Sandy Spring Bancorp Reports Net Income of $8.3 Million for the Fourth Quarter

OLNEY, Md., Jan. 18, 2018 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR), the parent company of Sandy Spring Bank, today reported net income for the fourth quarter of 2017 of $8.3 million ($0.34 per diluted share) compared to net income of $13.3 million ($0.55 per diluted share) for the fourth quarter of 2016 and net income of $15.1 million ($0.62 per diluted share) for the third quarter of 2017. The current quarter’s results included $5.6 million in additional income tax expense from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act, as well as $1.8 million in post-tax merger expenses. The combined impact of these items resulted in a reduction to quarterly earnings per share of approximately $0.30 per share.

Net income for the full year 2017 was a record $53.2 million ($2.20 per diluted share) after the inclusion of the additional tax expense and the expenses associated with the acquisition of WashingtonFirst Bankshares. The additional income tax and merger expenses, net of tax, resulted in a reduction of earnings per share of approximately $0.34 per share for full-year-2017.

“This has been an outstanding year in terms of core performance and our ability to grow our franchise organically. Even in light of the inclusion of the increased tax expense and merger costs, net income for 2017 reached record levels. Core earnings for the fourth quarter continued to positively reflect the effects of loan and deposit growth that we have been experiencing. With the acquisition of WashingtonFirst Bankshares, which became effective on January 1, 2018, we enter the year as one of the premier banks in the region, and with the same steadfast commitment to delivering personalized service to our clients and serving our communities. It’s this commitment that has helped us grow to better serve our clients, employees, and shareholders. We continue to be encouraged by the current economic environment and the prospects for our ongoing growth,” said Daniel J. Schrider, President and Chief Executive Officer.

Fourth Quarter Highlights:

  • Total loans increased 10% compared to the fourth quarter of 2016 and 3% compared to the third quarter of 2017. The year-over-year increase was driven primarily by year-over-year growth of 11% in the commercial loan portfolio.
  • Total deposits grew 11% from the prior year quarter.
  • The net interest margin was 3.57% for the fourth quarter of 2017, compared to 3.52% for the fourth quarter of 2016 and 3.54% for the third quarter of 2017. Net interest income from the fourth quarter of 2017 included $0.4 million recovery of interest income from a previously charged-off loan. Exclusive of this item, the quarter’s margin would have been 3.53%.
  • Pre-tax merger expenses recognized in the fourth quarter of 2017 totaled $2.9 million.
  • The tax rate reduction associated with the recently enacted tax reform legislation caused a revaluation of net deferred tax assets and resulted in $5.6 million of additional income tax expense in the fourth quarter of 2017.
  • Pre-tax, pre-provision income increased 14% compared with the fourth quarter of 2016.
  • The Non-GAAP efficiency ratio which excludes merger costs was 55.69% for the current quarter as compared to 57.54% for the fourth quarter of 2016 and 53.76% for the third quarter of 2017.

Review of Balance Sheet and Credit Quality

At December 31, 2017, total assets were $5.4 billion, a 7% increase compared to $5.1 billion at December 31, 2016. Loan growth continues to be the driver of asset growth as total loans ended the period at $4.3 billion compared to $3.9 billion at December 31, 2016. The growth in the loan portfolio was funded primarily by an 11% increase in total deposits from December 31, 2016, to December 31, 2017.

Combined noninterest-bearing and interest-bearing checking account balances at December 31, 2017, an important performance driver of multiple-product banking relationships with clients, increased by 10% compared to balances at December 31, 2016.

Tangible common equity totaled $484 million at December 31, 2017, compared to $454 million at December 31, 2016. As a result of asset growth over the preceding 12 months, the ratio of tangible common equity to tangible assets decreased to 9.04% at December 31, 2017, from 9.07% at December 31, 2016. At December 31, 2017, the Company had a total risk-based capital ratio of 11.85%, a common equity tier 1 risk-based capital ratio of 10.84%, a tier 1 risk-based capital ratio of 10.84% and a tier 1 leverage ratio of 9.24%. These ratios reflect the application of the currently applicable authoritative guidance.

The level of non-performing loans to total loans decreased to 0.68% at December 31, 2017, compared to 0.81% at December 31, 2016, as a result of the growth in the loan portfolio and a reduction in non-performing loans. At December 31, 2017, non-performing loans totaled $29.3 million compared to $31.9 million at December 31, 2016, and $30.2 million at September 30, 2017. Non-performing loans include accruing loans 90 days or more past due and restructured loans.

Loan charge-offs, net of recoveries, totaled $0.2 million for the fourth quarter of 2017 compared to $0.4 million for the fourth quarter of 2016. The allowance for loan losses represented 1.05% of outstanding loans and 154% of non-performing loans at December 31, 2017, compared to 1.12% of outstanding loans and 138% of non-performing loans at December 31, 2016. The decline in the allowance to outstanding loans ratio is a reflection of improved credit quality and growth of the loan portfolio over the past year.

Income Statement Review

Net interest income for the fourth quarter of 2017 increased 12% compared to the fourth quarter of 2016 as average loans compared to the prior year quarter increased 10%. The net interest margin improved to 3.57% for the fourth quarter of 2017 compared to 3.52% for the fourth quarter of 2016. Exclusive of the recovered interest income, the net interest margin would have been 3.53%. The maintenance of the current quarter’s margin compared to the prior year’s quarter, exclusive of the recovered interest, reflects the impact of loan growth coupled with rate increases during the year, benefits associated with the execution of funding strategies and higher yields associated with the investment portfolio that offset the increased funding costs for the current quarter compared to the prior year quarter.

The provision for loan losses was $0.5 million for the fourth quarter of 2017 compared to $0.6 million for the fourth quarter of 2016 and $0.9 million for the third quarter of 2017. The relative stability in the provision reflects the improved credit quality of the growing loan portfolio.

Non-interest income remained stable for the fourth quarter of 2017 as compared to the fourth quarter of 2016. Wealth management income increased 10% while deposit service charges and insurance commissions both increased 6% for the fourth quarter compared to the same period of the prior year. These results were offset by a 49% decline in mortgage banking income from the prior year as mortgage loan origination activity declined in the current quarter compared to the prior year quarter.

Non-interest expenses increased 15% to $35.1 million for the fourth quarter of 2017 compared to $30.5 million in the fourth quarter of 2016. The increase in the current quarter compared to the prior year quarter was driven primarily by a $2.9 million in merger related expenses and $0.6 million increase in salary and benefit costs. The non-GAAP efficiency ratio was 55.69% for the fourth quarter of 2017 compared to 57.54% for the fourth quarter of 2016 as a result of the growth in net interest income.

Due to the recently enacted tax legislation that results in a rate reduction in future years, authoritative guidance requires a revaluation of the deferred tax assets in 2017. Accordingly, this revaluation resulted in $5.6 million in additional income tax expense in the fourth quarter of 2017. The impact of the additional tax expense and the post-tax effect of the merger expenses resulted in a $0.30 per share reduction in quarterly earnings per share.

Net interest income for the year ended December 31, 2017, increased 13% compared to 2016 due primarily to an increase in average loans and investments, which was funded primarily by an 11% increase in average deposits. As a result, the net interest margin was 3.55% for 2017 compared to 3.49% for the prior year. Net interest income for 2017 included $1.1 million in interest recoveries. Exclusive of these recoveries the net interest margin would have been 3.53%.

The provision for loan losses was $3.0 million for the year ended December 31, 2017, compared to $5.5 million for 2016 reflecting the effect of improved credit quality of the loan portfolio that offset the impact of the growth of the loan portfolio from the prior year.

Non-interest income was $51.2 million for 2017 compared to $51.0 million for 2016. The year ended December 31, 2017, included gains of $1.3 million on sales of investment securities while the prior year included a $1.2 million gain on the extinguishment of subordinated debentures and $1.9 million in gains on the sales of investment securities. Excluding these gains, non-interest income increased 4% compared to the prior year primarily due to increases in wealth management income, insurance agency commissions and deposit service charges.

Non-interest expenses increased 5% to $129.1 million for the year ended December 31, 2017, compared to $123.1 million for the prior year. Included in 2017 were increases from the prior year of $1.8 million in salaries and benefits, $0.6 million in FDIC insurance as a result of asset growth, and $4.3 million in merger expenses. These increases were partially offset by the decrease in prepayment penalties of $1.9 million for the early payoff of high-rate FHLB advances as compared to the year ended December 31, 2016. Excluding the impact of the FHLB prepayment penalties from the current and prior year’s results and the exclusion of merger expenses for 2017, non-interest expense increased 3%. The non-GAAP efficiency ratio decreased to 54.59% for 2017 compared to 58.66% for 2016 as a direct result of the growth in net interest income.

The additional income tax expense of $5.6 million and merger expenses, net of tax, resulted in a reduction of earnings per share of approximately $0.34 per share for full- year 2017. Pre-tax, pre-provision income, which adjusts for these items, increased 23% from full-year 2016 to full-year 2017 to a record $95.2 million.

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 Webcast of the conference call is available through the Investor Relations’ section of the Sandy Spring Website at www.sandyspringbank.com. Participants may call 1-866-235-9910. A password is not necessary. Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) February 1, 2018. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10115505.

About Sandy Spring Bancorp, Inc.

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

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

Media Contact:
Amalia Kastberg
Division Executive, Marketing
Sandy Spring Bank
301-774-8465
akastberg@sandyspringbank.com

Forward-Looking Statements

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

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

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2016, 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) 2017 2016 Change 2017 2016 Change
Results of Operations:
Net interest income $ 43,492 $38,967 12% $ 168,768 $149,552 13%
Provision for loan losses 527 572 (8) 2,977 5,546 (46)
Non-interest income 12,294 12,344 - 51,243 51,042 -
Non-interest expenses 35,059 30,544 15 129,099 123,058 5
Income before income taxes 20,200 20,195 - 87,935 71,990 22
Net income 8,267 13,316 (38) 53,209 48,250 10
Pre-tax pre-provision income $ 23,647 $20,767 14 $ 95,164 $77,536 23
Return on average assets 0.61 % 1.09% 1.02 % 1.02%
Return on average common equity 5.82 % 9.92% 9.66 % 9.15%
Net interest margin 3.57 % 3.52% 3.55 % 3.49%
Efficiency ratio - GAAP basis (1) 62.85 % 59.53% 58.68 % 61.35%
Efficiency ratio - Non-GAAP basis (1) 55.69 % 57.54% 54.59 % 58.66%
Per share data:
Basic net income $ 0.34 $0.55 (38)% $ 2.20 $2.00 10%
Diluted net income $ 0.34 $0.55 (38) $ 2.20 $2.00 10
Average fully diluted shares 24,228,471 24,140,534 - 24,207,728 24,149,121 -
Dividends declared per share $ 0.26 $0.26 - $ 1.04 $0.98 6
Book value per share 23.50 22.32 5 23.50 22.32 5
Tangible book value per share 20.18 18.98 6 20.18 18.98 6
Outstanding shares 23,996,293 23,901,084 - 23,996,293 23,901,084 -
Financial Condition at period-end:
Investment securities $ 775,025 $779,648 (1)% $ 775,025 $779,648 (1)%
Loans 4,314,248 3,927,808 10 4,314,248 3,927,808 10
Interest-earning assets 5,155,928 4,801,613 7 5,155,928 4,801,613 7
Assets 5,446,675 5,091,383 7 5,446,675 5,091,383 7
Interest-bearing liabilities 3,584,462 3,384,524 6 3,584,462 3,384,524 6
Stockholders' equity 563,816 533,572 6 563,816 533,572 6
Capital ratios:
Tier 1 leverage (4) 9.24 % 10.14% 9.24 % 10.14%
Tier 1 capital to risk-weighted assets (4) 10.84 % 11.74% 10.84 % 11.74%
Total regulatory capital to risk-weighted assets (4) 11.85 % 12.80% 11.85 % 12.80%
Common equity tier 1 capital to risk-weighted assets (4) 10.84 % 11.01% 10.84 % 11.01%
Tangible common equity to tangible assets (2) 9.04 % 9.07% 9.04 % 9.07%
Average equity to average assets 10.54 % 10.95% 10.51 % 11.12%
Credit quality ratios:
Allowance for loan losses to loans 1.05 % 1.12% 1.05 % 1.12%
Non-performing loans to total loans 0.68 % 0.81% 0.68 % 0.81%
Non-performing assets to total assets 0.58 % 0.66% 0.58 % 0.66%
Allowance for loan losses to non-performing loans 154.20 % 138.00% 154.20 % 138.00%
Annualized net charge-offs to average loans (3) 0.02 % 0.05% 0.04 % 0.06%
(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, excluding residential mortgage loans held-for-sale.
(4) Estimated ratio at December 31, 2017 based on current authoritative guidance.

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
Three Months Ended Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2017 2016 2017 2016
Pre-tax pre-provision income:
Net income $ 8,267 $13,316 $ 53,209 $48,250
Plus non-GAAP adjustment:
Merger expenses 2,920 - 4,252 -
Income taxes 11,933 6,879 34,726 23,740
Provision for loan losses 527 572 2,977 5,546
Pre-tax pre-provision income $ 23,647 $20,767 $ 95,164 $77,536
Efficiency ratio - GAAP basis:
Non-interest expenses $ 35,059 $30,544 $ 129,099 $123,058
Net interest income plus non-interest income $ 55,786 $51,311 $ 220,011 $200,594
Efficiency ratio - GAAP basis 62.85% 59.53% 58.68% 61.35%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $ 35,059 $30,544 $ 129,099 $123,058
Less non-GAAP adjustment:
Amortization of intangible assets 25 36 101 130
Loss on FHLB Redemption - - 1,275 3,167
Merger expenses 2,920 - 4,252 -
Non-interest expenses - as adjusted $ 32,114 $30,508 $ 123,471 $119,761
Net interest income plus non-interest income $ 55,786 $51,311 $ 220,011 $200,594
Plus non-GAAP adjustment:
Tax-equivalent income 1,874 1,718 7,459 6,711
Less non-GAAP adjustments:
Securities gains (losses) (2) 13 1,273 1,932
Gain on redemption of subordinated debentures - - - 1,200
Net interest income plus non-interest income - as adjusted $ 57,662 $53,016 $ 226,197 $204,173
Efficiency ratio - Non-GAAP basis 55.69% 57.54% 54.59% 58.66%
Tangible common equity ratio:
Total stockholders' equity $ 563,816 $533,572 $ 563,816 $533,572
Accumulated other comprehensive income 6,857 6,614 6,857 6,614
Goodwill (85,768) (85,768) (85,768) (85,768)
Other intangible assets, net (580) (680) (580) (680)
Tangible common equity $ 484,325 $453,738 $ 484,325 $453,738
Total assets $ 5,446,675 $5,091,383 $ 5,446,675 $5,091,383
Goodwill (85,768) (85,768) (85,768) (85,768)
Other intangible assets, net (580) (680) (580) (680)
Tangible assets $ 5,360,327 $5,004,935 $ 5,360,327 $5,004,935
Tangible common equity ratio 9.04% 9.07% 9.04% 9.07%
Outstanding common shares 23,996,293 23,901,084 23,996,293 23,901,084
Tangible book value per common share $ 20.18 $18.98 $ 20.18 $18.98

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
December 31, December 31,
(Dollars in thousands) 2017 2016
Assets
Cash and due from banks $ 55,693 $53,190
Federal funds sold 2,845 1,953
Interest-bearing deposits with banks 53,962 78,982
Cash and cash equivalents 112,500 134,125
Residential mortgage loans held for sale (at fair value) 9,848 13,222
Investments available-for-sale (at fair value) 729,507 733,554
Other equity securities 45,518 46,094
Total loans 4,314,248 3,927,808
Less: allowance for loan losses (45,257) (44,067)
Net loans 4,268,991 3,883,741
Premises and equipment, net 54,761 53,562
Other real estate owned 2,253 1,911
Accrued interest receivable 15,480 14,589
Goodwill 85,768 85,768
Other intangible assets, net 580 680
Other assets 121,469 124,137
Total assets $ 5,446,675 $5,091,383
Liabilities
Noninterest-bearing deposits $ 1,264,392 $1,138,139
Interest-bearing deposits 2,699,270 2,439,405
Total deposits 3,963,662 3,577,544
Securities sold under retail repurchase agreements and federal funds purchased 119,359 125,119
Advances from FHLB 765,833 790,000
Subordinated debentures - 30,000
Accrued interest payable and other liabilities 34,005 35,148
Total liabilities 4,882,859 4,557,811
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding
23,996,293 and 23,901,084 at December 31, 2017 and December 31, 2016, respectively 23,996 23,901
Additional paid in capital 168,188 165,871
Retained earnings 378,489 350,414
Accumulated other comprehensive loss (6,857) (6,614)
Total stockholders' equity 563,816 533,572
Total liabilities and stockholders' equity $ 5,446,675 $5,091,383

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) 2017 2016 2017 2016
Interest Income:
Interest and fees on loans $ 45,230 $39,510 $ 172,091 $150,868
Interest on loans held for sale 6 93 279 387
Interest on deposits with banks 121 57 410 213
Interest and dividends on investment securities:
Taxable 3,309 2,751 13,881 11,500
Exempt from federal income taxes 2,001 1,830 8,111 7,583
Interest on federal funds sold 9 2 27 5
Total interest income 50,676 44,243 194,799 170,556
Interest Expense:
Interest on deposits 4,044 2,155 13,256 8,161
Interest on retail repurchase agreements and federal funds purchased 99 78 337 290
Interest on advances from FHLB 3,041 2,798 12,426 11,610
Interest on subordinated debt - 245 12 943
Total interest expense 7,184 5,276 26,031 21,004
Net interest income 43,492 38,967 168,768 149,552
Provision for loan losses 527 572 2,977 5,546
Net interest income after provision for loan losses 42,965 38,395 165,791 144,006
Non-interest Income:
Investment securities gains (losses) (2) 13 1,273 1,932
Service charges on deposit accounts 2,177 2,059 8,298 7,953
Mortgage banking activities 654 1,279 2,734 4,049
Wealth management income 5,054 4,605 19,146 17,805
Insurance agency commissions 1,307 1,228 6,231 5,408
Income from bank owned life insurance 595 616 2,403 2,462
Bank card fees 1,218 1,176 4,827 4,674
Other income 1,291 1,368 6,331 6,759
Total non-interest income 12,294 12,344 51,243 51,042
Non-interest Expenses:
Salaries and employee benefits 18,607 18,055 73,132 71,354
Occupancy expense of premises 3,146 3,195 13,053 12,960
Equipment expenses 1,802 1,781 7,015 6,883
Marketing 896 880 3,119 2,851
Outside data services 1,441 1,310 5,486 5,377
FDIC insurance 827 729 3,305 2,741
Amortization of intangible assets 25 36 101 130
Merger expenses 2,920 - 4,252 -
Other expenses 5,395 4,558 19,636 20,762
Total non-interest expenses 35,059 30,544 129,099 123,058
Income before income taxes 20,200 20,195 87,935 71,990
Income tax expense 11,933 6,879 34,726 23,740
Net income $ 8,267 $13,316 $ 53,209 $48,250
Net Income Per Share Amounts:
Basic net income per share $ 0.34 $0.55 $ 2.20 $2.00
Diluted net income per share $ 0.34 $0.55 $ 2.20 $2.00
Dividends declared per share $ 0.26 $0.26 $ 1.04 $0.98

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2017 2016
(Dollars in thousands, except per share data) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the Quarter:
Tax-equivalent interest income $ 52,550 $51,477 $50,477 $47,754 $45,961 $44,545 $43,443 $43,317
Interest expense 7,184 6,892 6,250 5,705 5,276 5,126 5,071 5,531
Tax-equivalent net interest income 45,366 44,585 44,227 42,049 40,685 39,419 38,372 37,786
Tax-equivalent adjustment 1,874 1,888 1,901 1,796 1,718 1,688 1,640 1,664
Provision for loan losses 527 934 1,322 194 572 781 2,957 1,236
Non-interest income 12,294 12,746 13,571 12,632 12,344 12,584 12,751 13,363
Non-interest expenses 35,059 31,191 32,868 29,981 30,544 29,326 30,871 32,317
Income before income taxes 20,200 23,318 21,707 22,710 20,195 20,208 15,655 15,932
Income tax expense 11,933 8,229 6,966 7,598 6,879 6,734 5,008 5,119
Net income $ 8,267 $15,089 $14,741 $15,112 $13,316 $13,474 $10,647 $10,813
Financial Performance:
Pre-tax pre-provision income $ 23,647 $24,597 $24,016 $22,904 $20,767 $20,989 $18,612 $17,168
Return on average assets 0.61% 1.13% 1.14% 1.20% 1.09% 1.13% 0.92% 0.93%
Return on average common equity 5.82% 10.74% 10.80% 11.45% 9.92% 10.11% 8.21% 8.29%
Net interest margin 3.57% 3.54% 3.60% 3.51% 3.52% 3.50% 3.51% 3.44%
Efficiency ratio - GAAP basis (1) 62.85% 56.26% 58.80% 56.69% 59.53% 58.28% 62.39% 65.31%
Efficiency ratio - Non-GAAP basis (1) 55.69% 53.76% 54.10% 54.78% 57.54% 56.33% 59.12% 61.84%
Per Share Data:
Basic net income per share $ 0.34 $0.62 $0.61 $0.63 $0.55 $0.56 $0.45 $0.45
Diluted net income per share $ 0.34 $0.62 $0.61 $0.63 $0.55 $0.56 $0.44 $0.45
Average fully diluted shares 24,228,471 24,223,004 24,262,745 24,158,566 24,140,534 24,122,923 24,108,668 24,222,940
Dividends declared per common share $ 0.26 $0.26 $0.26 $0.26 $0.26 $0.24 $0.24 $0.24
Non-interest Income:
Securities gains (losses) $ (2) $- $1,273 $2 $13 $- $150 $1,769
Service charges on deposit accounts 2,177 2,140 2,017 1,964 2,059 2,035 1,956 1,903
Mortgage banking activities 654 632 840 608 1,279 1,129 1,106 535
Wealth management income 5,054 4,864 4,744 4,484 4,605 4,347 4,448 4,405
Insurance agency commissions 1,307 1,950 1,222 1,752 1,228 1,786 949 1,445
Income from bank owned life insurance 595 609 605 594 616 616 615 615
Bank card fees 1,218 1,211 1,253 1,145 1,176 1,189 1,220 1,089
Other income 1,291 1,340 1,617 2,083 1,368 1,482 2,307 1,602
Total Non-interest Income $ 12,294 $12,746 $13,571 $12,632 $12,344 $12,584 $12,751 $13,363
Non-interest Expense:
Salaries and employee benefits $ 18,607 $18,442 $18,282 $17,801 $18,055 $17,848 $17,221 $18,230
Occupancy expense of premises 3,146 3,294 3,211 3,402 3,195 3,130 3,162 3,473
Equipment expenses 1,802 1,722 1,767 1,724 1,781 1,745 1,693 1,664
Marketing 896 784 776 663 880 628 662 681
Outside data services 1,441 1,286 1,367 1,392 1,310 1,349 1,355 1,363
FDIC insurance 827 850 823 805 729 726 649 637
Amortization of intangible assets 25 25 25 26 36 34 28 32
Merger expenses 2,920 345 987 - - - - -
Professional fees 1,439 1,053 1,045 955 1,268 987 1,447 1,138
Other real estate owned expenses 14 4 (6) 5 2 5 (5) 17
Other expenses 3,942 3,386 4,591 3,208 3,288 2,874 4,659 5,082
Total Non-interest Expense $ 35,059 $31,191 $32,868 $29,981 $30,544 $29,326 $30,871 $32,317
(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
2017 2016
(Dollars in thousands) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance Sheets at Quarter End:
Residential mortgage loans $ 921,435 $882,890 $871,766 $848,814 $841,692 $854,055 $820,618 $804,105
Residential construction loans 176,687 171,814 169,901 170,285 150,229 144,998 142,710 138,221
Commercial AD&C loans 292,443 295,222 314,259 309,350 308,279 302,522 285,585 261,204
Commercial investor real estate loans 1,112,710 1,104,669 1,069,988 979,410 928,113 847,946 824,252 783,161
Commercial owner occupied real estate loans 857,196 831,461 797,629 772,443 775,552 736,744 700,599 675,560
Commercial business loans 497,948 451,667 451,570 457,216 467,286 444,129 451,711 451,239
Consumer loans 455,829 456,395 458,058 455,478 456,657 450,113 447,149 447,198
Total loans 4,314,248 4,194,118 4,133,171 3,992,996 3,927,808 3,780,507 3,672,624 3,560,688
Allowance for loan losses (45,257) (44,924) (45,079) (43,861) (44,067) (43,942) (43,384) (41,766)
Loans held for sale 9,848 7,084 5,743 17,717 13,222 15,822 13,490 27,806
Investment securities 775,025 795,922 821,491 855,707 779,648 691,471 734,828 742,401
Interest-earning assets 5,155,928 5,049,229 4,988,704 4,919,927 4,801,613 4,537,331 4,461,180 4,447,063
Total assets 5,446,675 5,334,788 5,270,521 5,201,164 5,091,383 4,810,611 4,739,449 4,716,608
Noninterest-bearing demand deposits 1,264,392 1,312,710 1,302,536 1,234,505 1,138,139 1,154,227 1,176,135 1,084,746
Total deposits 3,963,662 3,955,792 3,885,445 3,799,198 3,577,544 3,537,157 3,510,141 3,412,308
Customer repurchase agreements 119,359 146,569 127,312 141,244 125,119 124,205 117,887 121,043
Total interest-bearing liabilities 3,584,462 3,422,568 3,380,221 3,380,937 3,384,524 3,087,135 2,996,893 3,073,605
Total stockholders' equity 563,816 564,480 554,683 544,261 533,572 536,655 529,479 522,392
Quarterly Average Balance Sheets:
Residential mortgage loans $ 903,660 $880,782 $860,081 $847,896 $848,399 $836,452 $811,705 $807,443
Residential construction loans 171,239 172,921 169,130 157,152 148,248 147,602 142,854 134,708
Commercial AD&C loans 289,737 291,569 302,924 310,325 310,110 287,836 272,090 261,687
Commercial investor real estate loans 1,114,960 1,090,641 1,010,389 945,080 878,511 832,529 788,785 750,821
Commercial owner occupied real estate loans 842,642 808,802 776,279 774,964 750,679 717,371 684,907 677,786
Commercial business loans 454,330 459,779 454,724 462,444 452,195 446,123 453,459 460,903
Consumer loans 458,378 457,526 461,672 458,162 454,349 450,171 449,594 451,075
Total loans 4,234,946 4,162,020 4,035,199 3,956,023 3,842,491 3,718,084 3,603,394 3,544,423
Loans held for sale 5,862 7,093 7,077 7,402 12,454 10,207 8,326 14,036
Investment securities 780,522 813,179 842,837 818,287 703,574 709,527 739,132 810,593
Interest-earning assets 5,061,075 5,019,133 4,922,389 4,829,208 4,599,426 4,477,438 4,394,879 4,411,796
Total assets 5,346,625 5,297,368 5,202,398 5,111,698 4,878,660 4,747,020 4,664,343 4,685,747
Noninterest-bearing demand deposits 1,322,157 1,293,470 1,251,396 1,159,715 1,167,379 1,131,739 1,082,762 1,021,471
Total deposits 3,991,936 3,916,657 3,810,180 3,673,731 3,582,437 3,528,665 3,429,897 3,300,131
Customer repurchase agreements 139,125 133,145 132,552 128,485 128,471 120,702 122,597 110,862
Total interest-bearing liabilities 3,419,669 3,407,279 3,360,128 3,375,002 3,138,420 3,045,998 3,020,505 3,103,710
Total stockholders' equity 563,506 557,282 547,229 535,308 534,057 530,241 521,387 524,309
Financial Measures:
Average equity to average assets 10.54% 10.52% 10.52% 10.47% 10.95% 11.17% 11.18% 11.19%
Investment securities to earning assets 15.03% 15.76% 16.47% 17.39% 16.24% 15.24% 16.47% 16.69%
Loans to earning assets 83.68% 83.06% 82.85% 81.16% 81.80% 83.32% 82.32% 80.07%
Loans to assets 79.21% 78.62% 78.42% 76.77% 77.15% 78.59% 77.49% 75.49%
Loans to deposits 108.85% 106.02% 106.38% 105.10% 109.79% 106.88% 104.63% 104.35%
Capital Measures:
Tier 1 leverage (1) 9.24% 9.28% 9.26% 9.26% 10.14% 10.25% 10.29% 10.23%
Tier 1 capital to risk-weighted assets (1) 10.84% 10.99% 10.96% 11.02% 11.74% 12.17% 12.42% 12.74%
Total regulatory capital to risk-weighted assets (1) 11.85% 12.01% 12.00% 12.06% 12.80% 13.29% 13.57% 13.86%
Common equity tier 1 capital to risk-weighted assets (1) 10.84% 10.99% 10.96% 11.02% 11.01% 11.41% 11.63% 11.79%
Book value per share $ 23.50 $23.53 $23.13 $22.74 $22.32 $22.47 $22.18 $21.92
Outstanding shares 23,996,293 23,990,370 23,983,997 23,930,165 23,901,084 23,886,651 23,874,650 23,827,305
(1) Estimated ratio at December 31, 2017 based on current authoritative guidance.

Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2017 2016
(Dollars in thousands) December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
Non-Performing Assets:
Loans 90 days past due:
Commercial business $ - $- $- $- $- $163 $- $-
Commercial real estate:
Commercial AD&C - - - - - - - -
Commercial investor real estate - - - - - - - -
Commercial owner occupied real estate - - 424 - - - - -
Consumer - 1 4 - - - 2 1
Residential real estate:
Residential mortgage 225 225 - 232 232 - - -
Residential construction - - - - - - - -
Total loans 90 days past due 225 226 428 232 232 163 2 1
Non-accrual loans:
Commercial business 6,703 6,091 6,807 4,849 5,833 4,140 4,263 3,741
Commercial real estate:
Commercial AD&C 136 137 137 137 137 137 137 147
Commercial investor real estate 5,575 5,589 6,934 7,970 8,107 9,189 8,868 7,885
Commercial owner occupied real estate 3,582 5,012 4,926 5,106 4,823 5,591 5,678 7,149
Consumer 2,967 3,152 3,111 3,058 2,859 2,726 2,600 2,715
Residential real estate:
Residential mortgage 7,196 7,345 7,101 6,908 7,257 7,321 6,186 9,329
Residential construction 177 182 187 189 195 199 202 412
Total non-accrual loans 26,336 27,508 29,203 28,217 29,211 29,303 27,934 31,378
Total restructured loans - accruing 2,788 2,471 2,569 2,409 2,489 2,512 3,420 4,716
Total non-performing loans 29,349 30,205 32,200 30,858 31,932 31,978 31,356 36,095
Other assets and real estate owned (OREO) 2,253 1,448 1,460 1,294 1,911 1,274 1,311 2,414
Total non-performing assets $ 31,602 $ 31,653 $ 33,660 $ 32,152 $ 33,843 $ 33,252 $ 32,667 $ 38,509
For the Quarter Ended,
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2017 2017 2017 2017 2016 2016 2016 2016
Analysis of Non-accrual Loan Activity:
Balance at beginning of period $ 27,508 $29,203 $28,217 $29,211 $29,303 $27,934 $31,378 $30,031
Non-accrual balances transferred to OREO (888) (411) (175) (113) (637) (38) - -
Non-accrual balances charged-off (446) (1,127) (179) (391) (390) (245) (1,305) (274)
Net payments or draws (1,707) (1,869) (1,804) (1,382) (1,547) (525) (4,810) (914)
Loans placed on non-accrual 2,504 1,712 3,144 1,461 2,482 2,486 2,671 2,535
Non-accrual loans brought current (635) - - (569) - (309) - -
Balance at end of period $ 26,336 $27,508 $29,203 $28,217 $29,211 $29,303 $27,934 $31,378
Analysis of Allowance for Loan Losses:
Balance at beginning of period $ 44,924 $45,079 $43,861 $44,067 $43,942 $43,384 $41,766 $40,895
Provision for loan losses 527 934 1,322 194 572 781 2,957 1,236
Less loans charged-off, net of recoveries:
Commercial business 48 1,029 107 260 285 95 106 67
Commercial real estate:
Commercial AD&C - - (103) - (18) (22) - 48
Commercial investor real estate (8) (10) (78) (5) (9) (12) (107) 192
Commercial owner occupied real estate 243 5 - - - (1) (1) (3)
Consumer (71) 103 189 167 177 145 364 54
Residential real estate:
Residential mortgage (12) (32) (3) (16) 18 24 989 15
Residential construction (6) (6) (8) (6) (6) (6) (12) (8)
Net charge-offs 194 1,089 104 400 447 223 1,339 365
Balance at end of period $ 45,257 $44,924 $45,079 $43,861 $44,067 $43,942 $43,384 $41,766
Asset Quality Ratios:
Non-performing loans to total loans 0.68% 0.72% 0.78% 0.77% 0.81% 0.85% 0.85% 1.01%
Non-performing assets to total assets 0.58% 0.59% 0.64% 0.62% 0.66% 0.69% 0.69% 0.82%
Allowance for loan losses to loans 1.05% 1.07% 1.09% 1.10% 1.12% 1.16% 1.18% 1.17%
Allowance for loan losses to non-performing loans 154.20% 148.73% 140.00% 142.14% 138.00% 137.41% 138.36% 115.72%
Annualized net charge-offs to average loans 0.02% 0.10% 0.01% 0.04% 0.05% 0.02% 0.15% 0.04%

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Three Months Ended December 31,
2017
2016
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 $ 903,660 $ 7,997 3.54% $848,399 $7,321 3.45%
Residential construction loans 171,239 1,636 3.79 148,248 1,365 3.66
Total mortgage loans 1,074,899 9,633 3.58 996,647 8,686 3.48
Commercial AD&C loans 289,737 3,718 5.09 310,110 3,688 4.73
Commercial investor real estate loans 1,114,960 12,580 4.48 878,511 10,023 4.54
Commercial owner occupied real estate loans 842,642 10,258 4.83 750,679 8,891 4.71
Commercial business loans 454,330 5,264 4.60 452,195 4,931 4.34
Total commercial loans 2,701,669 31,820 4.67 2,391,495 27,533 4.58
Consumer loans 458,378 4,438 3.88 454,349 3,905 3.45
Total loans (2) 4,234,946 45,891 4.31 3,842,491 40,124 4.16
Loans held for sale 5,862 6 0.38 12,454 93 2.98
Taxable securities 489,020 3,428 2.80 435,129 2,850 2.62
Tax-exempt securities (3) 291,502 3,095 4.25 268,445 2,835 4.22
Total investment securities 780,522 6,523 3.34 703,574 5,685 3.23
Interest-bearing deposits with banks 36,904 121 1.30 39,471 57 0.57
Federal funds sold 2,841 9 1.21 1,436 2 0.53
Total interest-earning assets 5,061,075 52,550 4.13 4,599,426 45,961 3.98
Less: allowance for loan losses (45,247) (43,298)
Cash and due from banks 50,489 50,090
Premises and equipment, net 54,741 53,588
Other assets 225,567 218,854
Total assets $ 5,346,625 $4,878,660
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 625,502 135 0.09% $589,259 111 0.08%
Regular savings deposits 323,367 53 0.07 306,261 45 0.06
Money market savings deposits 1,027,365 1,698 0.66 936,880 505 0.21
Time deposits 693,545 2,158 1.23 582,658 1,494 1.02
Total interest-bearing deposits 2,669,779 4,044 0.60 2,415,058 2,155 0.36
Other borrowings 139,125 99 0.28 128,471 78 0.24
Advances from FHLB 610,765 3,041 1.98 564,891 2,798 1.97
Subordinated debentures - - - 30,000 245 3.27
Total interest-bearing liabilities 3,419,669 7,184 0.83 3,138,420 5,276 0.67
Noninterest-bearing demand deposits 1,322,157 1,167,379
Other liabilities 41,293 38,804
Stockholders' equity 563,506 534,057
Total liabilities and stockholders' equity $ 5,346,625 $4,878,660
Net interest income and spread $ 45,366 3.30 % $40,685 3.31%
Less: tax-equivalent adjustment 1,874 1,718
Net interest income $ 43,492 $38,967
Interest income/earning assets 4.13 % 3.98%
Interest expense/earning assets 0.56 0.46
Net interest margin 3.57 % 3.52%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2017 and 2016. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.9 million and $1.7 million in 2017 and 2016, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Twelve Months Ended December 31,
2017 2016
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 $ 873,278 $ 30,648 3.51% $ 826,089 $ 28,331 3.43%
Residential construction loans 167,664 6,292 3.75 143,378 5,169 3.61
Total mortgage loans 1,040,942 36,940 3.55 969,467 33,500 3.46
Commercial AD&C loans 298,563 14,844 4.97 283,018 13,199 4.66
Commercial investor real estate loans 1,040,871 46,558 4.47 812,896 37,110 4.57
Commercial owner occupied real estate loans 800,879 38,759 4.84 707,830 33,837 4.78
Commercial business loans 457,802 20,585 4.50 453,148 19,750 4.36
Total commercial loans 2,598,115 120,746 4.65 2,256,892 103,896 4.60
Consumer loans 458,931 16,934 3.72 451,303 15,596 3.48
Total loans (2) 4,097,988 174,620 4.26 3,677,662 152,992 4.16
Loans held for sale 6,855 279 4.06 11,256 387 3.44
Taxable securities 517,375 14,372 2.78 461,973 11,923 2.58
Tax-exempt securities (3) 296,226 12,550 4.24 278,546 11,747 4.22
Total investment securities 813,601 26,922 3.31 740,519 23,670 3.20
Interest-bearing deposits with banks 37,728 410 1.09 40,940 213 0.52
Federal funds sold 2,581 27 1.03 876 5 0.50
Total interest-earning assets 4,958,753 202,258 4.08 4,471,253 177,267 3.96
Less: allowance for loan losses (44,557) (42,487)
Cash and due from banks 48,765 47,219
Premises and equipment, net 53,947 53,386
Other assets 223,012 214,004
Total assets $ 5,239,920 $ 4,743,375
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 616,524 507 0.08% $ 581,185 446 0.08%
Regular savings deposits 322,856 216 0.07 300,035 182 0.06
Money market savings deposits 1,000,965 5,031 0.50 920,125 1,951 0.21
Time deposits 651,610 7,502 1.15 558,355 5,582 1.00
Total interest-bearing deposits 2,591,955 13,256 0.51 2,359,700 8,161 0.35
Other borrowings 133,356 337 0.25 120,711 290 0.24
Advances from FHLB 664,966 12,426 1.87 565,342 11,610 2.05
Subordinated debentures 411 12 2.94 31,489 943 3.00
Total interest-bearing liabilities 3,390,688 26,031 0.77 3,077,242 21,004 0.68
Noninterest-bearing demand deposits 1,257,231 1,101,104
Other liabilities 41,075 37,505
Stockholders' equity 550,926 527,524
Total liabilities and stockholders' equity $ 5,239,920 $ 4,743,375
Net interest income and spread $ 176,227 3.31 % $ 156,263 3.28%
Less: tax-equivalent adjustment 7,459 6,711
Net interest income $ 168,768 $ 149,552
Interest income/earning assets 4.08 % 3.96%
Interest expense/earning assets 0.53 0.47
Net interest margin 3.55 % 3.49%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2017 and 2016. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $7.5 million and $6.7 million in 2017 and 2016, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.

Source:Sandy Spring Bancorp, Inc.