Sandy Spring Bancorp Reports Net Income of $11.1 Million for the Third Quarter

OLNEY, Md., Oct. 16, 2014 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the third quarter of 2014 of $11.1 million ($0.44 per diluted share) compared to net income of $12.1 million ($0.48 per diluted share) for the third quarter of 2013 and net income of $7.0 million ($0.28 per diluted share) for the second quarter of 2014.

Net income for the nine months ended September 30, 2014 was $29.1 million ($1.16 per diluted share) compared to net income of $34.8 million ($1.39 per diluted share) for the same period of the prior year.

"The Company continued to produce balanced growth across the loan portfolio. The impact of this continued loan growth and the resulting increase in interest income, in addition to solid performances from our wealth management and insurance businesses provides a solid core of earnings growth as we look to the future," said Daniel J. Schrider, President and Chief Executive Officer.

"We believe that pursuing promising lending opportunities and providing outstanding client service in this competitive market will result in meeting our performance objectives," said Schrider.

Third Quarter Highlights:

  • Total loans increased 12% compared to the third quarter of 2013 and 2% compared to the second quarter of 2014. Growth over the prior year exceeded 10% in most segments of the loan portfolio. Overall the entire portfolio grew $314 million from the prior year with residential mortgage loans comprising 33% of that growth.
  • Combined noninterest-bearing and interest-bearing transaction account balances increased 11% to $1.5 billion at September 30, 2014 as compared to $1.3 billion at September 30, 2013.
  • The provision for loan and lease losses for the third quarter of 2014 was a credit of $0.2 million compared to a charge of $1.1 million for the third quarter of 2013 and $0.2 million for the second quarter of 2014. The credit quality of the loan portfolio continues to exhibit stability while outstanding loans continued to grow significantly over the prior year.
  • The net interest margin was 3.42% for the third quarter of 2014, compared to 3.88% for the third quarter of 2013 and 3.48% for the second quarter of 2014. The prior year's margin was positively affected by loan recoveries on commercial loans. Exclusive of those recoveries, the net interest margin for the third quarter of 2013 would have been 3.49%.
  • Non-interest income increased 12% for the quarter compared to the prior year quarter due to significant increases in income from insurance and wealth management activities. These areas of non-interest income continue to be the focus in driving the growth of the Bank's non-interest income.

Review of Balance Sheet and Credit Quality

Total assets grew 5% to $4.2 billion at September 30, 2014 compared to $4.1 billion at September 30, 2013. This growth was driven by the $314 million or 12% increase in the loan portfolio as total loans and leases ended the period at $3.0 billion.

Deposits and certain other short-term borrowings that comprise all the funding sources derived from customers, increased 4% compared to September 30, 2013. At September 30, 2014, combined noninterest-bearing and interest-bearing checking account balances, an important performance driver of multiple-product banking relationships with clients, increased 11% compared to the balances at September 30, 2013.

Tangible common equity totaled $434 million at September 30, 2014 compared to $411 million at September 30, 2013, resulting in an increase in the ratio of tangible common equity to tangible assets to 10.42% at September 30, 2014 from 10.36% at September 30, 2013. Tangible common equity increased compared to the prior year while dividends per common share were raised to $0.56 per share for the first nine months of 2014 from $0.46 per common share for the first nine months of 2013, a 22% increase. During the quarter dividends were raised $0.02 per share to $0.20 per common share, for an annualized payout of $0.80 per share. At September 30, 2014, the Company had a total risk-based capital ratio of 15.68%, a tier 1 risk-based capital ratio of 14.52% and a tier 1 leverage ratio of 11.36%.

Non-performing loans totaled $43.7 million at September 30, 2014 compared to $38.3 million at September 30, 2013 and $41.7 million at June 30, 2014. The level of non-performing loans to total loans increased to 1.47% at September 30, 2014 compared to 1.44% at September 30, 2013. The increase from the prior year's level of non-performing loans was primarily due an increase in the owner occupied segment of the commercial loans. The increase from the prior year is attributable to several relationships, only one of which exceeded $2.0 million.

Loan charge-offs, net of recoveries, totaled $0.2 million for the third quarter of 2014 compared to net loan charge-offs of $0.7 million for the third quarter of 2013 and net loan charge-offs of $0.2 million for the second quarter of 2014. The allowance for loan and lease losses represented 1.26% of outstanding loans and leases and 86% of non-performing loans at September 30, 2014 compared to 1.48% of outstanding loans and leases and 103% of non-performing loans at September 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 2014 decreased 8% compared to the third quarter of 2013. The prior year's net interest income included $3.7 million in loan interest recoveries on previously non-performing commercial loans. Excluding the recoveries, net interest income grew 2% from the prior year. The net interest margin was 3.42% for the third quarter of 2014 compared to 3.88% for the third quarter of 2013. The net interest margin for the third quarter of 2013 would have been 3.49% exclusive of the above recoveries.

The provision for loan and lease losses was a credit of $0.2 million for the third quarter of 2014 compared to a charge of $1.1 million for the third quarter of 2013 and a charge of $0.2 million for the second quarter of 2014. The current quarter's credit reflects the stability in the credit quality of the loan portfolio while outstanding loans continued to grow over the prior year. Reduced charge-offs and the relative stability of problem loan migration into non-performing status more than offset the effect of the growth in the loan portfolio during the past twelve months.

Non-interest income increased 12% to $12.6 million for the third quarter of 2014 compared to $11.2 million for the third quarter of 2013. The increase in non-interest income for the quarter compared to the prior year quarter was due to significant increases in income from mortgage banking, insurance and wealth management activities.

Non-interest expenses increased 6% to $28.6 million for the third quarter of 2014 compared to $26.9 million in the third quarter of 2013. The current quarter included increases for salaries of $0.4 million, $0.4 million accrued for potential exposures on performance letters of credit and litigation expenses of $0.2 million. Last year's quarter included reductions of $0.5 million in professional fees. The non-GAAP efficiency ratio was 61.09% for the third quarter of 2014 compared to 55.21% for the third quarter of 2013. The prior year's quarter was positively impacted by the impact of the interest income and expense recoveries associated with previously non-performing loans. Excluding the effect of these recoveries, the non-GAAP efficiency ratio for the third quarter of 2013 was 61.47%

Net interest income for the first nine months of 2014 decreased 1% compared to the first nine months of 2013. Excluding interest recoveries of $3.7 million in the prior year, net interest income would have increased 3%. The net interest margin decreased to 3.46% for the first nine months of 2014 compared to 3.66% for the first nine months of 2013. The prior year's margin was positively impacted by loan recoveries on commercial loans. Exclusive of those recoveries the net interest margin for the third quarter of 2013 would have been 3.53%

The provision for loan and lease losses was a credit of $1.0 million for the first nine months of 2014 compared to a credit of $1.7 million for first nine months of 2013. These credits in the provision for the period have been driven by a decline in historical losses, an improvement in the overall credit quality of the loan portfolio and loan recoveries during these periods whose impact more than offset the effect of loan growth over the same period.

Non-interest income decreased 1% to $35.5 million for the first nine months of 2014 compared to $35.9 million for the first nine months of 2013. This decrease was driven primarily by the 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 8% due to higher assets under management while insurance agency commissions increased 12%.

Non-interest expenses increased to $90.3 million for the first nine months of 2014 compared to $82.2 million in the first nine months of 2013 due to the impact of the litigation expenses. Excluding the impact of the litigation expenses related to an adverse jury verdict, non-interest expense for the nine months ended September 30, 2014 was $84.0 million. The non-GAAP efficiency ratio was 61.32% for the first nine months of 2014 compared to 61.01% for the first nine months of 2013 excluding the effect of the interest recoveries previously mentioned.

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 1-888-235-9910. 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) October 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 10053632.

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 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.

For additional information or questions, please contact:
Daniel J. Schrider, President & Chief Executive Officer, or
Philip J. Mantua, E.V.P. & Chief Financial Officer
Sandy Spring Bancorp
17801 Georgia Avenue
Olney, Maryland 20832
1-800-399-5919
Email: DSchrider@sandyspringbank.com
PMantua@sandyspringbank.com
Web site: www.sandyspringbank.com

Forward-Looking Statements

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

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

Sandy Spring Bancorp's forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company's loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company's ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 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 Nine Months Ended
September 30, % September 30, %
(Dollars in thousands, except per share data) 2014 2013 Change 2014 2013 Change
Results of Operations:
Net interest income $ 32,420 $ 35,306 (8)% $ 96,321 $ 97,564 (1)%
Provision for loan and lease losses (192) 1,128 (117) (1,016) (1,670) (39)
Non-interest income 12,590 11,223 12 35,533 35,857 (1)
Non-interest expenses 28,632 26,893 6 90,322 82,224 10
Income before income taxes 16,570 18,508 (10) 42,548 52,867 (20)
Net income 11,142 12,089 (8) 29,052 34,809 (17)
Pre-tax pre-provision income $ 16,614 $ 19,636 (15) $ 47,896 $ 51,197 (6)
Return on average assets 1.05% 1.19% 0.93% 1.17%
Return on average common equity 8.54% 9.91% 7.60% 9.59%
Net interest margin 3.42% 3.88% 3.46% 3.66%
Efficiency ratio - GAAP basis (1) 63.61% 57.80% 68.50% 61.63%
Efficiency ratio - Non-GAAP basis (1) 61.09% 55.21% 61.32% 58.89%
Per share data:
Basic net income $ 0.44 $ 0.48 (8)% $ 1.16 $ 1.40 (17)%
Diluted net income $ 0.44 $ 0.48 (8) $ 1.16 $ 1.39 (17)
Average fully diluted shares 25,151,582 25,070,506 -- 25,135,078 25,049,181 --
Dividends declared per share $ 0.20 $ 0.16 25 $ 0.56 $ 0.46 22
Book value per share 20.83 19.77 5 20.83 19.77 5
Tangible book value per share 17.31 16.44 5 17.31 16.44 5
Outstanding shares 25,076,794 24,985,146 -- 25,076,794 24,985,146 --
Financial Condition at period-end:
Investment securities $ 950,869 $ 1,077,951 (12)% $ 950,869 $ 1,077,951 (12)%
Loans and leases 2,975,912 2,662,010 12 2,975,912 2,662,010 12
Interest-earning assets 3,976,731 3,771,825 5 3,976,731 3,771,825 5
Assets 4,248,731 4,052,969 5 4,248,731 4,052,969 5
Deposits 3,028,788 2,916,466 4 3,028,788 2,916,466 4
Interest-bearing liabilities 2,706,623 2,634,324 3 2,706,623 2,634,324 3
Stockholders' equity 522,404 493,882 6 522,404 493,882 6
Capital ratios:
Tier 1 leverage (4) 11.36% 11.29% 11.36% 11.29%
Tier 1 capital to risk-weighted assets (4) 14.52% 14.45% 14.52% 14.45%
Total regulatory capital to risk-weighted assets (4) 15.68% 15.70% 15.68% 15.70%
Tangible common equity to tangible assets (2) 10.42% 10.36% 10.42% 10.36%
Average equity to average assets 12.26% 11.98% 12.28% 12.19%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.26% 1.48% 1.26% 1.48%
Non-performing loans to total loans 1.47% 1.44% 1.47% 1.44%
Non-performing assets to total assets 1.07% 0.98% 1.07% 0.98%
Allowance for loan and lease losses to non-performing loans 86.03% 103.06% 86.03% 103.06%
Annualized net charge-offs to average loans and leases (3) 0.03% 0.11% 0.01% 0.10%
(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 September 30, 2014
Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2014 2013 2014 2013
Pre-tax pre-provision income:
Net income $ 11,142 $ 12,089 $ 29,052 $ 34,809
Plus non-GAAP adjustment:
Litigation expenses 236 -- 6,364 --
Income taxes 5,428 6,419 13,496 18,058
Provision (credit) for loan and lease losses (192) 1,128 (1,016) (1,670)
Pre-tax pre-provision income $ 16,614 $ 19,636 $ 47,896 $ 51,197
Efficiency ratio - GAAP basis:
Non-interest expenses $ 28,632 $ 26,893 $ 90,322 $ 82,224
Net interest income plus non-interest income $ 45,010 $ 46,529 $ 131,854 $ 133,421
Efficiency ratio - GAAP basis 63.61% 57.80% 68.50% 61.63%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $ 28,632 $ 26,893 $ 90,322 $ 82,224
Less non-GAAP adjustment:
Amortization of intangible assets 115 462 709 1,384
Litigation expenses 236 -- 6,364 --
Non-interest expenses -- as adjusted $ 28,281 $ 26,431 $ 83,249 $ 80,840
Net interest income plus non-interest income $ 45,010 $ 46,529 $ 131,854 $ 133,421
Plus non-GAAP adjustment:
Tax-equivalent income 1,296 1,344 3,909 3,967
Less non-GAAP adjustments:
Securities gains 8 -- 8 118
Net interest income plus non-interest income - as adjusted $ 46,298 $ 47,873 $ 135,755 $ 137,270
Efficiency ratio - Non-GAAP basis 61.09% 55.21% 61.32% 58.89%
Tangible common equity ratio:
Total stockholders' equity $ 522,404 $ 493,882 $ 522,404 $ 493,882
Accumulated other comprehensive (income) loss (3,632) 2,892 (3,632) 2,892
Goodwill (84,171) (84,171) (84,171) (84,171)
Other intangible assets, net (622) (1,792) (622) (1,792)
Tangible common equity $ 433,979 $ 410,811 $ 433,979 $ 410,811
Total assets $ 4,248,731 $ 4,052,969 $ 4,248,731 $ 4,052,969
Goodwill (84,171) (84,171) (84,171) (84,171)
Other intangible assets, net (622) (1,792) (622) (1,792)
Tangible assets $ 4,163,938 $ 3,967,006 $ 4,163,938 $ 3,967,006
Tangible common equity ratio 10.42% 10.36% 10.42% 10.36%
Outstanding common shares 25,076,794 24,985,146 25,076,794 24,985,146
Tangible book value per common share $ 17.31 $ 16.44 $ 17.31 $ 16.44
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
September 30, December 31, September 30,
(Dollars in thousands) 2014 2013 2013
Assets
Cash and due from banks $ 48,665 $ 46,755 $ 58,746
Federal funds sold 474 475 475
Interest-bearing deposits with banks 42,820 27,197 20,847
Cash and cash equivalents 91,959 74,427 80,068
Residential mortgage loans held for sale (at fair value) 6,656 8,365 10,542
Investments available-for-sale (at fair value) 692,107 751,284 815,545
Investments held-to-maturity -- fair value of $223,130, $216,007 and $220,054 at September 30, 2014, December 31, 2013 and September 30, 2013, respectively 221,690 224,638 225,994
Other equity securities 37,072 40,687 36,412
Total loans and leases 2,975,912 2,784,266 2,662,010
Less: allowance for loan and lease losses (37,574) (38,766) (39,422)
Net loans and leases 2,938,338 2,745,500 2,622,588
Premises and equipment, net 45,841 45,916 46,655
Other real estate owned 1,762 1,338 1,662
Accrued interest receivable 12,277 12,532 12,464
Goodwill 84,171 84,171 84,171
Other intangible assets, net 622 1,330 1,792
Other assets 116,236 115,912 115,076
Total assets $ 4,248,731 $ 4,106,100 $ 4,052,969
Liabilities
Noninterest-bearing deposits $ 986,549 $ 836,198 $ 890,319
Interest-bearing deposits 2,042,239 2,041,027 2,026,147
Total deposits 3,028,788 2,877,225 2,916,466
Securities sold under retail repurchase agreements and federal funds purchased 71,384 53,842 53,177
Advances from FHLB 558,000 615,000 520,000
Subordinated debentures 35,000 35,000 35,000
Accrued interest payable and other liabilities 33,155 25,670 34,444
Total liabilities 3,726,327 3,606,737 3,559,087
Stockholders' Equity
Common stock --- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 25,076,794
24,990,021 and 24,985,146 at September 30, 2014, December 31, 2013 and September 30, 2013, respectively 25,077 24,990 24,985
Additional paid in capital 194,899 193,445 192,964
Retained earnings 298,796 283,898 278,825
Accumulated other comprehensive income (loss) 3,632 (2,970) (2,892)
Total stockholders' equity 522,404 499,363 493,882
Total liabilities and stockholders' equity $ 4,248,731 $ 4,106,100 $ 4,052,969
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) 2014 2013 2014 2013
Interest Income:
Interest and fees on loans and leases $ 31,030 $ 33,079 $ 91,470 $ 91,937
Interest on loans held for sale 81 176 211 838
Interest on deposits with banks 24 22 66 65
Interest and dividends on investment securities:
Taxable 3,712 4,558 11,704 12,411
Exempt from federal income taxes 2,303 2,345 6,940 6,987
Total interest income 37,150 40,180 110,391 112,238
Interest Expense:
Interest on deposits 1,208 1,358 3,585 4,209
Interest on retail repurchase agreements and federal funds purchased 42 39 117 126
Interest on advances from FHLB 3,258 3,255 9,709 9,667
Interest on subordinated debt 222 222 659 672
Total interest expense 4,730 4,874 14,070 14,674
Net interest income 32,420 35,306 96,321 97,564
Provision (credit) for loan and lease losses (192) 1,128 (1,016) (1,670)
Net interest income after provision (credit) for loan and lease losses 32,612 34,178 97,337 99,234
Non-interest Income:
Investment securities gains 8 -- 8 118
Service charges on deposit accounts 2,226 2,171 6,287 6,390
Mortgage banking activities 596 (26) 1,482 2,738
Wealth management income 4,974 4,503 14,181 13,077
Insurance agency commissions 1,410 1,193 4,011 3,578
Income from bank owned life insurance 611 629 1,817 1,864
Bank card fees 1,148 1,077 3,295 3,113
Other income 1,617 1,676 4,452 4,979
Total non-interest income 12,590 11,223 35,533 35,857
Non-interest Expenses:
Salaries and employee benefits 16,765 16,382 49,594 48,891
Occupancy expense of premises 3,032 3,149 9,778 9,327
Equipment expenses 1,337 1,200 3,855 3,676
Marketing 744 713 2,088 1,983
Outside data services 1,231 1,152 3,663 3,418
FDIC insurance 594 678 1,687 1,855
Amortization of intangible assets 115 462 709 1,384
Litigation expenses 236 -- 6,364 --
Other expenses 4,578 3,157 12,584 11,690
Total non-interest expenses 28,632 26,893 90,322 82,224
Income before income taxes 16,570 18,508 42,548 52,867
Income tax expense 5,428 6,419 13,496 18,058
Net income $ 11,142 $ 12,089 $ 29,052 $ 34,809
Net Income Per Share Amounts:
Basic net income per share $ 0.44 $ 0.48 $ 1.16 $ 1.40
Diluted net income per share $ 0.44 $ 0.48 $ 1.16 $ 1.39
Dividends declared per share $ 0.20 $ 0.16 $ 0.56 $ 0.46
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2014 2013
(Dollars in thousands, except per share data) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 38,446 $ 38,322 $ 37,532 $ 38,434 $ 41,524 $ 37,091 $ 37,590
Interest expense 4,730 4,682 4,658 4,759 4,874 4,847 4,953
Tax-equivalent net interest income 33,716 33,640 32,874 33,675 36,650 32,244 32,637
Tax-equivalent adjustment 1,296 1,331 1,282 1,325 1,344 1,312 1,311
Provision for loan and lease losses (192) 158 (982) 586 1,128 (2,876) 78
Non-interest income 12,590 11,694 11,249 11,654 11,223 12,215 12,419
Non-interest expenses 28,632 34,141 27,549 29,300 26,893 27,508 27,823
Income before income taxes 16,570 9,704 16,274 14,118 18,508 18,515 15,844
Income tax expense 5,428 2,722 5,346 4,505 6,419 6,353 5,286
Net income $ 11,142 $ 6,982 $ 10,928 $ 9,613 $ 12,089 $ 12,162 $ 10,558
Financial performance:
Pre-tax pre-provision income $ 16,614 $ 15,990 $ 15,292 $ 14,704 $ 19,636 $ 15,639 $ 15,922
Return on average assets 1.05% 0.67% 1.08% 0.93% 1.19% 1.23% 1.08%
Return on average common equity 8.54% 5.47% 8.80% 7.71% 9.91% 9.98% 8.85%
Net interest margin 3.42% 3.48% 3.47% 3.53% 3.88% 3.51% 3.59%
Efficiency ratio - GAAP basis (1) 63.61% 77.59% 64.31% 66.59% 57.80% 63.75% 63.60%
Efficiency ratio - Non-GAAP basis (1) 61.09% 61.30% 61.60% 63.62% 55.21% 60.92% 60.80%
Per share data:
Basic net income per share $ 0.44 $ 0.28 $ 0.44 $ 0.38 $ 0.48 $ 0.49 $ 0.42
Diluted net income per share $ 0.44 $ 0.28 $ 0.43 $ 0.38 $ 0.48 $ 0.49 $ 0.42
Average fully diluted shares 25,151,582 25,127,036 25,124,206 25,108,109 25,070,506 25,009,092 25,002,612
Dividends declared per common share $ 0.20 $ 0.18 $ 0.18 $ 0.18 $ 0.16 $ 0.16 $ 0.14
Non-interest income:
Securities gains (losses) $ 8 $ -- $ -- $ (3) $ -- $ 62 $ 56
Service charges on deposit accounts 2,226 2,089 1,972 2,143 2,171 2,150 2,069
Mortgage banking activities 596 570 316 356 (26) 1,237 1,527
Wealth management income 4,974 4,741 4,466 4,508 4,503 4,532 4,042
Insurance agency commissions 1,410 961 1,640 1,243 1,193 1,036 1,349
Income from bank owned life insurance 611 608 598 635 629 623 612
Bank card fees 1,148 1,169 978 1,052 1,077 1,079 957
Other income 1,617 1,556 1,279 1,720 1,676 1,496 1,807
Total non-interest income $ 12,590 $ 11,694 $ 11,249 $ 11,654 $ 11,223 $ 12,215 $ 12,419
Non-interest expense:
Salaries and employee benefits $ 16,765 $ 16,474 $ 16,355 $ 16,707 $ 16,382 $ 16,163 $ 16,346
Occupancy expense of premises 3,032 3,274 3,472 3,844 3,149 2,996 3,182
Equipment expenses 1,337 1,262 1,256 1,264 1,200 1,227 1,249
Marketing 744 802 542 897 713 755 515
Outside data services 1,231 1,216 1,216 1,162 1,152 1,114 1,152
FDIC insurance 594 573 520 445 678 581 596
Amortization of intangible assets 115 224 370 461 462 461 461
Litigation expenses 236 6,128 -- -- -- -- --
Professional fees 1,092 1,292 914 1,386 511 1,332 1,250
Other real estate owned expenses 40 9 -- 91 (150) (281) 37
Other expenses 3,446 2,887 2,904 3,043 2,796 3,160 3,035
Total non-interest expense $ 28,632 $ 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) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 698,925 $ 668,536 $ 640,939 $ 618,381 $ 595,180 $ 565,282 $ 538,346
Residential construction loans 141,883 149,321 143,109 129,177 118,316 116,736 122,698
Commercial ADC loans 194,666 178,972 163,343 160,696 158,739 163,309 150,599
Commercial investor real estate loans 575,984 577,813 573,634 552,178 518,029 497,365 487,802
Commercial owner occupied real estate loans 584,964 581,795 582,472 592,823 569,350 563,258 565,820
Commercial business loans 368,611 357,472 348,180 356,651 332,670 334,979 344,489
Leasing 156 260 439 703 962 1,415 1,974
Consumer loans 410,723 396,775 380,697 373,657 368,764 363,114 353,341
Total loans and leases 2,975,912 2,910,944 2,832,813 2,784,266 2,662,010 2,605,458 2,565,069
Allowance for loan and lease losses (37,574) (37,959) (38,026) (38,766) (39,422) (39,015) (41,246)
Investment securities 950,869 980,530 997,584 1,016,609 1,077,951 1,102,209 1,008,693
Interest-earning assets 3,976,731 3,945,643 3,891,223 3,836,912 3,771,825 3,802,682 3,660,809
Total assets 4,248,731 4,234,342 4,168,998 4,106,100 4,052,969 4,072,617 3,932,026
Noninterest-bearing demand deposits 986,549 984,700 882,169 836,198 890,319 877,891 832,679
Total deposits 3,028,788 3,038,670 2,959,195 2,877,225 2,916,466 2,926,650 2,919,208
Customer repurchase agreements 71,384 72,917 67,038 53,842 53,177 54,731 50,302
Total interest-bearing liabilities 2,706,623 2,698,887 2,748,064 2,744,869 2,634,324 2,678,490 2,576,831
Total stockholders' equity 522,404 517,269 510,386 499,363 493,882 485,643 488,947
Quarterly average balance sheets:
Residential mortgage loans $ 689,531 $ 659,172 $ 633,160 $ 614,698 $ 593,335 $ 579,899 $ 575,889
Residential construction loans 147,750 145,968 134,261 125,744 120,676 119,197 120,283
Commercial ADC loans 180,293 168,063 162,544 156,558 158,557 160,483 148,749
Commercial investor real estate loans 577,851 575,283 557,168 522,085 499,896 485,630 474,062
Commercial owner occupied real estate loans 585,014 579,953 584,155 580,808 566,366 561,249 567,723
Commercial business loans 367,203 348,597 349,734 357,455 331,374 337,843 347,569
Leasing 206 352 567 817 1,152 1,644 2,510
Consumer loans 404,062 390,076 377,822 373,017 366,562 360,842 357,366
Total loans and leases 2,951,910 2,867,464 2,799,411 2,731,182 2,637,918 2,606,787 2,594,151
Investment securities 965,206 991,135 1,012,701 1,055,432 1,097,643 1,047,726 1,051,769
Interest-earning assets 3,954,858 3,893,843 3,845,513 3,817,033 3,770,855 3,692,215 3,677,444
Total assets 4,220,084 4,157,559 4,105,225 4,082,839 4,039,069 3,959,907 3,946,578
Noninterest-bearing demand deposits 956,830 899,287 825,968 872,532 862,046 838,502 797,926
Total deposits 3,036,686 2,965,329 2,876,641 2,901,814 2,903,926 2,892,704 2,860,451
Customer repurchase agreements 73,046 68,880 62,864 57,682 56,766 55,941 52,622
Total interest-bearing liabilities 2,711,206 2,716,537 2,749,459 2,679,812 2,659,406 2,599,704 2,631,198
Total stockholders' equity 517,534 511,738 503,851 494,779 483,811 489,014 483,664
Financial Measures
Average equity to average assets 12.26% 12.31% 12.27% 12.12% 11.98% 12.35% 12.26%
Investment securities to earning assets 23.91% 24.85% 25.64% 26.50% 28.58% 28.99% 27.55%
Loans to earning assets 74.83% 73.78% 72.80% 72.57% 70.58% 68.52% 70.07%
Loans to assets 70.04% 68.75% 67.95% 67.81% 65.68% 63.98% 65.24%
Loans to deposits 98.25% 95.80% 95.73% 96.77% 91.28% 89.03% 87.87%
Capital measures:
Tier 1 leverage (1) 11.36% 11.37% 11.43% 11.32% 11.29% 11.28% 11.07%
Tier 1 capital to risk-weighted assets (1) 14.52% 14.48% 14.64% 14.42% 14.45% 14.30% 14.23%
Total regulatory capital to risk-weighted assets (1) 15.68% 15.66% 15.85% 15.65% 15.70% 15.55% 15.48%
Book value per share $ 20.83 $ 20.63 $ 20.38 $ 19.98 $ 19.77 $ 19.45 $ 19.59
Outstanding shares 25,076,794 25,069,700 25,043,482 24,990,021 24,985,146 24,967,558 24,954,892
(1) Estimated ratio at September 30, 2014
Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2014 2013
(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 $ -- $ 1 $ -- $ -- $ -- $ 15 $ --
Commercial real estate:
Commercial AD&C -- -- -- -- -- -- --
Commercial investor real estate -- -- -- -- -- -- --
Commercial owner occupied real estate 649 -- -- -- -- -- --
Leasing -- -- -- -- -- -- --
Consumer 6 3 -- 1 10 -- 54
Residential real estate:
Residential mortgage -- -- -- -- -- -- --
Residential construction -- -- -- -- -- -- --
Total loans and leases 90 days past due 655 4 -- 1 10 15 54
Non-accrual loans and leases:
Commercial business 4,151 4,309 3,272 3,400 4,050 4,483 4,012
Commercial real estate:
Commercial AD&C 3,792 3,739 4,133 4,127 5,086 5,885 5,826
Commercial investor real estate 8,210 6,731 7,284 6,802 6,877 11,741 12,353
Commercial owner occupied real estate 10,742 10,868 7,150 5,936 4,202 5,413 5,346
Leasing -- -- -- -- -- -- --
Consumer 1,830 2,058 2,115 2,259 2,004 2,305 2,388
Residential real estate:
Residential mortgage 4,417 4,501 5,025 5,735 5,643 5,581 5,393
Residential construction 2,497 2,143 2,304 2,315 2,327 2,558 3,258
Total non-accrual loans and leases 35,639 34,349 31,283 30,574 30,189 37,966 38,576
Total restructured loans - accruing 7,382 7,364 7,411 9,459 8,054 8,213 10,839
Total non-performing loans and leases 43,676 41,717 38,694 40,034 38,253 46,194 49,469
Other assets and real estate owned (OREO) 1,762 1,967 1,619 1,338 1,662 4,831 5,250
Total non-performing assets $ 45,438 $ 43,684 $ 40,313 $ 41,372 $ 39,915 $ 51,025 $ 54,719
For the quarter ended,
September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2014 2014 2014 2013 2013 2013 2013
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $ 34,349 $ 31,283 $ 30,574 $ 30,189 $ 37,966 $ 38,576 $ 47,548
Non-accrual balances transferred to OREO (300) (390) (281) (365) (723) (1,426) (92)
Non-accrual balances charged-off (216) (357) (513) (922) (4,995) (668) (2,175)
Net payments or draws (590) (1,580) (1,073) (971) (13,547) (3,560) (11,768)
Loans placed on non-accrual 2,396 5,393 2,576 3,546 11,488 5,044 5,493
Non-accrual loans brought current -- -- -- (903) -- -- (430)
Balance at end of period $ 35,639 $ 34,349 $ 31,283 $ 30,574 $ 30,189 $ 37,966 $ 38,576
Analysis of Allowance for Loan Losses:
Balance at beginning of period $ 37,959 $ 38,026 $ 38,766 $ 39,422 $ 39,015 $ 41,246 $ 42,957
Provision (credit) for loan and lease losses (192) 158 (982) 586 1,128 (2,876) 78
Less loans charged-off, net of recoveries: --
Commercial business (58) 28 (768) 384 1 (32) 1,744
Commercial real estate:
Commercial AD&C -- -- -- 85 (616) (1,444) (1,020)
Commercial investor real estate (2) (23) (5) 23 1,243 123 31
Commercial owner occupied real estate -- 265 -- (82) (284) 100 81
Leasing -- -- -- -- (6) (4) --
Consumer 244 11 331 488 169 490 508
Residential real estate:
Residential mortgage 43 (27) 203 347 216 22 447
Residential construction (34) (29) (3) (3) (2) 100 (2)
Net charge-offs 193 225 (242) 1,242 721 (645) 1,789
Balance at end of period $ 37,574 $ 37,959 $ 38,026 $ 38,766 $ 39,422 $ 39,015 $ 41,246
Asset Quality Ratios:
Non-performing loans to total loans 1.47% 1.43% 1.37% 1.44% 1.44% 1.77% 1.93%
Non-performing assets to total assets 1.07% 1.03% 0.97% 1.01% 0.98% 1.25% 1.39%
Allowance for loan losses to loans 1.26% 1.30% 1.34% 1.39% 1.48% 1.50% 1.61%
Allowance for loan losses to non-performing loans 86.03% 90.99% 98.27% 96.83% 103.06% 84.46% 83.38%
Net charge-offs in quarter to average loans 0.03% 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 September 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) $ 689,531 $ 5,894 3.42% $ 593,335 $ 5,315 3.57%
Residential construction loans 147,750 1,376 3.69 120,676 1,106 3.63
Commercial ADC loans 180,293 2,196 4.83 158,557 3,438 8.60
Commercial investor real estate loans 577,851 7,009 4.81 499,896 8,608 6.83
Commercial owner occupied real estate loans 585,014 7,091 4.98 566,366 7,361 5.30
Commercial business loans 367,203 4,177 4.53 331,374 4,246 4.94
Leasing 206 4 6.91 1,152 20 7.11
Consumer loans 404,062 3,364 3.32 366,562 3,161 3.45
Total loans and leases (3) 2,951,910 31,111 4.22 2,637,918 33,255 5.03
Taxable securities 663,550 4,071 2.43 794,344 4,942 2.49
Tax-exempt securities (4) 301,656 3,240 4.26 303,299 3,305 4.36
Interest-bearing deposits with banks 37,268 24 0.25 34,819 22 0.25
Federal funds sold 474 -- 0.22 475 -- 0.22
Total interest-earning assets 3,954,858 38,446 3.89 3,770,855 41,524 4.39
Less: allowance for loan and lease losses (38,213) (41,385)
Cash and due from banks 45,600 45,322
Premises and equipment, net 45,959 46,784
Other assets 211,880 217,493
Total assets $ 4,220,084 $4,039,069
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 488,800 112 0.09% $ 442,210 97 0.09%
Regular savings deposits 263,255 34 0.05 240,910 53 0.09
Money market savings deposits 871,271 293 0.13 874,946 342 0.16
Time deposits 456,530 769 0.67 483,814 866 0.71
Total interest-bearing deposits 2,079,856 1,208 0.23 2,041,880 1,358 0.26
Other borrowings 73,046 42 0.23 56,983 39 0.27
Advances from FHLB 523,304 3,258 2.47 525,543 3,255 2.46
Subordinated debentures 35,000 222 2.54 35,000 222 2.55
Total interest-bearing liabilities 2,711,206 4,730 0.69 2,659,406 4,874 0.73
Noninterest-bearing demand deposits 956,830 862,046
Other liabilities 34,514 33,806
Stockholders' equity 517,534 483,811
Total liabilities and stockholders' equity $ 4,220,084 $4,039,069
Net interest income and spread $ 33,716 3.20% $ 36,650 3.66%
Less: tax-equivalent adjustment 1,296 1,344
Net interest income $ 32,420 $ 35,306
Interest income/earning assets 3.89% 4.39%
Interest expense/earning assets 0.47 0.51
Net interest margin 3.42% 3.88%
(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
Nine Months Ended September 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) $ 660,828 $ 17,085 3.45% $ 583,105 $ 16,001 3.66%
Residential construction loans 142,709 3,988 3.74 120,053 3,142 3.50
Commercial ADC loans 170,365 6,450 5.06 155,965 7,540 6.46
Commercial investor real estate loans 570,176 20,881 4.90 486,624 20,927 5.75
Commercial owner occupied real estate loans 583,044 21,304 5.05 565,108 22,464 5.45
Commercial business loans 355,242 12,268 4.62 338,869 13,288 5.10
Leasing 374 16 5.54 1,764 88 6.67
Consumer loans 390,749 9,689 3.34 361,624 9,325 3.47
Total loans and leases (3) 2,873,487 91,681 4.30 2,613,112 92,775 4.77
Taxable securities 687,359 12,786 2.48 765,054 13,536 2.36
Tax-exempt securities (4) 302,148 9,767 4.31 300,826 9,829 4.36
Interest-bearing deposits with banks 35,004 66 0.25 34,379 65 0.25
Federal funds sold 474 -- 0.22 475 -- 0.22
Total interest-earning assets 3,898,472 114,300 3.94 3,713,846 116,205 4.19
Less: allowance for loan and lease losses (38,645) (42,223)
Cash and due from banks 45,380 45,932
Premises and equipment, net 45,845 47,479
Other assets 210,325 216,958
Total assets $4,161,377 $3,981,992
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 475,459 306 0.09% $ 436,236 280 0.09%
Regular savings deposits 258,224 131 0.07 238,627 159 0.09
Money market savings deposits 871,399 839 0.13 880,794 1,131 0.17
Time deposits 460,548 2,309 0.67 497,136 2,639 0.71
Total interest-bearing deposits 2,065,630 3,585 0.23 2,052,793 4,209 0.27
Other borrowings 68,301 117 0.23 59,734 126 0.28
Advances from FHLB 556,663 9,709 2.33 482,679 9,667 2.68
Subordinated debentures 35,000 659 2.51 35,000 672 2.56
Total interest-bearing liabilities 2,725,594 14,070 0.69 2,630,206 14,674 0.75
Noninterest-bearing demand deposits 894,508 833,059
Other liabilities 30,184 33,230
Stockholders' equity 511,091 485,497
Total liabilities and stockholders' equity $4,161,377 $3,981,992
Net interest income and spread $ 100,230 3.25% $ 101,531 3.44%
Less: tax-equivalent adjustment 3,909 3,967
Net interest income $ 96,321 $ 97,564
Interest income/earning assets 3.94% 4.19%
Interest expense/earning assets 0.48 0.53
Net interest margin 3.46% 3.66%
(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 $3.9 million and $4.0 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.

Source:Sandy Spring Bancorp, Inc.