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Sandy Spring Bancorp Reports Third Quarter Profit of $11.0 Million

Sandy Spring Bancorp, Inc. Logo

OLNEY, Md., Oct. 18, 2012 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today announced net income for the third quarter of 2012 of $11.0 million ($.44 per diluted share) compared to net income of $11.3 million ($0.47 per diluted share) for the third quarter of 2011 and net income of $7.2 million ($0.30 per diluted share) for the second quarter of 2012.

Net income for the nine-month period ended September 30, 2012 totaled $26.7 million ($1.09 per diluted share) compared to net income of $26.8 million ($1.11 per diluted share) for the prior year period.

"Our strong third quarter results were driven by the accretive effect on the net interest margin from the CommerceFirst acquisition, completed in the prior quarter," said Daniel J. Schrider, President and Chief Executive Officer. "Together with continued improvement to our deposit mix, these factors produced a 12% increase in net interest income over the prior year quarter."

"While the struggling economy and intense competition in our markets limited our loan growth during the quarter, non-interest income benefited from an increased volume of mortgage originations, most of which were sold in the secondary market," said Schrider.

Third Quarter Highlights:

  • Pre-tax pre-provision income, a non-GAAP measure, was $17.0 million for the third quarter of 2012, a 23% increase over the third quarter of 2011 and a 16% increase over the second quarter of 2012.
  • The net interest margin was 3.67% for the third quarter of 2012, compared to 3.53% for the third quarter of 2011 and 3.62% for the second quarter of 2012.
  • Non-interest income increased 8% for the quarter compared to the prior year quarter due primarily to higher income from mortgage banking activities.
  • Non-performing loans decreased to $59.9 million at September 30, 2012 compared to $82.8 million at September 30, 2011 and $64.5 million at June 30, 2012. The decrease in the third quarter was due to a lower level of non-accrual loans.

Review of Balance Sheet and Credit Quality

Total assets increased 7% to $3.9 billion at September 30, 2012 compared to balances at September 30, 2011. Total loans and leases increased 15% to $2.5 billion compared to the prior year.This increase consisted of $157.2 million in loans from the acquisition of CommerceFirst and $166.4 million of internally-generated loan growth, primarily in the commercial loan portfolio. Total loans increased 10% compared to balances at December 31, 2011. Excluding the loans acquired in the CommerceFirst acquisition, total loans increased 8% compared to September 30, 2011 and 3% compared to December 31, 2011.

Customer funding sources, which include deposits and other short-term borrowings from customers, increased 8% compared to September 30, 2011. This increase was due primarily to a 22% increase in noninterest-bearing and interest-bearing checking accounts. The Company views the growth in checking accounts as an especially valuable metric as it provides additional opportunities to grow multiple product banking relationships with clients. Excluding the deposits acquired in the CommerceFirst acquisition, total customer funding sources increased 4% while certificates of deposit declined 17% at September 30, 2012 compared to balances at September 30, 2011, as the Company managed its deposit mix to maintain the net interest margin.

Tangible common equity, a non-GAAP metric, totaled $379.8 million at September 30, 2012 compared to $345.6 million at September 30, 2011 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.75% at September 30, 2011 to 9.99% at September 30, 2012. This increase was due primarily to stock issued in connection with the CommerceFirst acquisition and net income earned during the period. At September 30, 2012, the Company had a total risk-based capital ratio of 15.56%, a tier 1 risk-based capital ratio of 14.31% and a tier 1 leverage ratio of 10.99%.

Non-performing loans decreased to $59.9 million at September 30, 2012 compared to $82.8 million at September 30, 2011 and $64.5 million at June 30, 2012. The Company's credit quality metrics showed continued improvement due to resolution of existing problem credits and limited migration of new credits to non-performing status.

The provision for loan and lease losses was a charge of $0.2 million for the third quarter of 2012 compared to a credit of $3.5 million for the third quarter of 2011 and a charge of $1.6 million for the second quarter of 2012. The increase in the provision for the third quarter of 2012 compared to the third quarter of 2011 was due primarily to a decline in historical losses at September 30, 2011 which caused a credit balance in the provision for the third quarter of 2011. The decrease in the provision for the third quarter of 2012 compared to the second quarter of 2012 was largely due to a decline in total non-performing loans and related specific reserves.

Loan charge-offs, net of recoveries, totaled $2.9 million for the third quarter of 2012 compared to net charge-offs of $2.0 million for the third quarter of 2011 and $1.4 million for the second quarter of 2012. The allowance for loan and lease losses represented 1.73% of outstanding loans and leases and 71% of non-performing loans at September 30, 2012 compared to 2.32% of outstanding loans and leases and 60% of non-performing loans at September 30, 2011 and 1.83% of outstanding loans and leases and 70% of non-performing loans at June 30, 2012. 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 2012 increased by $3.5 million or 12% compared to the third quarter of 2011 due to an increase in average interest-earning assets resulting from the CommerceFirst transaction and organic growth. Combined with a lower cost deposit mix, these factors resulted in an increase in the net interest margin to 3.67% for the third quarter of 2012 compared to 3.53% for the third quarter of 2011.

Non-interest income increased $0.9 million or 8% to $12.2 million for the third quarter of 2012 compared to $11.3 million for the third quarter of 2011. This increase was due primarily to growth in income from mortgage banking activities of $0.8 million due to higher loan origination volumes and higher average gains on sales, both due to increased refinancing activity during the quarter. In addition, Visa check fees increased 6% over the prior year quarter due to a higher volume of electronic transactions.

Non-interest expenses were $27.2 million for the third quarter of 2012 compared to $25.8 million in the third quarter of 2011, an increase of $1.4 million or 5%. This increase was driven by higher salaries and benefits, occupancy and marketing expenses. The non-GAAP efficiency ratio improved to 58.9% for the third quarter of 2012 compared to 62.0% for the third quarter of 2011.

Net interest income for the first nine months of 2012 increased by $5.8 million or 7% compared to the first nine months of 2011 due to an increase in average earning assets resulting from organic loan growth, loans acquired in the CommerceFirst acquisition and an increased level of noninterest-bearing deposits, which more than offset lower earning asset yields. These factors, together with a decline in the cost of funds, resulted in an increase in the net interest margin to 3.62% for the first nine months of 2012 compared to 3.59% for the first nine months of 2011.

Non-interest income increased $2.6 million or 8% to $34.7 million for the first nine months of 2012 as compared to $32.1 million for 2011. This increase was due primarily to an increase of $1.9 million or 79% in income from mortgage banking activities due to higher volumes and increased average gains from refinancing activity. Revenue from wealth management services increased $0.3 million or 3% due primarily to higher assets under management.

Non-interest expenses were $82.7 million for the first nine months of 2012 compared to $77.7 million for the first nine months of 2011, an increase of $5.0 million or 6%. This increase was driven by a 7% increase in salaries and benefits expense due to merit salary increases, a larger staff and higher cost of health benefits. These expenses were partially offset by a 21% decrease in FDIC insurance premiums due to a change in calculation of such premiums effective in the third quarter of 2011. Excluding one-time merger expenses of $2.7 million in the first nine months of 2012, non-interest expenses increased only 3% over the prior year period. The non-GAAP efficiency ratio was 61.1% for the first nine months of 2012 compared to 63.3% for the first nine months of 2011.

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 1-877-317-6789. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) November 19, 2012. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10018787.

About Sandy Spring Bancorp/Sandy Spring Bank

With $3.9 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 49 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George's counties in Maryland, and Arlington, Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of insurance and investment management services. Visit www.sandyspringbank.com to locate an ATM near you or for more information about Sandy Spring Bank.

The Sandy Spring Bancorp, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4138

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, 2011, 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) 2012 2011 Change 2012 2011 Change
Results of Operations:
Net interest income $ 31,785 $ 28,330 12% $ 90,299 $ 84,494 7%
Provision for loan and lease losses 232 (3,520) (107) 2,481 (854) --
Non-interest income 12,242 11,336 8 34,709 32,130 8
Non-interest expenses 27,167 25,848 5 82,708 77,748 6
Income before income taxes 16,628 17,338 (4) 39,819 39,730 --
Net income 10,990 11,257 (2) 26,673 26,844 (1)
Pre-tax pre-provision pre-merger expense income $ 16,996 $ 13,818 23 $ 45,008 $ 38,876 16
Return on average assets 1.13% 1.24% 0.95% 1.01%
Return on average common equity 9.22% 10.42% 7.74% 8.61%
Net interest margin 3.67% 3.53% 3.62% 3.59%
Efficiency ratio - GAAP (1) 61.70% 65.16% 66.16% 66.67%
Efficiency ratio - Non-GAAP (1) 58.91% 62.02% 61.08% 63.29%
Per share data:
Basic net income $ 0.44 $ 0.47 (6)% $ 1.09 $ 1.11 (2)%
Diluted net income 0.44 0.47 (6) 1.09 1.11 (2)
Average fully diluted shares 24,949,205 24,142,137 3 24,535,439 24,127,814 2
Dividends declared per share 0.12 0.08 50 0.34 0.24 42
Book value per share 19.35 18.31 6 19.35 18.31 6
Tangible book value per share 15.26 14.35 6 15.26 14.35 6
Outstanding shares 24,896,136 24,079,204 3 24,896,136 24,079,204 3
Financial Condition at period-end:
Investment securities $1,074,918 $ 1,174,180 (8)% $1,074,918 $ 1,174,180 (8)%
Loans and leases 2,468,985 2,145,403 15 2,468,985 2,145,403 15
Interest-earning assets 3,614,310 3,370,360 7 3,614,310 3,370,360 7
Assets 3,887,427 3,626,043 7 3,887,427 3,626,043 7
Deposits 2,880,262 2,640,324 9 2,880,262 2,640,324 9
Interest-bearing liabilities 2,560,040 2,517,180 2 2,560,040 2,517,180 2
Stockholders' equity 481,810 440,791 9 481,810 440,791 9
Capital ratios:
Tier 1 leverage 10.99 10.79% 10.99% 10.79%
Tier 1 capital to risk-weighted assets 14.31 14.96% 14.31% 14.96%
Total regulatory capital to risk-weighted assets 15.56 16.21% 15.56% 16.21%
Tangible common equity to tangible assets (2) 9.99 9.75% 9.99% 9.75%
Average equity to average assets 12.27 11.87% 12.31% 11.71%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.73 2.32 1.73% 2.32%
Non-performing loans to total loans 2.42 3.86 2.42% 3.86%
Non-performing assets to total assets 1.78 2.50 1.78% 2.50%
Allowance for loan and lease losses to non-performing loans 71.18 60.01 71.18% 60.01%
Annualized net charge-offs to average loans and leases (3) 0.46 0.37 0.53% 0.72%
(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The traditional,
non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; securities gains (losses) from non-interest income; OTTI; and
the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and
other comprehensive gains (losses). See the Reconciliation Table included with these Financial Highlights.
(3) Calculation utilizes average loans and leases, excluding residential mortgage loans held-for-sale.
Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2012 2011 2012 2011
Pre-tax pre-provision pre-merger expense income:
Net income $ 10,990 $ 11,257 $ 26,673 $ 26,844
Plus non-GAAP adjustment:
Merger expenses 136 -- 2,708 --
Income taxes 5,638 6,081 13,146 12,886
Provision (credit) for loan and lease losses 232 (3,520) 2,481 (854)
Pre-tax pre-provision pre-merger expense income $ 16,996 $ 13,818 $ 45,008 $ 38,876
GAAP efficiency ratio:
Non-interest expenses $ 27,167 $ 25,848 $ 82,708 $ 77,748
Net interest income plus non-interest income $ 44,027 $ 39,666 $ 125,008 $ 116,624
GAAP Efficiency ratio 61.70% 65.16% 66.16% 66.67%
Non-GAAP efficiency ratio:
Non-interest expenses $ 27,167 $ 25,848 $ 82,708 $ 77,748
Less non-GAAP adjustment:
Amortization of intangible assets 476 461 1,403 1,384
Merger expenses 136 -- 2,708 --
Non-interest expenses -- as adjusted $ 26,555 $ 25,387 $ 78,597 $ 76,364
Net interest income plus non-interest income $ 44,027 $ 39,666 $ 125,008 $ 116,624
Plus non-GAAP adjustment:
Tax-equivalent income 1,324 1,420 4,040 4,154
Less non-GAAP adjustments:
Securities gains 296 231 459 283
OTTI recognized in earnings (23) (76) (95) (160)
Net interest income plus non-interest income - as adjusted $ 45,078 $ 40,931 $ 128,684 $ 120,655
Non-GAAP Efficiency ratio 58.91% 62.02% 61.08% 63.29%
Tangible common equity ratio:
Total stockholders' equity $ 481,810 $ 440,791 $ 481,810 $ 440,791
Accumulated other comprehensive income (loss) (16,433) (13,147) (16,433) (13,147)
Goodwill (81,892) (76,816) (81,892) (76,816)
Other intangible assets, net (3,641) (5,195) (3,641) (5,195)
Tangible common equity $ 379,844 $ 345,633 $ 379,844 $ 345,633
Total assets $ 3,887,427 $ 3,626,043 $ 3,887,427 $ 3,626,043
Goodwill (81,892) (76,816) (81,892) (76,816)
Other intangible assets, net (3,641) (5,195) (3,641) (5,195)
Tangible assets $ 3,801,894 $ 3,544,032 $ 3,801,894 $ 3,544,032
Tangible common equity ratio 9.99% 9.75% 9.99% 9.75%
Outstanding common shares 24,896,136 24,079,204 24,896,136 24,079,204
Tangible book value per common share $ 15.26 $ 14.35 $ 15.26 $ 14.35
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
September 30, December 31, September 30,
(Dollars in thousands) 2012 2011 2011
Assets
Cash and due from banks $ 48,744 $ 49,832 $ 43,132
Federal funds sold 466 1,006 1,146
Interest-bearing deposits with banks 30,057 21,476 26,535
Cash and cash equivalents 79,267 72,314 70,813
Residential mortgage loans held for sale (at fair value) 39,884 25,341 23,096
Investments available-for-sale (at fair value) 834,665 951,301 952,074
Investments held-to-maturity --- fair value of $213,235, $184,167 and $193,432
at September 30, 2012, December 31, 2011 and September 30, 2011, respectively 206,613 178,465 189,520
Other equity securities 33,640 34,933 32,586
Total loans and leases 2,468,985 2,239,692 2,145,403
Less: allowance for loan and lease losses (42,618) (49,426) (49,720)
Net loans and leases 2,426,367 2,190,266 2,095,683
Premises and equipment, net 48,784 48,483 48,750
Other real estate owned 9,291 4,431 7,938
Accrued interest receivable 12,813 12,898 12,382
Goodwill 81,892 76,816 76,816
Other intangible assets, net 3,641 4,734 5,195
Other assets 110,570 111,388 111,190
Total assets $ 3,887,427 $ 3,711,370 $ 3,626,043
Liabilities
Noninterest-bearing deposits $ 818,674 $ 650,377 $ 643,169
Interest-bearing deposits 2,061,588 2,006,143 1,997,155
Total deposits 2,880,262 2,656,520 2,640,324
Securities sold under retail repurchase agreements and federal funds purchased 58,306 143,613 79,529
Advances from FHLB 405,146 405,408 405,496
Subordinated debentures 35,000 35,000 35,000
Accrued interest payable and other liabilities 26,903 24,720 24,903
Total liabilities 3,405,617 3,265,261 3,185,252
Stockholders' Equity
Common stock --- par value $1.00; shares authorized 50,000,000; shares issued
and outstanding 24,896,136, 24,091,042 and 24,079,204 at September 30, 2012,
December 31, 2011 and September 30, 2011, respectively 24,896 24,091 24,079
Additional paid in capital 191,237 177,828 177,451
Retained earnings 249,244 230,942 226,114
Accumulated other comprehensive income 16,433 13,248 13,147
Total stockholders' equity 481,810 446,109 440,791
Total liabilities and stockholders' equity $ 3,887,427 $ 3,711,370 $ 3,626,043
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) 2012 2011 2012 2011
Interest Income:
Interest and fees on loans and leases $ 30,697 $ 26,791 $ 86,164 $ 80,597
Interest on loans held for sale 248 142 587 388
Interest on deposits with banks 38 23 83 62
Interest and dividends on investment securities:
Taxable 4,204 5,693 13,809 16,782
Exempt from federal income taxes 2,308 2,355 7,024 6,932
Interest on federal funds sold -- -- 1 1
Total interest income 37,495 35,004 107,668 104,762
Interest Expense:
Interest on deposits 1,823 2,773 5,707 8,673
Interest on retail repurchase agreements and federal funds purchased 46 49 158 155
Interest on advances from FHLB 3,599 3,628 10,772 10,769
Interest on subordinated debt 242 224 732 671
Total interest expense 5,710 6,674 17,369 20,268
Net interest income 31,785 28,330 90,299 84,494
Provision (credit) for loan and lease losses 232 (3,520) 2,481 (854)
Net interest income after provision (credit) for loan and lease losses 31,553 31,850 87,818 85,348
Non-interest Income:
Investment securities gains 296 231 459 283
Total other-than-temporary impairment ("OTTI") losses (23) (76) (95) (178)
Portion of OTTI losses recognized in other comprehensive income, before taxes -- -- -- 18
Net OTTI recognized in earnings (23) (76) (95) (160)
Service charges on deposit accounts 2,230 2,444 6,713 7,133
Mortgage banking activities 1,981 1,141 4,294 2,404
Wealth management income 3,858 3,937 11,949 11,605
Insurance agency commissions 1,020 1,044 3,156 3,177
Income from bank owned life insurance 660 662 1,954 1,962
Visa check fees 984 927 2,844 2,710
Other income 1,236 1,026 3,435 3,016
Total non-interest income 12,242 11,336 34,709 32,130
Non-interest Expenses:
Salaries and employee benefits 15,476 14,892 47,104 44,192
Occupancy expense of premises 3,106 2,784 8,895 8,717
Equipment expenses 1,237 1,143 3,682 3,413
Marketing 764 468 1,824 1,662
Outside data services 1,076 1,073 4,183 3,067
FDIC insurance 667 709 1,972 2,489
Amortization of intangible assets 476 461 1,403 1,384
Other expenses 4,365 4,318 13,645 12,824
Total non-interest expenses 27,167 25,848 82,708 77,748
Income before income taxes 16,628 17,338 39,819 39,730
Income tax expense 5,638 6,081 13,146 12,886
Net income $ 10,990 $ 11,257 $ 26,673 $ 26,844
Net Income Per Share Amounts:
Basic net income per share $ 0.44 $ 0.47 $ 1.09 $ 1.11
Diluted net income per share $ 0.44 $ 0.47 $ 1.09 $ 1.11
Dividends declared per share $ 0.12 $ 0.08 $ 0.34 $ 0.24
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2012 2011
(Dollars in thousands, except per share data) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 38,819 $ 36,898 $ 35,991 $ 36,156 $ 36,424 $ 36,435 $ 36,057
Interest expense 5,710 5,749 5,910 6,256 6,674 6,854 6,740
Tax-equivalent net interest income 33,109 31,149 30,081 29,900 29,750 29,581 29,317
Tax-equivalent adjustment 1,324 1,340 1,376 1,448 1,420 1,427 1,307
Provision for loan and lease losses 232 1,585 664 2,282 (3,520) 1,151 1,515
Non-interest income 12,242 11,493 10,974 11,370 11,336 10,802 9,992
Non-interest expenses 27,167 28,858 26,683 27,323 25,848 25,838 26,062
Income before income taxes 16,628 10,859 12,332 10,217 17,338 11,967 10,425
Income tax expense 5,638 3,652 3,856 2,959 6,081 3,671 3,134
Net income $ 10,990 $ 7,207 $ 8,476 $ 7,258 $ 11,257 $ 8,296 $ 7,291
Financial performance:
Pre-tax pre-provision pre-merger expense income $ 16,996 $ 14,642 $ 13,370 $ 12,499 $ 13,818 $ 13,118 $ 11,940
Return on average assets 1.13% 0.78% 0.94% 0.79% 1.24% 0.93% 0.84%
Return on average common equity 9.22% 6.34% 7.60% 6.54% 10.42% 8.03% 7.26%
Net interest margin 3.67% 3.62% 3.56% 3.51% 3.53% 3.58% 3.65%
Efficiency ratio - GAAP (1) 61.70% 69.87% 67.25% 68.61% 65.16% 66.33% 68.58%
Efficiency ratio - Non-GAAP (1) 58.91% 61.54% 63.88% 65.10% 62.02% 62.82% 65.09%
Per share data:
Basic net income per share $ 0.44 $ 0.30 $ 0.35 $ 0.30 $ 0.47 $ 0.34 $ 0.30
Diluted net income per share $ 0.44 $ 0.30 $ 0.35 $ 0.30 $ 0.47 $ 0.34 $ 0.30
Average fully diluted shares 24,949,205 24,423,236 24,180,501 24,141,084 24,142,137 24,130,357 24,115,906
Dividends declared per common share $ 0.12 $ 0.12 $ 0.10 $ 0.10 $ 0.08 $ 0.08 $ 0.08
Non-interest income:
Securities gains $ 296 $ 90 $ 73 $ 9 $ 231 $ 32 $ 20
Net OTTI recognized in earnings (23) (8) (64) -- (76) (43) (41)
Service charges on deposit accounts 2,230 2,283 2,200 2,394 2,444 2,437 2,252
Mortgage banking activities 1,981 1,288 1,025 824 1,141 808 455
Wealth management income 3,858 4,034 4,057 4,041 3,937 4,023 3,645
Insurance agency commissions 1,020 934 1,202 1,473 1,044 953 1,180
Income from bank owned life insurance 660 660 634 674 662 654 646
Visa check fees 984 962 898 927 927 949 834
Other income 1,236 1,250 949 1,028 1,026 989 1,001
Total non-interest income $ 12,242 $ 11,493 $ 10,974 $ 11,370 $ 11,336 $ 10,802 $ 9,992
Non-interest expense:
Salaries and employee benefits $ 15,476 $ 15,927 $ 15,701 $ 15,433 $ 14,892 $ 14,676 $ 14,624
Occupancy expense of premises 3,106 2,943 2,846 2,802 2,784 2,790 3,143
Equipment expenses 1,237 1,255 1,190 1,292 1,143 1,128 1,142
Marketing 764 565 495 727 468 709 485
Outside data services 1,076 1,828 1,279 1,092 1,073 999 995
FDIC insurance 667 653 652 698 709 736 1,044
Amortization of intangible assets 476 466 461 461 461 462 461
Professional fees 1,282 2,156 1,287 1,414 1,314 1,088 1,126
Other real estate owned expenses 174 351 64 604 383 726 699
Other expenses 2,909 2,714 2,708 2,800 2,621 2,524 2,343
Total non-interest expense $ 27,167 $ 28,858 $ 26,683 $ 27,323 $ 25,848 $ 25,838 $ 26,062
(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of
Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2012 2011
(Dollars in thousands) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 499,806 $ 472,426 $ 465,204 $ 448,662 $ 440,606 $ 445,605 $ 444,519
Residential construction loans 128,606 130,791 122,841 108,699 90,727 81,425 84,939
Commercial ADC loans 133,007 151,620 149,814 160,946 141,576 149,215 151,135
Commercial investor real estate loans 447,536 443,237 392,626 371,948 357,358 353,749 355,967
Commercial owner occupied real estate loans 579,711 579,812 525,022 522,076 519,837 511,271 509,215
Commercial business loans 322,087 334,040 253,827 260,327 226,528 225,624 231,448
Leasing 4,233 5,618 5,843 6,954 8,484 10,200 12,477
Consumer loans 353,999 357,534 356,215 360,080 360,287 360,831 360,349
Total loans and leases 2,468,985 2,475,078 2,271,392 2,239,692 2,145,403 2,137,920 2,150,049
Allowance for loan and lease losses (42,618) (45,265) (45,061) (49,426) (49,720) (55,246) (58,918)
Investment securities 1,074,918 1,006,743 1,067,462 1,164,699 1,174,180 1,128,589 1,087,620
Interest-earning assets 3,614,310 3,584,480 3,416,136 3,452,214 3,370,360 3,322,317 3,283,819
Total assets 3,887,427 3,855,177 3,668,273 3,711,370 3,626,043 3,612,016 3,549,533
Noninterest-bearing demand deposits 818,674 763,566 685,770 650,377 643,169 648,605 619,905
Total deposits 2,880,262 2,852,055 2,681,075 2,656,520 2,640,324 2,657,861 2,599,634
Customer repurchase agreements 58,306 64,779 73,130 63,613 79,529 65,214 75,516
Total interest-bearing liabilities 2,560,040 2,593,501 2,508,756 2,590,164 2,517,180 2,515,053 2,495,916
Total stockholders' equity 481,810 471,464 451,917 446,109 440,791 423,684 409,076
Quarterly average balance sheets:
Residential mortgage loans $ 510,475 $ 488,644 $ 474,149 $ 463,754 $ 453,645 $ 455,803 $ 458,329
Residential construction loans 133,236 125,582 116,630 99,983 89,128 84,144 85,891
Commercial ADC loans 142,870 151,374 159,769 153,598 145,835 149,773 149,071
Commercial investor real estate loans 445,012 410,258 377,072 353,975 350,925 352,668 340,008
Commercial owner occupied real estate loans 580,994 539,590 518,763 521,212 515,185 509,273 500,875
Commercial business loans 332,364 284,271 258,099 231,773 225,041 225,646 236,949
Leasing 4,858 5,528 6,325 7,671 9,269 11,154 14,009
Consumer loans 357,135 359,008 358,783 361,888 360,875 362,098 367,261
Total loans and leases 2,506,945 2,364,255 2,269,590 2,193,854 2,149,903 2,150,559 2,152,393
Investment securities 1,038,586 1,052,502 1,086,295 1,173,418 1,168,712 1,121,325 1,054,740
Interest-earning assets 3,599,715 3,453,590 3,389,843 3,392,773 3,355,937 3,305,059 3,237,556
Total assets 3,863,951 3,708,622 3,637,674 3,647,291 3,610,219 3,566,278 3,500,807
Noninterest-bearing demand deposits 774,215 699,638 641,477 655,381 631,192 607,092 582,441
Total deposits 2,857,523 2,714,980 2,642,634 2,658,676 2,640,729 2,607,854 2,548,117
Customer repurchase agreements 62,693 66,674 65,195 74,267 72,646 70,313 79,067
Total interest-bearing liabilities 2,587,815 2,526,541 2,523,394 2,525,128 2,524,728 2,519,114 2,485,451
Total stockholders' equity 474,231 457,338 448,406 440,154 428,511 414,624 407,007
Financial Measures
Average equity to average assets 12.27% 12.33% 12.33% 12.07% 11.87% 11.63% 11.63%
Investment securities to earning assets 29.74% 28.09% 31.25% 33.74% 34.84% 33.97% 33.12%
Loans to earnings assets 68.31% 69.05% 66.49% 64.88% 63.66% 64.35% 65.47%
Loans to assets 63.51% 64.20% 61.92% 60.35% 59.17% 59.19% 60.57%
Loans to deposits 85.72% 86.78% 84.72% 84.31% 81.26% 80.44% 82.71%
Capital measures:
Tier 1 leverage 10.99% 11.21% 11.05% 10.84% 10.79% 10.64% 10.63%
Tier 1 capital to risk-weighted assets 14.31% 14.12% 14.89% 14.57% 14.96% 14.75% 14.21%
Total regulatory capital to risk-weighted assets 15.56% 15.36% 16.14% 15.83% 16.21% 16.01% 15.48%
Book value per share $ 19.35 $ 18.94 $ 18.72 $ 18.52 $ 18.31 $ 17.58 $ 16.99
Outstanding shares 24,896,136 24,886,724 24,143,985 24,091,042 24,079,204 24,095,123 24,084,423
Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2012 2011
(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 $44 $70 $40 $ -- $-- $ -- $ --
Commercial real estate:
Commercial AD&C -- 342 -- -- -- -- --
Commercial investor real estate -- -- -- -- -- -- --
Commercial owner occupied real estate -- -- -- -- -- -- --
Leasing 127 96 -- 2 63 20 24
Consumer 18 5 89 165 373 337 169
Residential real estate:
Residential mortgage 116 91 167 167 2,291 3,820 4,616
Residential construction -- -- -- 243 -- -- 2,367
Total loans and leases 90 days past due 305 604 296 577 2,727 4,177 7,176
Non-accrual loans and leases:
Commercial business 4,919 4,583 6,542 7,226 8,038 8,288 9,649
Commercial real estate:
Commercial AD&C 8,957 13,055 14,303 18,702 24,481 26,133 28,310
Commercial investor real estate 12,345 13,327 13,893 16,963 16,118 2,975 2,519
Commercial owner occupied real estate 13,742 15,146 16,295 14,709 11,847 13,019 12,304
Leasing 834 872 858 853 956 1,017 1,529
Consumer 1,607 1,651 1,700 1,786 1,478 590 720
Residential real estate:
Residential mortgage 3,644 2,600 4,818 5,722 6,081 6,295 6,652
Residential construction 3,236 4,333 4,929 5,719 5,034 5,701 5,222
Total non-accrual loans and lease 49,284 55,567 63,338 71,680 74,033 64,018 66,905
Total restructured loans - accruing 10,283 8,285 8,547 6,881 6,088 8,299 14,266
Total non-performing loans and leases 59,872 64,456 72,181 79,138 82,848 76,494 88,347
Other assets and real estate owned (OREO) 9,291 9,553 4,834 4,431 7,938 6,951 7,960
Total non-performing assets $69,163 $74,009 $77,015 $83,569 $90,786 $83,445 $96,307
For the quarter ended,
September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2012 2012 2012 2011 2011 2011 2011
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $55,567 $63,338 $71,680 $74,033 $64,018 $66,905 $63,327
Non-accrual balances transferred to OREO (232) (2,131) -- (511) (142) (791) (535)
Non-accrual balances charged-off (3,697) (1,663) (4,965) (2,758) (1,375) (2,112) (2,701)
Net payments or draws (6,342) (4,149) (5,061) (6,724) (4,839) (8,016) (2,531)
Loans placed on non-accrual 3,988 1,261 1,809 8,640 17,226 8,032 9,526
Non-accrual loans brought current -- (1,089) (125) (1,000) (855) -- (181)
Balance at end of period $49,284 $55,567 $63,338 $71,680 $74,033 $64,018 $66,905
Analysis of Allowance for Loan Losses:
Balance at beginning of period 45,265 45,061 49,426 49,720 55,246 58,918 62,135
Provision for loan and lease losses 232 1,585 664 2,282 (3,520) 1,151 1,515
Less loans charged-off, net of recoveries:
Commercial business (225) (185) (39) (65) 397 769 790
Commercial real estate:
Commercial AD&C 1,983 (59) 1,076 275 151 253 (137)
Commercial investor real estate 123 140 3,219 335 30 504 (4)
Commercial owner occupied real estate 653 484 -- 329 45 113 --
Leasing (17) (3) 5 181 85 455 333
Consumer 111 228 348 352 375 713 1,091
Residential real estate:
Residential mortgage 253 713 420 792 751 1,319 2,095
Residential construction (2) 63 -- 377 172 697 564
Net charge-offs 2,879 1,381 5,029 2,576 2,006 4,823 4,732
Balance at end of period $42,618 $45,265 $45,061 $49,426 $49,720 $55,246 $58,918
Asset Quality Ratios:
Non-performing loans to total loans 2.42% 2.60% 3.18% 3.53% 3.86% 3.58% 4.11%
Non-performing assets to total assets 1.78% 1.92% 2.10% 2.25% 2.50% 2.31% 2.71%
Allowance for loan losses to loans 1.73% 1.83% 1.98% 2.21% 2.32% 2.58% 2.74%
Allowance for loan losses to non-performing loans 71.18% 70.23% 62.43% 62.46% 60.01% 72.22% 66.69%
Net charge-offs in quarter to average loans 0.46% 0.23% 0.89% 0.47% 0.37% 0.90% 0.89%
Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Three Months Ended September 30,
2012 2011
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) $ 510,475 $ 5,262 4.15% $ 453,645 $ 5,373 4.74%
Residential construction loans 133,236 1,214 3.63 89,128 899 4.00
Commercial ADC loans 142,870 1,965 5.47 145,835 1,688 4.59
Commercial investor real estate loans 445,012 6,161 5.51 350,925 4,908 5.49
Commercial owner occupied real estate loans 580,994 7,938 5.56 515,185 7,760 6.01
Commercial business loans 332,364 5,172 5.97 225,041 2,845 5.01
Leasing 4,858 79 6.51 9,269 157 6.79
Consumer loans 357,135 3,154 3.54 360,875 3,303 3.63
Total loans and leases (3) 2,506,945 30,945 4.93 2,149,903 26,933 4.98
Taxable securities 745,475 4,508 2.42 916,982 6,044 2.64
Tax-exempt securities (4) 293,111 3,328 4.54 251,730 3,424 5.44
Interest-bearing deposits with banks 53,717 38 0.29 35,992 23 0.25
Federal funds sold 466 -- 0.22 1,330 -- 0.13
Total interest-earning assets 3,599,715 38,819 4.30 3,355,937 36,424 4.32
Less: allowance for loan and lease losses (45,467) (55,980)
Cash and due from banks 46,583 47,421
Premises and equipment, net 49,234 49,037
Other assets 213,887 213,804
Total assets $3,863,951 $3,610,219
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 392,117 85 0.09% $ 346,941 102 0.12%
Regular savings deposits 216,249 51 0.09 187,060 47 0.10
Money market savings deposits 894,708 488 0.22 865,492 909 0.42
Time deposits 580,234 1,199 0.82 610,044 1,715 1.12
Total interest-bearing deposits 2,083,308 1,823 0.35 2,009,537 2,773 0.55
Other borrowings 64,324 46 0.29 74,657 49 0.26
Advances from FHLB 405,184 3,599 3.53 405,534 3,628 3.55
Subordinated debentures 35,000 242 2.77 35,000 224 2.55
Total interest-bearing liabilities 2,587,815 5,710 0.88 2,524,728 6,674 1.05
Noninterest-bearing demand deposits 774,215 631,192
Other liabilities 27,689 25,788
Stockholders' equity 474,231 428,511
Total liabilities and stockholders' equity $3,863,951 $3,610,219
Net interest income and spread $ 33,109 3.42% $ 29,750 3.27%
Less: tax-equivalent adjustment 1,324 1,420
Net interest income $ 31,785 $ 28,330
Interest income/earning assets 4.30% 4.32%
Interest expense/earning assets 0.63 0.79
Net interest margin 3.67% 3.53%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.4 million in 2012 and 2011, 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,
2012 2011
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) $ 491,160 $ 16,003 4.37% $ 455,909 $ 16,747 4.89%
Residential construction loans 125,179 3,505 3.74 86,399 2,448 3.79
Commercial ADC loans 151,307 5,855 5.17 148,215 4,813 4.34
Commercial investor real estate loans 410,905 16,925 5.50 347,926 15,236 5.94
Commercial owner occupied real estate loans 546,575 22,722 5.64 508,478 22,686 6.05
Commercial business loans 291,727 11,988 5.33 229,168 8,493 4.95
Leasing 5,568 272 6.52 11,460 576 6.70
Consumer loans 358,304 9,481 3.56 363,388 9,986 3.70
Total loans and leases (3) 2,380,725 86,751 4.88 2,150,943 80,985 5.03
Taxable securities 775,916 14,761 2.54 879,230 17,810 2.70
Tax-exempt securities (4) 283,137 10,112 4.76 236,113 10,058 5.68
Interest-bearing deposits with banks 40,892 83 0.27 32,257 62 0.25
Federal funds sold 811 1 0.17 1,408 1 0.14
Total interest-earning assets 3,481,481 111,708 4.28 3,299,951 108,916 4.41
Less: allowance for loan and lease losses (47,442) (58,672)
Cash and due from banks 45,844 45,587
Premises and equipment, net 48,959 49,130
Other assets 208,371 223,506
Total assets $3,737,213 $3,559,502
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 379,910 256 0.09% $ 336,020 278 0.11%
Regular savings deposits 209,920 155 0.10 182,424 142 0.10
Money market savings deposits 869,675 1,471 0.23 855,458 2,865 0.45
Time deposits 573,946 3,825 0.89 618,250 5,388 1.17
Total interest-bearing deposits 2,033,451 5,707 0.37 1,992,152 8,673 0.58
Other borrowings 72,347 158 0.29 77,135 155 0.27
Advances from FHLB 405,271 10,772 3.55 405,621 10,769 3.55
Subordinated debentures 35,000 732 2.79 35,000 671 2.55
Total interest-bearing liabilities 2,546,069 17,369 0.91 2,509,908 20,268 1.08
Noninterest-bearing demand deposits 705,362 607,087
Other liabilities 25,738 25,714
Stockholders' equity 460,044 416,793
Total liabilities and stockholders' equity $3,737,213 $3,559,502
Net interest income and spread $ 94,339 3.37% $ 88,648 3.33%
Less: tax-equivalent adjustment 4,040 4,154
Net interest income $ 90,299 $ 84,494
Interest income/earning assets 4.28% 4.41%
Interest expense/earning assets 0.66 0.82
Net interest margin 3.62% 3.59%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $4.0 million and $4.2 million in 2012 and 2011, 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.