Exhibit 99.1

 

News release

 

 

 

 

FOR IMMEDIATE RELEASE

 

SANDY SPRING BANCORP REPORTS NET INCOME OF $24.4 MILLION FOR THE SECOND QUARTER

Loan Growth Remains Strong and Dividends Increase to Record Levels

 

OLNEY, MARYLAND, July 19, 2018 — Today, Sandy Spring Bancorp, Inc., (Nasdaq-SASR), the parent company of Sandy Spring Bank, reported net income for the second quarter of 2018 of $24.4 million ($0.68 per diluted share) compared to net income of $14.7 million ($0.61 per diluted share) for the second quarter of 2017 and net income of $21.7 million ($0.61 per diluted share) for the first quarter of 2018. The current quarter’s results included $2.2 million in merger expenses. Exclusive of the after-tax impact of these expenses, earnings per diluted share would have been approximately $0.73 per share.

 

The results of operations from the January 1, 2018, acquisition of WashingtonFirst Bankshares (“WashingtonFirst”) are included in the Company’s consolidated results of operations for the first six months of 2018. The current period results reflect increased levels of average and period end balances, income and expense, versus comparable periods of 2017. WashingtonFirst had assets of $2.1 billion, loans of $1.7 billion and deposits of $1.6 billion at the acquisition date. The growth in interest income and expense from the prior year is the result of the growth in the balance sheet. As a result of the synergies from the combination of the two institutions, additional operating cost savings are expected to be realized throughout 2018.

 

“Our robust loan growth continues to provide the Company with momentum. Strong capital levels and solid results generated by our core operating performance have enabled us to increase dividends to record levels,” said Daniel J. Schrider, President and Chief Executive Officer. “We continue to prove our ability to succeed in a highly competitive market, and we are well positioned to serve the growing needs of both individual clients and businesses of all sizes.”

 

Second Quarter Highlights:

·

Total loans increased 51% compared to the second quarter of 2017, primarily as a result of the WashingtonFirst acquisition. Loan growth momentum remained strong as the loan portfolio grew 3 % compared to the first quarter of 2018.

 

·

The net interest margin was 3.56% for the second quarter of 2018, compared to 3.60% for the second quarter of 2017 and 3.58% for the first quarter of 2018. The prior year’s margin was positively impacted by an interest income recovery of $0.7 million. Exclusive of this non-core item, the margin would have been 3.54%.

 

 

·

Second quarter results reflected an annualized return on average assets of 1.23% and annualized return on average equity of 9.66% as compared to 1.14% and 10.80% respectively for the second quarter of 2017. Exclusive of merger costs on an after-tax basis, the return on average assets and return on average equity would have been 1.32% and 10.32%, respectively.

 

·

Pre-tax merger expenses recognized in the current quarter declined to $2.2 million compared to $9.0 million in the prior quarter.

 

·

The effective tax rate for the current quarter was 23.4% compared to 32.1% for the same quarter of the prior year and 23.6% for the prior quarter.

 

·

The Non-GAAP efficiency ratio was 52.98% for the current quarter as compared to 54.10% for the second quarter of 2017 and 49.54% for the first quarter of 2018.

 

·

The quarterly dividend increased 8% to $0.28 per share in the second quarter of 2018 from $0.26 per share in previous quarters.

 

Review of Balance Sheet and Credit Quality

 

At June 30, 2018, total assets amounted to $8.2 billion compared to $5.3 billion at June 30, 2017. The increase was primarily as a result of the WashingtonFirst acquisition. Total loans at June 30, 2018, were $6.3 billion compared to $4.1 billion at June 30, 2017. Loan production continues to provide the source for asset growth as organic loans grew $256 million in the first six months of 2018. This loan growth is net of the sale of $60 million in loans out of the mortgage portfolio during the first quarter.

 

Tangible common equity totaled $690 million at June 30, 2018, compared to $472 million at June 30, 2017. The growth in intangible assets associated with the WashingtonFirst acquisition resulted in a decline in the ratio of tangible common equity to tangible assets to 8.85% at June 30, 2018, as compared to 9.10% at June 30, 2017. The Company had a total risk-based capital ratio of 12.19%, a common equity tier 1 risk-based capital ratio of 10.85%, a tier 1 risk-based capital ratio of 11.01% and a tier 1 leverage ratio of 9.27% at June 30, 2018.

 

The ratio of non-performing loans to total loans decreased to 0.46% at June 30, 2018, compared to 0.78% at June 30, 2017, as a result of the growth in the loan portfolio. Non-performing loans totaled $28.8 million at June 30, 2018, compared to $32.2 million at June 30, 2017, and $29.4 million at March 31, 2018. Non-performing loans include accruing loans 90 days or more past due and restructured loans, but exclude non-performing loans acquired in the WashingtonFirst acquisition.

 

Loan charge-offs, net of recoveries, totaled $0.2 million for the second quarter of 2018 compared to $0.1 million for the second quarter of 2017. The allowance for loan losses represented 0.78% of outstanding loans and 168% of non-performing loans at June 30, 2018, compared to 1.09% of outstanding loans and 140% of non-performing loans at June 30, 2017. The decline in the ratio of the allowance for loan losses to outstanding loans ratio is the result of the accounting for credit losses on the loans acquired in the WashingtonFirst acquisition as any incurred credit losses have been embedded in the determination of the fair values of those loans.

 

 

Income Statement Review

 

For the second quarter of 2018 net interest income increased 51% to $63.8 million compared to $42.3 million for the second quarter of 2017 as average loans from quarter to quarter increased 51% primarily as a result of the WashingtonFirst acquisition and, to a lesser extent, the Company’s organic loan growth during the period. The net interest margin for the current quarter was 3.56% compared to the net interest margin for the second quarter of 2017 of 3.60%. The margin for the prior year’s quarter included $0.7 million from the full payoff of a previously acquired credit impaired loan. Exclusive of the recovered interest income, the net interest margin would have been 3.54% based on an adjusted net interest income of $41.6 million. Amortization of the fair value adjustments to both interest-earning assets and interest-bearing liabilities directly attributable to the acquisition had a 12 basis point positive effect on net interest margin for the current period. This favorable margin impact was offset by approximately 5 basis points as a result of the impact that the recent reduction in the tax rate had on tax-advantaged investments.

 

The provision for loan losses was $1.7 million for the second quarter of 2018, compared to $1.3 million for the second quarter of 2017 and $2.0 million for the first quarter of 2018. The increase in the provision reflects the impact of organic loan production and the impact of acquired loans being refinanced as they reach maturity under the original lending arrangements during the second quarter of 2018.

 

Non-interest income increased to $14.9 million for the second quarter of 2018, compared to $13.6 million for the second quarter of 2017. The second quarter of 2017 included gains of $1.3 million on sales of investment securities. Excluding the gains, non-interest income increased 21% due primarily to the impact of increased mortgage banking activities and, to a lesser extent, income from wealth management activities and service charges on deposit accounts.

 

Non-interest expenses increased 37% to $45.1 million for the second quarter of 2018, compared to $32.9 million in the second quarter of 2017. The current quarter included $2.2 million in merger expenses and the second quarter of 2017 included $1.3 million in penalties on the early payoff of high-rate FHLB advances and $1.0 million in merger expenses. Excluding these transactions, non-interest expenses increased 40% compared to the second quarter of 2017 due to increased compensation and benefit costs and facility and operational expenses. Merger expenses for the current quarter include the costs related to the consolidation of six redundant branches. The non-GAAP efficiency ratio improved to 52.98% for the second quarter of 2018, compared to 54.10% for the second quarter of 2017, as a result of the growth in net interest income.

 

Net interest income for the first six months of 2018 increased 53%, compared to the first six months of 2017, due the combination of the acquisition and organic loan growth. During the first six months of 2018, the net interest margin was 3.57% compared to 3.56% for the prior year period. The amortization of the fair value adjustments is estimated to be 12 basis points on an annual basis. This favorable margin effect was partially offset by the impact that the recently enacted tax rate reduction had on the tax-advantaged securities in the investment portfolio which adversely affected the margin by 5 basis points. Net interest income for the first six months of 2017 included the previously mentioned $0.7 million recovery of interest income. Exclusive of this recovery, the net interest margin would have been 3.54%.

 

 

The provision for loan losses was $3.7 million for the first six months of 2018, compared to $1.5 million for the first six months of 2017. The increase in the provision reflects the organic growth in the loan portfolio year over year in addition to the impact of acquired loans being refinanced as they reach maturity under the original lending arrangements and ceased to be accounted for as acquired loans.

 

Non-interest income was $32.0 million for the first six months of 2018, compared to $26.2 million for the first six months of 2017. The first six months of 2017 included gains of $1.3 million on sales of investment securities. Excluding these gains, non-interest income increased 28% compared to the prior year period primarily due to increases in mortgage banking activities, wealth management income and BOLI insurance proceeds. Origination volume associated with the mortgage lending operations acquired as part of the WashingtonFirst acquisition contributed to significant growth in mortgage banking income for the first six months of 2018.

 

Non-interest expenses increased 51% to $94.7 million for the first six months of 2018, compared to $62.8 million for the prior year period. The increase in non-interest expense excluding merger expense was 35%. The majority of the increase was in compensation, facility costs and other operational expenses resulting from increased size of the Company. The non-GAAP efficiency ratio improved to 51.25% for the first six months of 2018 compared to 54.44% for the first six months of 2017 as a direct result of the growth in net interest income.

 

Explanation of Non-GAAP Financial Measures

 

Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management uses supplemental non-GAAP financial measures in its analysis of the Company’s performance. These non-GAAP financial measures include: reported net income excluding intangible asset amortization, merger related expenses and the loss on the FHLB redemption from non-interest expense; non-interest income excluding securities gains (losses); and tax-equivalent net interest income, which adjusts the interest earned on tax-advantaged loans and tax-exempt investment securities to an amount comparable to interest subject to normal income taxes. Because the adjustments made to derive non-GAAP financial measures can vary from period to period, the Company’s management believes that the non-GAAP financial measures are useful in comparing period to period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Please refer to Non-GAAP Reconciliation table included with this release.

 

 

Conference Call

 

The Company’s management will host a conference call to discuss its first quarter results today at 2:00 P.M. (ET). A live Webcast of the conference call is available through the Investor Relations section of the Sandy Spring Website at www.sandyspringbank.com. Participants may call 1-800-860-2442. A password is not necessary. Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available on the website until 9:00 am (ET) August 2, 2018. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10121776.

 

About Sandy Spring Bancorp, Inc.

 

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank. Independent and community-oriented, Sandy Spring Bank offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. Through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services. Visit www.sandyspringbank.com for more information.

 

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

 

Media Contact:

Jen Schell

301-570-8331

jschell@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 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; the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period; 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, 2017, 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)		2018				2017				Change				2018				2017				Change
Results of Operations:
Net interest income		$	63,818			$	42,326				51	%		$	126,709			$	82,579				53	%
Provision for loan losses			1,733				1,322				31				3,730				1,516				146
Non-interest income			14,868				13,571				10				31,986				26,203				22
Non-interest expenses			45,082				32,868				37				94,723				62,849				51
Income before income taxes			31,871				21,707				47				60,242				44,417				36
Net income			24,399				14,741				66				46,064				29,853				54
Pre-tax pre-provision income		$	35,832			$	24,016				49			$	75,158			$	46,920				60
Return on average assets			1.23	%			1.14	%							1.18	%			1.17	%
Return on average common equity			9.66	%			10.80	%							9.18	%			11.12	%
Net interest margin			3.56	%			3.60	%							3.57	%			3.56	%
Efficiency ratio - GAAP basis   (1)			57.29	%			58.80	%							59.69	%			57.78	%
Efficiency ratio - Non-GAAP basis   (1)			52.98	%			54.10	%							51.25	%			54.44	%
Per share data:
Basic net income		$	0.68			$	0.61				11	%		$	1.29			$	1.24				4	%
Diluted net income		$	0.68			$	0.61				11			$	1.29			$	1.23				5
Average fully diluted shares			35,743,927				24,262,745				47				35,710,323				24,258,791				47
Dividends declared per share		$	0.28			$	0.26				8			$	0.54			$	0.52				4
Book value per share			28.90				23.13				25				28.90				23.13				25
Tangible book value per share			19.42				19.68				(1	)			19.42				19.68				(1	)
Outstanding shares			35,511,943				23,983,997				48				35,511,943				23,983,997				48
Financial Condition at period-end:
Investment securities		$	1,017,274			$	821,491				24	%		$	1,017,274			$	821,491				24	%
Loans			6,250,073				4,133,171				51				6,250,073				4,133,171				51
Interest-earning assets			7,532,664				4,988,704				51				7,532,664				4,988,704				51
Assets			8,152,600				5,270,521				55				8,152,600				5,270,521				55
Deposits			5,837,826				3,885,445				50				5,837,826				3,885,445				50
Interest-bearing liabilities			5,168,055				3,380,221				53				5,168,055				3,380,221				53
Stockholders' equity			1,026,349				554,683				85				1,026,349				554,683				85
Capital ratios:
Tier 1 leverage   (4)			9.27	%			9.26	%							9.27	%			9.26	%
Tier 1 capital to risk-weighted assets   (4)			11.01	%			10.96	%							11.01	%			10.96	%
Total regulatory capital to risk-weighted assets   (4)			12.19	%			12.00	%							12.19	%			12.00	%
Common equity tier 1 capital to risk-weighted assets   (4)			10.85	%			10.96	%							10.85	%			10.96	%
Tangible common equity to tangible assets   (2)			8.85	%			9.10	%							8.85	%			9.10	%
Average equity to average assets			12.78	%			10.52	%							12.83	%			10.50	%
Credit quality ratios:
Allowance for loan losses to loans			0.78	%			1.09	%							0.78	%			1.09	%
Non-performing loans to total loans			0.46	%			0.78	%							0.46	%			0.78	%
Non-performing assets to total assets			0.38	%			0.64	%							0.38	%			0.64	%
Allowance for loan losses to non-performing loans			168.17	%			140.00	%							168.17	%			140.00	%
Annualized net charge-offs to average loans    (3)			0.01	%			0.01	%							0.02	%			0.03	%

 

(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, merger expenses and loss on FHLB redemption from non-interest expense; securities gains (losses) from non-interest income and adds 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, excluding residential mortgage loans held-for-sale.

(4)

Estimated ratio at June 30, 2018

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

RECONCILIATION TABLE - UNAUDITED

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Dollars in thousands)		2018				2017				2018				2017
Pre-tax pre-provision income:
Net income		$	24,399			$	14,741			$	46,064			$	29,853
Plus non-GAAP adjustments:
Merger expenses			2,228				987				11,186				987
Income taxes			7,472				6,966				14,178				14,564
Provision for loan losses			1,733				1,322				3,730				1,516
Pre-tax pre-provision income		$	35,832			$	24,016			$	75,158			$	46,920
Efficiency ratio - GAAP basis:
Non-interest expenses		$	45,082			$	32,868			$	94,723			$	62,849
Net interest income plus non-interest income		$	78,686			$	55,897			$	158,695			$	108,782
Efficiency ratio - GAAP basis			57.29	%			58.80	%			59.69	%			57.78	%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses		$	45,082			$	32,868			$	94,723			$	62,849
Less non-GAAP adjustments:
Amortization of intangible assets			541				25				1,082				51
Loss on FHLB Redemption			-				1,275				-				1,275
Merger expenses			2,228				987				11,186				987
Non-interest expenses -  as adjusted		$	42,313			$	30,581			$	82,455			$	60,536
Net interest income plus non-interest income		$	78,686			$	55,897			$	158,695			$	108,782
Plus non-GAAP adjustment:
Tax-equivalent income			1,177				1,901				2,262				3,697
Less non-GAAP adjustment:
Securities gains			-				1,273				63				1,275
Net interest income plus non-interest income - as adjusted		$	79,863			$	56,525			$	160,894			$	111,204
Efficiency ratio - Non-GAAP basis			52.98	%			54.10	%			51.25	%			54.44	%
Supplemental Non-GAAP Performance Measurements:
Net income - GAAP		$	24,399			$	14,741			$	46,064			$	29,853
Plus non-GAAP adjustment:
Merger expenses - net of tax			1,646				593				8,263				593
Less non-GAAP adjustment:
Acquisition fair value marks - net of tax			1,631				22				3,278				47
Net income - Non-GAAP		$	24,414			$	15,312			$	51,049			$	30,399
Diluted net income per share - Non-GAAP		$	0.68			$	0.63			$	1.43			$	1.25
Return on average assets - Non-GAAP			1.24	%			1.18	%			1.31	%			1.19	%
Return on average common equity - Non-GAAP			9.67	%			11.22	%			10.18	%			11.32	%
Tangible common equity ratio:
Total stockholders' equity		$	1,026,349			$	554,683			$	1,026,349			$	554,683
Accumulated other comprehensive income			20,556				3,712				20,556				3,712
Goodwill			(346,312	)			(85,768	)			(346,312	)			(85,768	)
Other intangible assets, net			(10,868	)			(629	)			(10,868	)			(629	)
Tangible common equity		$	689,725			$	471,998			$	689,725			$	471,998
Total assets		$	8,152,600			$	5,270,521			$	8,152,600			$	5,270,521
Goodwill			(346,312	)			(85,768	)			(346,312	)			(85,768	)
Other intangible assets, net			(10,868	)			(629	)			(10,868	)			(629	)
Tangible assets		$	7,795,420			$	5,184,124			$	7,795,420			$	5,184,124
Tangible common equity ratio			8.85	%			9.10	%			8.85	%			9.10	%
Outstanding common shares			35,511,943				23,983,997				35,511,943				23,983,997
Tangible book value per common share		$	19.42			$	19.68			$	19.42			$	19.68

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION  - UNAUDITED            

 

		June 30,				December 31,				June 30,
(Dollars in thousands)		2018				2017				2017
Assets
Cash and due from banks		$	69,451			$	55,693			$	48,637
Federal funds sold			1,434				2,845				2,831
Interest-bearing deposits with banks			223,883				53,962				25,468
Cash and cash equivalents			294,768				112,500				76,936
Residential mortgage loans held for sale (at fair value)			40,000				9,848				5,743
Investments available-for-sale (at fair value)			942,832				729,507				780,078
Other equity securities			74,442				45,518				41,413
Total loans			6,250,073				4,314,248				4,133,171
Less: allowance for loan losses			(48,493	)			(45,257	)			(45,079	)
Net loans			6,201,580				4,268,991				4,088,092
Premises and equipment, net			62,275				54,761				53,235
Other real estate owned			2,361				2,253				1,460
Accrued interest receivable			23,197				15,480				14,910
Goodwill			346,312				85,768				85,768
Other intangible assets, net			10,868				580				629
Other assets			153,965				121,469				122,257
Total assets		$	8,152,600			$	5,446,675			$	5,270,521
Liabilities
Noninterest-bearing deposits		$	1,910,690			$	1,264,392			$	1,302,536
Interest-bearing deposits			3,927,136				2,699,270				2,582,909
Total deposits			5,837,826				3,963,662				3,885,445
Securities sold under retail repurchase agreements and federal funds purchased			139,647				119,359				127,312
Advances from FHLB			1,063,777				765,833				670,000
Subordinated debentures			37,495				-				-
Accrued interest payable and other liabilities			47,506				34,005				33,081
Total liabilities			7,126,251				4,882,859				4,715,838
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 35,511,943, 23,996,293 and 23,983,997 at June 30, 2018, December 31, 2017 and June 30, 2017, respectively			35,512				23,996				23,984
Additional paid in capital			604,631				168,188				166,705
Retained earnings			406,762				378,489				367,706
Accumulated other comprehensive loss			(20,556	)			(6,857	)			(3,712	)
Total stockholders' equity			1,026,349				563,816				554,683
Total liabilities and stockholders' equity		$	8,152,600			$	5,446,675			$	5,270,521

 

 

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)		2018				2017				2018				2017
Interest Income:
Interest and fees on loans		$	70,672			$	42,747			$	138,264			$	82,970
Interest on loans held for sale			279				72				647				154
Interest on deposits with banks			514				91				871				181
Interest and dividends on investment securities:
Taxable			5,083				3,554				10,185				7,162
Exempt from federal income taxes			2,042				2,106				4,114				4,057
Interest on federal funds sold			7				6				20				10
Total interest income			78,597				48,576				154,101				94,534
Interest Expense:
Interest on deposits			8,851				3,023				15,810				5,511
Interest on retail repurchase agreements and federal funds purchased			108				79				216				155
Interest on advances from FHLB			5,338				3,148				10,416				6,277
Interest on subordinated debt			482				-				950				12
Total interest expense			14,779				6,250				27,392				11,955
Net interest income			63,818				42,326				126,709				82,579
Provision for loan losses			1,733				1,322				3,730				1,516
Net interest income after provision for loan losses			62,085				41,004				122,979				81,063
Non-interest Income:
Investment securities gains			-				1,273				63				1,275
Service charges on deposit accounts			2,290				2,017				4,549				3,981
Mortgage banking activities			2,064				840				4,271				1,448
Wealth management income			5,387				4,744				10,448				9,228
Insurance agency commissions			1,180				1,222				3,004				2,974
Income from bank owned life insurance			670				605				3,001				1,199
Bank card fees			1,393				1,253				2,763				2,398
Other income			1,884				1,617				3,887				3,700
Total non-interest income			14,868				13,571				31,986				26,203
Non-interest Expenses:
Salaries and employee benefits			24,664				18,282				48,576				36,083
Occupancy expense of premises			4,642				3,211				9,584				6,613
Equipment expenses			2,243				1,767				4,468				3,491
Marketing			945				776				2,093				1,439
Outside data services			1,707				1,367				3,104				2,759
FDIC insurance			1,390				823				2,583				1,628
Amortization of intangible assets			541				25				1,082				51
Merger expenses			2,228				987				11,186				987
Other expenses			6,722				5,630				12,047				9,798
Total non-interest expenses			45,082				32,868				94,723				62,849
Income before income taxes			31,871				21,707				60,242				44,417
Income tax expense			7,472				6,966				14,178				14,564
Net income		$	24,399			$	14,741			$	46,064			$	29,853
Net Income Per Share Amounts:
Basic net income per share		$	0.68			$	0.61			$	1.29			$	1.24
Diluted net income per share		$	0.68			$	0.61			$	1.29			$	1.23
Dividends declared per share		$	0.28			$	0.26			$	0.54			$	0.52

 

 

 

Sandy Spring Bancorp, Inc. and Subsidiaries

HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED

 

		2018								2017
(Dollars in thousands, except per share data)		Q2				Q1				Q4				Q3				Q2				Q1
Profitability for the Quarter:
Tax-equivalent interest income		$	79,774			$	76,589			$	52,550			$	51,477			$	50,477			$	47,754
Interest expense			14,779				12,613				7,184				6,892				6,250				5,705
Tax-equivalent net interest income			64,995				63,976				45,366				44,585				44,227				42,049
Tax-equivalent adjustment			1,177				1,085				1,874				1,888				1,901				1,796
Provision for loan losses			1,733				1,997				527				934				1,322				194
Non-interest income			14,868				17,118				12,294				12,746				13,571				12,632
Non-interest expenses			45,082				49,641				35,059				31,191				32,868				29,981
Income before income taxes			31,871				28,371				20,200				23,318				21,707				22,710
Income tax expense			7,472				6,706				11,933				8,229				6,966				7,598
Net income		$	24,399			$	21,665			$	8,267			$	15,089			$	14,741			$	15,112
Financial Performance:
Pre-tax pre-provision income		$	35,832			$	39,326			$	23,647			$	24,597			$	24,016			$	22,904
Return on average assets			1.23	%			1.12	%			0.61	%			1.13	%			1.14	%			1.20	%
Return on average common equity			9.66	%			8.70	%			5.82	%			10.74	%			10.80	%			11.45	%
Net interest margin			3.56	%			3.58	%			3.57	%			3.54	%			3.60	%			3.51	%
Efficiency ratio - GAAP basis (1)			57.29	%			62.04	%			62.85	%			56.26	%			58.80	%			56.69	%
Efficiency ratio - Non-GAAP basis (1)			52.98	%			49.54	%			55.69	%			53.76	%			54.10	%			54.78	%
Per Share Data:
Basic net income per share		$	0.68			$	0.61			$	0.34			$	0.62			$	0.61			$	0.63
Diluted net income per share		$	0.68			$	0.61			$	0.34			$	0.62			$	0.61			$	0.63
Average fully diluted shares			35,743,927				35,683,542				24,228,471				24,223,004				24,262,745				24,158,566
Dividends declared per common share		$	0.28			$	0.26			$	0.26			$	0.26			$	0.26			$	0.26
Non-interest Income:
Securities gains (losses)		$	-			$	63			$	(2	)		$	-			$	1,273			$	2
Service charges on deposit accounts			2,290				2,259				2,177				2,140				2,017				1,964
Mortgage banking activities			2,064				2,207				654				632				840				608
Wealth management income			5,387				5,061				5,054				4,864				4,744				4,484
Insurance agency commissions			1,180				1,824				1,307				1,950				1,222				1,752
Income from bank owned life insurance			670				2,331				595				609				605				594
Bank card fees			1,393				1,370				1,218				1,211				1,253				1,145
Other income			1,884				2,003				1,291				1,340				1,617				2,083
Total Non-interest Income		$	14,868			$	17,118			$	12,294			$	12,746			$	13,571			$	12,632
Non-interest Expense:
Salaries and employee benefits		$	24,664			$	23,912			$	18,607			$	18,442			$	18,282			$	17,801
Occupancy expense of premises			4,642				4,942				3,146				3,294				3,211				3,402
Equipment expenses			2,243				2,225				1,802				1,722				1,767				1,724
Marketing			945				1,148				896				784				776				663
Outside data services			1,707				1,397				1,441				1,286				1,367				1,392
FDIC insurance			1,390				1,193				827				850				823				805
Amortization of intangible assets			541				541				25				25				25				26
Merger expenses			2,228				8,958				2,920				345				987				-
Professional fees			1,699				1,040				1,439				1,053				1,045				955
Other real estate owned expenses			41				38				14				4				(6	)			5
Other expenses			4,982				4,247				3,942				3,386				4,591				3,208
Total Non-interest Expense		$	45,082			$	49,641			$	35,059			$	31,191			$	32,868			$	29,981

 

(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, merger expenses and loss on FHLB redemption from non-interest expense; securities gains (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

 

		2018								2017
(Dollars in thousands)		Q2				Q1				Q4				Q3				Q2				Q1
Balance Sheets at Quarter End:
Residential mortgage loans		$	1,106,674			$	992,287			$	921,435			$	882,890			$	871,766			$	848,814
Residential construction loans			197,372				215,445				176,687				171,814				169,901				170,285
Commercial AD&C loans			609,266				564,871				292,443				295,222				314,259				309,350
Commercial investor real estate loans			1,923,827				1,928,439				1,112,710				1,104,669				1,069,988				979,410
Commercial owner occupied real estate loans			1,184,421				1,174,739				857,196				831,461				797,629				772,443
Commercial business loans			702,939				652,797				497,948				451,667				451,570				457,216
Consumer loans			525,574				532,973				455,829				456,395				458,058				455,478
Total loans			6,250,073				6,061,551				4,314,248				4,194,118				4,133,171				3,992,996
Allowance for loan losses			(48,493	)			(46,931	)			(45,257	)			(44,924	)			(45,079	)			(43,861	)
Loans held for sale			40,000				28,486				9,848				7,084				5,743				17,717
Investment securities			1,017,274				1,040,339				775,025				795,922				821,491				855,707
Interest-earning assets			7,532,664				7,285,731				5,155,928				5,049,229				4,988,704				4,919,927
Total assets			8,152,600				7,894,918				5,446,675				5,334,788				5,270,521				5,201,164
Noninterest-bearing demand deposits			1,910,690				1,767,523				1,264,392				1,312,710				1,302,536				1,234,505
Total deposits			5,837,826				5,627,206				3,963,662				3,955,792				3,885,445				3,799,198
Customer repurchase agreements			139,647				149,323				119,359				146,569				127,312				141,244
Total interest-bearing liabilities			5,168,055				5,057,645				3,584,462				3,422,568				3,380,221				3,380,937
Total stockholders' equity			1,026,349				1,014,608				563,816				564,480				554,683				544,261
Quarterly Average Balance Sheets:
Residential mortgage loans		$	1,034,062			$	1,117,478			$	903,660			$	880,782			$	860,081			$	847,896
Residential construction loans			223,171				193,327				171,239				172,921				169,130				157,152
Commercial AD&C loans			576,076				582,876				289,737				291,569				302,924				310,325
Commercial investor real estate loans			1,924,759				1,988,340				1,114,960				1,090,641				1,010,389				945,080
Commercial owner occupied real estate loans			1,184,409				940,065				842,642				808,802				776,279				774,964
Commercial business loans			666,280				657,372				454,330				459,779				454,724				462,444
Consumer loans			531,965				538,198				458,378				457,526				461,672				458,162
Total loans			6,140,722				6,017,656				4,234,946				4,162,020				4,035,199				3,956,023
Loans held for sale			25,403				35,768				5,862				7,093				7,077				7,402
Investment securities			1,028,306				1,062,325				780,522				813,179				842,837				818,287
Interest-earning assets			7,311,272				7,212,878				5,061,075				5,019,133				4,922,389				4,829,208
Total assets			7,926,735				7,841,611				5,346,625				5,297,368				5,202,398				5,111,698
Noninterest-bearing demand deposits			1,796,644				1,651,258				1,322,157				1,293,470				1,251,396				1,159,715
Total deposits			5,657,420				5,489,715				3,991,936				3,916,657				3,810,180				3,673,731
Customer repurchase agreements			148,539				136,694				139,125				133,145				132,552				128,485
Total interest-bearing liabilities			5,058,016				5,116,904				3,419,669				3,407,279				3,360,128				3,375,002
Total stockholders' equity			1,013,081				1,010,106				563,506				557,282				547,229				535,308
Financial Measures:
Average equity to average assets			12.78	%			12.88	%			10.54	%			10.52	%			10.52	%			10.47	%
Investment securities to earning assets			13.50	%			14.28	%			15.03	%			15.76	%			16.47	%			17.39	%
Loans to earning assets			82.97	%			83.20	%			83.68	%			83.06	%			82.85	%			81.16	%
Loans to assets			76.66	%			76.78	%			79.21	%			78.62	%			78.42	%			76.77	%
Loans to deposits			107.06	%			107.72	%			108.85	%			106.02	%			106.38	%			105.10	%
Capital Measures:
Tier 1 leverage  (1)			9.27	%			9.21	%			9.24	%			9.28	%			9.26	%			9.26	%
Tier 1 capital to risk-weighted assets  (1)			11.01	%			11.08	%			10.84	%			10.99	%			10.96	%			11.02	%
Total regulatory capital to risk-weighted assets  (1)			12.19	%			12.27	%			11.85	%			12.01	%			12.00	%			12.06	%
Common equity tier 1 capital to risk-weighted assets   (1)			10.85	%			10.92	%			10.84	%			10.99	%			10.96	%			11.02	%
Book value per share		$	28.90			$	28.61			$	23.50			$	23.53			$	23.13			$	22.74
Outstanding shares			35,511,943				35,463,269				23,996,293				23,990,370				23,983,997				23,930,165

 

(1)

Estimated ratio at June 30, 2018

  

 

Sandy Spring Bancorp, Inc. and Subsidiaries

LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

 

		2018								2017
(Dollars in thousands)		June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
Non-Performing Assets:
Loans 90 days past due:
Commercial business		$	6			$	-			$	-			$	-			$	-			$	-
Commercial real estate:
Commercial AD&C			-				-				-				-				-				-
Commercial investor real estate			-				-				-				-				-				-
Commercial owner occupied real estate			112				-				-				-				424				-
Consumer			-				126				-				1				4				-
Residential real estate:
Residential mortgage			-				-				225				225				-				232
Residential construction			-				-				-				-				-				-
Total loans 90 days past due			118				126				225				226				428				232
Non-accrual loans:
Commercial business			6,883				6,634				6,703				6,091				6,807				4,849
Commercial real estate:
Commercial AD&C			136				136				136				137				137				137
Commercial investor real estate			5,878				5,813				5,575				5,589				6,934				7,970
Commercial owner occupied real estate			3,440				3,524				3,582				5,012				4,926				5,106
Consumer			4,298				3,244				2,967				3,152				3,111				3,058
Residential real estate:
Residential mortgage			6,251				7,063				7,196				7,345				7,101				6,908
Residential construction			168				174				177				182				187				189
Total non-accrual loans			27,054				26,588				26,336				27,508				29,203				28,217
Total restructured loans - accruing			1,663				2,678				2,788				2,471				2,569				2,409
Total non-performing loans			28,835				29,392				29,349				30,205				32,200				30,858
Other assets and real estate owned (OREO)			2,361				2,761				2,253				1,448				1,460				1,294
Total non-performing assets		$	31,196			$	32,153			$	31,602			$	31,653			$	33,660			$	32,152

 

		For the Quarter Ended,
		June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2018				2018				2017				2017				2017				2017
Analysis of Non-accrual Loan Activity:
Balance at beginning of period		$	26,588			$	26,336			$	27,508			$	29,203			$	28,217			$	29,211
Non-accrual balances transferred to OREO			-				(289	)			(888	)			(411	)			(175	)			(113	)
Non-accrual balances charged-off			(144	)			(411	)			(446	)			(1,127	)			(179	)			(391	)
Net payments or draws			(1,635	)			(357	)			(1,707	)			(1,869	)			(1,804	)			(1,382	)
Loans placed on non-accrual			2,245				1,309				2,504				1,712				3,144				1,461
Non-accrual loans brought current			-				-				(635	)			-				-				(569	)
Balance at end of period		$	27,054			$	26,588			$	26,336			$	27,508			$	29,203			$	28,217
Analysis of Allowance for Loan Losses:
Balance at beginning of period		$	46,931			$	45,257			$	44,924			$	45,079			$	43,861			$	44,067
Provision for loan losses			1,733				1,997				527				934				1,322				194
Less loans charged-off, net of recoveries:
Commercial business			(73	)			322				48				1,029				107				260
Commercial real estate:
Commercial AD&C			-				(62	)			-				-				(103	)			-
Commercial investor real estate			(8	)			(8	)			(8	)			(10	)			(78	)			(5	)
Commercial owner occupied real estate			-				-				243				5				-				-
Consumer			244				99				(71	)			103				189				167
Residential real estate:
Residential mortgage			13				(22	)			(12	)			(32	)			(3	)			(16	)
Residential construction			(5	)			(6	)			(6	)			(6	)			(8	)			(6	)
Net charge-offs			171				323				194				1,089				104				400
Balance at end of period		$	48,493			$	46,931			$	45,257			$	44,924			$	45,079			$	43,861
Asset Quality Ratios:
Non-performing loans to total loans			0.46	%			0.48	%			0.68	%			0.72	%			0.78	%			0.77	%
Non-performing assets to total assets			0.38	%			0.41	%			0.58	%			0.59	%			0.64	%			0.62	%
Allowance for loan losses to loans			0.78	%			0.77	%			1.05	%			1.07	%			1.09	%			1.10	%
Allowance for loan losses to non-performing loans			168.17	%			159.67	%			154.20	%			148.73	%			140.00	%			142.14	%
Annualized net charge-offs to average loans			0.01	%			0.02	%			0.02	%			0.10	%			0.01	%			0.04	%

  

 

Sandy Spring Bancorp, Inc. and Subsidiaries

CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED                              

 

		Three Months Ended June 30,
		2018												2017
										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		$	1,034,062			$	9,414				3.64	%		$	860,081			$	7,531				3.50	%
Residential construction loans			223,171				2,199				3.95				169,130				1,579				3.74
Total mortgage loans			1,257,233				11,613				3.70				1,029,211				9,110				3.54
Commercial AD&C loans			576,076				8,271				5.76				302,924				3,767				4.99
Commercial investor real estate loans			1,924,759				22,661				4.72				1,010,389				11,280				4.48
Commercial owner occupied real estate loans			1,184,409				13,989				4.74				776,279				9,981				5.16
Commercial business loans			666,280				8,807				5.30				454,724				5,062				4.46
Total commercial loans			4,351,524				53,728				4.95				2,544,316				30,090				4.74
Consumer loans			531,965				5,753				4.40				461,672				4,171				3.66
Total loans (2)			6,140,722				71,094				4.64				4,035,199				43,371				4.31
Loans held for sale			25,403				279				4.39				7,077				72				4.09
Taxable securities			734,482				5,282				2.88				535,028				3,678				2.75
Tax-exempt securities (3)			293,824				2,598				3.54				307,809				3,259				4.23
Total investment securities			1,028,306				7,880				3.06				842,837				6,937				3.29
Interest-bearing deposits with banks			114,869				514				1.79				34,738				91				1.06
Federal funds sold			1,972				7				1.44				2,538				6				0.96
Total interest-earning assets			7,311,272				79,774				4.37				4,922,389				50,477				4.11
Less:  allowance for loan losses			(47,694	)											(43,679	)
Cash and due from banks			66,420												47,517
Premises and equipment, net			61,900												53,449
Other assets			534,837												222,722
Total assets		$	7,926,735											$	5,202,398
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	729,948				222				0.12	%		$	615,141				123				0.08	%
Regular savings deposits			356,077				94				0.11				325,634				57				0.07
Money market savings deposits			1,554,304				4,571				1.18				983,185				1,076				0.44
Time deposits			1,220,447				3,964				1.30				634,824				1,767				1.12
Total interest-bearing deposits			3,860,776				8,851				0.92				2,558,784				3,023				0.47
Other borrowings			148,542				108				0.29				132,553				79				0.24
Advances from FHLB			1,011,180				5,338				2.12				668,791				3,148				1.89
Subordinated debentures			37,518				482				5.14				-				-				-
Total interest-bearing liabilities			5,058,016				14,779				1.17				3,360,128				6,250				0.75
Noninterest-bearing demand deposits			1,796,644												1,251,396
Other liabilities			58,994												43,645
Stockholders' equity			1,013,081												547,229
Total liabilities and stockholders' equity		$	7,926,735											$	5,202,398
Net interest income and spread						$	64,995				3.20	%						$	44,227				3.36	%
Less: tax-equivalent adjustment							1,177												1,901
Net interest income						$	63,818											$	42,326
Interest income/earning assets											4.37	%											4.11	%
Interest expense/earning assets											0.81												0.51
Net interest margin											3.56	%											3.60	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017 respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.2 million and $1.9 million in 2018 and 2017, respectively.

(2)

Non-accrual loans are included in the average balances.

(3)

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,
						2018												2017
										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		$	1,075,540			$	19,795				3.68	%		$	854,022			$	14,879				3.48	%
Residential construction loans			208,332				4,043				3.91				163,174				3,015				3.73
Total mortgage loans			1,283,872				23,838				3.72				1,017,196				17,894				3.52
Commercial AD&C loans			579,458				16,407				5.71				306,604				7,421				4.88
Commercial investor real estate loans			1,956,374				46,089				4.75				977,915				21,699				4.47
Commercial owner occupied real estate loans			1,062,912				24,567				4.66				775,625				19,009				4.94
Commercial business loans			661,851				16,856				5.14				458,563				10,069				4.43
Total commercial loans			4,260,595				103,919				4.92				2,518,707				58,198				4.66
Consumer loans			535,064				11,299				4.32				459,927				8,101				3.58
Total loans (2)			6,079,531				139,056				4.61				3,995,830				84,193				4.24
Loans held for sale			30,557				647				4.24				7,238				154				4.27
Taxable securities			747,862				10,549				2.82				534,306				7,413				2.78
Tax-exempt securities (3)			297,359				5,220				3.51				296,323				6,280				4.24
Total investment securities			1,045,221				15,769				3.02				830,629				13,693				3.30
Interest-bearing deposits with banks			104,115				871				1.69				40,038				181				0.91
Federal funds sold			2,925				20				1.36				2,320				10				0.84
Total interest-earning assets			7,262,349				156,363				4.33				4,876,055				98,231				4.05
Less:  allowance for loan losses			(46,689	)											(43,703	)
Cash and due from banks			71,664												48,165
Premises and equipment, net			61,027												53,548
Other assets			535,844												223,228
Total assets		$	7,884,195											$	5,157,293
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	744,048				426				0.12	%		$	612,608				237				0.08	%
Regular savings deposits			412,053				395				0.19				320,577				106				0.07
Money market savings deposits			1,467,823				7,698				1.06				986,625				1,854				0.38
Time deposits			1,225,755				7,291				1.20				616,713				3,314				1.08
Total interest-bearing deposits			3,849,679				15,810				0.83				2,536,523				5,511				0.44
Other borrowings			144,100				216				0.30				130,531				155				0.24
Advances from FHLB			1,055,982				10,416				1.99				699,641				6,277				1.81
Subordinated debentures			37,536				950				5.07				829				12				2.91
Total interest-bearing liabilities			5,087,297				27,392				1.09				3,367,524				11,955				0.72
Noninterest-bearing demand deposits			1,724,353												1,205,809
Other liabilities			60,943												42,659
Stockholders' equity			1,011,602												541,301
Total liabilities and stockholders' equity		$	7,884,195											$	5,157,293
Net interest income and spread						$	128,971				3.24	%						$	86,276				3.33	%
Less: tax-equivalent adjustment							2,262												3,697
Net interest income						$	126,709											$	82,579
Interest income/earning assets											4.33	%											4.05	%
Interest expense/earning assets											0.76												0.49
Net interest margin											3.57	%											3.56	%

 

(1)

Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017 respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $2.3 million and $3.7 million in 2018 and 2017, respectively.

(2)

Non-accrual loans are included in the average balances.

(3)

Includes only investments that are exempt from federal taxes.