Allowance for loan losses to non-performing loans			90.99	%			98.27	%			96.83	%			103.06	%			84.46	%			83.38	%
Net charge-offs in quarter to average loans			0.03	%			(0.04	)%			0.18	%			0.11	%			(0.10	)%			0.28	%

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED

 

		Three Months Ended June 30,
		2014												2013
										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)		$	659,172			$	5,685				3.45	%		$	579,899			$	5,310				3.68	%
Residential construction loans			145,968				1,359				3.73				119,197				1,032				3.47
Commercial ADC loans			168,063				2,180				5.20				160,483				2,106				5.26
Commercial investor real estate loans			575,283				7,139				4.98				485,630				6,184				5.11
Commercial owner occupied real estate loans			579,953				7,146				5.09				561,249				7,302				5.34
Commercial business loans			348,597				4,054				4.69				337,843				4,456				5.15
Leasing			352				6				6.30				1,644				30				7.22
Consumer loans			390,076				3,208				3.32				360,842				3,101				3.47
Total loans and leases (3)			2,867,464				30,777				4.34				2,606,787				29,521				4.57
Taxable securities			688,793				4,263				2.48				746,266				4,289				2.30
Tax-exempt securities (4)			302,342				3,260				4.32				301,460				3,257				4.32
Interest-bearing deposits with banks			34,770				22				0.25				37,227				24				0.25
Federal funds sold			474				-				0.22				475				-				0.22
Total interest-earning assets			3,893,843				38,322				3.97				3,692,215				37,091				4.03
Less:  allowance for loan and lease losses			(38,342	)											(41,605	)
Cash and due from banks			44,987												45,603
Premises and equipment, net			45,696												47,501
Other assets			211,375												216,193
Total assets		$	4,157,559											$	3,959,907
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	477,018				102				0.09	%		$	442,808				91				0.08	%
Regular savings deposits			262,078				49				0.07				240,410				58				0.10
Money market savings deposits			865,134				273				0.13				875,282				378				0.17
Time deposits			461,812				769				0.67				495,702				869				0.70
Total interest-bearing deposits			2,066,042				1,193				0.23				2,054,202				1,396				0.27
Other borrowings			68,880				37				0.22				56,711				38				0.27
Advances from FHLB			546,615				3,233				2.37				453,791				3,189				2.82
Subordinated debentures			35,000				219				2.50				35,000				224				2.56
Total interest-bearing liabilities			2,716,537				4,682				0.69				2,599,704				4,847				0.75
Noninterest-bearing demand deposits			899,287												838,502
Other liabilities			29,997												32,687
Stockholders' equity			511,738												489,014
Total liabilities and stockholders' equity		$	4,157,559											$	3,959,907
Net interest income and spread						$	33,640				3.28	%						$	32,244				3.28	%
Less: tax-equivalent adjustment							1,331												1,312
Net interest income						$	32,309											$	30,932
Interest income/earning assets											3.97	%											4.03	%
Interest expense/earning assets											0.49												0.52
Net interest margin											3.48	%											3.51	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and 2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.3 million in 2014 and 2013, 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

 

		Six Months Ended June 30,
		2014												2013
										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)		$	646,238			$	11,191				3.46	%		$	577,905			$	10,686				3.70	%
Residential construction loans			140,147				2,612				3.76				119,737				2,036				3.43
Commercial ADC loans			165,319				4,253				5.19				154,648				4,102				5.35
Commercial investor real estate loans			566,275				13,872				4.94				479,878				12,319				5.18
Commercial owner occupied real estate loans			582,042				14,213				5.08				564,468				15,103				5.53
Commercial business loans			349,162				8,091				4.67				342,679				9,042				5.18
Leasing			459				12				5.22				2,075				68				6.53
Consumer loans			383,983				6,326				3.34				359,114				6,164				3.49
Total loans and leases (3)			2,833,625				60,570				4.34				2,600,504				59,520				4.64
Taxable securities			699,460				8,715				2.49				750,167				8,594				2.29
Tax-exempt securities (4)			302,398				6,527				4.32				299,569				6,524				4.36
Interest-bearing deposits with banks			33,853				42				0.25				34,156				43				0.25
Federal funds sold			475				-				0.22				475				-				0.22
Total interest-earning assets			3,869,811				75,854				3.96				3,684,871				74,681				4.08
Less:  allowance for loan and lease losses			(38,864	)											(42,650	)
Cash and due from banks			45,268												46,242
Premises and equipment, net			45,787												47,832
Other assets			209,535												216,984
Total assets		$	4,131,537											$	3,953,279
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	468,677				194				0.08	%		$	433,200				183				0.09	%
Regular savings deposits			255,667				97				0.08				237,467				106				0.09
Money market savings deposits			871,464				546				0.13				883,765				789				0.18
Time deposits			462,591				1,540				0.67				503,908				1,773				0.71
Total interest-bearing deposits			2,058,399				2,377				0.23				2,058,340				2,851				0.28
Other borrowings			65,889				75				0.23				61,132				87				0.29
Advances from FHLB			573,619				6,451				2.27				460,892				6,412				2.81
Subordinated debentures			35,000				437				2.50				35,000				450				2.57
Total interest-bearing liabilities			2,732,907				9,340				0.69				2,615,364				9,800				0.76
Noninterest-bearing demand deposits			862,830												818,326
Other liabilities			27,984												33,235
Stockholders' equity			507,816												486,354
Total liabilities and stockholders' equity		$	4,131,537											$	3,953,279
Net interest income and spread						$	66,514				3.27	%						$	64,881				3.32	%
Less: tax-equivalent adjustment							2,613												2,623
Net interest income						$	63,901											$	62,258
Interest income/earning assets											3.96	%											4.08	%
Interest expense/earning assets											0.48												0.53
Net interest margin											3.48	%											3.55	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and 2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $2.6 million and $2.6 million in 2014 and 2013, 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.