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Sandy Spring Bancorp Reports Net Income of $24.4 Million for the Second Quarter

July 19, 2018 7:00 AM

OLNEY, Md., July 19, 2018 (GLOBE NEWSWIRE) -- Today, Sandy Spring Bancorp, Inc., (Nasdaq: SASR), the parent company of Sandy Spring Bank, reported net income for the second quarter of 2018 of $24.4 million ($0.68 per diluted share) compared to net income of $14.7 million ($0.61 per diluted share) for the second quarter of 2017 and net income of $21.7 million ($0.61 per diluted share) for the first quarter of 2018. The current quarter’s results included $2.2 million in merger expenses. Exclusive of the after-tax impact of these expenses, earnings per diluted share would have been approximately $0.73 per share.

The results of operations from the January 1, 2018, acquisition of WashingtonFirst Bankshares (“WashingtonFirst”) are included in the Company’s consolidated results of operations for the first six months of 2018. The current period results reflect increased levels of average and period end balances, income and expense, versus comparable periods of 2017. WashingtonFirst had assets of $2.1 billion, loans of $1.7 billion and deposits of $1.6 billion at the acquisition date. The growth in interest income and expense from the prior year is the result of the growth in the balance sheet. As a result of the synergies from the combination of the two institutions, additional operating cost savings are expected to be realized throughout 2018.

“Our robust loan growth continues to provide the Company with momentum. Strong capital levels and solid results generated by our core operating performance have enabled us to increase dividends to record levels,” said Daniel J. Schrider, President and Chief Executive Officer. “We continue to prove our ability to succeed in a highly competitive market, and we are well positioned to serve the growing needs of both individual clients and businesses of all sizes.” Second Quarter Highlights:

Review of Balance Sheet and Credit Quality

At June 30, 2018, total assets amounted to $8.2 billion compared to $5.3 billion at June 30, 2017. The increase was primarily as a result of the WashingtonFirst acquisition. Total loans at June 30, 2018, were $6.3 billion compared to $4.1 billion at June 30, 2017. Loan production continues to provide the source for asset growth as organic loans grew $256 million in the first six months of 2018. This loan growth is net of the sale of $60 million in loans out of the mortgage portfolio during the first quarter.

Tangible common equity totaled $690 million at June 30, 2018, compared to $472 million at June 30, 2017. The growth in intangible assets associated with the WashingtonFirst acquisition resulted in a decline in the ratio of tangible common equity to tangible assets to 8.85% at June 30, 2018, as compared to 9.10% at June 30, 2017. The Company had a total risk-based capital ratio of 12.19%, a common equity tier 1 risk-based capital ratio of 10.85%, a tier 1 risk-based capital ratio of 11.01% and a tier 1 leverage ratio of 9.27% at June 30, 2018.

The ratio of non-performing loans to total loans decreased to 0.46% at June 30, 2018, compared to 0.78% at June 30, 2017, as a result of the growth in the loan portfolio. Non-performing loans totaled $28.8 million at June 30, 2018, compared to $32.2 million at June 30, 2017, and $29.4 million at March 31, 2018. Non-performing loans include accruing loans 90 days or more past due and restructured loans, but exclude non-performing loans acquired in the WashingtonFirst acquisition.

Loan charge-offs, net of recoveries, totaled $0.2 million for the second quarter of 2018 compared to $0.1 million for the second quarter of 2017. The allowance for loan losses represented 0.78% of outstanding loans and 168% of non-performing loans at June 30, 2018, compared to 1.09% of outstanding loans and 140% of non-performing loans at June 30, 2017. The decline in the ratio of the allowance for loan losses to outstanding loans ratio is the result of the accounting for credit losses on the loans acquired in the WashingtonFirst acquisition as any incurred credit losses have been embedded in the determination of the fair values of those loans.

Income Statement Review

For the second quarter of 2018 net interest income increased 51% to $63.8 million compared to $42.3 million for the second quarter of 2017 as average loans from quarter to quarter increased 51% primarily as a result of the WashingtonFirst acquisition and, to a lesser extent, the Company’s organic loan growth during the period. The net interest margin for the current quarter was 3.56% compared to the net interest margin for the second quarter of 2017 of 3.60%. The margin for the prior year’s quarter included $0.7 million from the full payoff of a previously acquired credit impaired loan. Exclusive of the recovered interest income, the net interest margin would have been 3.54% based on an adjusted net interest income of $41.6 million. Amortization of the fair value adjustments to both interest-earning assets and interest-bearing liabilities directly attributable to the acquisition had a 12 basis point positive effect on net interest margin for the current period. This favorable margin impact was offset by approximately 5 basis points as a result of the impact that the recent reduction in the tax rate had on tax-advantaged investments.

The provision for loan losses was $1.7 million for the second quarter of 2018, compared to $1.3 million for the second quarter of 2017 and $2.0 million for the first quarter of 2018. The increase in the provision reflects the impact of organic loan production and the impact of acquired loans being refinanced as they reach maturity under the original lending arrangements during the second quarter of 2018.

Non-interest income increased to $14.9 million for the second quarter of 2018, compared to $13.6 million for the second quarter of 2017. The second quarter of 2017 included gains of $1.3 million on sales of investment securities. Excluding the gains, non-interest income increased 21% due primarily to the impact of increased mortgage banking activities and, to a lesser extent, income from wealth management activities and service charges on deposit accounts.

Non-interest expenses increased 37% to $45.1 million for the second quarter of 2018, compared to $32.9 million in the second quarter of 2017. The current quarter included $2.2 million in merger expenses and the second quarter of 2017 included $1.3 million in penalties on the early payoff of high-rate FHLB advances and $1.0 million in merger expenses. Excluding these transactions, non-interest expenses increased 40% compared to the second quarter of 2017 due to increased compensation and benefit costs and facility and operational expenses. Merger expenses for the current quarter include the costs related to the consolidation of six redundant branches. The non-GAAP efficiency ratio improved to 52.98% for the second quarter of 2018, compared to 54.10% for the second quarter of 2017, as a result of the growth in net interest income.

Net interest income for the first six months of 2018 increased 53%, compared to the first six months of 2017, due the combination of the acquisition and organic loan growth. During the first six months of 2018, the net interest margin was 3.57% compared to 3.56% for the prior year period. The amortization of the fair value adjustments is estimated to be 12 basis points on an annual basis. This favorable margin effect was partially offset by the impact that the recently enacted tax rate reduction had on the tax-advantaged securities in the investment portfolio which adversely affected the margin by 5 basis points. Net interest income for the first six months of 2017 included the previously mentioned $0.7 million recovery of interest income. Exclusive of this recovery, the net interest margin would have been 3.54%.

The provision for loan losses was $3.7 million for the first six months of 2018, compared to $1.5 million for the first six months of 2017. The increase in the provision reflects the organic growth in the loan portfolio year over year in addition to the impact of acquired loans being refinanced as they reach maturity under the original lending arrangements and ceased to be accounted for as acquired loans.

Non-interest income was $32.0 million for the first six months of 2018, compared to $26.2 million for the first six months of 2017. The first six months of 2017 included gains of $1.3 million on sales of investment securities. Excluding these gains, non-interest income increased 28% compared to the prior year period primarily due to increases in mortgage banking activities, wealth management income and BOLI insurance proceeds. Origination volume associated with the mortgage lending operations acquired as part of the WashingtonFirst acquisition contributed to significant growth in mortgage banking income for the first six months of 2018.

Non-interest expenses increased 51% to $94.7 million for the first six months of 2018, compared to $62.8 million for the prior year period. The increase in non-interest expense excluding merger expense was 35%. The majority of the increase was in compensation, facility costs and other operational expenses resulting from increased size of the Company. The non-GAAP efficiency ratio improved to 51.25% for the first six months of 2018 compared to 54.44% for the first six months of 2017 as a direct result of the growth in net interest income.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management uses supplemental non-GAAP financial measures in its analysis of the Company’s performance. These non-GAAP financial measures include: reported net income excluding intangible asset amortization, merger related expenses and the loss on the FHLB redemption from non-interest expense; non-interest income excluding securities gains (losses); and tax-equivalent net interest income, which adjusts the interest earned on tax-advantaged loans and tax-exempt investment securities to an amount comparable to interest subject to normal income taxes. Because the adjustments made to derive non-GAAP financial measures can vary from period to period, the Company’s management believes that the non-GAAP financial measures are useful in comparing period to period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Please refer to Non-GAAP Reconciliation table included with this release.

Conference Call

The Company’s management will host a conference call to discuss its first 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 1-800-860-2442. 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 on the website until 9:00 am (ET) August 2, 2018. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10121776.

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, orPhilip J. Mantua, E.V.P. & Chief Financial OfficerSandy Spring Bancorp17801 Georgia AvenueOlney, Maryland 208321-800-399-5919 Email: [email protected] [email protected] Web site: www.sandyspringbank.com

Media Contact:Jen Schell301-570-8331[email protected]

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, 2017, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov.

Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
Three Months Ended Six Months Ended
June 30, % June 30, %
(Dollars in thousands, except per share data) 2018 2017 Change 2018 2017 Change
Results of Operations:
Net interest income $63,818 $42,326 51 % $126,709 $82,579 53 %
Provision for loan losses 1,733 1,322 31 3,730 1,516 146
Non-interest income 14,868 13,571 10 31,986 26,203 22
Non-interest expenses 45,082 32,868 37 94,723 62,849 51
Income before income taxes 31,871 21,707 47 60,242 44,417 36
Net income 24,399 14,741 66 46,064 29,853 54
Pre-tax pre-provision income $35,832 $24,016 49 $75,158 $46,920 60
Return on average assets 1.23% 1.14% 1.18% 1.17%
Return on average common equity 9.66% 10.80% 9.18% 11.12%
Net interest margin 3.56% 3.60% 3.57% 3.56%
Efficiency ratio - GAAP basis (1) 57.29% 58.80% 59.69% 57.78%
Efficiency ratio - Non-GAAP basis (1) 52.98% 54.10% 51.25% 54.44%
Per share data:
Basic net income $0.68 $0.61 11 % $1.29 $1.24 4 %
Diluted net income $0.68 $0.61 11 $1.29 $1.23 5
Average fully diluted shares 35,743,927 24,262,745 47 35,710,323 24,258,791 47
Dividends declared per share $0.28 $0.26 8 $0.54 $0.52 4
Book value per share 28.90 23.13 25 28.90 23.13 25
Tangible book value per share 19.42 19.68 (1) 19.42 19.68 (1)
Outstanding shares 35,511,943 23,983,997 48 35,511,943 23,983,997 48
Financial Condition at period-end:
Investment securities $1,017,274 $821,491 24 % $1,017,274 $821,491 24 %
Loans 6,250,073 4,133,171 51 6,250,073 4,133,171 51
Interest-earning assets 7,532,664 4,988,704 51 7,532,664 4,988,704 51
Assets 8,152,600 5,270,521 55 8,152,600 5,270,521 55
Deposits 5,837,826 3,885,445 50 5,837,826 3,885,445 50
Interest-bearing liabilities 5,168,055 3,380,221 53 5,168,055 3,380,221 53
Stockholders' equity 1,026,349 554,683 85 1,026,349 554,683 85
Capital ratios:
Tier 1 leverage (4) 9.27% 9.26% 9.27% 9.26%
Tier 1 capital to risk-weighted assets (4) 11.01% 10.96% 11.01% 10.96%
Total regulatory capital to risk-weighted assets (4) 12.19% 12.00% 12.19% 12.00%
Common equity tier 1 capital to risk-weighted assets (4) 10.85% 10.96% 10.85% 10.96%
Tangible common equity to tangible assets (2) 8.85% 9.10% 8.85% 9.10%
Average equity to average assets 12.78% 10.52% 12.83% 10.50%
Credit quality ratios:
Allowance for loan losses to loans 0.78% 1.09% 0.78% 1.09%
Non-performing loans to total loans 0.46% 0.78% 0.46% 0.78%
Non-performing assets to total assets 0.38% 0.64% 0.38% 0.64%
Allowance for loan losses to non-performing loans 168.17% 140.00% 168.17% 140.00%
Annualized net charge-offs to average loans (3) 0.01% 0.01% 0.02% 0.03%
(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, merger expenses and loss on FHLB redemption from non-interest expense;
securities gains (losses) from non-interest income and adds 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 June 30, 2018

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in thousands) 2018 2017 2018 2017
Pre-tax pre-provision income:
Net income $24,399 $14,741 $46,064 $29,853
Plus non-GAAP adjustments:
Merger expenses 2,228 987 11,186 987
Income taxes 7,472 6,966 14,178 14,564
Provision for loan losses 1,733 1,322 3,730 1,516
Pre-tax pre-provision income $35,832 $24,016 $75,158 $46,920
Efficiency ratio - GAAP basis:
Non-interest expenses $45,082 $32,868 $94,723 $62,849
Net interest income plus non-interest income $78,686 $55,897 $158,695 $108,782
Efficiency ratio - GAAP basis 57.29% 58.80% 59.69% 57.78%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses $45,082 $32,868 $94,723 $62,849
Less non-GAAP adjustments:
Amortization of intangible assets 541 25 1,082 51
Loss on FHLB Redemption - 1,275 - 1,275
Merger expenses 2,228 987 11,186 987
Non-interest expenses - as adjusted $42,313 $30,581 $82,455 $60,536
Net interest income plus non-interest income $78,686 $55,897 $158,695 $108,782
Plus non-GAAP adjustment:
Tax-equivalent income 1,177 1,901 2,262 3,697
Less non-GAAP adjustment:
Securities gains - 1,273 63 1,275
Net interest income plus non-interest income - as adjusted $79,863 $56,525 $160,894 $111,204
Efficiency ratio - Non-GAAP basis 52.98% 54.10% 51.25% 54.44%
Supplemental Non-GAAP Performance Measurements:
Net income - GAAP $24,399 $14,741 $46,064 $29,853
Plus non-GAAP adjustment:
Merger expenses - net of tax 1,646 593 8,263 593
Less non-GAAP adjustment:
Acquisition fair value marks - net of tax 1,631 22 3,278 47
Net income - Non-GAAP $24,414 $15,312 $51,049 $30,399
Diluted net income per share - Non-GAAP $0.68 $0.63 $1.43 $1.25
Return on average assets - Non-GAAP 1.24% 1.18% 1.31% 1.19%
Return on average common equity - Non-GAAP 9.67% 11.22% 10.18% 11.32%
Tangible common equity ratio:
Total stockholders' equity $1,026,349 $554,683 $1,026,349 $554,683
Accumulated other comprehensive income 20,556 3,712 20,556 3,712
Goodwill (346,312) (85,768) (346,312) (85,768)
Other intangible assets, net (10,868) (629) (10,868) (629)
Tangible common equity $689,725 $471,998 $689,725 $471,998
Total assets $8,152,600 $5,270,521 $8,152,600 $5,270,521
Goodwill (346,312) (85,768) (346,312) (85,768)
Other intangible assets, net (10,868) (629) (10,868) (629)
Tangible assets $7,795,420 $5,184,124 $7,795,420 $5,184,124
Tangible common equity ratio 8.85% 9.10% 8.85% 9.10%
Outstanding common shares 35,511,943 23,983,997 35,511,943 23,983,997
Tangible book value per common share $19.42 $19.68 $19.42 $19.68

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
June 30, December 31, June 30,
(Dollars in thousands) 2018 2017 2017
Assets
Cash and due from banks $69,451 $55,693 $48,637
Federal funds sold 1,434 2,845 2,831
Interest-bearing deposits with banks 223,883 53,962 25,468
Cash and cash equivalents 294,768 112,500 76,936
Residential mortgage loans held for sale (at fair value) 40,000 9,848 5,743
Investments available-for-sale (at fair value) 942,832 729,507 780,078
Other equity securities 74,442 45,518 41,413
Total loans 6,250,073 4,314,248 4,133,171
Less: allowance for loan losses (48,493) (45,257) (45,079)
Net loans 6,201,580 4,268,991 4,088,092
Premises and equipment, net 62,275 54,761 53,235
Other real estate owned 2,361 2,253 1,460
Accrued interest receivable 23,197 15,480 14,910
Goodwill 346,312 85,768 85,768
Other intangible assets, net 10,868 580 629
Other assets 153,965 121,469 122,257
Total assets $8,152,600 $5,446,675 $5,270,521
Liabilities
Noninterest-bearing deposits $1,910,690 $1,264,392 $1,302,536
Interest-bearing deposits 3,927,136 2,699,270 2,582,909
Total deposits 5,837,826 3,963,662 3,885,445
Securities sold under retail repurchase agreements and federal funds purchased 139,647 119,359 127,312
Advances from FHLB 1,063,777 765,833 670,000
Subordinated debentures 37,495 - -
Accrued interest payable and other liabilities 47,506 34,005 33,081
Total liabilities 7,126,251 4,882,859 4,715,838
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 35,511,943,
23,996,293 and 23,983,997 at June 30, 2018, December 31, 2017 and June 30, 2017, respectively 35,512 23,996 23,984
Additional paid in capital 604,631 168,188 166,705
Retained earnings 406,762 378,489 367,706
Accumulated other comprehensive loss (20,556) (6,857) (3,712)
Total stockholders' equity 1,026,349 563,816 554,683
Total liabilities and stockholders' equity $8,152,600 $5,446,675 $5,270,521

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended Six Months Ended
June 30,June 30,
(Dollars in thousands, except per share data) 2018 2017 2018 2017
Interest Income:
Interest and fees on loans $70,672 $42,747 $138,264 $82,970
Interest on loans held for sale 279 72 647 154
Interest on deposits with banks 514 91 871 181
Interest and dividends on investment securities:
Taxable 5,083 3,554 10,185 7,162
Exempt from federal income taxes 2,042 2,106 4,114 4,057
Interest on federal funds sold 7 6 20 10
Total interest income 78,597 48,576 154,101 94,534
Interest Expense:
Interest on deposits 8,851 3,023 15,810 5,511
Interest on retail repurchase agreements and federal funds purchased 108 79 216 155
Interest on advances from FHLB 5,338 3,148 10,416 6,277
Interest on subordinated debt 482 - 950 12
Total interest expense 14,779 6,250 27,392 11,955
Net interest income 63,818 42,326 126,709 82,579
Provision for loan losses 1,733 1,322 3,730 1,516
Net interest income after provision for loan losses 62,085 41,004 122,979 81,063
Non-interest Income:
Investment securities gains - 1,273 63 1,275
Service charges on deposit accounts 2,290 2,017 4,549 3,981
Mortgage banking activities 2,064 840 4,271 1,448
Wealth management income 5,387 4,744 10,448 9,228
Insurance agency commissions 1,180 1,222 3,004 2,974
Income from bank owned life insurance 670 605 3,001 1,199
Bank card fees 1,393 1,253 2,763 2,398
Other income 1,884 1,617 3,887 3,700
Total non-interest income 14,868 13,571 31,986 26,203
Non-interest Expenses:
Salaries and employee benefits 24,664 18,282 48,576 36,083
Occupancy expense of premises 4,642 3,211 9,584 6,613
Equipment expenses 2,243 1,767 4,468 3,491
Marketing 945 776 2,093 1,439
Outside data services 1,707 1,367 3,104 2,759
FDIC insurance 1,390 823 2,583 1,628
Amortization of intangible assets 541 25 1,082 51
Merger expenses 2,228 987 11,186 987
Other expenses 6,722 5,630 12,047 9,798
Total non-interest expenses 45,082 32,868 94,723 62,849
Income before income taxes 31,871 21,707 60,242 44,417
Income tax expense 7,472 6,966 14,178 14,564
Net income $24,399 $14,741 $46,064 $29,853
Net Income Per Share Amounts:
Basic net income per share $0.68 $0.61 $1.29 $1.24
Diluted net income per share $0.68 $0.61 $1.29 $1.23
Dividends declared per share $0.28 $0.26 $0.54 $0.52

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
2018 2017
(Dollars in thousands, except per share data) Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the Quarter:
Tax-equivalent interest income $79,774 $76,589 $52,550 $51,477 $50,477 $47,754
Interest expense 14,779 12,613 7,184 6,892 6,250 5,705
Tax-equivalent net interest income 64,995 63,976 45,366 44,585 44,227 42,049
Tax-equivalent adjustment 1,177 1,085 1,874 1,888 1,901 1,796
Provision for loan losses 1,733 1,997 527 934 1,322 194
Non-interest income 14,868 17,118 12,294 12,746 13,571 12,632
Non-interest expenses 45,082 49,641 35,059 31,191 32,868 29,981
Income before income taxes 31,871 28,371 20,200 23,318 21,707 22,710
Income tax expense 7,472 6,706 11,933 8,229 6,966 7,598
Net income $24,399 $21,665 $8,267 $15,089 $14,741 $15,112
Financial Performance:
Pre-tax pre-provision income $35,832 $39,326 $23,647 $24,597 $24,016 $22,904
Return on average assets 1.23% 1.12% 0.61% 1.13% 1.14% 1.20%
Return on average common equity 9.66% 8.70% 5.82% 10.74% 10.80% 11.45%
Net interest margin 3.56% 3.58% 3.57% 3.54% 3.60% 3.51%
Efficiency ratio - GAAP basis (1) 57.29% 62.04% 62.85% 56.26% 58.80% 56.69%
Efficiency ratio - Non-GAAP basis (1) 52.98% 49.54% 55.69% 53.76% 54.10% 54.78%
Per Share Data:
Basic net income per share $0.68 $0.61 $0.34 $0.62 $0.61 $0.63
Diluted net income per share $0.68 $0.61 $0.34 $0.62 $0.61 $0.63
Average fully diluted shares 35,743,927 35,683,542 24,228,471 24,223,004 24,262,745 24,158,566
Dividends declared per common share $0.28 $0.26 $0.26 $0.26 $0.26 $0.26
Non-interest Income:
Securities gains (losses) $- $63 $(2) $- $1,273 $2
Service charges on deposit accounts 2,290 2,259 2,177 2,140 2,017 1,964
Mortgage banking activities 2,064 2,207 654 632 840 608
Wealth management income 5,387 5,061 5,054 4,864 4,744 4,484
Insurance agency commissions 1,180 1,824 1,307 1,950 1,222 1,752
Income from bank owned life insurance 670 2,331 595 609 605 594
Bank card fees 1,393 1,370 1,218 1,211 1,253 1,145
Other income 1,884 2,003 1,291 1,340 1,617 2,083
Total Non-interest Income $14,868 $17,118 $12,294 $12,746 $13,571 $12,632
Non-interest Expense:
Salaries and employee benefits $24,664 $23,912 $18,607 $18,442 $18,282 $17,801
Occupancy expense of premises 4,642 4,942 3,146 3,294 3,211 3,402
Equipment expenses 2,243 2,225 1,802 1,722 1,767 1,724
Marketing 945 1,148 896 784 776 663
Outside data services 1,707 1,397 1,441 1,286 1,367 1,392
FDIC insurance 1,390 1,193 827 850 823 805
Amortization of intangible assets 541 541 25 25 25 26
Merger expenses 2,228 8,958 2,920 345 987 -
Professional fees 1,699 1,040 1,439 1,053 1,045 955
Other real estate owned expenses 41 38 14 4 (6) 5
Other expenses 4,982 4,247 3,942 3,386 4,591 3,208
Total Non-interest Expense $45,082 $49,641 $35,059 $31,191 $32,868 $29,981
(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, merger expenses and loss on FHLB redemption from non-interest expense;
securities gains (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
2018 2017
(Dollars in thousands) Q2 Q1 Q4 Q3 Q2 Q1
Balance Sheets at Quarter End:
Residential mortgage loans $1,106,674 $992,287 $921,435 $882,890 $871,766 $848,814
Residential construction loans 197,372 215,445 176,687 171,814 169,901 170,285
Commercial AD&C loans 609,266 564,871 292,443 295,222 314,259 309,350
Commercial investor real estate loans 1,923,827 1,928,439 1,112,710 1,104,669 1,069,988 979,410
Commercial owner occupied real estate loans 1,184,421 1,174,739 857,196 831,461 797,629 772,443
Commercial business loans 702,939 652,797 497,948 451,667 451,570 457,216
Consumer loans 525,574 532,973 455,829 456,395 458,058 455,478
Total loans 6,250,073 6,061,551 4,314,248 4,194,118 4,133,171 3,992,996
Allowance for loan losses (48,493) (46,931) (45,257) (44,924) (45,079) (43,861)
Loans held for sale 40,000 28,486 9,848 7,084 5,743 17,717
Investment securities 1,017,274 1,040,339 775,025 795,922 821,491 855,707
Interest-earning assets 7,532,664 7,285,731 5,155,928 5,049,229 4,988,704 4,919,927
Total assets 8,152,600 7,894,918 5,446,675 5,334,788 5,270,521 5,201,164
Noninterest-bearing demand deposits 1,910,690 1,767,523 1,264,392 1,312,710 1,302,536 1,234,505
Total deposits 5,837,826 5,627,206 3,963,662 3,955,792 3,885,445 3,799,198
Customer repurchase agreements 139,647 149,323 119,359 146,569 127,312 141,244
Total interest-bearing liabilities 5,168,055 5,057,645 3,584,462 3,422,568 3,380,221 3,380,937
Total stockholders' equity 1,026,349 1,014,608 563,816 564,480 554,683 544,261
Quarterly Average Balance Sheets:
Residential mortgage loans $1,034,062 $1,117,478 $903,660 $880,782 $860,081 $847,896
Residential construction loans 223,171 193,327 171,239 172,921 169,130 157,152
Commercial AD&C loans 576,076 582,876 289,737 291,569 302,924 310,325
Commercial investor real estate loans 1,924,759 1,988,340 1,114,960 1,090,641 1,010,389 945,080
Commercial owner occupied real estate loans 1,184,409 940,065 842,642 808,802 776,279 774,964
Commercial business loans 666,280 657,372 454,330 459,779 454,724 462,444
Consumer loans 531,965 538,198 458,378 457,526 461,672 458,162
Total loans 6,140,722 6,017,656 4,234,946 4,162,020 4,035,199 3,956,023
Loans held for sale 25,403 35,768 5,862 7,093 7,077 7,402
Investment securities 1,028,306 1,062,325 780,522 813,179 842,837 818,287
Interest-earning assets 7,311,272 7,212,878 5,061,075 5,019,133 4,922,389 4,829,208
Total assets 7,926,735 7,841,611 5,346,625 5,297,368 5,202,398 5,111,698
Noninterest-bearing demand deposits 1,796,644 1,651,258 1,322,157 1,293,470 1,251,396 1,159,715
Total deposits 5,657,420 5,489,715 3,991,936 3,916,657 3,810,180 3,673,731
Customer repurchase agreements 148,539 136,694 139,125 133,145 132,552 128,485
Total interest-bearing liabilities 5,058,016 5,116,904 3,419,669 3,407,279 3,360,128 3,375,002
Total stockholders' equity 1,013,081 1,010,106 563,506 557,282 547,229 535,308
Financial Measures:
Average equity to average assets 12.78% 12.88% 10.54% 10.52% 10.52% 10.47%
Investment securities to earning assets 13.50% 14.28% 15.03% 15.76% 16.47% 17.39%
Loans to earning assets 82.97% 83.20% 83.68% 83.06% 82.85% 81.16%
Loans to assets 76.66% 76.78% 79.21% 78.62% 78.42% 76.77%
Loans to deposits 107.06% 107.72% 108.85% 106.02% 106.38% 105.10%
Capital Measures:
Tier 1 leverage (1) 9.27% 9.21% 9.24% 9.28% 9.26% 9.26%
Tier 1 capital to risk-weighted assets (1) 11.01% 11.08% 10.84% 10.99% 10.96% 11.02%
Total regulatory capital to risk-weighted assets (1) 12.19% 12.27% 11.85% 12.01% 12.00% 12.06%
Common equity tier 1 capital to risk-weighted assets (1) 10.85% 10.92% 10.84% 10.99% 10.96% 11.02%
Book value per share $28.90 $28.61 $23.50 $23.53 $23.13 $22.74
Outstanding shares 35,511,943 35,463,269 23,996,293 23,990,370 23,983,997 23,930,165
(1) Estimated ratio at June 30, 2018

Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
2018 2017
(Dollars in thousands) June 30, March 31, December 31, September 30, June 30, March 31,
Non-Performing Assets:
Loans 90 days past due:
Commercial business $6 $- $- $- $- $-
Commercial real estate:
Commercial AD&C - - - - - -
Commercial investor real estate - - - - - -
Commercial owner occupied real estate 112 - - - 424 -
Consumer - 126 - 1 4 -
Residential real estate:
Residential mortgage - - 225 225 - 232
Residential construction - - - - - -
Total loans 90 days past due 118 126 225 226 428 232
Non-accrual loans:
Commercial business 6,883 6,634 6,703 6,091 6,807 4,849
Commercial real estate:
Commercial AD&C 136 136 136 137 137 137
Commercial investor real estate 5,878 5,813 5,575 5,589 6,934 7,970
Commercial owner occupied real estate 3,440 3,524 3,582 5,012 4,926 5,106
Consumer 4,298 3,244 2,967 3,152 3,111 3,058
Residential real estate:
Residential mortgage 6,251 7,063 7,196 7,345 7,101 6,908
Residential construction 168 174 177 182 187 189
Total non-accrual loans 27,054 26,588 26,336 27,508 29,203 28,217
Total restructured loans - accruing 1,663 2,678 2,788 2,471 2,569 2,409
Total non-performing loans 28,835 29,392 29,349 30,205 32,200 30,858
Other assets and real estate owned (OREO) 2,361 2,761 2,253 1,448 1,460 1,294
Total non-performing assets $31,196 $32,153 $31,602 $31,653 $33,660 $32,152
For the Quarter Ended,
June 30, March 31, December 31, September 30, June 30, March 31,
(Dollars in thousands) 2018 2018 2017 2017 2017 2017
Analysis of Non-accrual Loan Activity:
Balance at beginning of period $26,588 $26,336 $27,508 $29,203 $28,217 $29,211
Non-accrual balances transferred to OREO - (289) (888) (411) (175) (113)
Non-accrual balances charged-off (144) (411) (446) (1,127) (179) (391)
Net payments or draws (1,635) (357) (1,707) (1,869) (1,804) (1,382)
Loans placed on non-accrual 2,245 1,309 2,504 1,712 3,144 1,461
Non-accrual loans brought current - - (635) - - (569)
Balance at end of period $27,054 $26,588 $26,336 $27,508 $29,203 $28,217
Analysis of Allowance for Loan Losses:
Balance at beginning of period $46,931 $45,257 $44,924 $45,079 $43,861 $44,067
Provision for loan losses 1,733 1,997 527 934 1,322 194
Less loans charged-off, net of recoveries:
Commercial business (73) 322 48 1,029 107 260
Commercial real estate:
Commercial AD&C - (62) - - (103) -
Commercial investor real estate (8) (8) (8) (10) (78) (5)
Commercial owner occupied real estate - - 243 5 - -
Consumer 244 99 (71) 103 189 167
Residential real estate:
Residential mortgage 13 (22) (12) (32) (3) (16)
Residential construction (5) (6) (6) (6) (8) (6)
Net charge-offs 171 323 194 1,089 104 400
Balance at end of period $48,493 $46,931 $45,257 $44,924 $45,079 $43,861
Asset Quality Ratios:
Non-performing loans to total loans 0.46% 0.48% 0.68% 0.72% 0.78% 0.77%
Non-performing assets to total assets 0.38% 0.41% 0.58% 0.59% 0.64% 0.62%
Allowance for loan losses to loans 0.78% 0.77% 1.05% 1.07% 1.09% 1.10%
Allowance for loan losses to non-performing loans 168.17% 159.67% 154.20% 148.73% 140.00% 142.14%
Annualized net charge-offs to average loans 0.01% 0.02% 0.02% 0.10% 0.01% 0.04%

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
Three Months Ended June 30,
2018 2017
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 $1,034,062 $9,414 3.64% $860,081 $7,531 3.50%
Residential construction loans 223,171 2,199 3.95 169,130 1,579 3.74
Total mortgage loans 1,257,233 11,613 3.70 1,029,211 9,110 3.54
Commercial AD&C loans 576,076 8,271 5.76 302,924 3,767 4.99
Commercial investor real estate loans 1,924,759 22,661 4.72 1,010,389 11,280 4.48
Commercial owner occupied real estate loans 1,184,409 13,989 4.74 776,279 9,981 5.16
Commercial business loans 666,280 8,807 5.30 454,724 5,062 4.46
Total commercial loans 4,351,524 53,728 4.95 2,544,316 30,090 4.74
Consumer loans 531,965 5,753 4.40 461,672 4,171 3.66
Total loans (2) 6,140,722 71,094 4.64 4,035,199 43,371 4.31
Loans held for sale 25,403 279 4.39 7,077 72 4.09
Taxable securities 734,482 5,282 2.88 535,028 3,678 2.75
Tax-exempt securities (3) 293,824 2,598 3.54 307,809 3,259 4.23
Total investment securities 1,028,306 7,880 3.06 842,837 6,937 3.29
Interest-bearing deposits with banks 114,869 514 1.79 34,738 91 1.06
Federal funds sold 1,972 7 1.44 2,538 6 0.96
Total interest-earning assets 7,311,272 79,774 4.37 4,922,389 50,477 4.11
Less: allowance for loan losses (47,694) (43,679)
Cash and due from banks 66,420 47,517
Premises and equipment, net 61,900 53,449
Other assets 534,837 222,722
Total assets $7,926,735 $5,202,398
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $729,948 222 0.12% $615,141 123 0.08%
Regular savings deposits 356,077 94 0.11 325,634 57 0.07
Money market savings deposits 1,554,304 4,571 1.18 983,185 1,076 0.44
Time deposits 1,220,447 3,964 1.30 634,824 1,767 1.12
Total interest-bearing deposits 3,860,776 8,851 0.92 2,558,784 3,023 0.47
Other borrowings 148,542 108 0.29 132,553 79 0.24
Advances from FHLB 1,011,180 5,338 2.12 668,791 3,148 1.89
Subordinated debentures 37,518 482 5.14 - - -
Total interest-bearing liabilities 5,058,016 14,779 1.17 3,360,128 6,250 0.75
Noninterest-bearing demand deposits 1,796,644 1,251,396
Other liabilities 58,994 43,645
Stockholders' equity 1,013,081 547,229
Total liabilities and stockholders' equity $7,926,735 $5,202,398
Net interest income and spread $64,995 3.20% $44,227 3.36%
Less: tax-equivalent adjustment 1,177 1,901
Net interest income $63,818 $42,326
Interest income/earning assets 4.37% 4.11%
Interest expense/earning assets 0.81 0.51
Net interest margin 3.56% 3.60%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017, respectively. The annualized taxable-equivalent adjustments utilized in
the above table to compute yields aggregated to $1.2 million and $1.9 million in 2018 and 2017, 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
Six Months Ended June 30,
2018 2017
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 $1,075,540 $19,795 3.68% $854,022 $14,879 3.48%
Residential construction loans 208,332 4,043 3.91 163,174 3,015 3.73
Total mortgage loans 1,283,872 23,838 3.72 1,017,196 17,894 3.52
Commercial AD&C loans 579,458 16,407 5.71 306,604 7,421 4.88
Commercial investor real estate loans 1,956,374 46,089 4.75 977,915 21,699 4.47
Commercial owner occupied real estate loans 1,062,912 24,567 4.66 775,625 19,009 4.94
Commercial business loans 661,851 16,856 5.14 458,563 10,069 4.43
Total commercial loans 4,260,595 103,919 4.92 2,518,707 58,198 4.66
Consumer loans 535,064 11,299 4.32 459,927 8,101 3.58
Total loans (2) 6,079,531 139,056 4.61 3,995,830 84,193 4.24
Loans held for sale 30,557 647 4.24 7,238 154 4.27
Taxable securities 747,862 10,549 2.82 534,306 7,413 2.78
Tax-exempt securities (3) 297,359 5,220 3.51 296,323 6,280 4.24
Total investment securities 1,045,221 15,769 3.02 830,629 13,693 3.30
Interest-bearing deposits with banks 104,115 871 1.69 40,038 181 0.91
Federal funds sold 2,925 20 1.36 2,320 10 0.84
Total interest-earning assets 7,262,349 156,363 4.33 4,876,055 98,231 4.05
Less: allowance for loan losses (46,689) (43,703)
Cash and due from banks 71,664 48,165
Premises and equipment, net 61,027 53,548
Other assets 535,844 223,228
Total assets $7,884,195 $5,157,293
Liabilities and Stockholders' Equity
Interest-bearing demand deposits $744,048 426 0.12% $612,608 237 0.08%
Regular savings deposits 412,053 395 0.19 320,577 106 0.07
Money market savings deposits 1,467,823 7,698 1.06 986,625 1,854 0.38
Time deposits 1,225,755 7,291 1.20 616,713 3,314 1.08
Total interest-bearing deposits 3,849,679 15,810 0.83 2,536,523 5,511 0.44
Other borrowings 144,100 216 0.30 130,531 155 0.24
Advances from FHLB 1,055,982 10,416 1.99 699,641 6,277 1.81
Subordinated debentures 37,536 950 5.07 829 12 2.91
Total interest-bearing liabilities 5,087,297 27,392 1.09 3,367,524 11,955 0.72
Noninterest-bearing demand deposits 1,724,353 1,205,809
Other liabilities 60,943 42,659
Stockholders' equity 1,011,602 541,301
Total liabilities and stockholders' equity $7,884,195 $5,157,293
Net interest income and spread $128,971 3.24% $86,276 3.33%
Less: tax-equivalent adjustment 2,262 3,697
Net interest income $126,709 $82,579
Interest income/earning assets 4.33% 4.05%
Interest expense/earning assets 0.76 0.49
Net interest margin 3.57% 3.56%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017, respectively. The annualized taxable-equivalent adjustments utilized in
the above table to compute yields aggregated to $2.3 million and $3.7 million in 2018 and 2017, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.

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