Sandy Spring Bancorp Reports Third Quarter Net Income of $12.1 Million, an Increase of 10% Over Prior Year

Sandy Spring Bancorp, Inc. Logo

OLNEY, Md., Oct. 17, 2013 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the third quarter of 2013 of $12.1 million ($0.48 per diluted share) compared to net income of $11.0 million ($0.44 per diluted share) for the third quarter of 2012 and net income of $12.2 million ($0.49 per diluted share) for the second quarter of 2013.

Net income for the nine-month period ended September 30, 2013 totaled $34.8 million ($1.39 per diluted share) compared to net income of $26.7 million ($1.09 per diluted share) for the prior year period, an increase of 31%.

"While our third quarter results benefitted from significant recoveries on two commercial real estate loans, historically low interest rates continued to exert downward pressure on our net interest margin. The increase in long-term treasury rates reduced both mortgage loan origination volume and the related mortgage banking income from the sales of such loans," said Daniel J. Schrider, President and Chief Executive Officer.

"Despite ongoing challenging market conditions, our focused efforts resulted in further improvement in credit quality metrics, growth from our wealth management and insurance segments and continued control of our funding costs.

"We continue to believe the consistent application of prudent banking principles together with outstanding client service is the formula for success in this very difficult and volatile economy," said Schrider.

Third Quarter Highlights:

  • Pre-tax pre-provision income, a non-GAAP measure, was $19.6 million for the third quarter of 2013, a 16% increase compared to the third quarter of 2012 and a 26% increase compared to the second quarter of 2013. Third quarter results with respect to credit metrics, the net interest margin and non-interest income and expense were positively affected by major recoveries from resolution of two previously non-performing commercial real estate credits.
  • The provision for loan and lease losses for the third quarter of 2013 was a charge of $1.1 million compared to a charge of $0.2 million for the third quarter of 2012 and a credit of $2.9 million for the second quarter of 2013. This increase in the provision compared to the prior quarter was due primarily to loan growth during the quarter.
  • Non-performing loans decreased to $38.3 million at September 30, 2013 compared to $58.9 million at September 30, 2012 and $46.2 million at June 30, 2013. The coverage ratio of the allowance for loan and lease losses to non-performing loans was 103% at September 30, 2013 compared to a coverage ratio of 72% at September 30, 2012 and 84% at June 30, 2013.
  • The net interest margin was 3.88% for the third quarter of 2013, compared to 3.67% for the third quarter of 2012 and 3.51% for the second quarter of 2013. Excluding the effect of the loan recoveries mentioned above, the net interest margin was 3.49% for the quarter. The decrease in the normalized margin was due primarily to the decline in the yield on a higher level of earning assets which more than offset the lower cost of borrowings and deposits.
  • Non-interest income decreased 8% for the quarter compared to both the prior year quarter and the second quarter of 2013. The decrease was due primarily to the decrease in income from mortgage banking due primarily to a significant decline in the volume of saleable mortgage loan originations. This decrease was somewhat offset by increases in insurance agency commissions and other non-interest income.
  • Total loans increased 8% compared to the third quarter of 2012 and 2% compared to the second quarter of 2013 due to organic loan growth in the residential mortgage, commercial investor real estate and consumer loan portfolios.

Review of Balance Sheet and Credit Quality

Total assets increased 4% to $4.1 billion at September 30, 2013 as compared to September 30, 2012. Total loans and leases increased 8% to $2.7 billion compared to the prior year due primarily to the growth in the specific loan portfolios mentioned above.

Customer funding sources, which include deposits and other short-term borrowings from customers, remained stable compared to September 30, 2012. Noninterest-bearing and interest-bearing checking account balances increased 10% compared to the prior year quarter. 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. Certificates of deposit declined 14% while FHLB advances increased 28% at September 30, 2013 compared to balances at September 30, 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 $410.8 million at September 30, 2013 compared to $379.8 million at September 30, 2012 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.99% at September 30, 2012 to 10.36% at September 30, 2013. This increase was due primarily to net income earned during the period. At September 30, 2013, the Company had a total risk-based capital ratio of 15.70%, a tier 1 risk-based capital ratio of 14.45% and a tier 1 leverage ratio of 11.29%.

Non-performing loans totaled $38.3 million at September 30, 2013 compared to $58.9 million at September 30, 2012 and $46.2 million at June 30, 2013. Overall credit quality continued to improve due to the resolution of existing problem credits and the reduced migration of new credits to non-performing status.

Loan charge-offs, net of recoveries, totaled $0.7 million for the third quarter of 2013 compared to net charge-offs of $2.9 million for the third quarter of 2012 and net recoveries of $0.6 million for the second quarter of 2013. This improvement for the third quarter of 2013 compared to the prior year quarter was due primarily to recoveries on existing problem credits. The allowance for loan and lease losses represented 1.48% of outstanding loans and leases and 103% of non-performing loans at September 30, 2013 compared to 1.73% of outstanding loans and leases and 72% of non-performing loans at September 30, 2012 and 1.50% of outstanding loans and leases and 84% of non-performing loans at June 30, 2013. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

Income Statement Review

Net interest income for the third quarter of 2013 increased 11% compared to the third quarter of 2012 due to $3.7 million in interest recoveries on loans previously charged-off. Excluding these recoveries, net interest income remained virtually level compared to the prior year quarter. The resulting increase was due to an increase in average interest-earning assets and lower funding costs which 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 increased to 3.88% for the third quarter of 2013 compared to 3.67% for the third quarter of 2012 due to loan recoveries. Excluding the effect of these loan recoveries, the net interest margin would have been 3.49% for the quarter. The resulting decrease in the margin was due to lower yields on a higher amount of interest-earning assets.

The provision for loan and lease losses was a charge of $1.1 million for the third quarter of 2013 compared to a charge of $0.2 million for the third quarter of 2012 and a credit of $2.9 million for the second quarter of 2013. The increase in the provision for the third quarter of 2013 compared to the third quarter of 2012 was due primarily to loan growth during the quarter and the previously mentioned recoveries which were largely offset by a charge-off on a commercial real estate loan together with a lower migration of new problem loans into non-performing status.

Non-interest income decreased 8% to $11.2 million for the third quarter of 2013 compared to $12.2 million for the third quarter of 2012. This decrease was driven by a lack of mortgage banking income due primarily to lower mortgage origination volumes and a decline in client refinancing activity. This decrease was somewhat offset by a 17% increase in wealth management income due to higher assets under management. In addition, other non-interest income increased 36% due to gains on sales and dispositions of loans.

Non-interest expenses decreased 1% to $26.9 million for the third quarter of 2013 compared to $27.2 million in the third quarter of 2012. This decrease was driven primarily by a decline in other non-interest expenses related to the recovery of expenses related to the resolution of problem loan credits mentioned above. The non-GAAP efficiency ratio improved to 55.21% for the third quarter of 2013 compared to 58.91% for the third quarter of 2012. Excluding the effect of the interest recoveries mentioned above, the non-GAAP efficiency ratio for the third quarter of 2013 was 61.47%.

Net interest income for the first nine months of 2013 increased 8% compared to the prior year period while the net interest margin increased to 3.66% for the year to date compared to 3.62% in 2012 due to the $3.7 million in interest recoveries on previously mentioned commercial loans. Excluding the effect of the interest recoveries, net interest income increased 4% for the first nine months of 2013 compared to the prior year period while the net interest margin decreased to 3.53% for the first nine months of 2013 compared to 3.62% for the first nine months of 2012. The increase in net interest income and decrease in the net interest margin were due primarily to the factors cited previously with respect to the third quarter of 2013.

The provision for loan and lease losses was a credit of $1.7 million for the first nine months of 2013 compared to a charge of $2.5 million for first nine months of 2012. The decrease in the provision for the period was due primarily to a decline in historical losses, a lower migration of new problem loans into non-performing status, and net loan recoveries during the period.

Non-interest income increased 3% to $35.9 million for the first nine months of 2013 compared to $34.7 million for the first nine months of 2012. This increase was driven by a 9% increase in wealth management income due to higher assets under management while insurance agency commissions increased 13% due to higher revenues on whole life insurance and physicians' liability lines. Other non-interest income increased 45% due to gains on sales and dispositions of loans and a non-recurring legal settlement. These increases were partially offset by a 36% decrease in mortgage banking income due to declining mortgage origination volumes.

Non-interest expenses remained virtually level at $82.2 million for the first nine months of 2013 compared to $82.7 million in the first nine months of 2012. Outside data services decreased due to merger expenses from the CommerceFirst acquisition recorded in the second quarter of 2012. Other non-interest expenses decreased due to such merger expenses and due to the recovery of expenses from the resolution of problem loan credits. These decreases were somewhat offset by an increase in salaries and benefits expenses due to additional staff and higher incentive compensation. The non-GAAP efficiency ratio improved to 58.89% for the first nine months of 2013 compared to 61.08% for the first nine months of 2012. Excluding the effect of the interest recoveries mentioned above, the non-GAAP efficiency ratio for the first nine months of 2013 was 61.01%.

Conference Call

The Company's management will host a conference call to discuss its third 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) November 18, 2013. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10034198.

About Sandy Spring Bancorp/Sandy Spring Bank

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.

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 Nine Months Ended
September 30, % September 30, %
(Dollars in thousands, except per share data) 2013 2012 Change 2013 2012 Change
Results of Operations:
Net interest income $ 35,306 $ 31,785 11% $ 97,564 $ 90,299 8%
Provision for loan and lease losses 1,128 232 -- (1,670) 2,481 (167)
Non-interest income 11,223 12,242 (8) 35,857 34,709 3
Non-interest expenses 26,893 27,167 (1) 82,224 82,708 (1)
Income before income taxes 18,508 16,628 11 52,867 39,819 33
Net income 12,089 10,990 10 34,809 26,673 31
Pre-tax pre-provision pre-merger expense income $ 19,636 $ 16,996 16 $ 51,197 $ 45,008 14
Return on average assets 1.19% 1.13% 1.17% 0.95%
Return on average common equity 9.91% 9.22% 9.59% 7.74%
Net interest margin 3.88% 3.67% 3.66% 3.62%
Efficiency ratio - GAAP basis (1) 57.80% 61.70% 61.63% 66.16%
Efficiency ratio - Non-GAAP basis (1) 55.21% 58.91% 58.89% 61.08%
Per share data:
Basic net income $ 0.48 $ 0.44 9% $ 1.40 $ 1.09 28%
Diluted net income $ 0.48 $ 0.44 9 $ 1.39 $ 1.09 28
Average fully diluted shares 25,070,506 24,949,205 -- 25,049,181 24,535,439 2
Dividends declared per share $ 0.16 $ 0.12 33 $ 0.46 $ 0.34 35
Book value per share 19.77 19.35 2 19.77 19.35 2
Tangible book value per share 16.44 15.26 8 16.44 15.26 8
Outstanding shares 24,985,146 24,896,136 -- 24,985,146 24,896,136 --
Financial Condition at period-end:
Investment securities $1,077,951 $ 1,074,918 --% $1,077,951 $ 1,074,918 --%
Loans and leases 2,662,010 2,468,985 8 2,662,010 2,468,985 8
Interest-earning assets 3,771,825 3,614,310 4 3,771,825 3,614,310 4
Assets 4,052,969 3,887,427 4 4,052,969 3,887,427 4
Deposits 2,916,466 2,880,262 1 2,916,466 2,880,262 1
Interest-bearing liabilities 2,634,324 2,560,040 3 2,634,324 2,560,040 3
Stockholders' equity 493,882 481,810 3 493,882 481,810 3
Capital ratios:
Tier 1 leverage 11.29% 10.99% 11.29% 10.99%
Tier 1 capital to risk-weighted assets 14.45% 14.31% 14.45% 14.31%
Total regulatory capital to risk-weighted assets 15.70% 15.56% 15.70% 15.56%
Tangible common equity to tangible assets (2) 10.36% 9.99% 10.36% 9.99%
Average equity to average assets 11.98% 12.27% 12.19% 12.31%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.48% 1.73% 1.48% 1.73%
Non-performing loans to total loans 1.44% 2.38% 1.44% 2.38%
Non-performing assets to total assets 0.98% 1.75% 0.98% 1.75%
Allowance for loan and lease losses to non-performing loans 103.06% 72.40% 103.06% 72.40%
Annualized net charge-offs to average loans and leases (3) 0.11% 0.46% 0.10% 0.53%
(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; 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 Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2013 2012 2013 2012
Pre-tax pre-provision pre-merger expense income:
Net income $ 12,089 $ 10,990 $ 34,809 $ 26,673
Plus non-GAAP adjustment:
Merger expenses -- 136 -- 2,708
Income taxes 6,419 5,638 18,058 13,146
Provision for loan and lease losses 1,128 232 (1,670) 2,481
Pre-tax pre-provision pre-merger expense income $ 19,636 $ 16,996 $ 51,197 $ 45,008
Efficiency ratio - GAAP basis:
Non-interest expenses $ 26,893 $ 27,167 $ 82,224 $ 82,708
Net interest income plus non-interest income $ 46,529 $ 44,027 $ 133,421 $ 125,008
Efficiency ratio - GAAP basis 57.80% 61.70% 61.63% 66.16%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $ 26,893 $ 27,167 $ 82,224 $ 82,708
Less non-GAAP adjustment:
Amortization of intangible assets 462 476 1,384 1,403
Merger expenses -- 136 -- 2,708
Non-interest expenses -- as adjusted $ 26,431 $ 26,555 $ 80,840 $ 78,597
Net interest income plus non-interest income $ 46,529 $ 44,027 $ 133,421 $ 125,008
Plus non-GAAP adjustment:
Tax-equivalent income 1,344 1,324 3,967 4,040
Less non-GAAP adjustments:
Securities gains -- 296 118 459
OTTI recognized in earnings -- (23) -- (95)
Net interest income plus non-interest income - as adjusted $ 47,873 $ 45,078 $ 137,270 $ 128,684
Efficiency ratio - Non-GAAP basis 55.21% 58.91% 58.89% 61.08%
Tangible common equity ratio:
Total stockholders' equity $ 493,882 $ 481,810 $ 493,882 $ 481,810
Accumulated other comprehensive loss 2,892 (16,433) 2,892 (16,433)
Goodwill (84,171) (81,892) (84,171) (81,892)
Other intangible assets, net (1,792) (3,641) (1,792) (3,641)
Tangible common equity $ 410,811 $ 379,844 $ 410,811 $ 379,844
Total assets $ 4,052,969 $ 3,887,427 $ 4,052,969 $ 3,887,427
Goodwill (84,171) (81,892) (84,171) (81,892)
Other intangible assets, net (1,792) (3,641) (1,792) (3,641)
Tangible assets $ 3,967,006 $ 3,801,894 $ 3,967,006 $ 3,801,894
Tangible common equity ratio 10.36% 9.99% 10.36% 9.99%
Outstanding common shares 24,985,146 24,896,136 24,985,146 24,896,136
Tangible book value per common share $ 16.44 $ 15.26 $ 16.44 $ 15.26
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
September 30, December 31, September 30,
(Dollars in thousands) 2013 2012 2012
Assets
Cash and due from banks $ 58,746 $ 59,540 $ 48,744
Federal funds sold 475 466 466
Interest-bearing deposits with banks 20,847 26,400 30,057
Cash and cash equivalents 80,068 86,406 79,267
Residential mortgage loans held for sale (at fair value) 10,542 36,149 39,884
Investments available-for-sale (at fair value) 815,545 825,582 834,665
Investments held-to-maturity --- fair value of $220,054, $222,024 and $213,235 at September 30, 2013, December 31, 2012 and September 30, 2012, respectively 225,994 215,814 206,613
Other equity securities 36,412 33,636 33,640
Total loans and leases 2,662,010 2,531,128 2,468,985
Less: allowance for loan and lease losses (39,422) (42,957) (42,618)
Net loans and leases 2,622,588 2,488,171 2,426,367
Premises and equipment, net 46,655 48,326 48,784
Other real estate owned 1,662 5,926 9,291
Accrued interest receivable 12,464 12,392 12,813
Goodwill 84,171 84,808 81,892
Other intangible assets, net 1,792 3,163 3,641
Other assets 115,076 114,833 110,570
Total assets $ 4,052,969 $ 3,955,206 $ 3,887,427
Liabilities
Noninterest-bearing deposits $ 890,319 $ 847,415 $ 818,674
Interest-bearing deposits 2,026,147 2,065,619 2,061,588
Total deposits 2,916,466 2,913,034 2,880,262
Securities sold under retail repurchase agreements and federal funds purchased 53,177 86,929 58,306
Advances from FHLB 520,000 405,058 405,146
Subordinated debentures 35,000 35,000 35,000
Accrued interest payable and other liabilities 34,444 31,673 26,903
Total liabilities 3,559,087 3,471,694 3,405,617
Stockholders' Equity
Common stock --- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 24,985,146, 24,905,392 and 24,896,136 at September 30, 2013, December 31, 2012 and September 30, 2012, respectively 24,985 24,905 24,896
Additional paid in capital 192,964 191,689 191,237
Retained earnings 278,825 255,606 249,244
Accumulated other comprehensive income (loss) (2,892) 11,312 16,433
Total stockholders' equity 493,882 483,512 481,810
Total liabilities and stockholders' equity $ 4,052,969 $ 3,955,206 $ 3,887,427
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share data) 2013 2012 2013 2012
Interest Income:
Interest and fees on loans and leases $ 33,079 $ 30,697 $ 91,937 $ 86,164
Interest on loans held for sale 176 248 838 587
Interest on deposits with banks 22 38 65 83
Interest and dividends on investment securities:
Taxable 4,558 4,204 12,411 13,809
Exempt from federal income taxes 2,345 2,308 6,987 7,024
Interest on federal funds sold -- -- -- 1
Total interest income 40,180 37,495 112,238 107,668
Interest Expense:
Interest on deposits 1,358 1,823 4,209 5,707
Interest on retail repurchase agreements and federal funds purchased 39 46 126 158
Interest on advances from FHLB 3,255 3,599 9,667 10,772
Interest on subordinated debt 222 242 672 732
Total interest expense 4,874 5,710 14,674 17,369
Net interest income 35,306 31,785 97,564 90,299
Provision for loan and lease losses 1,128 232 (1,670) 2,481
Net interest income after provision for loan and lease losses 34,178 31,553 99,234 87,818
Non-interest Income:
Investment securities gains -- 296 118 459
Total other-than-temporary impairment ("OTTI") losses -- (23) -- (95)
Portion of OTTI losses recognized in other comprehensive income, before taxes -- -- -- --
Net OTTI recognized in earnings -- (23) -- (95)
Service charges on deposit accounts 2,171 2,230 6,390 6,713
Mortgage banking activities (26) 1,981 2,738 4,294
Wealth management income 4,503 3,858 13,077 11,949
Insurance agency commissions 1,193 1,020 3,578 3,156
Income from bank owned life insurance 629 660 1,864 1,954
Visa check fees 1,077 984 3,113 2,844
Other income 1,676 1,236 4,979 3,435
Total non-interest income 11,223 12,242 35,857 34,709
Non-interest Expenses:
Salaries and employee benefits 16,382 15,476 48,891 47,104
Occupancy expense of premises 3,149 3,106 9,327 8,895
Equipment expenses 1,200 1,237 3,676 3,682
Marketing 713 764 1,983 1,824
Outside data services 1,152 1,076 3,418 4,183
FDIC insurance 678 667 1,855 1,972
Amortization of intangible assets 462 476 1,384 1,403
Other expenses 3,157 4,365 11,690 13,645
Total non-interest expenses 26,893 27,167 82,224 82,708
Income before income taxes 18,508 16,628 52,867 39,819
Income tax expense 6,419 5,638 18,058 13,146
Net income $ 12,089 $ 10,990 $ 34,809 $ 26,673
Net Income Per Share Amounts:
Basic net income per share $ 0.48 $ 0.44 $ 1.40 $ 1.09
Diluted net income per share $ 0.48 $ 0.44 $ 1.39 $ 1.09
Dividends declared per share $ 0.16 $ 0.12 $ 0.46 $ 0.34
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2013 2012
(Dollars in thousands, except per share data) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 41,524 $ 37,091 $ 37,590 $ 37,536 $ 38,819 $ 36,898 $ 35,991
Interest expense 4,874 4,847 4,953 5,282 5,710 5,749 5,910
Tax-equivalent net interest income 36,650 32,244 32,637 32,254 33,109 31,149 30,081
Tax-equivalent adjustment 1,344 1,312 1,311 1,334 1,324 1,340 1,376
Provision for loan and lease losses 1,128 (2,876) 78 1,168 232 1,585 664
Non-interest income 11,223 12,215 12,419 12,247 12,242 11,493 10,974
Non-interest expenses 26,893 27,508 27,823 27,219 27,167 28,858 26,683
Income before income taxes 18,508 18,515 15,844 14,780 16,628 10,859 12,332
Income tax expense 6,419 6,353 5,286 4,899 5,638 3,652 3,856
Net income $ 12,089 $ 12,162 $ 10,558 $ 9,881 $ 10,990 $ 7,207 $ 8,476
Financial performance:
Pre-tax pre-provision pre-merger expense income $ 19,636 $ 15,639 $ 15,922 $ 15,740 $ 16,996 $ 14,642 $ 13,370
Return on average assets 1.19% 1.23% 1.08% 1.01% 1.13% 0.78% 0.94%
Return on average common equity 9.91% 9.98% 8.85% 8.14% 9.22% 6.34% 7.60%
Net interest margin 3.88% 3.51% 3.59% 3.53% 3.67% 3.62% 3.56%
Efficiency ratio - GAAP basis (1) 57.80% 63.75% 63.60% 63.06% 61.70% 69.87% 67.25%
Efficiency ratio - Non-GAAP basis (1) 55.21% 60.92% 60.80% 60.54% 58.91% 61.54% 62.97%
Per share data:
Basic net income per share $ 0.48 $ 0.49 $ 0.42 $ 0.40 $ 0.44 $ 0.30 $ 0.35
Diluted net income per share $ 0.48 $ 0.49 $ 0.42 $ 0.40 $ 0.44 $ 0.30 $ 0.35
Average fully diluted shares 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 $ 0.16 $ 0.16 $ 0.14 $ 0.14 $ 0.12 $ 0.12 $ 0.10
Non-interest income:
Securities gains $ -- $ 62 $ 56 $ -- $ 296 $ 90 $ 73
Net OTTI recognized in earnings -- -- -- (14) (23) (8) (64)
Service charges on deposit accounts 2,171 2,150 2,069 2,197 2,230 2,283 2,200
Mortgage banking activities (26) 1,237 1,527 1,738 1,981 1,288 1,025
Wealth management income 4,503 4,532 4,042 4,000 3,858 4,034 4,057
Insurance agency commissions 1,193 1,036 1,349 1,334 1,020 934 1,202
Income from bank owned life insurance 629 623 612 662 660 660 634
Visa check fees 1,077 1,079 957 1,043 984 962 898
Other income 1,676 1,496 1,807 1,287 1,236 1,250 949
Total non-interest income $ 11,223 $ 12,215 $ 12,419 $ 12,247 $ 12,242 $ 11,493 $ 10,974
Non-interest expense:
Salaries and employee benefits $ 16,382 $ 16,163 $ 16,346 $ 15,405 $ 15,476 $ 15,927 $ 15,701
Occupancy expense of premises 3,149 2,996 3,182 3,115 3,106 2,943 2,846
Equipment expenses 1,200 1,227 1,249 1,189 1,237 1,255 1,190
Marketing 713 755 515 827 764 565 495
Outside data services 1,152 1,114 1,152 836 1,076 1,828 1,279
FDIC insurance 678 581 596 601 667 653 652
Amortization of intangible assets 462 461 461 478 476 466 461
Professional fees 511 1,332 1,250 1,584 1,282 2,156 1,287
Other real estate owned expenses (150) (281) 37 316 174 351 64
Other expenses 2,796 3,160 3,035 2,868 2,909 2,714 2,708
Total non-interest expense $ 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) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 595,180 $ 565,282 $ 538,346 $ 523,364 $ 499,806 $ 472,426 $ 465,204
Residential construction loans 118,316 116,736 122,698 120,314 128,606 130,791 122,841
Commercial ADC loans 158,739 163,309 150,599 151,933 133,007 151,620 149,814
Commercial investor real estate loans 518,029 497,365 487,802 456,888 447,536 443,237 392,626
Commercial owner occupied real estate loans 569,350 563,258 565,820 571,510 579,711 579,812 525,022
Commercial business loans 332,670 334,979 344,489 346,708 322,087 334,040 253,827
Leasing 962 1,415 1,974 3,421 4,233 5,618 5,843
Consumer loans 368,764 363,114 353,341 356,990 353,999 357,534 356,215
Total loans and leases 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 (39,422) (39,015) (41,246) (42,957) (42,618) (45,265) (45,061)
Investment securities 1,077,951 1,102,209 1,008,693 1,075,032 1,074,918 1,006,743 1,067,462
Interest-earning assets 3,771,825 3,802,682 3,660,809 3,669,175 3,614,310 3,584,480 3,416,136
Total assets 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 890,319 877,891 832,679 847,415 818,674 763,566 685,770
Total deposits 2,916,466 2,926,650 2,919,208 2,913,034 2,880,262 2,852,055 2,681,075
Customer repurchase agreements 53,177 54,731 50,302 51,929 58,306 64,779 73,130
Total interest-bearing liabilities 2,634,324 2,678,490 2,576,831 2,592,606 2,560,040 2,593,501 2,508,756
Total stockholders' equity 493,882 485,643 488,947 483,512 481,810 471,464 451,917
Quarterly average balance sheets:
Residential mortgage loans $ 593,335 $ 579,899 $ 575,889 $ 542,095 $ 510,475 $ 488,644 $ 474,149
Residential construction loans 120,676 119,197 120,283 125,640 133,236 125,582 116,630
Commercial ADC loans 158,557 160,483 148,749 137,679 142,870 151,374 159,769
Commercial investor real estate loans 499,896 485,630 474,062 453,074 445,012 410,258 377,072
Commercial owner occupied real estate loans 566,366 561,249 567,723 577,693 580,994 539,590 518,763
Commercial business loans 331,374 337,843 347,569 322,501 332,364 284,271 258,099
Leasing 1,152 1,644 2,510 3,773 4,858 5,528 6,325
Consumer loans 366,562 360,842 357,366 356,452 357,135 359,008 358,783
Total loans and leases 2,637,918 2,606,787 2,594,151 2,518,907 2,506,945 2,364,255 2,269,590
Investment securities 1,097,643 1,047,726 1,051,769 1,072,278 1,038,586 1,052,502 1,086,295
Interest-earning assets 3,770,855 3,692,215 3,677,444 3,639,605 3,599,715 3,453,590 3,389,843
Total assets 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 862,046 838,502 797,926 824,188 774,215 699,638 641,477
Total deposits 2,903,926 2,892,704 2,860,451 2,891,120 2,857,523 2,714,980 2,642,634
Customer repurchase agreements 56,766 55,941 52,622 60,941 62,693 66,674 65,195
Total interest-bearing liabilities 2,659,406 2,599,704 2,631,198 2,571,937 2,587,815 2,526,541 2,523,394
Total stockholders' equity 483,811 489,014 483,664 482,621 474,231 457,338 448,406
Financial Measures
Average equity to average assets 11.98% 12.35% 12.26% 12.35% 12.27% 12.33% 12.33%
Investment securities to earning assets 28.58% 28.99% 27.55% 29.30% 29.74% 28.09% 31.25%
Loans to earnings assets 70.58% 68.52% 70.07% 68.98% 68.31% 69.05% 66.49%
Loans to assets 65.68% 63.98% 65.24% 63.99% 63.51% 64.20% 61.92%
Loans to deposits 91.28% 89.03% 87.87% 86.89% 85.72% 86.78% 84.72%
Capital measures:
Tier 1 leverage 11.29% 11.28% 11.07% 10.98% 10.99% 11.21% 11.05%
Tier 1 capital to risk-weighted assets 14.45% 14.30% 14.23% 14.15% 14.31% 14.12% 14.89%
Total regulatory capital to risk-weighted assets 15.70% 15.55% 15.48% 15.40% 15.56% 15.36% 16.14%
Book value per share $ 19.77 $ 19.45 $ 19.59 $ 19.41 $ 19.35 $ 18.94 $ 18.72
Outstanding shares 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) 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 10 -- 54 14 18 5 89
Residential real estate:
Residential mortgage -- -- -- -- 116 91 167
Residential construction -- -- -- -- -- -- --
Total loans and leases 90 days past due 10 15 54 247 305 604 296
Non-accrual loans and leases:
Commercial business 4,050 4,483 4,012 4,611 4,919 4,583 6,542
Commercial real estate:
Commercial AD&C 5,086 5,885 5,826 6,332 8,957 13,055 14,303
Commercial investor real estate 6,877 11,741 12,353 11,843 12,345 13,327 13,893
Commercial owner occupied real estate 4,202 5,413 5,346 13,681 13,742 15,146 16,295
Leasing -- -- -- 865 834 872 858
Consumer 2,004 2,305 2,388 2,410 1,607 1,651 1,700
Residential real estate:
Residential mortgage 5,643 5,581 5,393 4,681 3,644 2,600 4,818
Residential construction 2,327 2,558 3,258 3,125 3,236 4,333 4,929
Total non-accrual loans and lease 30,189 37,966 38,576 47,548 49,284 55,567 63,338
Total restructured loans - accruing 8,054 8,213 10,839 10,110 9,277 8,285 8,547
Total non-performing loans and leases 38,253 46,194 49,469 57,905 58,866 64,456 72,181
Other assets and real estate owned (OREO) 1,662 4,831 5,250 5,926 9,291 9,553 4,834
Total non-performing assets $ 39,915 $ 51,025 $ 54,719 $ 63,831 $ 68,157 $ 74,009 $ 77,015
For the quarter ended,
September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2013 2013 2013 2012 2012 2012 2012
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $ 37,966 $ 38,576 $ 47,548 $ 49,284 $ 55,567 $ 63,338 $ 71,680
Non-accrual balances transferred to OREO (723) (1,426) (92) (400) (232) (2,131) --
Non-accrual balances charged-off (4,995) (668) (2,175) (979) (3,697) (1,663) (4,965)
Net payments or draws (13,547) (3,560) (11,768) (3,852) (6,342) (4,149) (5,061)
Loans placed on non-accrual 11,488 5,044 5,493 5,023 3,988 1,261 1,809
Non-accrual loans brought current -- -- (430) (1,528) -- (1,089) (125)
Balance at end of period $ 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 $ 39,015 $ 41,246 $ 42,957 $ 42,618 $ 45,265 $ 45,061 $ 49,426
Provision for loan and lease losses 1,128 (2,876) 78 1,168 232 1,585 664
Less loans charged-off, net of recoveries:
Commercial business 1 (32) 1,744 (76) (225) (185) (39)
Commercial real estate:
Commercial AD&C (616) (1,444) (1,020) (248) 1,983 (59) 1,076
Commercial investor real estate 1,243 123 31 110 123 140 3,219
Commercial owner occupied real estate (284) 100 81 -- 653 484 --
Leasing (6) (4) -- -- (17) (3) 5
Consumer 169 490 508 384 111 228 348
Residential real estate:
Residential mortgage 216 22 447 508 253 713 420
Residential construction (2) 100 (2) 151 (2) 63 --
Net charge-offs 721 (645) 1,789 829 2,879 1,381 5,029
Balance at end of period $ 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% 1.77% 1.93% 2.29% 2.38% 2.60% 3.18%
Non-performing assets to total assets 0.98% 1.25% 1.39% 1.61% 1.75% 1.92% 2.10%
Allowance for loan losses to loans 1.48% 1.50% 1.61% 1.70% 1.73% 1.83% 1.98%
Allowance for loan losses to non-performing loans 103.06% 84.46% 83.38% 74.18% 72.40% 70.23% 62.43%
Net charge-offs in quarter to average loans 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 September 30,
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) $ 593,335 $ 5,315 3.57% $ 510,475 $ 5,262 4.15%
Residential construction loans 120,676 1,106 3.63 133,236 1,214 3.63
Commercial ADC loans 158,557 3,438 8.60 142,870 1,965 5.47
Commercial investor real estate loans 499,896 8,608 6.83 445,012 6,161 5.51
Commercial owner occupied real estate loans 566,366 7,361 5.30 580,994 7,938 5.56
Commercial business loans 331,374 4,246 4.94 332,364 5,172 5.97
Leasing 1,152 20 7.11 4,858 79 6.51
Consumer loans 366,562 3,161 3.45 357,136 3,154 3.54
Total loans and leases (3) 2,637,918 33,255 5.03 2,506,945 30,945 4.93
Taxable securities 794,344 4,942 2.49 745,475 4,508 2.42
Tax-exempt securities (4) 303,299 3,305 4.36 293,111 3,328 4.54
Interest-bearing deposits with banks 34,819 22 0.25 53,717 38 0.29
Federal funds sold 475 -- 0.22 466 -- 0.22
Total interest-earning assets 3,770,855 41,524 4.39 3,599,714 38,819 4.30
Less: allowance for loan and lease losses (41,385) (45,467)
Cash and due from banks 45,322 46,583
Premises and equipment, net 46,784 49,234
Other assets 217,493 213,887
Total assets $ 4,039,069 $3,863,951
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 442,210 97 0.09% $ 392,117 85 0.09%
Regular savings deposits 240,910 53 0.09 216,249 51 0.09
Money market savings deposits 874,946 342 0.16 894,708 488 0.22
Time deposits 483,814 866 0.71 580,234 1,199 0.82
Total interest-bearing deposits 2,041,880 1,358 0.26 2,083,308 1,823 0.35
Other borrowings 56,983 39 0.27 64,324 46 0.29
Advances from FHLB 525,543 3,255 2.46 405,184 3,599 3.53
Subordinated debentures 35,000 222 2.55 35,000 242 2.77
Total interest-bearing liabilities 2,659,406 4,874 0.73 2,587,816 5,710 0.88
Noninterest-bearing demand deposits 862,046 774,215
Other liabilities 33,806 27,689
Stockholders' equity 483,811 474,231
Total liabilities and stockholders' equity $ 4,039,069 $3,863,951
Net interest income and spread $ 36,650 3.66% $ 33,109 3.42%
Less: tax-equivalent adjustment 1,344 1,324
Net interest income $ 35,306 $ 31,785
Interest income/earning assets 4.39% 4.30%
Interest expense/earning assets 0.51 0.63
Net interest margin 3.88% 3.67%
(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
Nine Months Ended September 30,
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) $ 583,105 $ 16,001 3.66% $ 491,160 $ 16,003 4.37%
Residential construction loans 120,053 3,142 3.50 125,179 3,505 3.74
Commercial ADC loans 155,965 7,540 6.46 151,307 5,855 5.17
Commercial investor real estate loans 486,624 20,927 5.75 410,905 16,925 5.50
Commercial owner occupied real estate loans 565,108 22,464 5.45 546,575 22,722 5.64
Commercial business loans 338,869 13,288 5.10 291,727 11,988 5.33
Leasing 1,764 88 6.67 5,568 272 6.52
Consumer loans 361,624 9,325 3.47 358,304 9,481 3.56
Total loans and leases (3) 2,613,112 92,775 4.77 2,380,725 86,751 4.88
Taxable securities 765,054 13,536 2.36 775,916 14,761 2.54
Tax-exempt securities (4) 300,826 9,829 4.36 283,137 10,112 4.76
Interest-bearing deposits with banks 34,379 65 0.25 40,892 83 0.27
Federal funds sold 475 -- 0.22 811 1 0.17
Total interest-earning assets 3,713,846 116,205 4.19 3,481,481 111,708 4.28
Less: allowance for loan and lease losses (42,223) (47,442)
Cash and due from banks 45,932 45,844
Premises and equipment, net 47,479 48,959
Other assets 216,958 208,371
Total assets $3,981,992 $3,737,213
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 436,236 280 0.09% $ 379,910 256 0.09%
Regular savings deposits 238,627 159 0.09 209,920 155 0.10
Money market savings deposits 880,794 1,131 0.17 869,675 1,471 0.23
Time deposits 497,136 2,639 0.71 573,946 3,825 0.89
Total interest-bearing deposits 2,052,793 4,209 0.27 2,033,451 5,707 0.37
Other borrowings 59,734 126 0.28 72,347 158 0.29
Advances from FHLB 482,679 9,667 2.68 405,271 10,772 3.55
Subordinated debentures 35,000 672 2.56 35,000 732 2.79
Total interest-bearing liabilities 2,630,206 14,674 0.75 2,546,069 17,369 0.91
Noninterest-bearing demand deposits 833,059 705,362
Other liabilities 33,230 25,738
Stockholders' equity 485,497 460,044
Total liabilities and stockholders' equity $3,981,992 $3,737,213
Net interest income and spread $ 101,531 3.44% $ 94,339 3.37%
Less: tax-equivalent adjustment 3,967 4,040
Net interest income $ 97,564 $ 90,299
Interest income/earning assets 4.19% 4.28%
Interest expense/earning assets 0.53 0.66
Net interest margin 3.66% 3.62%
(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 $4.0 million and $4.0 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.

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

Source:Sandy Spring Bancorp, Inc.