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Sandy Spring Bancorp Reports Net Income of $9.9 Million for Fourth Quarter of 2012 and $36.6 Million for Full Year

Sandy Spring Bancorp, Inc. Logo

OLNEY, Md., Jan. 24, 2013 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today announced net income for the fourth quarter of 2012 of $9.9 million ($.40 per diluted share) compared to net income of $7.3 million ($0.30 per diluted share) for the fourth quarter of 2011 and net income of $11.0 million ($0.44 per diluted share) for the third quarter of 2012.

Net income for the year ended December 31, 2012 totaled $36.6 million ($1.48 per diluted share), compared to net income of $34.1 million ($1.41 per diluted share) for the prior year, an increase of 7%.

"The solid results for the fourth quarter and the full year were a result of the combination of increased loan growth and continued improvement to our funding mix," said Daniel J. Schrider, President and Chief Executive Officer. "Looking back on 2012, we benefited from two full quarters of the accretive effect on the net interest margin from the CommerceFirst acquisition combined with a stellar year in income from our mortgage banking activities."

"We are committed to providing outstanding value to our clients via quality financial products delivered through a consistently high level of service that they have come to expect," said Schrider. "Together with our strong capital and liquidity positions and improved credit quality, we believe we are well positioned for continued growth during the coming year."

Fourth Quarter Highlights:

  • Pre-tax pre-provision income, a non-GAAP measure, was $15.7 million for the fourth quarter of 2012, a 26% increase over the fourth quarter of 2011 and a 7% decrease compared to the third quarter of 2012.
  • The net interest margin was 3.53% for the fourth quarter of 2012, compared to 3.51% for the fourth quarter of 2011 and 3.67% for the third quarter of 2012. The decrease compared to the prior quarter was due primarily to the accrual status of specific commercial loans together with declining yields in the residential construction and mortgage portfolios.
  • Non-interest income increased 8% for the quarter compared to the prior year quarter and remained virtually level compared to the third quarter of 2012. The increase over the prior year quarter was due primarily to higher income from mortgage banking activities.
  • Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. The coverage ratio of the allowance for loan and lease losses to non-performing loans increased to 74% at December 31, 2012 compared to a ratio of 62% at December 31, 2011 and 72% at September 30, 2012.
  • Total loans, excluding those acquired in the CommerceFirst acquisition, reflected a 6% increase over the prior year quarter due primarily to growth in commercial business, investor real estate and residential mortgage loans.

Review of Balance Sheet and Credit Quality

Total assets increased 7% to $4.0 billion at December 31, 2012 as compared to December 31, 2011. During the same period, total loans and leases increased 13% to $2.5 billion compared to the prior year end. This increase consisted of $155.0 million in loans from the acquisition of CommerceFirst and $136.4 million of internally-generated loan growth, primarily in the commercial loan and residential mortgage portfolios.

Customer funding sources, which include deposits and other short-term borrowings from customers, increased 9% compared to December 31, 2011. This increase was due primarily to a 25% increase in noninterest-bearing and interest-bearing checking accounts. The Company considers the growth in checking accounts to be an especially valuable metric as such accounts typically are the primary drivers of growth in multiple product banking relationships with clients. Excluding the deposits acquired in the CommerceFirst acquisition, total customer funding sources increased 5% while certificates of deposit declined 17% at December 31, 2012 compared to balances at December 31, 2011, as the Company managed its deposit mix to maintain the net interest margin.

Tangible common equity totaled $384.2 million at December 31, 2012 compared to $351.3 million at December 31, 2011 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.68% at December 31, 2011 to 9.94% at December 31, 2012. This increase was due primarily to net income earned during 2012. At December 31, 2012, the Company had a total risk-based capital ratio of 15.40%, a tier 1 risk-based capital ratio of 14.15% and a tier 1 leverage ratio of 10.98%.

Non-performing loans totaled $57.9 million at December 31, 2012 compared to $79.1 million at December 31, 2011 and $58.9 million at September 30, 2012. Overall credit quality continued to improve as a result of resolution of existing problem credits and limited migration of new credits to non-performing status.

The provision for loan and lease losses was $1.2 million for the fourth quarter of 2012 compared to $2.3 million for the fourth quarter of 2011 and $0.2 million for the third quarter of 2012. The decrease in the provision for the fourth quarter of 2012 compared to the fourth quarter of 2011 was due primarily to a decline in both historical losses and the impact of non-performing loans at December 31, 2012. The increase in the provision for the fourth quarter of 2012 compared to the third quarter of 2012 was largely due to an increase in the overall size of the loan portfolio together with an increase in specific reserves on selected loans.

Loan charge-offs, net of recoveries, totaled $0.8 million for the fourth quarter of 2012 compared to net charge-offs of $2.6 million for the fourth quarter of 2011 and net charge-offs of $2.9 million for the third quarter of 2012. The allowance for loan and lease losses represented 1.70% of outstanding loans and leases and 74% of non-performing loans at December 31, 2012 compared to 2.21% of outstanding loans and leases and 62% of non-performing loans at December 31, 2011 and 1.73% of outstanding loans and leases and 72% of non-performing loans at September 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 fourth quarter of 2012 increased by $2.5 million or 9% compared to the fourth quarter of 2011 due to an increase in average interest-earning assets 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 3.53% for the fourth quarter of 2012 compared to 3.51% for the fourth quarter of 2011.

Non-interest income increased $0.8 million or 8% to $12.2 million for the fourth quarter of 2012 compared to $11.4 million for the fourth quarter of 2011. This increase was driven by growth in income from mortgage banking activities of $0.9 million due to higher loan origination volumes and higher average gains on sales, both due to historically low interest rates during the quarter.

Non-interest expenses remained virtually level at $27.2 million for the fourth quarter of 2012 compared to $27.3 million in the fourth quarter of 2011. This was driven by decreases in benefits expenses, commissions on sales of investment products and incentive compensation which largely offset a 5% increase in salaries. The non-GAAP efficiency ratio improved to 60.5% for the fourth quarter of 2012 compared to 65.1% for the fourth quarter of 2011.

Net interest income for the year ended December 31, 2012 increased by $8.3 million or 7% compared to the year ended December 31, 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 3.60% for 2012 compared to 3.57% for 2011.

Non-interest income increased $3.5 million or 8% to $47.0 million for 2012 as compared to $43.5 million for 2011. This increase was due primarily to an increase of $2.8 million or 87% 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 2% due primarily to higher assets under management while Visa check fees increased $0.3 million or 7% due to an increased volume of electronic transactions.

Non-interest expenses were $109.9 million for 2012 compared to $105.1 million for 2011, an increase of $4.8 million or 5%. Excluding one-time merger expenses of $2.5 million in 2012, non-interest expenses increased 2% over the prior year. This increase was driven by a 4% increase in salaries and benefits expense, excluding merger expenses, due to merit salary increases, a larger staff and higher cost of health benefits. These expenses were partially offset by a 19% decrease in FDIC insurance premiums due to a change in calculation of such premiums effective in the third quarter of 2011. The non-GAAP efficiency ratio was 60.9% for 2012 compared to 63.8% for 2011.

Conference Call

The Company's management will host a conference call to discuss its fourth quarter and full year results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 1-888-317-6016. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) February 25, 2013. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10023201.

About Sandy Spring Bancorp/Sandy Spring Bank

With $4.0 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 Twelve Months Ended
December 31, % December 31, %
(Dollars in thousands, except per share data) 2012 2011 Change 2012 2011 Change
Results of Operations:
Net interest income $ 30,920 $ 28,452 9% $ 121,219 $ 112,946 7%
Provision for loan and lease losses 1,168 2,282 (49) 3,649 1,428 156
Non-interest income 12,247 11,370 8 46,956 43,500 8
Non-interest expenses 27,219 27,323 -- 109,927 105,071 5
Income before income taxes 14,780 10,217 45 54,599 49,947 9
Net income 9,881 7,258 36 36,554 34,102 7
Pre-tax pre-provision pre-merger expense income $ 15,740 $ 12,499 26 $ 60,748 $ 51,375 18
Return on average assets 1.01% 0.79% 0.97% 0.95%
Return on average common equity 8.14% 6.54% 7.85% 8.07%
Net interest margin 3.53% 3.51% 3.60% 3.57%
Efficiency ratio - GAAP (1) 63.06% 68.61% 65.36% 67.16%
Efficiency ratio - Non-GAAP (1) 60.54% 65.10% 60.94% 63.75%
Per share data:
Basic net income $ 0.40 $ 0.30 33% $ 1.49 $ 1.42 5%
Diluted net income $ 0.40 0.30 33 1.48 1.41 5
Average fully diluted shares 24,971,249 24,141,084 3 24,657,149 24,149,205 2
Dividends declared per share $ 0.14 0.10 40 $ 0.48 0.34 41
Book value per share 19.41 18.52 5 19.41 18.52 5
Tangible book value per share 15.43 14.58 6 15.43 14.58 6
Outstanding shares 24,905,392 24,091,042 3 24,905,392 24,091,042 3
Financial Condition at period-end:
Investment securities $ 1,075,032 $ 1,164,699 (8)% $ 1,075,032 $ 1,164,699 (8)%
Loans and leases 2,531,128 2,239,692 13 2,531,128 2,239,692 13
Interest-earning assets 3,669,175 3,452,214 6 3,669,175 3,452,214 6
Assets 3,955,206 3,711,370 7 3,955,206 3,711,370 7
Deposits 2,913,034 2,656,520 10 2,913,034 2,656,520 10
Interest-bearing liabilities 2,592,606 2,590,165 -- 2,592,606 2,590,165 --
Stockholders' equity 483,512 446,109 8 483,512 446,109 8
Capital ratios:
Tier 1 leverage 10.98% 10.84% 10.98% 10.84%
Tier 1 capital to risk-weighted assets 14.15% 14.57% 14.15% 14.57%
Total regulatory capital to risk-weighted assets 15.40% 15.83% 15.40% 15.83%
Tangible common equity to tangible assets (2) 9.94% 9.68% 9.94% 9.68%
Average equity to average assets 12.35% 12.07% 12.32% 11.80%
Credit quality ratios:
Allowance for loan and lease losses to loans and leases 1.70% 2.21% 1.70% 2.21%
Non-performing loans to total loans 2.29% 3.53% 2.29% 3.53%
Non-performing assets to total assets 1.61% 2.25% 1.61% 2.25%
Allowance for loan and lease losses to non-performing loans 74.18% 62.46% 74.18% 62.46%
Annualized net charge-offs to average loans and leases (3) 0.13% 0.47% 0.42% 0.66%
(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 Twelve Months Ended
December 31, December 31,
(Dollars in thousands) 2012 2011 2012 2011
Pre-tax pre-provision pre-merger expense income:
Net income $ 9,881 $ 7,258 $ 36,554 $ 34,102
Plus non-GAAP adjustment:
Merger expenses (208) -- 2,500 --
Income taxes 4,899 2,959 18,045 15,845
Provision (credit) for loan and lease losses 1,168 2,282 3,649 1,428
Pre-tax pre-provision pre-merger expense income $ 15,740 $ 12,499 $ 60,748 $ 51,375
GAAP efficiency ratio:
Non-interest expenses $ 27,219 $ 27,323 $ 109,927 $ 105,071
Net interest income plus non-interest income $ 43,167 $ 39,822 $ 168,175 $ 156,446
GAAP Efficiency ratio 63.06% 68.61% 65.36% 67.16%
Non-GAAP efficiency ratio:
Non-interest expenses $ 27,219 $ 27,323 $ 109,927 $ 105,071
Less non-GAAP adjustment:
Amortization of intangible assets 478 461 1,881 1,845
Merger expenses (208) -- 2,500 --
Non-interest expenses -- as adjusted $ 26,949 $ 26,862 $ 105,546 $ 103,226
Net interest income plus non-interest income $ 43,167 $ 39,822 $ 168,175 $ 156,446
Plus non-GAAP adjustment:
Tax-equivalent income 1,334 1,448 5,374 5,602
Less non-GAAP adjustments:
Securities gains -- 9 459 292
OTTI recognized in earnings (14) -- (109) (160)
Net interest income plus non-interest income - as adjusted $ 44,515 $ 41,261 $ 173,199 $ 161,916
Non-GAAP Efficiency ratio 60.54% 65.10% 60.94% 63.75%
Tangible common equity ratio:
Total stockholders' equity $ 483,512 $ 446,109 $ 483,512 $ 446,109
Accumulated other comprehensive income (loss) (11,312) (13,248) (11,312) (13,248)
Goodwill (84,808) (76,816) (84,808) (76,816)
Other intangible assets, net (3,163) (4,734) (3,163) (4,734)
Tangible common equity $ 384,229 $ 351,311 $ 384,229 $ 351,311
Total assets $ 3,955,206 $ 3,711,370 $ 3,955,206 $ 3,711,370
Goodwill (84,808) (76,816) (84,808) (76,816)
Other intangible assets, net (3,163) (4,734) (3,163) (4,734)
Tangible assets $ 3,867,235 $ 3,629,820 $ 3,867,235 $ 3,629,820
Tangible common equity ratio 9.94% 9.68% 9.94% 9.68%
Outstanding common shares 24,905,392 24,091,042 24,905,392 24,091,042
Tangible book value per common share $ 15.43 $ 14.58 $ 15.43 $ 14.58
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
December 31,
(Dollars in thousands) 2012 2011
Assets
Cash and due from banks $ 59,540 $ 49,832
Federal funds sold 466 1,006
Interest-bearing deposits with banks 26,400 21,476
Cash and cash equivalents 86,406 72,314
Residential mortgage loans held for sale (at fair value) 36,149 25,341
Investments available-for-sale (at fair value) 825,582 951,301
Investments held-to-maturity --- fair value of $222,024 and $184,167 at December 31, 2012 and 2011, respectively 215,814 178,465
Other equity securities 33,636 34,933
Total loans and leases 2,531,128 2,239,692
Less: allowance for loan and lease losses (42,957) (49,426)
Net loans and leases 2,488,171 2,190,266
Premises and equipment, net 48,326 48,483
Other real estate owned 5,926 4,431
Accrued interest receivable 12,392 12,898
Goodwill 84,808 76,816
Other intangible assets, net 3,163 4,734
Other assets 114,833 111,388
Total assets $ 3,955,206 $ 3,711,370
Liabilities
Noninterest-bearing deposits $ 847,415 $ 650,377
Interest-bearing deposits 2,065,619 2,006,143
Total deposits 2,913,034 2,656,520
Securities sold under retail repurchase agreements and federal funds purchased 86,929 143,613
Advances from FHLB 405,058 405,408
Subordinated debentures 35,000 35,000
Accrued interest payable and other liabilities 31,673 24,720
Total liabilities 3,471,694 3,265,261
Stockholders' Equity
Common stock --- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 24,905,392 and 24,091,042 at December 31, 2012 and 2011, respectively 24,905 24,091
Additional paid in capital 191,689 177,828
Retained earnings 255,606 230,942
Accumulated other comprehensive income 11,312 13,248
Total stockholders' equity 483,512 446,109
Total liabilities and stockholders' equity $ 3,955,206 $ 3,711,370
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) 2012 2011 2012 2011
Interest Income:
Interest and fees on loans and leases $ 29,410 $ 26,758 $ 115,574 $ 107,355
Interest on loans held for sale 254 189 841 577
Interest on deposits with banks 28 15 111 77
Interest and dividends on investment securities:
Taxable 4,142 5,314 17,951 22,096
Exempt from federal income taxes 2,368 2,431 9,392 9,363
Interest on federal funds sold -- 1 1 2
Total interest income 36,202 34,708 143,870 139,470
Interest Expense:
Interest on deposits 1,650 2,329 7,357 11,002
Interest on retail repurchase agreements and federal funds purchased 46 57 204 212
Interest on advances from FHLB 3,359 3,628 14,131 14,397
Interest on subordinated debt 227 242 959 913
Total interest expense 5,282 6,256 22,651 26,524
Net interest income 30,920 28,452 121,219 112,946
Provision (credit) for loan and lease losses 1,168 2,282 3,649 1,428
Net interest income after provision for loan and lease losses 29,752 26,170 117,570 111,518
Non-interest Income:
Investment securities gains -- 9 459 292
Total other-than-temporary impairment ("OTTI") losses (14) -- (109) (178)
Portion of OTTI losses recognized in other comprehensive income, before taxes -- -- -- 18
Net OTTI recognized in earnings (14) -- (109) (160)
Service charges on deposit accounts 2,197 2,394 8,910 9,527
Mortgage banking activities 1,738 824 6,032 3,228
Wealth management income 4,000 4,041 15,949 15,646
Insurance agency commissions 1,334 1,473 4,490 4,650
Income from bank owned life insurance 662 674 2,616 2,636
Visa check fees 1,043 927 3,887 3,637
Other income 1,287 1,028 4,722 4,044
Total non-interest income 12,247 11,370 46,956 43,500
Non-interest Expenses:
Salaries and employee benefits 15,405 15,433 62,509 59,625
Occupancy expense of premises 3,115 2,802 12,010 11,519
Equipment expenses 1,189 1,292 4,871 4,705
Marketing 827 727 2,651 2,389
Outside data services 836 1,092 5,019 4,159
FDIC insurance 601 698 2,573 3,187
Amortization of intangible assets 478 461 1,881 1,845
Other expenses 4,768 4,818 18,413 17,642
Total non-interest expenses 27,219 27,323 109,927 105,071
Income before income taxes 14,780 10,217 54,599 49,947
Income tax expense 4,899 2,959 18,045 15,845
Net income $ 9,881 $ 7,258 $ 36,554 $ 34,102
Net Income Per Share Amounts:
Basic net income per share $ 0.40 $ 0.30 $ 1.49 $ 1.42
Diluted net income per share $ 0.40 $ 0.30 $ 1.48 $ 1.41
Dividends declared per share $ 0.14 $ 0.10 $ 0.48 $ 0.34
Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2012 2011
(Dollars in thousands, except per share data) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:
Tax-equivalent interest income $ 37,536 $ 38,819 $ 36,898 $ 35,991 $ 36,156 $ 36,424 $ 36,435 $ 36,057
Interest expense 5,282 5,710 5,749 5,910 6,256 6,674 6,854 6,740
Tax-equivalent net interest income 32,254 33,109 31,149 30,081 29,900 29,750 29,581 29,317
Tax-equivalent adjustment 1,334 1,324 1,340 1,376 1,448 1,420 1,427 1,307
Provision for loan and lease losses 1,168 232 1,585 664 2,282 (3,520) 1,151 1,515
Non-interest income 12,247 12,242 11,493 10,974 11,370 11,336 10,802 9,992
Non-interest expenses 27,219 27,167 28,858 26,683 27,323 25,848 25,838 26,062
Income before income taxes 14,780 16,628 10,859 12,332 10,217 17,338 11,967 10,425
Income tax expense 4,899 5,638 3,652 3,856 2,959 6,081 3,671 3,134
Net income $ 9,881 $ 10,990 $ 7,207 $ 8,476 $ 7,258 $ 11,257 $ 8,296 $ 7,291
Financial performance:
Pre-tax pre-provision pre-merger expense income $ 15,740 $ 16,996 $ 14,642 $ 13,370 $ 12,499 $ 13,818 $ 13,118 $ 11,940
Return on average assets 1.01% 1.13% 0.78% 0.94% 0.79% 1.24% 0.93% 0.84%
Return on average common equity 8.14% 9.22% 6.34% 7.60% 6.54% 10.42% 8.03% 7.26%
Net interest margin 3.53% 3.67% 3.62% 3.56% 3.51% 3.53% 3.58% 3.65%
Efficiency ratio - GAAP (1) 63.06% 61.70% 69.87% 67.25% 68.61% 65.16% 66.33% 68.58%
Efficiency ratio - Non-GAAP (1) 60.54% 58.91% 61.54% 63.88% 65.10% 62.02% 62.82% 65.09%
Per share data:
Basic net income per share $ 0.40 $ 0.44 $ 0.30 $ 0.35 $ 0.30 $ 0.47 $ 0.34 $ 0.30
Diluted net income per share 0.40 $ 0.44 $ 0.30 $ 0.35 $ 0.30 $ 0.47 $ 0.34 $ 0.30
Average fully diluted shares 24,971,249 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 $ 0.14 $ 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 (14) (23) (8) (64) -- (76) (43) (41)
Service charges on deposit accounts 2,197 2,230 2,283 2,200 2,394 2,444 2,437 2,252
Mortgage banking activities 1,738 1,981 1,288 1,025 824 1,141 808 455
Wealth management income 4,000 3,858 4,034 4,057 4,041 3,937 4,023 3,645
Insurance agency commissions 1,334 1,020 934 1,202 1,473 1,044 953 1,180
Income from bank owned life insurance 662 660 660 634 674 662 654 646
Visa check fees 1,043 984 962 898 927 927 949 834
Other income 1,287 1,236 1,250 949 1,028 1,026 989 1,001
Total non-interest income $ 12,247 $ 12,242 $ 11,493 $ 10,974 $ 11,370 $ 11,336 $ 10,802 $ 9,992
Non-interest expense:
Salaries and employee benefits $ 15,405 $ 15,476 $ 15,927 $ 15,701 $ 15,433 $ 14,892 $ 14,676 $ 14,624
Occupancy expense of premises 3,115 3,106 2,943 2,846 2,802 2,784 2,790 3,143
Equipment expenses 1,189 1,237 1,255 1,190 1,292 1,143 1,128 1,142
Marketing 827 764 565 495 727 468 709 485
Outside data services 836 1,076 1,828 1,279 1,092 1,073 999 995
FDIC insurance 601 667 653 652 698 709 736 1,044
Amortization of intangible assets 478 476 466 461 461 461 462 461
Professional fees 1,584 1,282 2,156 1,287 1,414 1,314 1,088 1,126
Other real estate owned expenses 316 174 351 64 604 383 726 699
Other expenses 2,868 2,909 2,714 2,708 2,800 2,621 2,524 2,343
Total non-interest expense $ 27,219 $ 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) Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:
Residential mortgage loans $ 523,364 $ 499,806 $ 472,426 $ 465,204 $ 448,662 $ 440,606 $ 445,605 $ 444,519
Residential construction loans 120,314 128,606 130,791 122,841 108,699 90,727 81,425 84,939
Commercial ADC loans 151,933 133,007 151,620 149,814 160,946 141,576 149,215 151,135
Commercial investor real estate loans 456,888 447,536 443,237 392,626 371,948 357,358 353,749 355,967
Commercial owner occupied real estate loans 571,510 579,711 579,812 525,022 522,076 519,837 511,271 509,215
Commercial business loans 346,708 322,087 334,040 253,827 260,327 226,528 225,624 231,448
Leasing 3,421 4,233 5,618 5,843 6,954 8,484 10,200 12,477
Consumer loans 356,990 353,999 357,534 356,215 360,080 360,287 360,831 360,349
Total loans and leases 2,531,128 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 (42,957) (42,618) (45,265) (45,061) (49,426) (49,720) (55,246) (58,918)
Investment securities 1,075,032 1,074,918 1,006,743 1,067,462 1,164,699 1,174,180 1,128,589 1,087,620
Interest-earning assets 3,669,175 3,614,310 3,584,480 3,416,136 3,452,214 3,370,360 3,322,317 3,283,819
Total assets 3,955,206 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 847,415 818,674 763,566 685,770 650,377 643,169 648,605 619,905
Total deposits 2,913,034 2,880,262 2,852,055 2,681,075 2,656,520 2,640,324 2,657,861 2,599,634
Customer repurchase agreements 51,929 58,306 64,779 73,130 63,613 79,529 65,214 75,516
Total interest-bearing liabilities 2,592,606 2,560,040 2,593,501 2,508,756 2,590,164 2,517,180 2,515,053 2,495,916
Total stockholders' equity 483,512 481,810 471,464 451,917 446,109 440,791 423,684 409,076
Quarterly average balance sheets:
Residential mortgage loans $ 542,095 $ 510,475 $ 488,644 $ 474,149 $ 463,754 $ 453,645 $ 455,803 $ 458,329
Residential construction loans 125,640 133,236 125,582 116,630 99,983 89,128 84,144 85,891
Commercial ADC loans 137,679 142,870 151,374 159,769 153,598 145,835 149,773 149,071
Commercial investor real estate loans 453,074 445,012 410,258 377,072 353,975 350,925 352,668 340,008
Commercial owner occupied real estate loans 577,693 580,994 539,590 518,763 521,212 515,185 509,273 500,875
Commercial business loans 322,501 332,364 284,271 258,099 231,773 225,041 225,646 236,949
Leasing 3,773 4,858 5,528 6,325 7,671 9,269 11,154 14,009
Consumer loans 356,452 357,135 359,008 358,783 361,888 360,875 362,098 367,261
Total loans and leases 2,518,907 2,506,945 2,364,255 2,269,590 2,193,854 2,149,903 2,150,559 2,152,393
Investment securities 1,072,278 1,038,586 1,052,502 1,086,295 1,173,418 1,168,712 1,121,325 1,054,740
Interest-earning assets 3,639,605 3,599,715 3,453,590 3,389,843 3,392,773 3,355,937 3,305,059 3,237,556
Total assets 3,908,479 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 824,188 774,215 699,638 641,477 655,381 631,192 607,092 582,441
Total deposits 2,891,120 2,857,523 2,714,980 2,642,634 2,658,676 2,640,729 2,607,854 2,548,117
Customer repurchase agreements 60,941 62,693 66,674 65,195 74,267 72,646 70,313 79,067
Total interest-bearing liabilities 2,571,937 2,587,815 2,526,541 2,523,394 2,525,128 2,524,728 2,519,114 2,485,451
Total stockholders' equity 482,621 474,231 457,338 448,406 440,154 428,511 414,624 407,007
Financial Measures
Average equity to average assets 12.35% 12.27% 12.33% 12.33% 12.07% 11.87% 11.63% 11.63%
Investment securities to earning assets 29.30% 29.74% 28.09% 31.25% 33.74% 34.84% 33.97% 33.12%
Loans to earnings assets 68.98% 68.31% 69.05% 66.49% 64.88% 63.66% 64.35% 65.47%
Loans to assets 63.99% 63.51% 64.20% 61.92% 60.35% 59.17% 59.19% 60.57%
Loans to deposits 86.89% 85.72% 86.78% 84.72% 84.31% 81.26% 80.44% 82.71%
Capital measures:
Tier 1 leverage 10.98% 10.99% 11.21% 11.05% 10.84% 10.79% 10.64% 10.63%
Tier 1 capital to risk-weighted assets 14.15% 14.31% 14.12% 14.89% 14.57% 14.96% 14.75% 14.21%
Total regulatory capital to risk-weighted assets 15.40% 15.56% 15.36% 16.14% 15.83% 16.21% 16.01% 15.48%
Book value per share $ 19.41 $ 19.35 $ 18.94 $ 18.72 $ 18.52 $ 18.31 $ 17.58 $ 16.99
Outstanding shares 24,905,392 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) December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
Non-Performing Assets:
Loans and leases 90 days past due:
Commercial business $ 24 $ 44 $ 70 $ 40 $ -- $ -- $ -- $ --
Commercial real estate:
Commercial AD&C -- -- 342 -- -- -- -- --
Commercial investor real estate -- -- -- -- -- -- -- --
Commercial owner occupied real estate 209 -- -- -- -- -- -- --
Leasing -- 127 96 -- 2 63 20 24
Consumer 14 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 247 305 604 296 577 2,727 4,177 7,176
Non-accrual loans and leases:
Commercial business 4,611 4,919 4,583 6,542 7,226 8,038 8,288 9,649
Commercial real estate:
Commercial AD&C 6,332 8,957 13,055 14,303 18,702 24,481 26,133 28,310
Commercial investor real estate 11,843 12,345 13,327 13,893 16,963 16,118 2,975 2,519
Commercial owner occupied real estate 13,681 13,742 15,146 16,295 14,709 11,847 13,019 12,304
Leasing 865 834 872 858 853 956 1,017 1,529
Consumer 2,410 1,607 1,651 1,700 1,786 1,478 590 720
Residential real estate:
Residential mortgage 4,681 3,644 2,600 4,818 5,722 6,081 6,295 6,652
Residential construction 3,125 3,236 4,333 4,929 5,719 5,034 5,701 5,222
Total non-accrual loans and lease 47,548 49,284 55,567 63,338 71,680 74,033 64,018 66,905
Total restructured loans - accruing 10,110 9,277 8,285 8,547 6,881 6,088 8,299 14,266
Total non-performing loans and leases 57,905 58,866 64,456 72,181 79,138 82,848 76,494 88,347
Other assets and real estate owned (OREO) 5,926 9,291 9,553 4,834 4,431 7,938 6,951 7,960
Total non-performing assets $ 63,831 $ 68,157 $ 74,009 $ 77,015 $ 83,569 $ 90,786 $ 83,445 $ 96,307
For the quarter ended,
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2012 2012 2012 2012 2011 2011 2011 2011
Analysis of Non-accrual Loan and Lease Activity:
Balance at beginning of period $ 49,284 $ 55,567 $ 63,338 $ 71,680 $ 74,033 $ 64,018 $ 66,905 $ 63,327
Non-accrual balances transferred to OREO (400) (232) (2,131) -- (511) (142) (791) (535)
Non-accrual balances charged-off (979) (3,697) (1,663) (4,965) (2,758) (1,375) (2,112) (2,701)
Net payments or draws (3,852) (6,342) (4,149) (5,061) (6,724) (4,839) (8,016) (2,531)
Loans placed on non-accrual 5,023 3,988 1,261 1,809 8,640 17,226 8,032 9,526
Non-accrual loans brought current (1,528) -- (1,089) (125) (1,000) (855) -- (181)
Balance at end of period $ 47,548 $ 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 $ 42,618 $ 45,265 $ 45,061 $ 49,426 $ 49,720 $ 55,246 $ 58,918 $ 62,135
Provision for loan and lease losses 1,168 232 1,585 664 2,282 (3,520) 1,151 1,515
Less loans charged-off, net of recoveries:
Commercial business (76) (225) (185) (39) (65) 397 769 790
Commercial real estate:
Commercial AD&C (248) 1,983 (59) 1,076 275 151 253 (137)
Commercial investor real estate 110 123 140 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 384 111 228 348 352 375 713 1,091
Residential real estate:
Residential mortgage 508 253 713 420 792 751 1,319 2,095
Residential construction 151 (2) 63 -- 377 172 697 564
Net charge-offs 829 2,879 1,381 5,029 2,576 2,006 4,823 4,732
Balance at end of period $ 42,957 $ 42,618 $ 45,265 $ 45,061 $ 49,426 $ 49,720 $ 55,246 $ 58,918
Asset Quality Ratios:
Non-performing loans to total loans 2.29% 2.38% 2.60% 3.18% 3.53% 3.86% 3.58% 4.11%
Non-performing assets to total assets 1.61% 1.75% 1.92% 2.10% 2.25% 2.50% 2.31% 2.71%
Allowance for loan losses to loans 1.70% 1.73% 1.83% 1.98% 2.21% 2.32% 2.58% 2.74%
Allowance for loan losses to non-performing loans 74.18% 72.40% 70.23% 62.43% 62.46% 60.01% 72.22% 66.69%
Net charge-offs in quarter to average loans 0.13% 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 December 31,
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) $ 542,095 $ 5,278 3.93% $ 463,754 $ 5,224 4.53%
Residential construction loans 125,640 1,076 3.41 99,983 962 3.82
Commercial ADC loans 137,679 1,866 5.39 153,598 2,006 5.18
Commercial investor real estate loans 453,074 6,242 5.48 353,975 4,977 5.53
Commercial owner occupied real estate loans 577,693 7,514 5.26 521,212 7,511 5.75
Commercial business loans 322,501 4,523 5.43 231,773 2,851 4.88
Leasing 3,773 54 5.62 7,671 131 6.83
Consumer loans 356,452 3,111 3.50 361,888 3,285 3.62
Total loans and leases (3) 2,518,907 29,664 4.71 2,193,854 26,947 4.89
Taxable securities 768,412 4,493 2.34 902,211 5,661 2.51
Tax-exempt securities (4) 303,866 3,351 4.41 271,207 3,532 5.21
Interest-bearing deposits with banks 47,954 28 0.22 24,374 15 0.25
Federal funds sold 466 -- 0.22 1,127 1 0.12
Total interest-earning assets 3,639,605 37,536 4.11 3,392,773 36,156 4.24
Less: allowance for loan and lease losses (42,741) (51,126)
Cash and due from banks 48,803 46,121
Premises and equipment, net 48,626 48,800
Other assets 214,186 210,723
Total assets $3,908,479 $3,647,291
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 400,175 88 0.09% $ 352,244 86 0.10%
Regular savings deposits 220,814 44 0.08 188,877 41 0.09
Money market savings deposits 900,991 472 0.21 871,923 682 0.31
Time deposits 544,952 1,046 0.76 590,250 1,520 1.02
Total interest-bearing deposits 2,066,932 1,650 0.32 2,003,294 2,329 0.46
Other borrowings 64,908 46 0.28 81,387 57 0.27
Advances from FHLB 405,097 3,359 3.30 405,447 3,628 3.55
Subordinated debentures 35,000 227 2.59 35,000 242 2.77
Total interest-bearing liabilities 2,571,937 5,282 0.82 2,525,128 6,256 0.98
Noninterest-bearing demand deposits 824,188 655,381
Other liabilities 29,733 26,628
Stockholders' equity 482,621 440,154
Total liabilities and stockholders' equity $3,908,479 $3,647,291
Net interest income and spread $ 32,254 3.29% $ 29,900 3.26%
Less: tax-equivalent adjustment 1,334 1,448
Net interest income $ 30,920 $ 28,452
Interest income/earning assets 4.11% 4.24%
Interest expense/earning assets 0.58 0.73
Net interest margin 3.53% 3.51%
(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
Twelve Months Ended December 31,
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) $ 503,963 $ 21,281 4.22% $ 457,886 $ 21,971 4.80%
Residential construction loans 125,295 4,581 3.66 89,823 3,410 3.80
Commercial ADC loans 147,881 7,721 5.22 149,571 6,819 4.56
Commercial investor real estate loans 421,505 23,167 5.50 349,447 20,213 5.78
Commercial owner occupied real estate loans 554,397 30,236 5.45 511,692 30,197 5.90
Commercial business loans 299,462 16,511 5.51 229,825 11,344 4.94
Leasing 5,117 326 6.36 10,505 707 6.73
Consumer loans 357,839 12,592 3.52 363,010 13,271 3.68
Total loans and leases (3) 2,415,459 116,415 4.82 2,161,759 107,932 5.00
Taxable securities 774,030 19,254 2.49 885,023 23,471 2.65
Tax-exempt securities (4) 288,347 13,463 4.67 244,958 13,590 5.55
Interest-bearing deposits with banks 42,668 111 0.26 30,270 77 0.25
Federal funds sold 724 1 0.18 1,337 2 0.14
Total interest-earning assets 3,521,228 149,244 4.24 3,323,347 145,072 4.37
Less: allowance for loan and lease losses (46,260) (56,770)
Cash and due from banks 46,588 45,721
Premises and equipment, net 48,875 49,047
Other assets 209,653 220,221
Total assets $3,780,084 $3,581,566
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $ 385,004 344 0.09% $ 340,110 364 0.11%
Regular savings deposits 212,659 199 0.09 184,050 183 0.10
Money market savings deposits 877,546 1,943 0.22 859,608 3,547 0.41
Time deposits 566,658 4,871 0.86 611,192 6,908 1.13
Total interest-bearing deposits 2,041,867 7,357 0.36 1,994,960 11,002 0.55
Other borrowings 70,477 204 0.29 78,207 212 0.27
Advances from FHLB 405,227 14,131 3.49 405,577 14,397 3.55
Subordinated debentures 35,000 959 2.74 35,000 913 2.61
Total interest-bearing liabilities 2,552,571 22,651 0.89 2,513,744 26,524 1.06
Noninterest-bearing demand deposits 735,231 619,260
Other liabilities 26,563 25,881
Stockholders' equity 465,719 422,681
Total liabilities and stockholders' equity $3,780,084 $3,581,566
Net interest income and spread $ 126,593 3.35% $ 118,548 3.31%
Less: tax-equivalent adjustment 5,374 5,602
Net interest income $ 121,219 $ 112,946
Interest income/earning assets 4.24% 4.37%
Interest expense/earning assets 0.64 0.80
Net interest margin 3.60% 3.57%
(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 $5.4 million and $5.6 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.