Sandy Spring Bancorp Reports Record Net Income of $44.4 Million for Full Year

Sandy Spring Bancorp, Inc. Logo

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

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

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

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

Fourth Quarter Highlights:

  • Total loans increased 10% compared to the fourth quarter of 2012 and 5% compared to the third quarter of 2013 due to organic loan growth in the residential mortgage, commercial investor real estate, commercial owner occupied real estate and consumer loan portfolios.
  • The provision for loan and lease losses for the fourth quarter of 2013 was a charge of $0.6 million compared to a charge of $1.2 million for the fourth quarter of 2012 and a charge of $1.1 million for the third quarter of 2013.
  • Non-performing loans totaled $40.0 million at December 31, 2013 compared to $57.9 million at December 31, 2012 and $38.3 million at September 30, 2013. The coverage ratio of the allowance for loan and lease losses to non-performing loans was 97% at December 31, 2013 compared to a coverage ratio of 74% at December 31, 2012 and 103% at September 30, 2013.
  • The net interest margin was 3.53% for the fourth quarter of 2013, compared to 3.53% for the fourth quarter of 2012 and 3.88% for the third quarter of 2013. Excluding the effect of interest recoveries in the third quarter on two previously non-performing loans, the net interest margin would have been 3.49% for the third quarter.
  • Non-interest income decreased 5% for the quarter compared to the prior year quarter due primarily to the decline in income from mortgage banking caused by a significantly lower volume of saleable mortgage loan originations. Compared to the third quarter, non-interest income increased 4% due to an increase in mortgage banking income as volumes stabilized.

Review of Balance Sheet and Credit Quality

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

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

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

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

Loan charge-offs, net of recoveries, totaled $1.2 million for the fourth quarter of 2013 compared to net charge-offs of $0.8 million for the fourth quarter of 2012 and net charge-offs of $0.7 million for the third quarter of 2013. The increase in net charge-offs in the quarter was the product of aggressive management of previously existing problem credits. The allowance for loan and lease losses represented 1.39% of outstanding loans and leases and 97% of non-performing loans at December 31, 2013 compared to 1.70% of outstanding loans and leases and 74% of non-performing loans at December 31, 2012. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

Income Statement Review

Net interest income for the fourth quarter of 2013 increased 5% compared to the fourth quarter of 2012. The resulting increase was due to an increase in average interest-earning assets and lower funding costs, that somewhat offset the decline in asset yields. The Company's funding costs declined due to a lower cost deposit mix and the restructuring of $170 million in Federal Home Loan Bank advances during the fourth quarter of 2012 and the first six months of 2013. The net interest margin remained level at 3.53% for the fourth quarter of 2013 compared to 3.53% for the fourth quarter of 2012 as the decline in asset yields was offset by a higher amount of interest-earning assets.

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

Non-interest income decreased 5% to $11.7 million for the fourth quarter of 2013 compared to $12.2 million for the fourth quarter of 2012. This decrease was driven by a reduction in mortgage banking income due primarily to lower mortgage origination volumes and a decline in client refinancing activity. This decrease was somewhat offset by a 13% increase in wealth management income due to higher assets under management. In addition, other non-interest income increased 34% due to gains recognized on sales of SBA loans and fixed assets.

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

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

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

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

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

Conference Call

The Company's management will host a conference call to discuss its fourth quarter results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations' section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 1-888-317-6016. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) February 21, 2014. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10038886.

About Sandy Spring Bancorp, Inc.

With $4.1 billion in assets, Sandy Spring Bancorp, Inc. is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 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 Twelve Months Ended
December 31, % December 31, %
(Dollars in thousands, except per share data) 2013 2012 Change 2013 2012 Change
Results of Operations:
Net interest income $ 32,350 $ 30,920 5% $ 129,914 $ 121,219 7%
Provision for loan and lease losses 586 1,168 (50) (1,084) 3,649 (130)
Non-interest income 11,654 12,247 (5) 47,511 46,956 1
Non-interest expenses 29,300 27,219 8 111,524 109,927 1
Income before income taxes 14,118 14,780 (4) 66,985 54,599 23
Net income 9,613 9,881 (3) 44,422 36,554 22
Pre-tax pre-provision pre-merger expense income $ 14,704 $ 15,740 (7) $ 65,901 $ 60,748 8
Return on average assets 0.93% 1.01% 1.11% 0.97%
Return on average common equity 7.71% 8.14% 9.11% 7.85%
Net interest margin 3.53% 3.53% 3.63% 3.60%
Efficiency ratio - GAAP basis (1) 66.59% 63.06% 62.86% 65.36%
Efficiency ratio - Non-GAAP basis (1) 63.62% 60.54% 60.06% 60.94%
Per share data:
Basic net income $ 0.38 $ 0.40 (5)% $ 1.78 $ 1.49 19%
Diluted net income $ 0.38 $ 0.40 (5) $ 1.77 $ 1.48 20
Average fully diluted shares 25,108,109 24,971,249 1 25,075,014 24,657,149 2
Dividends declared per share $ 0.18 $ 0.14 29 $ 0.64 $ 0.48 33
Book value per share 19.98 19.41 3 19.98 19.41 3
Tangible book value per share 16.68 15.43 8 16.68 15.43 8
Outstanding shares 24,990,021 24,905,392 -- 24,990,021 24,905,392 --
Financial Condition at period-end:
Investment securities $1,016,609 $ 1,075,032 (5)% $1,016,609 $ 1,075,032 (5)%
Loans and leases 2,784,266 2,531,128 10 2,784,266 2,531,128 10
Interest-earning assets 3,836,912 3,669,175 5 3,836,912 3,669,175 5
Assets 4,106,100 3,955,206 4 4,106,100 3,955,206 4
Deposits 2,877,225 2,913,034 (1) 2,877,225 2,913,034 (1)
Interest-bearing liabilities 2,744,869 2,592,606 6 2,744,869 2,592,606 6
Stockholders' equity 499,363 483,512 3 499,363 483,512 3
Capital ratios:
Tier 1 leverage 11.32% 10.98% 11.32% 10.98%
Tier 1 capital to risk-weighted assets 14.42% 14.15% 14.42% 14.15%
Total regulatory capital to risk-weighted assets 15.65% 15.40% 15.65% 15.40%
Tangible common equity to tangible assets (2) 10.37% 9.94% 10.37% 9.94%
Average equity to average assets 12.12% 12.35% 12.17% 12.32%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.39% 1.70% 1.39% 1.70%
Non-performing loans to total loans 1.44% 2.29% 1.44% 2.29%
Non-performing assets to total assets 1.01% 1.61% 1.01% 1.61%
Allowance for loan and lease losses to non-performing loans 96.83% 74.18% 96.83% 74.18%
Annualized net charge-offs to average loans and leases (3) 0.18% 0.13% 0.12% 0.42%
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional 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 Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2013 2012 2013 2012
Pre-tax pre-provision pre-merger expense income:
Net income $ 9,613 $ 9,881 $ 44,422 $ 36,554
Plus non-GAAP adjustment:
Merger expenses -- (208) -- 2,500
Income taxes 4,505 4,899 22,563 18,045
Provision for loan and lease losses 586 1,168 (1,084) 3,649
Pre-tax pre-provision pre-merger expense income $ 14,704 $ 15,740 $ 65,901 $ 60,748
Efficiency ratio - GAAP basis:
Non-interest expenses $ 29,300 $ 27,219 $ 111,524 $ 109,927
Net interest income plus non-interest income $ 44,004 $ 43,167 $ 177,425 $ 168,175
Efficiency ratio - GAAP basis 66.59% 63.06% 62.86% 65.36%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $ 29,300 $ 27,219 $ 111,524 $ 109,927
Less non-GAAP adjustment:
Amortization of intangible assets 461 478 1,845 1,881
Merger expenses -- (208) -- 2,500
Non-interest expenses -- as adjusted $ 28,839 $ 26,949 $ 109,679 $ 105,546
Net interest income plus non-interest income $ 44,004 $ 43,167 $ 177,425 $ 168,175
Plus non-GAAP adjustment:
Tax-equivalent income 1,325 1,334 5,292 5,374
Less non-GAAP adjustments:
Securities gains (3) -- 115 459
OTTI recognized in earnings -- (14) -- (109)
Net interest income plus non-interest income - as adjusted $ 45,332 $ 44,515 $ 182,602 $ 173,199
Efficiency ratio - Non-GAAP basis 63.62% 60.54% 60.06% 60.94%
Tangible common equity ratio:
Total stockholders' equity $ 499,363 $ 483,512 $ 499,363 $ 483,512
Accumulated other comprehensive (income) loss 2,970 (11,312) 2,970 (11,312)
Goodwill (84,171) (84,808) (84,171) (84,808)
Other intangible assets, net (1,330) (3,163) (1,330) (3,163)
Tangible common equity $ 416,832 $ 384,229 $ 416,832 $ 384,229
Total assets $ 4,106,100 $ 3,955,206 $ 4,106,100 $ 3,955,206
Goodwill (84,171) (84,808) (84,171) (84,808)
Other intangible assets, net (1,330) (3,163) (1,330) (3,163)
Tangible assets $ 4,020,599 $ 3,867,235 $ 4,020,599 $ 3,867,235
Tangible common equity ratio 10.37% 9.94% 10.37% 9.94%
Outstanding common shares 24,990,021 24,905,392 24,990,021 24,905,392
Tangible book value per common share $ 16.68 $ 15.43 $ 16.68 $ 15.43
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
December 31, December 31,
(Dollars in thousands) 2013 2012
Assets
Cash and due from banks $ 46,755 $ 59,540
Federal funds sold 475 466
Interest-bearing deposits with banks 27,197 26,400
Cash and cash equivalents 74,427 86,406
Residential mortgage loans held for sale (at fair value) 8,365 36,149
Investments available-for-sale (at fair value) 751,284 825,582
Investments held-to-maturity --- fair value of $216,007 and $222,024 at December 31, 2013 and 2012, respectively 224,638 215,814
Other equity securities 40,687 33,636
Total loans and leases 2,784,266 2,531,128
Less: allowance for loan and lease losses (38,766) (42,957)
Net loans and leases 2,745,500 2,488,171
Premises and equipment, net 45,916 48,326
Other real estate owned 1,338 5,926
Accrued interest receivable 12,532 12,392
Goodwill 84,171 84,808
Other intangible assets, net 1,330 3,163
Other assets 115,912 114,833
Total assets $ 4,106,100 $ 3,955,206
Liabilities
Noninterest-bearing deposits $ 836,198 $ 847,415
Interest-bearing deposits 2,041,027 2,065,619
Total deposits 2,877,225 2,913,034
Securities sold under retail repurchase agreements and federal funds purchased 53,842 86,929
Advances from FHLB 615,000 405,058
Subordinated debentures 35,000 35,000
Accrued interest payable and other liabilities 25,670 31,673
Total liabilities 3,606,737 3,471,694
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000;
shares issued and outstanding 24,990,021 and 24,905,392 at December 31, 2013 and 2012, respectively
24,990 24,905
Additional paid in capital 193,445 191,689
Retained earnings 283,898 255,606
Accumulated other comprehensive income (loss) (2,970) 11,312
Total stockholders' equity 499,363 483,512
Total liabilities and stockholders' equity $ 4,106,100 $ 3,955,206
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended Twelve Months Ended
December 31, December 31,
(Dollars in thousands, except per share data) 2013 2012 2013 2012
Interest Income:
Interest and fees on loans and leases $ 30,443 $ 29,410 $ 122,380 $ 115,574
Interest on loans held for sale 91 254 929 841
Interest on deposits with banks 19 28 84 111
Interest and dividends on investment securities:
Taxable 4,224 4,142 16,635 17,951
Exempt from federal income taxes 2,331 2,368 9,318 9,392
Interest on federal funds sold 1 -- 1 1
Total interest income 37,109 36,202 149,347 143,870
Interest Expense:
Interest on deposits 1,230 1,650 5,439 7,357
Interest on retail repurchase agreements and federal funds purchased 37 46 163 204
Interest on advances from FHLB 3,269 3,359 12,936 14,131
Interest on subordinated debt 223 227 895 959
Total interest expense 4,759 5,282 19,433 22,651
Net interest income 32,350 30,920 129,914 121,219
Provision (credit) for loan and lease losses 586 1,168 (1,084) 3,649
Net interest income after provision for loan and lease losses 31,764 29,752 130,998 117,570
Non-interest Income:
Investment securities gains (losses) (3) -- 115 459
Total other-than-temporary impairment ("OTTI") losses -- (14) -- (109)
Portion of OTTI losses recognized in other comprehensive income, before taxes -- -- -- --
Net OTTI recognized in earnings -- (14) -- (109)
Service charges on deposit accounts 2,143 2,197 8,533 8,910
Mortgage banking activities 356 1,738 3,094 6,032
Wealth management income 4,508 4,000 17,585 15,949
Insurance agency commissions 1,243 1,334 4,821 4,490
Income from bank owned life insurance 635 662 2,499 2,616
Visa check fees 1,052 1,043 4,165 3,887
Other income 1,720 1,287 6,699 4,722
Total non-interest income 11,654 12,247 47,511 46,956
Non-interest Expenses:
Salaries and employee benefits 16,707 15,405 65,598 62,509
Occupancy expense of premises 3,844 3,115 13,171 12,010
Equipment expenses 1,264 1,189 4,940 4,871
Marketing 897 827 2,880 2,651
Outside data services 1,162 836 4,580 5,019
FDIC insurance 445 601 2,300 2,573
Amortization of intangible assets 461 478 1,845 1,881
Other expenses 4,520 4,768 16,210 18,413
Total non-interest expenses 29,300 27,219 111,524 109,927
Income before income taxes 14,118 14,780 66,985 54,599
Income tax expense 4,505 4,899 22,563 18,045
Net income $ 9,613 $ 9,881 $ 44,422 $ 36,554
Net Income Per Share Amounts:
Basic net income per share $ 0.38 $ 0.40 $ 1.78 $ 1.49
Diluted net income per share $ 0.38 $ 0.40 $ 1.77 $ 1.48
Dividends declared per share $ 0.18 $ 0.14 $ 0.64 $ 0.48
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2013 2012
(Dollars in thousands, except per share data) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 38,434 $ 41,524 $ 37,091 $ 37,590 $ 37,536 $ 38,819 $ 36,898 $ 35,991
Interest expense 4,759 4,874 4,847 4,953 5,282 5,710 5,749 5,910
Tax-equivalent net interest income 33,675 36,650 32,244 32,637 32,254 33,109 31,149 30,081
Tax-equivalent adjustment 1,325 1,344 1,312 1,311 1,334 1,324 1,340 1,376
Provision for loan and lease losses 586 1,128 (2,876) 78 1,168 232 1,585 664
Non-interest income 11,654 11,223 12,215 12,419 12,247 12,242 11,493 10,974
Non-interest expenses 29,300 26,893 27,508 27,823 27,219 27,167 28,858 26,683
Income before income taxes 14,118 18,508 18,515 15,844 14,780 16,628 10,859 12,332
Income tax expense 4,505 6,419 6,353 5,286 4,899 5,638 3,652 3,856
Net income $ 9,613 $ 12,089 $ 12,162 $ 10,558 $ 9,881 $ 10,990 $ 7,207 $ 8,476
Financial performance:
Pre-tax pre-provision pre-merger expense income $ 14,704 $ 19,636 $ 15,639 $ 15,922 $ 15,740 $ 16,996 $ 14,642 $ 13,370
Return on average assets 0.93% 1.19% 1.23% 1.08% 1.01% 1.13% 0.78% 0.94%
Return on average common equity 7.71% 9.91% 9.98% 8.85% 8.14% 9.22% 6.34% 7.60%
Net interest margin 3.53% 3.88% 3.51% 3.59% 3.53% 3.67% 3.62% 3.56%
Efficiency ratio - GAAP basis (1) 66.59% 57.80% 63.75% 63.60% 63.06% 61.70% 69.87% 67.25%
Efficiency ratio - Non-GAAP basis (1) 63.62% 55.21% 60.92% 60.80% 60.54% 58.91% 61.54% 62.97%
Per share data:
Basic net income per share $ 0.38 $ 0.48 $ 0.49 $ 0.42 $ 0.40 $ 0.44 $ 0.30 $ 0.35
Diluted net income per share $ 0.38 $ 0.48 $ 0.49 $ 0.42 $ 0.40 $ 0.44 $ 0.30 $ 0.35
Average fully diluted shares 25,108,109 25,070,506 25,009,092 25,002,612 24,971,249 24,949,205 24,423,236 24,180,501
Dividends declared per common share $ 0.18 $ 0.16 $ 0.16 $ 0.14 $ 0.14 $ 0.12 $ 0.12 $ 0.10
Non-interest income:
Securities gains (losses) $ (3) $ -- $ 62 $ 56 $ -- $ 296 $ 90 $ 73
Net OTTI recognized in earnings -- -- -- -- (14) (23) (8) (64)
Service charges on deposit accounts 2,143 2,171 2,150 2,069 2,197 2,230 2,283 2,200
Mortgage banking activities 356 (26) 1,237 1,527 1,738 1,981 1,288 1,025
Wealth management income 4,508 4,503 4,532 4,042 4,000 3,858 4,034 4,057
Insurance agency commissions 1,243 1,193 1,036 1,349 1,334 1,020 934 1,202
Income from bank owned life insurance 635 629 623 612 662 660 660 634
Visa check fees 1,052 1,077 1,079 957 1,043 984 962 898
Other income 1,720 1,676 1,496 1,807 1,287 1,236 1,250 949
Total non-interest income $ 11,654 $ 11,223 $ 12,215 $ 12,419 $ 12,247 $ 12,242 $ 11,493 $ 10,974
Non-interest expense:
Salaries and employee benefits $ 16,707 $ 16,382 $ 16,163 $ 16,346 $ 15,405 $ 15,476 $ 15,927 $ 15,701
Occupancy expense of premises 3,844 3,149 2,996 3,182 3,115 3,106 2,943 2,846
Equipment expenses 1,264 1,200 1,227 1,249 1,189 1,237 1,255 1,190
Marketing 897 713 755 515 827 764 565 495
Outside data services 1,162 1,152 1,114 1,152 836 1,076 1,828 1,279
FDIC insurance 445 678 581 596 601 667 653 652
Amortization of intangible assets 461 462 461 461 478 476 466 461
Professional fees 1,386 511 1,332 1,250 1,584 1,282 2,156 1,287
Other real estate owned expenses 91 (150) (281) 37 316 174 351 64
Other expenses 3,043 2,796 3,160 3,035 2,868 2,909 2,714 2,708
Total non-interest expense $ 29,300 $ 26,893 $ 27,508 $ 27,823 $ 27,219 $ 27,167 $ 28,858 $ 26,683
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, efficiency ratio - non-GAAP basis excludes intangible asset amortization and merger expenses from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2013 2012
(Dollars in thousands) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 618,381 $ 595,180 $ 565,282 $ 538,346 $ 523,364 $ 499,806 $ 472,426 $ 465,204
Residential construction loans 129,177 118,316 116,736 122,698 120,314 128,606 130,791 122,841
Commercial ADC loans 160,696 158,739 163,309 150,599 151,933 133,007 151,620 149,814
Commercial investor real estate loans 552,178 518,029 497,365 487,802 456,888 447,536 443,237 392,626
Commercial owner occupied real estate loans 592,823 569,350 563,258 565,820 571,510 579,711 579,812 525,022
Commercial business loans 356,651 332,670 334,979 344,489 346,708 322,087 334,040 253,827
Leasing 703 962 1,415 1,974 3,421 4,233 5,618 5,843
Consumer loans 373,657 368,764 363,114 353,341 356,990 353,999 357,534 356,215
Total loans and leases 2,784,266 2,662,010 2,605,458 2,565,069 2,531,128 2,468,985 2,475,078 2,271,392
Allowance for loan and lease losses (38,766) (39,422) (39,015) (41,246) (42,957) (42,618) (45,265) (45,061)
Investment securities 1,016,609 1,077,951 1,102,209 1,008,693 1,075,032 1,074,918 1,006,743 1,067,462
Interest-earning assets 3,836,912 3,771,825 3,802,682 3,660,809 3,669,175 3,614,310 3,584,480 3,416,136
Total assets 4,106,100 4,052,969 4,072,617 3,932,026 3,955,206 3,887,427 3,855,177 3,668,273
Noninterest-bearing demand deposits 836,198 890,319 877,891 832,679 847,415 818,674 763,566 685,770
Total deposits 2,877,225 2,916,466 2,926,650 2,919,208 2,913,034 2,880,262 2,852,055 2,681,075
Customer repurchase agreements 53,842 53,177 54,731 50,302 51,929 58,306 64,779 73,130
Total interest-bearing liabilities 2,744,869 2,634,324 2,678,490 2,576,831 2,592,606 2,560,040 2,593,501 2,508,756
Total stockholders' equity 499,363 493,882 485,643 488,947 483,512 481,810 471,464 451,917
Quarterly average balance sheets:
Residential mortgage loans $ 614,698 $ 593,335 $ 579,899 $ 575,889 $ 542,095 $ 510,475 $ 488,644 $ 474,149
Residential construction loans 125,744 120,676 119,197 120,283 125,640 133,236 125,582 116,630
Commercial ADC loans 156,558 158,557 160,483 148,749 137,679 142,870 151,374 159,769
Commercial investor real estate loans 522,085 499,896 485,630 474,062 453,074 445,012 410,258 377,072
Commercial owner occupied real estate loans 580,808 566,366 561,249 567,723 577,693 580,994 539,590 518,763
Commercial business loans 357,455 331,374 337,843 347,569 322,501 332,364 284,271 258,099
Leasing 817 1,152 1,644 2,510 3,773 4,858 5,528 6,325
Consumer loans 373,017 366,562 360,842 357,366 356,452 357,135 359,008 358,783
Total loans and leases 2,731,182 2,637,918 2,606,787 2,594,151 2,518,907 2,506,945 2,364,255 2,269,590
Investment securities 1,055,432 1,097,643 1,047,726 1,051,769 1,072,278 1,038,586 1,052,502 1,086,295
Interest-earning assets 3,817,033 3,770,855 3,692,215 3,677,444 3,639,605 3,599,715 3,453,590 3,389,843
Total assets 4,082,839 4,039,069 3,959,907 3,946,578 3,908,479 3,863,951 3,708,622 3,637,674
Noninterest-bearing demand deposits 872,532 862,046 838,502 797,926 824,188 774,215 699,638 641,477
Total deposits 2,901,814 2,903,926 2,892,704 2,860,451 2,891,120 2,857,523 2,714,980 2,642,634
Customer repurchase agreements 57,682 56,766 55,941 52,622 60,941 62,693 66,674 65,195
Total interest-bearing liabilities 2,679,812 2,659,406 2,599,704 2,631,198 2,571,937 2,587,815 2,526,541 2,523,394
Total stockholders' equity 494,779 483,811 489,014 483,664 482,621 474,231 457,338 448,406
Financial Measures
Average equity to average assets 12.12% 11.98% 12.35% 12.26% 12.35% 12.27% 12.33% 12.33%
Investment securities to earning assets 26.50% 28.58% 28.99% 27.55% 29.30% 29.74% 28.09% 31.25%
Loans to earning assets 72.57% 70.58% 68.52% 70.07% 68.98% 68.31% 69.05% 66.49%
Loans to assets 67.81% 65.68% 63.98% 65.24% 63.99% 63.51% 64.20% 61.92%
Loans to deposits 96.77% 91.28% 89.03% 87.87% 86.89% 85.72% 86.78% 84.72%
Capital measures:
Tier 1 leverage 11.32% 11.29% 11.28% 11.07% 10.98% 10.99% 11.21% 11.05%
Tier 1 capital to risk-weighted assets 14.42% 14.45% 14.30% 14.23% 14.15% 14.31% 14.12% 14.89%
Total regulatory capital to risk-weighted assets 15.65% 15.70% 15.55% 15.48% 15.40% 15.56% 15.36% 16.14%
Book value per share $ 19.98 $ 19.77 $ 19.45 $ 19.59 $ 19.41 $ 19.35 $ 18.94 $ 18.72
Outstanding shares 24,990,021 24,985,146 24,967,558 24,954,892 24,905,392 24,896,136 24,886,724 24,143,985
Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2013 2012
(Dollars in thousands) December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
Non-Performing Assets:
Loans and leases 90 days past due:
Commercial business $ -- $ -- $ 15 $ -- $ 24 $ 44 $ 70 $ 40
Commercial real estate:
Commercial AD&C -- -- -- -- -- -- 342 --
Commercial investor real estate -- -- -- -- -- -- -- --
Commercial owner occupied real estate -- -- -- -- 209 -- -- --
Leasing -- -- -- -- -- 127 96 --
Consumer 1 10 -- 54 14 18 5 89
Residential real estate:
Residential mortgage -- -- -- -- -- 116 91 167
Residential construction -- -- -- -- -- -- -- --
Total loans and leases 90 days past due 1 10 15 54 247 305 604 296
Non-accrual loans and leases:
Commercial business 3,400 4,050 4,483 4,012 4,611 4,919 4,583 6,542
Commercial real estate:
Commercial AD&C 4,127 5,086 5,885 5,826 6,332 8,957 13,055 14,303
Commercial investor real estate 6,802 6,877 11,741 12,353 11,843 12,345 13,327 13,893
Commercial owner occupied real estate 5,936 4,202 5,413 5,346 13,681 13,742 15,146 16,295
Leasing -- -- -- -- 865 834 872 858
Consumer 2,259 2,004 2,305 2,388 2,410 1,607 1,651 1,700
Residential real estate:
Residential mortgage 5,735 5,643 5,581 5,393 4,681 3,644 2,600 4,818
Residential construction 2,315 2,327 2,558 3,258 3,125 3,236 4,333 4,929
Total non-accrual loans and leases 30,574 30,189 37,966 38,576 47,548 49,284 55,567 63,338
Total restructured loans - accruing 9,459 8,054 8,213 10,839 10,110 9,277 8,285 8,547
Total non-performing loans and leases 40,034 38,253 46,194 49,469 57,905 58,866 64,456 72,181
Other assets and real estate owned (OREO) 1,338 1,662 4,831 5,250 5,926 9,291 9,553 4,834
Total non-performing assets $ 41,372 $ 39,915 $ 51,025 $ 54,719 $ 63,831 $ 68,157 $ 74,009 $ 77,015
For the quarter ended,
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2013 2013 2013 2013 2012 2012 2012 2012
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $ 30,189 $ 37,966 $ 38,576 $ 47,548 $ 49,284 $ 55,567 $ 63,338 $ 71,680
Non-accrual balances transferred to OREO (365) (723) (1,426) (92) (400) (232) (2,131) --
Non-accrual balances charged-off (922) (4,995) (668) (2,175) (979) (3,697) (1,663) (4,965)
Net payments or draws (971) (13,547) (3,560) (11,768) (3,852) (6,342) (4,149) (5,061)
Loans placed on non-accrual 3,546 11,488 5,044 5,493 5,023 3,988 1,261 1,809
Non-accrual loans brought current (903) -- -- (430) (1,528) -- (1,089) (125)
Balance at end of period $ 30,574 $ 30,189 $ 37,966 $ 38,576 $ 47,548 $ 49,284 $ 55,567 $ 63,338
Analysis of Allowance for Loan Losses:
Balance at beginning of period $ 39,422 $ 39,015 $ 41,246 $ 42,957 $ 42,618 $ 45,265 $ 45,061 $ 49,426
Provision (credit) for loan and lease losses 586 1,128 (2,876) 78 1,168 232 1,585 664
Less loans charged-off, net of recoveries:
Commercial business 384 1 (32) 1,744 (76) (225) (185) (39)
Commercial real estate:
Commercial AD&C 85 (616) (1,444) (1,020) (248) 1,983 (59) 1,076
Commercial investor real estate 23 1,243 123 31 110 123 140 3,219
Commercial owner occupied real estate (82) (284) 100 81 -- 653 484 --
Leasing -- (6) (4) -- -- (17) (3) 5
Consumer 488 169 490 508 384 111 228 348
Residential real estate:
Residential mortgage 347 216 22 447 508 253 713 420
Residential construction (3) (2) 100 (2) 151 (2) 63 --
Net charge-offs 1,242 721 (645) 1,789 829 2,879 1,381 5,029
Balance at end of period $ 38,766 $ 39,422 $ 39,015 $ 41,246 $ 42,957 $ 42,618 $ 45,265 $ 45,061
Asset Quality Ratios:
Non-performing loans to total loans 1.44% 1.44% 1.77% 1.93% 2.29% 2.38% 2.60% 3.18%
Non-performing assets to total assets 1.01% 0.98% 1.25% 1.39% 1.61% 1.75% 1.92% 2.10%
Allowance for loan losses to loans 1.39% 1.48% 1.50% 1.61% 1.70% 1.73% 1.83% 1.98%
Allowance for loan losses to non-performing loans 96.83% 103.06% 84.46% 83.38% 74.18% 72.40% 70.23% 62.43%
Net charge-offs in quarter to average loans 0.18% 0.11% (0.10)% 0.28% 0.13% 0.46% 0.23% 0.89%
Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Three Months Ended December 31,
2013 2012
Annualized Annualized
Average (1) Average Average (1) Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets
Residential mortgage loans (2) $ 614,698 $ 5,384 3.49% $ 542,095 $ 5,278 3.93%
Residential construction loans 125,744 1,189 3.75 125,640 1,076 3.41
Commercial ADC loans 156,558 2,057 5.21 137,679 1,866 5.39
Commercial investor real estate loans 522,085 6,974 5.30 453,074 6,242 5.48
Commercial owner occupied real estate loans 580,808 7,230 5.10 577,693 7,514 5.26
Commercial business loans 357,455 4,520 4.97 322,501 4,523 5.43
Leasing 817 14 6.81 3,773 54 5.62
Consumer loans 373,017 3,166 3.39 356,452 3,111 3.50
Total loans and leases (3) 2,731,182 30,534 4.47 2,518,907 29,664 4.71
Taxable securities 751,796 4,597 2.43 768,412 4,493 2.34
Tax-exempt securities (4) 303,636 3,283 4.29 303,866 3,351 4.41
Interest-bearing deposits with banks 29,944 19 0.25 47,954 28 0.22
Federal funds sold 475 1 0.22 466 -- 0.22
Total interest-earning assets 3,817,033 38,434 4.03 3,639,605 37,536 4.11
Less: allowance for loan and lease losses (39,775) (42,741)
Cash and due from banks 45,549 48,803
Premises and equipment, net 46,545 48,626
Other assets 213,487 214,186
Total assets $ 4,082,839 $3,908,479
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 443,959 93 0.08% $ 400,175 88 0.09%
Regular savings deposits 239,382 45 0.08 220,814 44 0.08
Money market savings deposits 876,014 283 0.13 900,991 472 0.21
Time deposits 469,927 809 0.68 544,952 1,046 0.76
Total interest-bearing deposits 2,029,282 1,230 0.24 2,066,932 1,650 0.32
Other borrowings 61,780 37 0.24 64,908 46 0.28
Advances from FHLB 553,750 3,269 2.34 405,097 3,359 3.30
Subordinated debentures 35,000 223 2.55 35,000 227 2.59
Total interest-bearing liabilities 2,679,812 4,759 0.70 2,571,937 5,282 0.82
Noninterest-bearing demand deposits 872,532 824,188
Other liabilities 35,716 29,733
Stockholders' equity 494,779 482,621
Total liabilities and stockholders' equity $ 4,082,839 $3,908,479
Net interest income and spread $ 33,675 3.33% $ 32,254 3.29%
Less: tax-equivalent adjustment 1,325 1,334
Net interest income $ 32,350 $ 30,920
Interest income/earning assets 4.03% 4.11%
Interest expense/earning assets 0.50 0.58
Net interest margin 3.53% 3.53%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2013 and 2012. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.3 million in 2013 and 2012, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3) Non-accrual loans are included in the average balances.
(4) Includes only investments that are exempt from federal taxes.
Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Twelve Months Ended December 31,
2013 2012
Annualized Annualized
Average (1) Average Average (1) Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets
Residential mortgage loans (2) $ 591,068 $ 21,385 3.62% $ 503,963 $ 21,281 4.22%
Residential construction loans 121,488 4,331 3.57 125,295 4,581 3.66
Commercial ADC loans 156,115 9,596 6.15 147,881 7,721 5.22
Commercial investor real estate loans 495,562 27,901 5.63 421,505 23,167 5.50
Commercial owner occupied real estate loans 569,065 29,696 5.36 554,397 30,236 5.45
Commercial business loans 343,554 17,807 5.07 299,462 16,511 5.51
Leasing 1,525 102 6.70 5,117 326 6.36
Consumer loans 364,495 12,491 3.45 357,839 12,592 3.52
Total loans and leases (3) 2,642,872 123,309 4.69 2,415,459 116,415 4.82
Taxable securities 761,713 18,133 2.38 774,030 19,254 2.49
Tax-exempt securities (4) 301,534 13,112 4.35 288,347 13,463 4.67
Interest-bearing deposits with banks 33,261 84 0.25 42,668 111 0.26
Federal funds sold 475 1 0.22 724 1 0.18
Total interest-earning assets 3,739,855 154,639 4.15 3,521,228 149,244 4.24
Less: allowance for loan and lease losses (41,606) (46,260)
Cash and due from banks 45,836 46,588
Premises and equipment, net 47,244 48,875
Other assets 216,082 209,653
Total assets $4,007,411 $3,780,084
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 438,183 373 0.09% $ 385,004 344 0.09%
Regular savings deposits 238,818 204 0.09 212,659 199 0.09
Money market savings deposits 879,588 1,414 0.16 877,546 1,943 0.22
Time deposits 490,278 3,448 0.70 566,658 4,871 0.86
Total interest-bearing deposits 2,046,867 5,439 0.27 2,041,867 7,357 0.36
Other borrowings 60,249 163 0.27 70,477 204 0.29
Advances from FHLB 500,593 12,936 2.58 405,227 14,131 3.49
Subordinated debentures 35,000 895 2.56 35,000 959 2.74
Total interest-bearing liabilities 2,642,709 19,433 0.74 2,552,571 22,651 0.89
Noninterest-bearing demand deposits 843,008 735,231
Other liabilities 33,858 26,563
Stockholders' equity 487,836 465,719
Total liabilities and stockholders' equity $4,007,411 $3,780,084
Net interest income and spread $ 135,206 3.41% $ 126,593 3.35%
Less: tax-equivalent adjustment 5,292 5,374
Net interest income $ 129,914 $ 121,219
Interest income/earning assets 4.15% 4.24%
Interest expense/earning assets 0.52 0.64
Net interest margin 3.63% 3.60%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2013 and 2012. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $5.3 million and $5.4 million in 2013 and 2012, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3) Non-accrual loans are included in the average balances.
(4) Includes only investments that are exempt from federal taxes.

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.