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Sandy Spring Bancorp Reports Net Income of $7.0 Million for the Second Quarter

Sandy Spring Bancorp, Inc. Logo

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

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

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

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

Second Quarter Highlights:

  • Total loans increased 12% compared to the second quarter of 2013 and 3% compared to the first quarter of 2014 due to significant loan growth in the commercial investor real estate portfolio and due to the retention of a greater portion of mortgage originations over the past year.
  • The provision for loan and lease losses for the second quarter of 2014 was a charge of $0.2 million compared to a credit of $2.9 million for the second quarter of 2013 and a credit of $1.0 million for the first quarter of 2014. The current quarter's provision reflects the stability in the credit quality of the loan portfolio as outstanding loans continued to grow from the prior year.
  • The net interest margin was 3.48% for the second quarter of 2014, compared to 3.51% for the second quarter of 2013 and 3.47% for the first quarter of 2014. The decline compared to the prior year was the result of declining loan yields during the period that exceeded the reduction in rates paid on interest-bearing liabilities.
  • Non-interest income decreased 4% for the quarter compared to the prior year quarter due to the decline in income from mortgage banking caused by a significantly lower volume of saleable mortgage loan originations. During this same period wealth management income increased 5%.
  • Non-performing loans totaled $41.7 million at June 30, 2014 compared to $46.2 million at June 30, 2013 and $38.7 million at March 31, 2014. The coverage ratio of the allowance for loan and lease losses to non-performing loans was 91% at June 30, 2014 compared to a coverage ratio of 84% at June 30, 2013 and 98% at March 31, 2014.
  • Litigation expenses of $6.1 million were accrued during the quarter as a result of an adverse jury verdict associated with the actions of a former employee of CommerceFirst Bank which was acquired in 2012.

Review of Balance Sheet and Credit Quality

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

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

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

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

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

Income Statement Review

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

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

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

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

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

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

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

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

Conference Call

The Company's management will host a conference call to discuss its second quarter results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations' section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 1-888-317-6016. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) July 31, 2014. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10048612.

About Sandy Spring Bancorp, Inc.

With $4.2 billion in assets, Sandy Spring Bancorp, Inc. is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 46 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George's counties in Maryland, and Arlington, Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of insurance and investment management services. Visit www.sandyspringbank.com for more information about Sandy Spring Bank.

Forward-Looking Statements

Sandy Spring Bancorp makes forward-looking statements in this news release and in the conference call regarding this news release. These forward-looking statements may include: statements of goals, intentions, earnings expectations, and other expectations; estimates of risks and of future costs and benefits; assessments of probable loan and lease losses; assessments of market risk; and statements of the ability to achieve financial and other goals.

Forward-looking statements are typically identified by words such as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project" and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. Sandy Spring Bancorp does not assume any duty and does not undertake to update its forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that Sandy Spring Bancorp anticipated in its forward-looking statements and future results could differ materially from historical performance.

Sandy Spring Bancorp's forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company's loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company's ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2013, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp's forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC's Web site at www.sec.gov.

Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
Three Months Ended Six Months Ended
June 30, % June 30, %
(Dollars in thousands, except per share data) 2014 2013 Change 2014 2013 Change
Results of Operations:
Net interest income $ 32,309 $ 30,932 4% $ 63,901 $ 62,258 3%
Provision for loan and lease losses 158 (2,876) (105) (824) (2,798) (71)
Non-interest income 11,694 12,215 (4) 22,943 24,634 (7)
Non-interest expenses 34,141 27,508 24 61,690 55,331 11
Income before income taxes 9,704 18,515 (48) 25,978 34,359 (24)
Net income 6,982 12,162 (43) 17,910 22,720 (21)
Pre-tax pre-provision income $ 15,990 $ 15,639 2 $ 31,282 $ 31,561 (1)
Return on average assets 0.67% 1.23% 0.87% 1.16%
Return on average common equity 5.47% 9.98% 7.11% 9.42%
Net interest margin 3.48% 3.51% 3.48% 3.55%
Efficiency ratio - GAAP basis (1) 77.59% 63.75% 71.04% 63.68%
Efficiency ratio - Non-GAAP basis (1) 61.30% 60.92% 61.45% 60.86%
Per share data:
Basic net income $ 0.28 $ 0.49 (43)% $ 0.72 $ 0.91 (21)%
Diluted net income $ 0.28 $ 0.49 (43) $ 0.71 $ 0.91 (22)
Average fully diluted shares 25,127,036 25,009,092 -- 25,126,369 25,006,161 --
Dividends declared per share $ 0.18 $ 0.16 13 $ 0.36 $ 0.30 20
Book value per share 20.63 19.45 6 20.63 19.45 6
Tangible book value per share 17.04 16.09 6 17.04 16.09 6
Outstanding shares 25,069,700 24,967,558 -- 25,069,700 24,967,558 --
Financial Condition at period-end:
Investment securities $ 980,530 $ 1,102,209 (11)% $ 980,530 $ 1,102,209 (11)%
Loans and leases 2,910,944 2,605,458 12 2,910,944 2,605,458 12
Interest-earning assets 3,945,643 3,802,682 4 3,945,643 3,802,682 4
Assets 4,234,342 4,072,617 4 4,234,342 4,072,617 4
Deposits 3,038,670 2,926,650 4 3,038,670 2,926,650 4
Interest-bearing liabilities 2,698,887 2,678,490 1 2,698,887 2,678,490 1
Stockholders' equity 517,269 485,643 7 517,269 485,643 7
Capital ratios:
Tier 1 leverage (4) 11.37% 11.28% 11.37% 11.28%
Tier 1 capital to risk-weighted assets (4) 14.48% 14.30% 14.48% 14.30%
Total regulatory capital to risk-weighted assets (4) 15.66% 15.55% 15.66% 15.55%
Tangible common equity to tangible assets (2) 10.29% 10.08% 10.29% 10.08%
Average equity to average assets 12.31% 12.35% 12.29% 12.30%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.30% 1.50% 1.30% 1.50%
Non-performing loans to total loans 1.43% 1.77% 1.43% 1.77%
Non-performing assets to total assets 1.03% 1.25% 1.03% 1.25%
Allowance for loan and lease losses to non-performing loans 90.99% 84.46% 90.99% 84.46%
Annualized net charge-offs to average loans and leases (3) 0.03% (0.10)% -- % 0.09%
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional efficiency ratio - non-GAAP basis excludes intangible asset amortization from non-interest expense; securities gains (losses) from non-interest income; OTTI; and the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and other comprehensive gains (losses). See the Reconciliation Table included with these Financial Highlights.
(3) Calculation utilizes average loans and leases, excluding residential mortgage loans held-for-sale.
(4) Estimated ratio at June 30, 2014
Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2014 2013 2014 2013
Pre-tax pre-provision income:
Net income $ 6,982 $ 12,162 $ 17,910 $ 22,720
Plus non-GAAP adjustment:
Litigation expenses 6,128 -- 6,128 --
Income taxes 2,722 6,353 8,068 11,639
Provision (credit) for loan and lease losses 158 (2,876) (824) (2,798)
Pre-tax pre-provision income $ 15,990 $ 15,639 $ 31,282 $ 31,561
Efficiency ratio - GAAP basis:
Non-interest expenses $ 34,141 $ 27,508 $ 61,690 $ 55,331
Net interest income plus non-interest income $ 44,003 $ 43,147 $ 86,844 $ 86,892
Efficiency ratio - GAAP basis 77.59% 63.75% 71.04% 63.68%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $ 34,141 $ 27,508 $ 61,690 $ 55,331
Less non-GAAP adjustment:
Amortization of intangible assets 224 461 594 922
Litigation expenses 6,128 -- 6,128 --
Non-interest expenses -- as adjusted $ 27,789 $ 27,047 $ 54,968 $ 54,409
Net interest income plus non-interest income $ 44,003 $ 43,147 $ 86,844 $ 86,892
Plus non-GAAP adjustment:
Tax-equivalent income 1,331 1,312 2,613 2,623
Less non-GAAP adjustments:
Securities gains -- 62 -- 118
Net interest income plus non-interest income - as adjusted $ 45,334 $ 44,397 $ 89,457 $ 89,397
Efficiency ratio - Non-GAAP basis 61.30% 60.92% 61.45% 60.86%
Tangible common equity ratio:
Total stockholders' equity $ 517,269 $ 485,643 $ 517,269 $ 485,643
Accumulated other comprehensive (income) loss (5,233) 2,425 (5,233) 2,425
Goodwill (84,171) (84,171) (84,171) (84,171)
Other intangible assets, net (737) (2,241) (737) (2,241)
Tangible common equity $ 427,128 $ 401,656 $ 427,128 $ 401,656
Total assets $ 4,234,342 $ 4,072,617 $ 4,234,342 $ 4,072,617
Goodwill (84,171) (84,171) (84,171) (84,171)
Other intangible assets, net (737) (2,241) (737) (2,241)
Tangible assets $ 4,149,434 $ 3,986,205 $ 4,149,434 $ 3,986,205
Tangible common equity ratio 10.29% 10.08% 10.29% 10.08%
Outstanding common shares 25,069,700 24,967,558 25,069,700 24,967,558
Tangible book value per common share $ 17.04 $ 16.09 $ 17.04 $ 16.09
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
June 30, December 31, June 30,
(Dollars in thousands) 2014 2013 2013
Assets
Cash and due from banks $ 65,674 $ 46,755 $ 41,525
Federal funds sold 474 475 475
Interest-bearing deposits with banks 44,653 27,197 65,507
Cash and cash equivalents 110,801 74,427 107,507
Residential mortgage loans held for sale (at fair value) 9,042 8,365 29,033
Investments available-for-sale (at fair value) 720,885 751,284 838,440
Investments held-to-maturity -- fair value of $224,313, $216,007 and 220,838 at June 30, 2014,
December 31, 2013 and June 30, 2013, respectively 223,518 224,638 226,457
Other equity securities 36,127 40,687 37,312
Total loans and leases 2,910,944 2,784,266 2,605,458
Less: allowance for loan and lease losses (37,959) (38,766) (39,015)
Net loans and leases 2,872,985 2,745,500 2,566,443
Premises and equipment, net 45,296 45,916 46,901
Other real estate owned 1,967 1,338 4,831
Accrued interest receivable 12,271 12,532 13,071
Goodwill 84,171 84,171 84,171
Other intangible assets, net 737 1,330 2,241
Other assets 116,542 115,912 116,210
Total assets $ 4,234,342 $ 4,106,100 $ 4,072,617
Liabilities
Noninterest-bearing deposits $ 984,700 $ 836,198 $ 877,891
Interest-bearing deposits 2,053,970 2,041,027 2,048,759
Total deposits 3,038,670 2,877,225 2,926,650
Securities sold under retail repurchase agreements and federal funds purchased 72,917 53,842 54,731
Advances from FHLB 537,000 615,000 540,000
Subordinated debentures 35,000 35,000 35,000
Accrued interest payable and other liabilities 33,486 25,670 30,593
Total liabilities 3,717,073 3,606,737 3,586,974
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 25,069,700,
24,990,021 and 24,967,558 at June 30, 2014, December 31, 2013 and June 30, 2013, respectively 25,070 24,990 24,968
Additional paid in capital 194,252 193,445 192,327
Retained earnings 292,714 283,898 270,773
Accumulated other comprehensive income (loss) 5,233 (2,970) (2,425)
Total stockholders' equity 517,269 499,363 485,643
Total liabilities and stockholders' equity $ 4,234,342 $ 4,106,100 $ 4,072,617
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands, except per share data) 2014 2013 2014 2013
Interest Income:
Interest and fees on loans and leases $ 30,706 $ 29,212 $ 60,440 $ 58,858
Interest on loans held for sale 71 309 130 662
Interest on deposits with banks 22 24 42 43
Interest and dividends on investment securities:
Taxable 3,876 3,919 7,992 7,853
Exempt from federal income taxes 2,316 2,315 4,637 4,642
Total interest income 36,991 35,779 73,241 72,058
Interest Expense:
Interest on deposits 1,193 1,396 2,377 2,851
Interest on retail repurchase agreements and federal funds purchased 37 38 75 87
Interest on advances from FHLB 3,233 3,189 6,451 6,412
Interest on subordinated debt 219 224 437 450
Total interest expense 4,682 4,847 9,340 9,800
Net interest income 32,309 30,932 63,901 62,258
Provision (credit) for loan and lease losses 158 (2,876) (824) (2,798)
Net interest income after provision (credit) for loan and lease losses 32,151 33,808 64,725 65,056
Non-interest Income:
Investment securities gains -- 62 -- 118
Service charges on deposit accounts 2,089 2,150 4,061 4,219
Mortgage banking activities 570 1,237 886 2,764
Wealth management income 4,741 4,532 9,207 8,574
Insurance agency commissions 961 1,036 2,601 2,385
Income from bank owned life insurance 608 623 1,206 1,235
Bank card fees 1,169 1,079 2,147 2,036
Other income 1,556 1,496 2,835 3,303
Total non-interest income 11,694 12,215 22,943 24,634
Non-interest Expenses:
Salaries and employee benefits 16,474 16,163 32,829 32,509
Occupancy expense of premises 3,274 2,996 6,746 6,178
Equipment expenses 1,262 1,227 2,518 2,476
Marketing 802 755 1,344 1,270
Outside data services 1,216 1,114 2,432 2,266
FDIC insurance 573 581 1,093 1,177
Amortization of intangible assets 224 461 594 922
Litigation expenses 6,128 -- 6,128 --
Other expenses 4,188 4,211 8,006 8,533
Total non-interest expenses 34,141 27,508 61,690 55,331
Income before income taxes 9,704 18,515 25,978 34,359
Income tax expense 2,722 6,353 8,068 11,639
Net income $ 6,982 $ 12,162 $ 17,910 $ 22,720
Net Income Per Share Amounts:
Basic net income per share $ 0.28 $ 0.49 $ 0.72 $ 0.91
Diluted net income per share $ 0.28 $ 0.49 $ 0.71 $ 0.91
Dividends declared per share $ 0.18 $ 0.16 $ 0.36 $ 0.30
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2014 2013
(Dollars in thousands, except per share data) Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 38,322 $ 37,532 $ 38,434 $ 41,524 $ 37,091 $ 37,590
Interest expense 4,682 4,658 4,759 4,874 4,847 4,953
Tax-equivalent net interest income 33,640 32,874 33,675 36,650 32,244 32,637
Tax-equivalent adjustment 1,331 1,282 1,325 1,344 1,312 1,311
Provision for loan and lease losses 158 (982) 586 1,128 (2,876) 78
Non-interest income 11,694 11,249 11,654 11,223 12,215 12,419
Non-interest expenses 34,141 27,549 29,300 26,893 27,508 27,823
Income before income taxes 9,704 16,274 14,118 18,508 18,515 15,844
Income tax expense 2,722 5,346 4,505 6,419 6,353 5,286
Net income $ 6,982 $ 10,928 $ 9,613 $ 12,089 $ 12,162 $ 10,558
Financial performance:
Pre-tax pre-provision income $ 15,990 $ 15,292 $ 14,704 $ 19,636 $ 15,639 $ 15,922
Return on average assets 0.67% 1.08% 0.93% 1.19% 1.23% 1.08%
Return on average common equity 5.47% 8.80% 7.71% 9.91% 9.98% 8.85%
Net interest margin 3.48% 3.47% 3.53% 3.88% 3.51% 3.59%
Efficiency ratio - GAAP basis (1) 77.59% 64.31% 66.59% 57.80% 63.75% 63.60%
Efficiency ratio - Non-GAAP basis (1) 61.30% 61.60% 63.62% 55.21% 60.92% 60.80%
Per share data:
Basic net income per share $ 0.28 $ 0.44 $ 0.38 $ 0.48 $ 0.49 $ 0.42
Diluted net income per share $ 0.28 $ 0.43 $ 0.38 $ 0.48 $ 0.49 $ 0.42
Average fully diluted shares 25,127,036 25,124,206 25,108,109 25,070,506 25,009,092 25,002,612
Dividends declared per common share $ 0.18 $ 0.18 $ 0.18 $ 0.16 $ 0.16 $ 0.14
Non-interest income:
Securities gains (losses) $ -- $ -- $ (3) $ -- $ 62 $ 56
Service charges on deposit accounts 2,089 1,972 2,143 2,171 2,150 2,069
Mortgage banking activities 570 316 356 (26) 1,237 1,527
Wealth management income 4,741 4,466 4,508 4,503 4,532 4,042
Insurance agency commissions 961 1,640 1,243 1,193 1,036 1,349
Income from bank owned life insurance 608 598 635 629 623 612
Bank card fees 1,169 978 1,052 1,077 1,079 957
Other income 1,556 1,279 1,720 1,676 1,496 1,807
Total non-interest income $ 11,694 $ 11,249 $ 11,654 $ 11,223 $ 12,215 $ 12,419
Non-interest expense:
Salaries and employee benefits $ 16,474 $ 16,355 $ 16,707 $ 16,382 $ 16,163 $ 16,346
Occupancy expense of premises 3,274 3,472 3,844 3,149 2,996 3,182
Equipment expenses 1,262 1,256 1,264 1,200 1,227 1,249
Marketing 802 542 897 713 755 515
Outside data services 1,216 1,216 1,162 1,152 1,114 1,152
FDIC insurance 573 520 445 678 581 596
Amortization of intangible assets 224 370 461 462 461 461
Litigation expenses 6,128 -- -- -- -- --
Professional fees 1,292 914 1,386 511 1,332 1,250
Other real estate owned expenses 9 -- 91 (150) (281) 37
Other expenses 2,887 2,904 3,043 2,796 3,160 3,035
Total non-interest expense $ 34,141 $ 27,549 $ 29,300 $ 26,893 $ 27,508 $ 27,823
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, efficiency ratio - non-GAAP basis excludes intangible asset amortization from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2014 2013
(Dollars in thousands) Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 668,536 $ 640,939 $ 618,381 $ 595,180 $ 565,282 $ 538,346
Residential construction loans 149,321 143,109 129,177 118,316 116,736 122,698
Commercial ADC loans 178,972 163,343 160,696 158,739 163,309 150,599
Commercial investor real estate loans 577,813 573,634 552,178 518,029 497,365 487,802
Commercial owner occupied real estate loans 581,795 582,472 592,823 569,350 563,258 565,820
Commercial business loans 357,472 348,180 356,651 332,670 334,979 344,489
Leasing 260 439 703 962 1,415 1,974
Consumer loans 396,775 380,697 373,657 368,764 363,114 353,341
Total loans and leases 2,910,944 2,832,813 2,784,266 2,662,010 2,605,458 2,565,069
Allowance for loan and lease losses (37,959) (38,026) (38,766) (39,422) (39,015) (41,246)
Investment securities 980,530 997,584 1,016,609 1,077,951 1,102,209 1,008,693
Interest-earning assets 3,945,643 3,891,223 3,836,912 3,771,825 3,802,682 3,660,809
Total assets 4,234,342 4,168,998 4,106,100 4,052,969 4,072,617 3,932,026
Noninterest-bearing demand deposits 984,700 882,169 836,198 890,319 877,891 832,679
Total deposits 3,038,670 2,959,195 2,877,225 2,916,466 2,926,650 2,919,208
Customer repurchase agreements 72,917 67,038 53,842 53,177 54,731 50,302
Total interest-bearing liabilities 2,698,887 2,748,064 2,744,869 2,634,324 2,678,490 2,576,831
Total stockholders' equity 517,269 510,386 499,363 493,882 485,643 488,947
Quarterly average balance sheets:
Residential mortgage loans $ 659,172 $ 633,160 $ 614,698 $ 593,335 $ 579,899 $ 575,889
Residential construction loans 145,968 134,261 125,744 120,676 119,197 120,283
Commercial ADC loans 168,063 162,544 156,558 158,557 160,483 148,749
Commercial investor real estate loans 575,283 557,168 522,085 499,896 485,630 474,062
Commercial owner occupied real estate loans 579,953 584,155 580,808 566,366 561,249 567,723
Commercial business loans 348,597 349,734 357,455 331,374 337,843 347,569
Leasing 352 567 817 1,152 1,644 2,510
Consumer loans 390,076 377,822 373,017 366,562 360,842 357,366
Total loans and leases 2,867,464 2,799,411 2,731,182 2,637,918 2,606,787 2,594,151
Investment securities 991,135 1,012,701 1,055,432 1,097,643 1,047,726 1,051,769
Interest-earning assets 3,893,843 3,845,513 3,817,033 3,770,855 3,692,215 3,677,444
Total assets 4,157,559 4,105,225 4,082,839 4,039,069 3,959,907 3,946,578
Noninterest-bearing demand deposits 899,287 825,968 872,532 862,046 838,502 797,926
Total deposits 2,965,329 2,876,641 2,901,814 2,903,926 2,892,704 2,860,451
Customer repurchase agreements 68,880 62,864 57,682 56,766 55,941 52,622
Total interest-bearing liabilities 2,716,537 2,749,459 2,679,812 2,659,406 2,599,704 2,631,198
Total stockholders' equity 511,738 503,851 494,779 483,811 489,014 483,664
Financial Measures
Average equity to average assets 12.31% 12.27% 12.12% 11.98% 12.35% 12.26%
Investment securities to earning assets 24.85% 25.64% 26.50% 28.58% 28.99% 27.55%
Loans to earning assets 73.78% 72.80% 72.57% 70.58% 68.52% 70.07%
Loans to assets 68.75% 67.95% 67.81% 65.68% 63.98% 65.24%
Loans to deposits 95.80% 95.73% 96.77% 91.28% 89.03% 87.87%
Capital measures:
Tier 1 leverage (1) 11.37% 11.43% 11.32% 11.29% 11.28% 11.07%
Tier 1 capital to risk-weighted assets (1) 14.48% 14.64% 14.42% 14.45% 14.30% 14.23%
Total regulatory capital to risk-weighted assets (1) 15.66% 15.85% 15.65% 15.70% 15.55% 15.48%
Book value per share $ 20.63 $ 20.38 $ 19.98 $ 19.77 $ 19.45 $ 19.59
Outstanding shares 25,069,700 25,043,482 24,990,021 24,985,146 24,967,558 24,954,892
(1) Estimated ratio at June 30, 2014
Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2014 2013
(Dollars in thousands) June 30, March 31, December 31, September 30, June 30, March 31,
Non-Performing Assets:
Loans and leases 90 days past due:
Commercial business $ 1 $ -- $ -- $ -- $ 15 $ --
Commercial real estate:
Commercial AD&C -- -- -- -- -- --
Commercial investor real estate -- -- -- -- -- --
Commercial owner occupied real estate -- -- -- -- -- --
Leasing -- -- -- -- -- --
Consumer 3 -- 1 10 -- 54
Residential real estate:
Residential mortgage -- -- -- -- -- --
Residential construction -- -- -- -- -- --
Total loans and leases 90 days past due 4 -- 1 10 15 54
Non-accrual loans and leases:
Commercial business 4,309 3,272 3,400 4,050 4,483 4,012
Commercial real estate:
Commercial AD&C 3,739 4,133 4,127 5,086 5,885 5,826
Commercial investor real estate 6,731 7,284 6,802 6,877 11,741 12,353
Commercial owner occupied real estate 10,868 7,150 5,936 4,202 5,413 5,346
Leasing -- -- -- -- -- --
Consumer 2,058 2,115 2,259 2,004 2,305 2,388
Residential real estate:
Residential mortgage 4,501 5,025 5,735 5,643 5,581 5,393
Residential construction 2,143 2,304 2,315 2,327 2,558 3,258
Total non-accrual loans and leases 34,349 31,283 30,574 30,189 37,966 38,576
Total restructured loans - accruing 7,364 7,411 9,459 8,054 8,213 10,839
Total non-performing loans and leases 41,717 38,694 40,034 38,253 46,194 49,469
Other assets and real estate owned (OREO) 1,967 1,619 1,338 1,662 4,831 5,250
Total non-performing assets $ 43,684 $ 40,313 $ 41,372 $ 39,915 $ 51,025 $ 54,719
For the quarter ended,
June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2014 2014 2013 2013 2013 2013
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $ 31,283 $ 30,574 $ 30,189 $ 37,966 $ 38,576 $ 47,548
Non-accrual balances transferred to OREO (390) (281) (365) (723) (1,426) (92)
Non-accrual balances charged-off (357) (513) (922) (4,995) (668) (2,175)
Net payments or draws (1,580) (1,073) (971) (13,547) (3,560) (11,768)
Loans placed on non-accrual 5,393 2,576 3,546 11,488 5,044 5,493
Non-accrual loans brought current -- -- (903) -- -- (430)
Balance at end of period $ 34,349 $ 31,283 $ 30,574 $ 30,189 $ 37,966 $ 38,576
Analysis of Allowance for Loan Losses:
Balance at beginning of period $ 38,026 $ 38,766 $ 39,422 $ 39,015 $ 41,246 $ 42,957
Provision (credit) for loan and lease losses 158 (982) 586 1,128 (2,876) 78
Less loans charged-off, net of recoveries:
Commercial business 28 (768) 384 1 (32) 1,744
Commercial real estate:
Commercial AD&C -- -- 85 (616) (1,444) (1,020)
Commercial investor real estate (23) (5) 23 1,243 123 31
Commercial owner occupied real estate 265 -- (82) (284) 100 81
Leasing -- -- -- (6) (4) --
Consumer 11 331 488 169 490 508
Residential real estate:
Residential mortgage (27) 203 347 216 22 447
Residential construction (29) (3) (3) (2) 100 (2)
Net charge-offs 225 (242) 1,242 721 (645) 1,789
Balance at end of period $ 37,959 $ 38,026 $ 38,766 $ 39,422 $ 39,015 $ 41,246
Asset Quality Ratios:
Non-performing loans to total loans 1.43% 1.37% 1.44% 1.44% 1.77% 1.93%
Non-performing assets to total assets 1.03% 0.97% 1.01% 0.98% 1.25% 1.39%
Allowance for loan losses to loans 1.30% 1.34% 1.39% 1.48% 1.50% 1.61%
Allowance for loan losses to non-performing loans 90.99% 98.27% 96.83% 103.06% 84.46% 83.38%
Net charge-offs in quarter to average loans 0.03% (0.04)% 0.18% 0.11% (0.10)% 0.28%
Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Three Months Ended June 30,
2014 2013
Annualized Annualized
Average (1) Average Average (1) Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets
Residential mortgage loans (2) $ 659,172 $ 5,685 3.45% $ 579,899 $ 5,310 3.68%
Residential construction loans 145,968 1,359 3.73 119,197 1,032 3.47
Commercial ADC loans 168,063 2,180 5.20 160,483 2,106 5.26
Commercial investor real estate loans 575,283 7,139 4.98 485,630 6,184 5.11
Commercial owner occupied real estate loans 579,953 7,146 5.09 561,249 7,302 5.34
Commercial business loans 348,597 4,054 4.69 337,843 4,456 5.15
Leasing 352 6 6.30 1,644 30 7.22
Consumer loans 390,076 3,208 3.32 360,842 3,101 3.47
Total loans and leases (3) 2,867,464 30,777 4.34 2,606,787 29,521 4.57
Taxable securities 688,793 4,263 2.48 746,266 4,289 2.30
Tax-exempt securities (4) 302,342 3,260 4.32 301,460 3,257 4.32
Interest-bearing deposits with banks 34,770 22 0.25 37,227 24 0.25
Federal funds sold 474 -- 0.22 475 -- 0.22
Total interest-earning assets 3,893,843 38,322 3.97 3,692,215 37,091 4.03
Less: allowance for loan and lease losses (38,342) (41,605)
Cash and due from banks 44,987 45,603
Premises and equipment, net 45,696 47,501
Other assets 211,375 216,193
Total assets $ 4,157,559 $ 3,959,907
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 477,018 102 0.09% $ 442,808 91 0.08%
Regular savings deposits 262,078 49 0.07 240,410 58 0.10
Money market savings deposits 865,134 273 0.13 875,282 378 0.17
Time deposits 461,812 769 0.67 495,702 869 0.70
Total interest-bearing deposits 2,066,042 1,193 0.23 2,054,202 1,396 0.27
Other borrowings 68,880 37 0.22 56,711 38 0.27
Advances from FHLB 546,615 3,233 2.37 453,791 3,189 2.82
Subordinated debentures 35,000 219 2.50 35,000 224 2.56
Total interest-bearing liabilities 2,716,537 4,682 0.69 2,599,704 4,847 0.75
Noninterest-bearing demand deposits 899,287 838,502
Other liabilities 29,997 32,687
Stockholders' equity 511,738 489,014
Total liabilities and stockholders' equity $ 4,157,559 $ 3,959,907
Net interest income and spread $ 33,640 3.28% $ 32,244 3.28%
Less: tax-equivalent adjustment 1,331 1,312
Net interest income $ 32,309 $ 30,932
Interest income/earning assets 3.97% 4.03%
Interest expense/earning assets 0.49 0.52
Net interest margin 3.48% 3.51%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and 2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.3 million in 2014 and 2013, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3) Non-accrual loans are included in the average balances.
(4) Includes only investments that are exempt from federal taxes.
Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Six Months Ended June 30,
2014 2013
Annualized Annualized
Average (1) Average Average (1) Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets
Residential mortgage loans (2) $ 646,238 $ 11,191 3.46% $ 577,905 $ 10,686 3.70%
Residential construction loans 140,147 2,612 3.76 119,737 2,036 3.43
Commercial ADC loans 165,319 4,253 5.19 154,648 4,102 5.35
Commercial investor real estate loans 566,275 13,872 4.94 479,878 12,319 5.18
Commercial owner occupied real estate loans 582,042 14,213 5.08 564,468 15,103 5.53
Commercial business loans 349,162 8,091 4.67 342,679 9,042 5.18
Leasing 459 12 5.22 2,075 68 6.53
Consumer loans 383,983 6,326 3.34 359,114 6,164 3.49
Total loans and leases (3) 2,833,625 60,570 4.34 2,600,504 59,520 4.64
Taxable securities 699,460 8,715 2.49 750,167 8,594 2.29
Tax-exempt securities (4) 302,398 6,527 4.32 299,569 6,524 4.36
Interest-bearing deposits with banks 33,853 42 0.25 34,156 43 0.25
Federal funds sold 475 -- 0.22 475 -- 0.22
Total interest-earning assets 3,869,811 75,854 3.96 3,684,871 74,681 4.08
Less: allowance for loan and lease losses (38,864) (42,650)
Cash and due from banks 45,268 46,242
Premises and equipment, net 45,787 47,832
Other assets 209,535 216,984
Total assets $ 4,131,537 $ 3,953,279
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 468,677 194 0.08% $ 433,200 183 0.09%
Regular savings deposits 255,667 97 0.08 237,467 106 0.09
Money market savings deposits 871,464 546 0.13 883,765 789 0.18
Time deposits 462,591 1,540 0.67 503,908 1,773 0.71
Total interest-bearing deposits 2,058,399 2,377 0.23 2,058,340 2,851 0.28
Other borrowings 65,889 75 0.23 61,132 87 0.29
Advances from FHLB 573,619 6,451 2.27 460,892 6,412 2.81
Subordinated debentures 35,000 437 2.50 35,000 450 2.57
Total interest-bearing liabilities 2,732,907 9,340 0.69 2,615,364 9,800 0.76
Noninterest-bearing demand deposits 862,830 818,326
Other liabilities 27,984 33,235
Stockholders' equity 507,816 486,354
Total liabilities and stockholders' equity $ 4,131,537 $ 3,953,279
Net interest income and spread $ 66,514 3.27% $ 64,881 3.32%
Less: tax-equivalent adjustment 2,613 2,623
Net interest income $ 63,901 $ 62,258
Interest income/earning assets 3.96% 4.08%
Interest expense/earning assets 0.48 0.53
Net interest margin 3.48% 3.55%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and 2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $2.6 million and $2.6 million in 2014 and 2013, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.
(3) Non-accrual loans are included in the average balances.
(4) Includes only investments that are exempt from federal taxes.

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.