News release

 

 

 

FOR IMMEDIATE RELEASE

 

SANDY SPRING BANCORP REPORTS RECORD NET INCOME OF $44.4 MILLION FOR FULL YEAR

 

OLNEY, MARYLAND, January 23, 2014 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today reported net income for the fourth quarter of 2013 of $9.6 million ($0.38 per diluted share) compared to net income of $9.9 million ($0.40 per diluted share) for the fourth quarter of 2012 and net income of $12.1 million ($0.48 per diluted share) for the third quarter of 2013.

 

Net income for the year ended December 31, 2013 totaled $44.4 million ($1.77 per diluted share) compared to net income of $36.6 million ($1.48 per diluted share) for the prior year, an increase of 22%.

 

“We are confident in our ability to produce consistent and quality investor returns in this marketplace as demonstrated by our record earnings for the year, which were driven largely by growth in the loan portfolio and our growing wealth management and insurance operations. This is noteworthy considering the effect of historically low interest rates on the net interest margin and the related reduction in both mortgage origination volumes and mortgage banking income from the sales of such loans,” said Daniel J. Schrider, President and Chief Executive Officer.

 

“Our results were also positively benefited by the continued improvement in our credit metrics due to the resolution of previously non-performing loans and lower loan charge-offs, and also by very disciplined control of our funding costs,” said Schrider.

 

 

 

Fourth Quarter Highlights:

 

 

·

Total loans increased 10% compared to the fourth quarter of 2012 and 5% compared to the third quarter of 2013 due to organic loan growth in the residential mortgage, commercial investor real estate, commercial owner occupied real estate and consumer loan portfolios.

 

·

The provision for loan and lease losses for the fourth quarter of 2013 was a charge of $0.6 million compared to a charge of $1.2 million for the fourth quarter of 2012 and a charge of $1.1 million for the third quarter of 2013.

 

 

·

Non-performing loans totaled $40.0 million at December 31, 2013 compared to $57.9 million at December 31, 2012 and $38.3 million at September 30, 2013. The coverage ratio of the allowance for loan and lease losses to non-performing loans was 97% at December 31, 2013 compared to a coverage ratio of 74% at December 31, 2012 and 103% at September 30, 2013.

 

·

The net interest margin was 3.53% for the fourth quarter of 2013, compared to 3.53% for the fourth quarter of 2012 and 3.88% for the third quarter of 2013. Excluding the effect of interest recoveries in the third quarter on two previously non-performing loans, the net interest margin would have been 3.49% for the third quarter.

 

·

Non-interest income decreased 5% for the quarter compared to the prior year quarter due primarily to the decline in income from mortgage banking caused by a significantly lower volume of saleable mortgage loan originations. Compared to the third quarter, non-interest income increased 4% due to an increase in mortgage banking income as volumes stabilized.

 

 

Review of Balance Sheet and Credit Quality

 

Total assets increased 4% to $4.1 billion at December 31, 2013 as compared to December 31, 2012. Total loans and leases increased 10% to $2.8 billion compared to the prior year due primarily to the growth in the residential mortgage, commercial investor real estate, commercial owner occupied real estate and consumer loan portfolios.

 

Customer funding sources, which include deposits and other short-term borrowings from customers, decreased 1% compared to December 31, 2012. Certificates of deposit declined 11% while combined noninterest-bearing and interest-bearing checking account balances increased 2% compared to the prior year-end. The Company considers the growth in checking accounts to be an important performance metric as such accounts typically are the primary drivers of growth in multiple product banking relationships with clients. FHLB advances increased 52% at December 31, 2013 compared to balances at December 31, 2012, as the Company managed its funding mix to take advantage of current low interest rates to maintain the net interest margin.

 

Tangible common equity totaled $416.8 million at December 31, 2013 compared to $384.2 million at December 31, 2012, resulting in an increase in the ratio of tangible common equity to tangible assets to 10.37% at December 31, 2013 from 9.94% at December 31, 2012. The increase in tangible common equity was due primarily to net income earned during the period. At December 31, 2013, the Company had a total risk-based capital ratio of 15.65%, a tier 1 risk-based capital ratio of 14.42% and a tier 1 leverage ratio of 11.32%.

 

Non-performing loans totaled $40.0 million at December 31, 2013 compared to $57.9 million at December 31, 2012 and $38.3 million at September 30, 2013. Overall credit quality was maintained due to the proactive management and resolution of problem credits.

 

Loan charge-offs, net of recoveries, totaled $1.2 million for the fourth quarter of 2013 compared to net charge-offs of $0.8 million for the fourth quarter of 2012 and net charge-offs of $0.7 million for the third quarter of 2013. The increase in net charge-offs in the quarter was the product of aggressive management of previously existing problem credits. The allowance for loan and lease losses represented 1.39% of outstanding loans and leases and 97% of non-performing loans at December 31, 2013 compared to 1.70% of outstanding loans and leases and 74% of non-performing loans at December 31, 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 2013 increased 5% compared to the fourth quarter of 2012. The resulting increase was due to an increase in average interest-earning assets and lower funding costs, that somewhat offset the decline in asset yields. The Company’s funding costs declined due to a lower cost deposit mix and the restructuring of $170 million in Federal Home Loan Bank advances during the fourth quarter of 2012 and the first six months of 2013. The net interest margin remained level at 3.53% for the fourth quarter of 2013 compared to 3.53% for the fourth quarter of 2012 as the decline in asset yields was offset by a higher amount of interest-earning assets.

 

The provision for loan and lease losses was a charge of $0.6 million for the fourth quarter of 2013 compared to a charge of $1.2 million for the fourth quarter of 2012 and a charge of $1.1 million for the third quarter of 2013. This decrease in the provision compared to the fourth quarter of 2012 and the third quarter of 2013 was due primarily to lower historical losses and improved credit metrics, that more than offset the effect of loan growth during the quarter.

 

Non-interest income decreased 5% to $11.7 million for the fourth quarter of 2013 compared to $12.2 million for the fourth quarter of 2012. 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 somewhat offset by a 13% increase in wealth management income due to higher assets under management. In addition, other non-interest income increased 34% due to gains recognized on sales of SBA loans and fixed assets.

 

Non-interest expenses increased 8% to $29.3 million for the fourth quarter of 2013 compared to $27.2 million in the fourth quarter of 2012. This increase was driven primarily by higher salaries and benefits expenses and the recognition of $0.8 million in expenses during the quarter for the planned 2014 closing of three branches. The non-GAAP efficiency ratio was 63.62% for the fourth quarter of 2013 compared to 60.54% for the fourth quarter of 2012.

 

Net interest income for the year ended December 31, 2013 increased 7% compared to the prior year while the net interest margin increased to 3.63% for 2013 compared to 3.60% in 2012. The increase in net interest income and the net interest margin were due primarily to the factors cited previously with respect to the fourth quarter of 2013 together with the recognition in the third quarter of 2013 of $3.7 million in interest recoveries on loans previously charged-off. Excluding the effect of these interest recoveries, the net interest margin would have been 3.53% for 2013.

 

The provision for loan and lease losses was a credit of $1.1 million for the year ended December 31, 2013 compared to a charge of $3.6 million for the year ended December 31, 2012. The decrease in the provision for the year was due primarily to a decline in historical losses and a lower migration of new problem loans into non-performing status.

 

 

Non-interest income increased 1% to $47.5 million for 2013 compared to $47.0 million for 2012. This increase was driven by a 10% increase in wealth management income due to higher assets under management. Insurance agency commissions increased 7% due to higher revenues on whole life insurance and physicians’ liability lines. Other non-interest income increased 42% due to sales and dispositions of loans and fixed assets and a non-recurring legal settlement. These increases were partially offset by a 49% decrease in mortgage banking income caused by declining mortgage origination volumes.

 

Non-interest expenses increased 1% to $111.5 million for 2013 compared to $109.9 million for 2012. This increase was driven by an increase in salaries and benefits expenses due to additional staff and higher sales incentive compensation. Occupancy expenses also increased due to the recognition of expenses in the fourth quarter for the planned 2014 closing of three branches. These increases were somewhat offset by decreases in outside data services due to merger expenses incurred from the CommerceFirst acquisition in 2012. Other non-interest expenses also decreased in 2013 due to the lack of merger expenses and the recovery of expenses from the resolution of problem loan credits. The non-GAAP efficiency ratio improved to 60.06% for 2013 compared to 60.94% for 2012.

 

 

Conference Call

 

The Company’s management will host a conference call to discuss its fourth 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) February 21, 2014. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10038886.

 

 

About Sandy Spring Bancorp, Inc.

 

With $4.1 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 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, 2012, 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)		2013				2012				Change				2013				2012				Change
Results of Operations:
Net interest income		$	32,350			$	30,920				5	%		$	129,914			$	121,219				7	%
Provision for loan and lease losses			586				1,168				(50	)			(1,084	)			3,649				(130	)
Non-interest income			11,654				12,247				(5	)			47,511				46,956				1
Non-interest expenses			29,300				27,219				8				111,524				109,927				1
Income before income taxes			14,118				14,780				(4	)			66,985				54,599				23
Net income			9,613				9,881				(3	)			44,422				36,554				22
Pre-tax pre-provision pre-merger expense income		$	14,704			$	15,740				(7	)		$	65,901			$	60,748				8
Return on average assets			0.93	%			1.01	%							1.11	%			0.97	%
Return on average common equity			7.71	%			8.14	%							9.11	%			7.85	%
Net interest margin			3.53	%			3.53	%							3.63	%			3.60	%
Efficiency ratio - GAAP basis   (1)			66.59	%			63.06	%							62.86	%			65.36	%
Efficiency ratio - Non-GAAP basis   (1)			63.62	%			60.54	%							60.06	%			60.94	%
Per share data:
Basic net income		$	0.38			$	0.40				(5	)%		$	1.78			$	1.49				19	%
Diluted net income		$	0.38			$	0.40				(5	)		$	1.77			$	1.48				20
Average fully diluted shares			25,108,109				24,971,249				1				25,075,014				24,657,149				2
Dividends declared per share		$	0.18			$	0.14				29			$	0.64			$	0.48				33
Book value per share			19.98				19.41				3				19.98				19.41				3
Tangible book value per share			16.68				15.43				8				16.68				15.43				8
Outstanding shares			24,990,021				24,905,392				-				24,990,021				24,905,392				-
Financial Condition at period-end:
Investment securities		$	1,016,609			$	1,075,032				(5	)%		$	1,016,609			$	1,075,032				(5	)%
Loans and leases			2,784,266				2,531,128				10				2,784,266				2,531,128				10
Interest-earning assets			3,836,912				3,669,175				5				3,836,912				3,669,175				5
Assets			4,106,100				3,955,206				4				4,106,100				3,955,206				4
Deposits			2,877,225				2,913,034				(1	)			2,877,225				2,913,034				(1	)
Interest-bearing liabilities			2,744,869				2,592,606				6				2,744,869				2,592,606				6
Stockholders' equity			499,363				483,512				3				499,363				483,512				3
Capital ratios:
Tier 1 leverage			11.32	%			10.98	%							11.32	%			10.98	%
Tier 1 capital to risk-weighted assets			14.42	%			14.15	%							14.42	%			14.15	%
Total regulatory capital to risk-weighted assets			15.65	%			15.40	%							15.65	%			15.40	%
Tangible common equity to tangible assets   (2)			10.37	%			9.94	%							10.37	%			9.94	%
Average equity to average assets			12.12	%			12.35	%							12.17	%			12.32	%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases			1.39	%			1.70	%							1.39	%			1.70	%
Non-performing loans to total loans			1.44	%			2.29	%							1.44	%			2.29	%
Non-performing assets to total assets			1.01	%			1.61	%							1.01	%			1.61	%
Allowance for loan and lease losses to non-performing loans			96.83	%			74.18	%							96.83	%			74.18	%
Annualized net charge-offs to average loans and leases    (3)			0.18	%			0.13	%							0.12	%			0.42	%

 

(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 eficiency ratio - non-GAAP basis 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)		2013				2012				2013				2012
Pre-tax pre-provision pre-merger expense income:
Net income		$	9,613			$	9,881			$	44,422			$	36,554
Plus non-GAAP adjustment:
Merger expenses			-				(208	)			-				2,500
Income taxes			4,505				4,899				22,563				18,045
Provision for loan and lease losses			586				1,168				(1,084	)			3,649
Pre-tax pre-provision pre-merger expense income		$	14,704			$	15,740			$	65,901			$	60,748
Efficiency ratio - GAAP basis:
Non-interest expenses		$	29,300			$	27,219			$	111,524			$	109,927
Net interest income plus non-interest income		$	44,004			$	43,167			$	177,425			$	168,175
Efficiency ratio - GAAP basis			66.59	%			63.06	%			62.86	%			65.36	%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses		$	29,300			$	27,219			$	111,524			$	109,927
Less non-GAAP adjustment:
Amortization of intangible assets			461				478				1,845				1,881
Merger expenses			-				(208	)			-				2,500
Non-interest expenses -  as adjusted		$	28,839			$	26,949			$	109,679			$	105,546
Net interest income plus non-interest income		$	44,004			$	43,167			$	177,425			$	168,175
Plus non-GAAP adjustment:
Tax-equivalent income			1,325				1,334				5,292				5,374
Less non-GAAP adjustments:
Securities gains			(3	)			-				115				459
OTTI recognized in earnings			-				(14	)			-				(109	)
Net interest income plus non-interest income - as adjusted		$	45,332			$	44,515			$	182,602			$	173,199
Efficiency ratio - Non-GAAP basis			63.62	%			60.54	%			60.06	%			60.94	%
Tangible common equity ratio:
Total stockholders' equity		$	499,363			$	483,512			$	499,363			$	483,512
Accumulated other comprehensive (income) loss			2,970				(11,312	)			2,970				(11,312	)
Goodwill			(84,171	)			(84,808	)			(84,171	)			(84,808	)
Other intangible assets, net			(1,330	)			(3,163	)			(1,330	)			(3,163	)
Tangible common equity		$	416,832			$	384,229			$	416,832			$	384,229
Total assets		$	4,106,100			$	3,955,206			$	4,106,100			$	3,955,206
Goodwill			(84,171	)			(84,808	)			(84,171	)			(84,808	)
Other intangible assets, net			(1,330	)			(3,163	)			(1,330	)			(3,163	)
Tangible assets		$	4,020,599			$	3,867,235			$	4,020,599			$	3,867,235
Tangible common equity ratio			10.37	%			9.94	%			10.37	%			9.94	%
Outstanding common shares			24,990,021				24,905,392				24,990,021				24,905,392
Tangible book value per common share		$	16.68			$	15.43			$	16.68			$	15.43

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION  - UNAUDITED

 

		December 31,				December 31,
(Dollars in thousands)		2013				2012
Assets
Cash and due from banks		$	46,755			$	59,540
Federal funds sold			475				466
Interest-bearing deposits with banks			27,197				26,400
Cash and cash equivalents			74,427				86,406
Residential mortgage loans held for sale (at fair value)			8,365				36,149
Investments available-for-sale (at fair value)			751,284				825,582
Investments held-to-maturity -- fair value of $216,007 and $222,024 at December 31, 2013 and 2012, respectively			224,638				215,814
Other equity securities			40,687				33,636
Total loans and leases			2,784,266				2,531,128
Less: allowance for loan and lease losses			(38,766	)			(42,957	)
Net loans and leases			2,745,500				2,488,171
Premises and equipment, net			45,916				48,326
Other real estate owned			1,338				5,926
Accrued interest receivable			12,532				12,392
Goodwill			84,171				84,808
Other intangible assets, net			1,330				3,163
Other assets			115,912				114,833
Total assets		$	4,106,100			$	3,955,206
Liabilities
Noninterest-bearing deposits		$	836,198			$	847,415
Interest-bearing deposits			2,041,027				2,065,619
Total deposits			2,877,225				2,913,034
Securities sold under retail repurchase agreements and federal funds purchased			53,842				86,929
Advances from FHLB			615,000				405,058
Subordinated debentures			35,000				35,000
Accrued interest payable and other liabilities			25,670				31,673
Total liabilities			3,606,737				3,471,694
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 24,990,021 and
24,905,392 at December 31, 2013 and 2012, respectively			24,990				24,905
Additional paid in capital			193,445				191,689
Retained earnings			283,898				255,606
Accumulated other comprehensive income (loss)			(2,970	)			11,312
Total stockholders' equity			499,363				483,512
Total liabilities and stockholders' equity		$	4,106,100			$	3,955,206

 

 

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)		2013				2012				2013				2012
Interest Income:
Interest and fees on loans and leases		$	30,443			$	29,410			$	122,380			$	115,574
Interest on loans held for sale			91				254				929				841
Interest on deposits with banks			19				28				84				111
Interest and dividends on investment securities:
Taxable			4,224				4,142				16,635				17,951
Exempt from federal income taxes			2,331				2,368				9,318				9,392
Interest on federal funds sold			1				-				1				1
Total interest income			37,109				36,202				149,347				143,870
Interest Expense:
Interest on deposits			1,230				1,650				5,439				7,357
Interest on retail repurchase agreements and federal funds purchased			37				46				163				204
Interest on advances from FHLB			3,269				3,359				12,936				14,131
Interest on subordinated debt			223				227				895				959
Total interest expense			4,759				5,282				19,433				22,651
Net interest income			32,350				30,920				129,914				121,219
Provision (credit) for loan and lease losses			586				1,168				(1,084	)			3,649
Net interest income after provision for loan and lease losses			31,764				29,752				130,998				117,570
Non-interest Income:
Investment securities gains (losses)			(3	)			-				115				459
Total other-than-temporary impairment ("OTTI") losses			-				(14	)			-				(109	)
Portion of OTTI losses recognized in other comprehensive income, before taxes			-				-				-				-
Net OTTI recognized in earnings			-				(14	)			-				(109	)
Service charges on deposit accounts			2,143				2,197				8,533				8,910
Mortgage banking activities			356				1,738				3,094				6,032
Wealth management income			4,508				4,000				17,585				15,949
Insurance agency commissions			1,243				1,334				4,821				4,490
Income from bank owned life insurance			635				662				2,499				2,616
Visa check fees			1,052				1,043				4,165				3,887
Other income			1,720				1,287				6,699				4,722
Total non-interest income			11,654				12,247				47,511				46,956
Non-interest Expenses:
Salaries and employee benefits			16,707				15,405				65,598				62,509
Occupancy expense of premises			3,844				3,115				13,171				12,010
Equipment expenses			1,264				1,189				4,940				4,871
Marketing			897				827				2,880				2,651
Outside data services			1,162				836				4,580				5,019
FDIC insurance			445				601				2,300				2,573
Amortization of intangible assets			461				478				1,845				1,881
Other expenses			4,520				4,768				16,210				18,413
Total non-interest expenses			29,300				27,219				111,524				109,927
Income before income taxes			14,118				14,780				66,985				54,599
Income tax expense			4,505				4,899				22,563				18,045
Net income		$	9,613			$	9,881			$	44,422			$	36,554
Net Income Per Share Amounts:
Basic net income per share		$	0.38			$	0.40			$	1.78			$	1.49
Diluted net income per share		$	0.38			$	0.40			$	1.77			$	1.48
Dividends declared per share		$	0.18			$	0.14			$	0.64			$	0.48

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED

 

		2013																2012
(Dollars in thousands, except per share data)		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Profitability for the quarter:
Tax-equivalent interest income		$	38,434			$	41,524			$	37,091			$	37,590			$	37,536			$	38,819			$	36,898			$	35,991
Interest expense			4,759				4,874				4,847				4,953				5,282				5,710				5,749				5,910
Tax-equivalent net interest income			33,675				36,650				32,244				32,637				32,254				33,109				31,149				30,081
Tax-equivalent adjustment			1,325				1,344				1,312				1,311				1,334				1,324				1,340				1,376
Provision for loan and lease losses			586				1,128				(2,876	)			78				1,168				232				1,585				664
Non-interest income			11,654				11,223				12,215				12,419				12,247				12,242				11,493				10,974
Non-interest expenses			29,300				26,893				27,508				27,823				27,219				27,167				28,858				26,683
Income before income taxes			14,118				18,508				18,515				15,844				14,780				16,628				10,859				12,332
Income tax expense			4,505				6,419				6,353				5,286				4,899				5,638				3,652				3,856
Net income		$	9,613			$	12,089			$	12,162			$	10,558			$	9,881			$	10,990			$	7,207			$	8,476
Financial performance:
Pre-tax pre-provision pre-merger expense income		$	14,704			$	19,636			$	15,639			$	15,922			$	15,740			$	16,996			$	14,642			$	13,370
Return on average assets			0.93	%			1.19	%			1.23	%			1.08	%			1.01	%			1.13	%			0.78	%			0.94	%
Return on average common equity			7.71	%			9.91	%			9.98	%			8.85	%			8.14	%			9.22	%			6.34	%			7.60	%
Net interest margin			3.53	%			3.88	%			3.51	%			3.59	%			3.53	%			3.67	%			3.62	%			3.56	%
Efficiency ratio - GAAP basis (1)			66.59	%			57.80	%			63.75	%			63.60	%			63.06	%			61.70	%			69.87	%			67.25	%
Efficiency ratio - Non-GAAP basis (1)			63.62	%			55.21	%			60.92	%			60.80	%			60.54	%			58.91	%			61.54	%			62.97	%
Per share data:
Basic net income per share		$	0.38			$	0.48			$	0.49			$	0.42			$	0.40			$	0.44			$	0.30			$	0.35
Diluted net income per share		$	0.38			$	0.48			$	0.49			$	0.42			$	0.40			$	0.44			$	0.30			$	0.35
Average fully diluted shares			25,108,109				25,070,506				25,009,092				25,002,612				24,971,249				24,949,205				24,423,236				24,180,501
Dividends declared per common share		$	0.18			$	0.16			$	0.16			$	0.14			$	0.14			$	0.12			$	0.12			$	0.10
Non-interest income:
Securities gains (losses)		$	(3	)		$	-			$	62			$	56			$	-			$	296			$	90			$	73
Net OTTI recognized in earnings			-				-				-				-				(14	)			(23	)			(8	)			(64	)
Service charges on deposit accounts			2,143				2,171				2,150				2,069				2,197				2,230				2,283				2,200
Mortgage banking activities			356				(26	)			1,237				1,527				1,738				1,981				1,288				1,025
Wealth management income			4,508				4,503				4,532				4,042				4,000				3,858				4,034				4,057
Insurance agency commissions			1,243				1,193				1,036				1,349				1,334				1,020				934				1,202
Income from bank owned life insurance			635				629				623				612				662				660				660				634
Visa check fees			1,052				1,077				1,079				957				1,043				984				962				898
Other income			1,720				1,676				1,496				1,807				1,287				1,236				1,250				949
Total non-interest income		$	11,654			$	11,223			$	12,215			$	12,419			$	12,247			$	12,242			$	11,493			$	10,974
Non-interest expense:
Salaries and employee benefits		$	16,707			$	16,382			$	16,163			$	16,346			$	15,405			$	15,476			$	15,927			$	15,701
Occupancy expense of premises			3,844				3,149				2,996				3,182				3,115				3,106				2,943				2,846
Equipment expenses			1,264				1,200				1,227				1,249				1,189				1,237				1,255				1,190
Marketing			897				713				755				515				827				764				565				495
Outside data services			1,162				1,152				1,114				1,152				836				1,076				1,828				1,279
FDIC insurance			445				678				581				596				601				667				653				652
Amortization of intangible assets			461				462				461				461				478				476				466				461
Professional fees			1,386				511				1,332				1,250				1,584				1,282				2,156				1,287
Other real estate owned expenses			91				(150	)			(281	)			37				316				174				351				64
Other expenses			3,043				2,796				3,160				3,035				2,868				2,909				2,714				2,708
Total non-interest expense		$	29,300			$	26,893			$	27,508			$	27,823			$	27,219			$	27,167			$	28,858			$	26,683

 

(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 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

 

		2013																2012
(Dollars in thousands)		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Balance sheets at quarter end:
Residential mortgage loans		$	618,381			$	595,180			$	565,282			$	538,346			$	523,364			$	499,806			$	472,426			$	465,204
Residential construction loans			129,177				118,316				116,736				122,698				120,314				128,606				130,791				122,841
Commercial ADC loans			160,696				158,739				163,309				150,599				151,933				133,007				151,620				149,814
Commercial investor real estate loans			552,178				518,029				497,365				487,802				456,888				447,536				443,237				392,626
Commercial owner occupied real estate loans			592,823				569,350				563,258				565,820				571,510				579,711				579,812				525,022
Commercial business loans			356,651				332,670				334,979				344,489				346,708				322,087				334,040				253,827
Leasing			703				962				1,415				1,974				3,421				4,233				5,618				5,843
Consumer loans			373,657				368,764				363,114				353,341				356,990				353,999				357,534				356,215
Total loans and leases			2,784,266				2,662,010				2,605,458				2,565,069				2,531,128				2,468,985				2,475,078				2,271,392
Allowance for loan and lease losses			(38,766	)			(39,422	)			(39,015	)			(41,246	)			(42,957	)			(42,618	)			(45,265	)			(45,061	)
Investment securities			1,016,609				1,077,951				1,102,209				1,008,693				1,075,032				1,074,918				1,006,743				1,067,462
Interest-earning assets			3,836,912				3,771,825				3,802,682				3,660,809				3,669,175				3,614,310				3,584,480				3,416,136
Total assets			4,106,100				4,052,969				4,072,617				3,932,026				3,955,206				3,887,427				3,855,177				3,668,273
Noninterest-bearing demand deposits			836,198				890,319				877,891				832,679				847,415				818,674				763,566				685,770
Total deposits			2,877,225				2,916,466				2,926,650				2,919,208				2,913,034				2,880,262				2,852,055				2,681,075
Customer repurchase agreements			53,842				53,177				54,731				50,302				51,929				58,306				64,779				73,130
Total interest-bearing liabilities			2,744,869				2,634,324				2,678,490				2,576,831				2,592,606				2,560,040				2,593,501				2,508,756
Total stockholders' equity			499,363				493,882				485,643				488,947				483,512				481,810				471,464				451,917
Quarterly average balance sheets:
Residential mortgage loans		$	614,698			$	593,335			$	579,899			$	575,889			$	542,095			$	510,475			$	488,644			$	474,149
Residential construction loans			125,744				120,676				119,197				120,283				125,640				133,236				125,582				116,630
Commercial ADC loans			156,558				158,557				160,483				148,749				137,679				142,870				151,374				159,769
Commercial investor real estate loans			522,085				499,896				485,630				474,062				453,074				445,012				410,258				377,072
Commercial owner occupied real estate loans			580,808				566,366				561,249				567,723				577,693				580,994				539,590				518,763
Commercial business loans			357,455				331,374				337,843				347,569				322,501				332,364				284,271				258,099
Leasing			817				1,152				1,644				2,510				3,773				4,858				5,528				6,325
Consumer loans			373,017				366,562				360,842				357,366				356,452				357,135				359,008				358,783
Total loans and leases			2,731,182				2,637,918				2,606,787				2,594,151				2,518,907				2,506,945				2,364,255				2,269,590
Investment securities			1,055,432				1,097,643				1,047,726				1,051,769				1,072,278				1,038,586				1,052,502				1,086,295
Interest-earning assets			3,817,033				3,770,855				3,692,215				3,677,444				3,639,605				3,599,715				3,453,590				3,389,843
Total assets			4,082,839				4,039,069				3,959,907				3,946,578				3,908,479				3,863,951				3,708,622				3,637,674
Noninterest-bearing demand deposits			872,532				862,046				838,502				797,926				824,188				774,215				699,638				641,477
Total deposits			2,901,814				2,903,926				2,892,704				2,860,451				2,891,120				2,857,523				2,714,980				2,642,634
Customer repurchase agreements			57,682				56,766				55,941				52,622				60,941				62,693				66,674				65,195
Total interest-bearing liabilities			2,679,812				2,659,406				2,599,704				2,631,198				2,571,937				2,587,815				2,526,541				2,523,394
Total stockholders' equity			494,779				483,811				489,014				483,664				482,621				474,231				457,338				448,406
Financial Measures
Average equity to average assets			12.12	%			11.98	%			12.35	%			12.26	%			12.35	%			12.27	%			12.33	%			12.33	%
Investment securities to earning assets			26.50	%			28.58	%			28.99	%			27.55	%			29.30	%			29.74	%			28.09	%			31.25	%
Loans to earning assets			72.57	%			70.58	%			68.52	%			70.07	%			68.98	%			68.31	%			69.05	%			66.49	%
Loans to assets			67.81	%			65.68	%			63.98	%			65.24	%			63.99	%			63.51	%			64.20	%			61.92	%
Loans to deposits			96.77	%			91.28	%			89.03	%			87.87	%			86.89	%			85.72	%			86.78	%			84.72	%
Capital measures:
Tier 1 leverage			11.32	%			11.29	%			11.28	%			11.07	%			10.98	%			10.99	%			11.21	%			11.05	%
Tier 1 capital to risk-weighted assets			14.42	%			14.45	%			14.30	%			14.23	%			14.15	%			14.31	%			14.12	%			14.89	%
Total regulatory capital to risk-weighted assets			15.65	%			15.70	%			15.55	%			15.48	%			15.40	%			15.56	%			15.36	%			16.14	%
Book value per share		$	19.98			$	19.77			$	19.45			$	19.59			$	19.41			$	19.35			$	18.94			$	18.72
Outstanding shares			24,990,021				24,985,146				24,967,558				24,954,892				24,905,392				24,896,136				24,886,724				24,143,985

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

 

		2013																2012
(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		$	-			$	-			$	15			$	-			$	24			$	44			$	70			$	40
Commercial real estate:
Commercial AD&C			-				-				-				-				-				-				342				-
Commercial investor real estate			-				-				-				-				-				-				-				-
Commercial owner occupied real estate			-				-				-				-				209				-				-				-
Leasing			-				-				-				-				-				127				96				-
Consumer			1				10				-				54				14				18				5				89
Residential real estate:
Residential mortgage			-				-				-				-				-				116				91				167
Residential construction			-				-				-				-				-				-				-				-
Total loans and leases 90 days past due			1				10				15				54				247				305				604				296
Non-accrual loans and leases:
Commercial business			3,400				4,050				4,483				4,012				4,611				4,919				4,583				6,542
Commercial real estate:
Commercial AD&C			4,127				5,086				5,885				5,826				6,332				8,957				13,055				14,303
Commercial investor real estate			6,802				6,877				11,741				12,353				11,843				12,345				13,327				13,893
Commercial owner occupied real estate			5,936				4,202				5,413				5,346				13,681				13,742				15,146				16,295
Leasing			-				-				-				-				865				834				872				858
Consumer			2,259				2,004				2,305				2,388				2,410				1,607				1,651				1,700
Residential real estate:
Residential mortgage			5,735				5,643				5,581				5,393				4,681				3,644				2,600				4,818
Residential construction			2,315				2,327				2,558				3,258				3,125				3,236				4,333				4,929
Total non-accrual loans and leases			30,574				30,189				37,966				38,576				47,548				49,284				55,567				63,338
Total restructured loans - accruing			9,459				8,054				8,213				10,839				10,110				9,277				8,285				8,547
Total non-performing loans and leases			40,034				38,253				46,194				49,469				57,905				58,866				64,456				72,181
Other assets and real estate owned (OREO)			1,338				1,662				4,831				5,250				5,926				9,291				9,553				4,834
Total non-performing assets		$	41,372			$	39,915			$	51,025			$	54,719			$	63,831			$	68,157			$	74,009			$	77,015

 

		For the quarter ended,
		December 31,				September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2013				2013				2013				2013				2012				2012				2012				2012
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period		$	30,189			$	37,966			$	38,576			$	47,548			$	49,284			$	55,567			$	63,338			$	71,680
Non-accrual balances transferred to OREO			(365	)			(723	)			(1,426	)			(92	)			(400	)			(232	)			(2,131	)			-
Non-accrual balances charged-off			(922	)			(4,995	)			(668	)			(2,175	)			(979	)			(3,697	)			(1,663	)			(4,965	)
Net payments or draws			(971	)			(13,547	)			(3,560	)			(11,768	)			(3,852	)			(6,342	)			(4,149	)			(5,061	)
Loans placed on non-accrual			3,546				11,488				5,044				5,493				5,023				3,988				1,261				1,809
Non-accrual loans brought current			(903	)			-				-				(430	)			(1,528	)			-				(1,089	)			(125	)
Balance at end of period		$	30,574			$	30,189			$	37,966			$	38,576			$	47,548			$	49,284			$	55,567			$	63,338
Analysis of Allowance for Loan Losses:
Balance at beginning of period		$	39,422			$	39,015			$	41,246			$	42,957			$	42,618			$	45,265			$	45,061			$	49,426
Provision (credit) for loan and lease losses			586				1,128				(2,876	)			78				1,168				232				1,585				664
Less loans charged-off, net of recoveries:
Commercial business			384				1				(32	)			1,744				(76	)			(225	)			(185	)			(39	)
Commercial real estate:
Commercial AD&C			85				(616	)			(1,444	)			(1,020	)			(248	)			1,983				(59	)			1,076
Commercial investor real estate			23				1,243				123				31				110				123				140				3,219
Commercial owner occupied real estate			(82	)			(284	)			100				81				-				653				484				-
Leasing			-				(6	)			(4	)			-				-				(17	)			(3	)			5
Consumer			488				169				490				508				384				111				228				348
Residential real estate:
Residential mortgage			347				216				22				447				508				253				713				420
Residential construction			(3	)			(2	)			100				(2	)			151				(2	)			63				-
Net charge-offs			1,242				721				(645	)			1,789				829				2,879				1,381				5,029
Balance at end of period		$	38,766			$	39,422			$	39,015			$	41,246			$	42,957			$	42,618			$	45,265			$	45,061
Asset Quality Ratios:
Non-performing loans to total loans			1.44	%			1.44	%			1.77	%			1.93	%			2.29	%			2.38	%			2.60	%			3.18	%
Non-performing assets to total assets			1.01	%			0.98	%			1.25	%			1.39	%			1.61	%			1.75	%			1.92	%			2.10	%
Allowance for loan losses to loans			1.39	%			1.48	%			1.50	%			1.61	%			1.70	%			1.73	%			1.83	%			1.98	%
Allowance for loan losses to non-performing loans			96.83	%			103.06	%			84.46	%			83.38	%			74.18	%			72.40	%			70.23	%			62.43	%
Net charge-offs in quarter to average loans			0.18	%			0.11	%			(0.10	)%			0.28	%			0.13	%			0.46	%			0.23	%			0.89	%

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED

 

		Three Months Ended December 31,
						2013												2012
										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)		$	614,698			$	5,384				3.49	%		$	542,095			$	5,278				3.93	%
Residential construction loans			125,744				1,189				3.75				125,640				1,076				3.41
Commercial ADC loans			156,558				2,057				5.21				137,679				1,866				5.39
Commercial investor real estate loans			522,085				6,974				5.30				453,074				6,242				5.48
Commercial owner occupied real estate loans			580,808				7,230				5.10				577,693				7,514				5.26
Commercial business loans			357,455				4,520				4.97				322,501				4,523				5.43
Leasing			817				14				6.81				3,773				54				5.62
Consumer loans			373,017				3,166				3.39				356,452				3,111				3.50
Total loans and leases (3)			2,731,182				30,534				4.47				2,518,907				29,664				4.71
Taxable securities			751,796				4,597				2.43				768,412				4,493				2.34
Tax-exempt securities (4)			303,636				3,283				4.29				303,866				3,351				4.41
Interest-bearing deposits with banks			29,944				19				0.25				47,954				28				0.22
Federal funds sold			475				1				0.22				466				-				0.22
Total interest-earning assets			3,817,033				38,434				4.03				3,639,605				37,536				4.11
Less:  allowance for loan and lease losses			(39,775	)											(42,741	)
Cash and due from banks			45,549												48,803
Premises and equipment, net			46,545												48,626
Other assets			213,487												214,186
Total assets		$	4,082,839											$	3,908,479
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	443,959				93				0.08	%		$	400,175				88				0.09	%
Regular savings deposits			239,382				45				0.08				220,814				44				0.08
Money market savings deposits			876,014				283				0.13				900,991				472				0.21
Time deposits			469,927				809				0.68				544,952				1,046				0.76
Total interest-bearing deposits			2,029,282				1,230				0.24				2,066,932				1,650				0.32
Other borrowings			61,780				37				0.24				64,908				46				0.28
Advances from FHLB			553,750				3,269				2.34				405,097				3,359				3.30
Subordinated debentures			35,000				223				2.55				35,000				227				2.59
Total interest-bearing liabilities			2,679,812				4,759				0.70				2,571,937				5,282				0.82
Noninterest-bearing demand deposits			872,532												824,188
Other liabilities			35,716												29,733
Stockholders' equity			494,779												482,621
Total liabilities and stockholders' equity		$	4,082,839											$	3,908,479
Net interest income and spread						$	33,675				3.33	%						$	32,254				3.29	%
Less: tax-equivalent adjustment							1,325												1,334
Net interest income						$	32,350											$	30,920
Interest income/earning assets											4.03	%											4.11	%
Interest expense/earning assets											0.50												0.58
Net interest margin											3.53	%											3.53	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2013 and 2012. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.3 million in 2013 and 2012, 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,
						2013												2012
										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)		$	591,068			$	21,385				3.62	%		$	503,963			$	21,281				4.22	%
Residential construction loans			121,488				4,331				3.57				125,295				4,581				3.66
Commercial ADC loans			156,115				9,596				6.15				147,881				7,721				5.22
Commercial investor real estate loans			495,562				27,901				5.63				421,505				23,167				5.50
Commercial owner occupied real estate loans			569,065				29,696				5.36				554,397				30,236				5.45
Commercial business loans			343,554				17,807				5.07				299,462				16,511				5.51
Leasing			1,525				102				6.70				5,117				326				6.36
Consumer loans			364,495				12,491				3.45				357,839				12,592				3.52
Total loans and leases (3)			2,642,872				123,309				4.69				2,415,459				116,415				4.82
Taxable securities			761,713				18,133				2.38				774,030				19,254				2.49
Tax-exempt securities (4)			301,534				13,112				4.35				288,347				13,463				4.67
Interest-bearing deposits with banks			33,261				84				0.25				42,668				111				0.26
Federal funds sold			475				1				0.22				724				1				0.18
Total interest-earning assets			3,739,855				154,639				4.15				3,521,228				149,244				4.24
Less:  allowance for loan and lease losses			(41,606	)											(46,260	)
Cash and due from banks			45,836												46,588
Premises and equipment, net			47,244												48,875
Other assets			216,082												209,653
Total assets		$	4,007,411											$	3,780,084
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	438,183				373				0.09	%		$	385,004				344				0.09	%
Regular savings deposits			238,818				204				0.09				212,659				199				0.09
Money market savings deposits			879,588				1,414				0.16				877,546				1,943				0.22
Time deposits			490,278				3,448				0.70				566,658				4,871				0.86
Total interest-bearing deposits			2,046,867				5,439				0.27				2,041,867				7,357				0.36
Other borrowings			60,249				163				0.27				70,477				204				0.29
Advances from FHLB			500,593				12,936				2.58				405,227				14,131				3.49
Subordinated debentures			35,000				895				2.56				35,000				959				2.74
Total interest-bearing liabilities			2,642,709				19,433				0.74				2,552,571				22,651				0.89
Noninterest-bearing demand deposits			843,008												735,231
Other liabilities			33,858												26,563
Stockholders' equity			487,836												465,719
Total liabilities and stockholders' equity		$	4,007,411											$	3,780,084
Net interest income and spread						$	135,206				3.41	%						$	126,593				3.35	%
Less: tax-equivalent adjustment							5,292												5,374
Net interest income						$	129,914											$	121,219
Interest income/earning assets											4.15	%											4.24	%
Interest expense/earning assets											0.52												0.64
Net interest margin											3.63	%											3.60	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2013 and 2012. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $5.3 million and $5.4 million in 2013 and 2012, 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.