Sandy Spring Bancorp Reports First Quarter Earnings of $51.3 Million

Sandy Spring Bancorp, Inc.

OLNEY, Md., April 20, 2023 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc. (Nasdaq-SASR), the parent company of Sandy Spring Bank, reported net income of $51.3 million ($1.14 per diluted common share) for the quarter ended March 31, 2023, compared to net income of $43.9 million ($0.96 per diluted common share) for the first quarter of 2022 and $34.0 million ($0.76 per diluted common share) for the fourth quarter of 2022.

Current quarter core earnings were $52.3 million ($1.16 per diluted common share), compared to $45.1 million ($0.99 per diluted common share) for the quarter ended March 31, 2022 and $35.3 million ($0.79 per diluted common share) for the quarter ended December 31, 2022. Core earnings exclude the after-tax impact of amortization of intangibles, investment securities gains or losses and non-recurring or extraordinary items. The current period driver in the growth of GAAP earnings and core earnings compared to the linked quarter and the prior year quarter was the credit to the provision for credit losses. The provision for credit losses for the current quarter was a credit of $21.5 million compared to a charge of $1.6 million for the first quarter of 2022 and a charge of $10.8 million for the fourth quarter of 2022. The current quarter's credit to the provision was primarily the result of the improvement in the forecasted regional unemployment rate coupled with the stable credit quality in the loan portfolio.

“Following the closures of Silicon Valley Bank and Signature Bank last month, our bankers did a tremendous job proactively reaching out to our clients, answering their questions and working together to find solutions to any concerns that arose,” said Daniel J. Schrider, Chair, President and Chief Executive Officer. “Our clients are loyal to our company and believe in the valuable service we provide in the Greater Washington region.”

“Given the challenging interest rate environment, recessionary pressures and the industry-wide disruption, our priorities for the balance of the year remain growing core funding, managing expenses and taking care of our clients,” Schrider added.

First Quarter Highlights

• Total assets at March 31, 2023 increased 2% to $14.1 billion compared to $13.8 billion at December 31, 2022. Total loan and deposit balances remained relatively flat compared to the prior quarter end.
  

• At March 31, 2023 total loans have remained relatively stable at $11.4 billion compared to December 31, 2022 as a result of reduced loan demand and lower payoff activity during the current quarter.
  

• Deposits increased 1% to $11.1 billion at March 31, 2023 compared to $11.0 billion at December 31, 2022. During the current quarter attrition in noninterest-bearing deposits was 12%, primarily in commercial checking accounts, while interest-bearing deposits grew 8% driven by the addition of brokered time deposits. Excluding the increase in brokered time deposits during the current quarter, total deposits declined 3%.
  

• Total borrowings in the current quarter increased by $130.8 million over amounts at December 31, 2022 as management bolstered on-balance sheet liquidity following the closures of Silicon Valley Bank and Signature Bank.
  

• Net interest income for the first quarter of 2023 declined $4.1 million or 4% compared to the first quarter of 2022. The growth in interest income of $45.3 million provided by loan growth was more than offset by the $49.5 million increase in interest expense for the comparative periods that resulted from the increase in rates paid on deposits and higher borrowing costs.
  

• For the first quarter of 2023, the net interest margin was 2.99% compared to 3.49% for the first quarter of 2022, and 3.26% for the fourth quarter of 2022. The erosion in net interest margin for the current quarter was due to higher rates paid on interest-bearing liabilities, which outpaced the increase in the yield on interest-earning assets. The overall rate and yield increases were driven by the multiple federal funds rate increases that occurred over the preceding twelve months coupled with competition for deposits in the market. During this period, the rate paid on interest-bearing liabilities rose 223 basis points, while the yield on interest-earning assets increased 98 basis points, resulting in the aforementioned margin compression of 50 basis points.
  

• The current quarter's provision for credit losses directly attributable to the funded loan portfolio was a credit of $18.9 million compared to the prior year quarter’s provision for credit losses of $1.6 million. In addition, the quarterly credit to the provision contained a credit of $2.6 million associated with the provision for unfunded loan commitments. The credit to the provision in the current quarter reflects the impact of the improvement in forecasted regional unemployment rate, management's consideration of existing economic versus historical conditions and the continued strong credit performance of our loan portfolio segments.
  

• The current quarter's non-interest income decreased by 23% or $4.6 million compared to the prior year quarter. The decrease represents the cumulative result of the impact of the interest rate and market environment on mortgage banking activities and wealth management income, the decline in insurance commission income as a result of the disposition of the Company's insurance business during the second quarter of 2022 and lower bank card income due to regulatory restrictions on transaction fees that became effective for the Company in the second quarter of 2022.
  

• Non-interest expense for the current quarter increased $4.2 million or 7% compared to the prior year quarter, driven primarily by increases in the FDIC insurance assessment, professional fees and services and other expenses.
  

• Return on average assets (“ROA”) for the quarter ended March 31, 2023 was 1.49% and return on average tangible common equity (“ROTCE”) was 19.10% compared to 1.42% and 16.45%, respectively, for the first quarter of 2022. On a non-GAAP basis, the current quarter's core ROA was 1.52% and core ROTCE was 19.11% compared to core ROA of 1.45% and core ROTCE of 16.45% for the first quarter of 2022.
  

• The GAAP efficiency ratio was 58.55% for the first quarter of 2023, compared to 50.92% for the first quarter of 2022, and 53.23% for the fourth quarter of 2022. The non-GAAP efficiency ratio was 56.87% for the first quarter of 2023 compared to 49.34% for the prior year quarter, and 51.46% for the fourth quarter of 2022. The increase in both the GAAP and non-GAAP efficiency ratios (reflecting a decrease in efficiency) in the current quarter compared to the previous quarter and the first quarter of the prior year was the result of declines in net revenue from the prior periods coupled with the growth in non-interest expense.
  

Customer Deposit Focus

Deposits amounted to $11.1 billion at March 31, 2023. Core deposits, which exclude brokered relationships, represented 88% of total deposits at the end of the current quarter as compared to 92% for the previous quarter, reflecting the stability of the core deposit base. Total insured deposits, including pass-through insured deposits, represented approximately 66% of total deposits at March 31, 2023. During the quarter, the availability of high yields in savings products and short-term debt securities coupled with expected seasonal run-off led to noninterest-bearing deposits declining 12%. The rotation into higher yielding accounts along with growth in brokered time deposits drove an 8% increase in interest-bearing deposits. The Company mitigated deposit outflows by providing reciprocal deposit arrangements, which provide FDIC deposit insurance for accounts that would otherwise exceed deposit insurance limits.

At March 31, 2023, contingent liquidity amounted to $3.8 billion or 101% of the amount of uninsured deposits. This amount of contingent liquidity does not include any consideration of the held-to-maturity or the available-for-sale investment portfolios. With the inclusion of the total unpledged investment securities portfolio, in addition to $1.5 billion in available federal funds, this results in total coverage of 158% of uninsured deposits.

Balance Sheet and Credit Quality

Total assets grew 9% to $14.1 billion at March 31, 2023, as compared to $13.0 billion at March 31, 2022. During this period, total loans grew by 12% to $11.4 billion at March 31, 2023, compared to $10.1 billion at March 31, 2022. Total commercial loans, grew by $902.1 million or 12% during the past twelve months. The growth in the commercial portfolio occurred in most commercial portfolios led by the $779.2 million or 18% growth in the investor owned commercial real estate portfolio. Year-over-year the total residential mortgage loan portfolio grew 33%, as a greater number of conventional 1-4 family mortgage and ARM loans were retained to grow the portfolio. Reduced loan demand coupled with lower payoff activity during the current quarter resulted in minimal loan growth compared to the prior quarter.

Deposits increased 2% to $11.1 billion at March 31, 2023 compared to $10.9 billion at March 31, 2022. During the preceding twelve months, the increase in deposits occurred despite the 20% attrition in noninterest-bearing deposits, primarily in commercial checking accounts, as interest-bearing deposits, driven by brokered time deposits, grew 15%. Excluding the impact of the increase in brokered time deposits, total deposits declined 7%. Borrowings, primarily advances from the FHLB, have increased by $872.2 million in reaction to the loan growth over the previous year and, more recently, to provide greater on-balance sheet liquidity following the closures of Silicon Valley Bank and Signature Bank.

The tangible common equity ratio decreased to 8.40% of tangible assets at March 31, 2023, compared to 8.70% at March 31, 2022. This decrease reflects the impact of the $46.7 million increase in the accumulated other comprehensive loss on common equity as a result of the rising interest rate environment negatively affecting the fair values in the available-for-sale investment portfolio coupled with the 9% increase in total assets over the preceding twelve months. At March 31, 2023, the Company had a total risk-based capital ratio of 14.43%, a common equity tier 1 risk-based capital ratio of 10.53%, a tier 1 risk-based capital ratio of 10.53%, and a tier 1 leverage ratio of 9.44%. All of these ratios remain well in excess of the mandated minimum regulatory requirements.

Non-performing loans include non-accrual loans and accruing loans 90 days or more past due. Credit quality improved at March 31, 2023 compared to March 31, 2022, as the level of non-performing loans to total loans declined to 0.41% compared to 0.46%. These levels of non-performing loans compare to 0.35% for the prior quarter and continue to indicate stable credit quality during a period of significant loan growth and a degree of economic uncertainty. At March 31, 2023, non-performing loans totaled $47.2 million, compared to $46.3 million at March 31, 2022, and $39.4 million at December 31, 2022. Loans placed on non-accrual during the current quarter amounted to $19.7 million compared to $1.5 million for the prior year quarter and $5.5 million for the fourth quarter of 2022. During the current quarter, the Company successfully resolved several large non-accrual relationships for a total pay-off of $10.2 million, including a significant recovery of delinquent interest, without incurring any charge-offs. The growth in non-performing loans from the previous quarter reflects a large borrowing relationship within the custodial care sector with an aggregate balance of $14.6 million. This large relationship is collateral dependent and required a minimal individual reserve due to sufficient values of the underlying collateral. The Company realized net recoveries of $0.3 million for the first quarter of 2023, as compared to net charge-offs of $0.2 million for the first quarter of 2022 and $0.1 million in recoveries for the fourth quarter of 2022.

At March 31, 2023, the allowance for credit losses was $117.6 million or 1.03% of outstanding loans and 249% of non-performing loans, compared to $136.2 million or 1.20% of outstanding loans and 346% of non-performing loans at the end of the previous quarter and $110.6 million or 1.09% of outstanding loans and 239% of non-performing loans at the end of the first quarter of 2022. The decrease in the allowance for the current quarter compared to the previous quarter reflects the impact of the improvement in forecasted regional unemployment rate, management's consideration of existing economic versus historical conditions and the continued strong credit performance of our portfolio segments.

Income Statement Review

Quarterly Results

Net income was $51.3 million for the three months ended March 31, 2023 compared to net income of $43.9 million for the prior year quarter. The rise in the current quarter's earnings compared to the prior year quarter was the result of the current quarter's significant credit to the provision for credit losses compared to the prior year's charge to the provision. The impact of the credit to the provision more than offset the combined effect of lower net interest income and non-interest income and the rise in non-interest expense. During the comparative period, the impact on interest income from loan growth was more than offset by the increase in interest expense, the result of the increase in rates paid on deposits and higher borrowing costs. The decline in non-interest income was the result of the combination of lower mortgage banking income, a decline in wealth management income, reduced insurance commission income due to the impact of the sale of the Company's insurance business in the second quarter of 2022 and lower bank card fees resulting from the implementation of applicable regulations in the second half of 2022. Non-interest expense increased 7% compared to the prior year quarter, mainly due to increases in the FDIC insurance assessment, professional fees and services and other expenses. Current quarter core earnings were $52.3 million ($1.16 per diluted common share), compared to $45.1 million ($0.99 per diluted common share) for the quarter ended March 31, 2022 and $35.3 million ($0.79 per diluted common share) for the quarter ended December 31, 2022.

Net interest income decreased $4.1 million or 4% for the first quarter of 2023 compared to the first quarter of 2022. During the past twelve months, loan growth coupled with the rising interest rate environment was primarily responsible for a $45.3 million or 43% increase in interest income. This growth in interest income was fully offset by the $49.5 million growth in interest expense as funding costs have also risen in response to the rising rate environment and significant competition for deposits. Interest income growth occurred in all categories of commercial loans and, to a lesser degree, in residential mortgage loans, consumer loans and investment securities income. Interest expense grew due to the rising cost of interest-bearing deposits, primarily time and money market deposits, and the growth and cost of borrowings in the current year period compared to the same period of the prior year. The net interest margin for the current quarter was 2.99% compared to 3.49% for the first quarter of 2022, and 3.26% for the fourth quarter of 2022. The erosion in net interest margin for the current quarter was due to the higher rate paid on interest-bearing liabilities, which outpaced the increase in the yield on interest-earning assets. The overall rate and yield increases were driven by the multiple federal funds rate increases that occurred over the preceding twelve months coupled with competition for deposits in the market. During this period, while the yield on interest-earning assets increased 98 basis points, the rate paid on interest-bearing liabilities rose 223 basis points resulting in the aforementioned margin compression of 50 basis points.

The total provision for credit losses was a credit of $21.5 million for the first quarter of 2023 compared to a charge of $1.6 million for the first quarter of 2022 and $10.8 million for the previous quarter. The provision for credit losses directly attributable to the funded loan portfolio was $18.9 million for the current quarter compared to the prior year quarter’s provision for credit losses of $1.6 million and $7.9 million for the fourth quarter of 2022. The current quarter's credit to the provision reflects the impact of the improvement in forecasted regional unemployment rate, management's consideration of existing economic versus historical conditions and the continued strong credit performance of our loan portfolio segments.

For the first quarter of 2023, non-interest income decreased $4.6 million or 23% compared to the prior year quarter. The decline reflects the cumulative result of the decrease in income from mortgage banking activities reflecting the impact of the interest rate and market environment, lower wealth management income driven by market performance, the decline in insurance commission income as a result of the second quarter's disposition of the Company's insurance business, and reduced bank card income due to regulatory restrictions on fee recognition.

Non-interest expense increased $4.2 million or 7% for the first quarter of 2023, compared to the prior year quarter, driven primarily by increases in the FDIC insurance assessment, professional fees and services and other expenses. Compensation and benefits costs during the comparative period was $0.4 million lower driven by decreases in commission and incentive payments. Occupancy and equipment expense rose $0.4 million compared to the prior year quarter as a result of increased software amortization. Marketing and outside data services also increased during the comparative period.

For the first quarter of 2023, the GAAP efficiency ratio was 58.55% compared to 50.92% for the first quarter of 2022, and 53.23% for the fourth quarter of 2022. The GAAP efficiency ratio rose from the prior year quarter primarily the result of the 7% decrease in GAAP revenue in combination with the 7% increase in GAAP non-interest expense. The non-GAAP efficiency ratio was 56.87% for the current quarter as compared to 49.34% for the first quarter of 2022, and 51.46% for the fourth quarter of 2022. The increase in the non-GAAP efficiency ratio (reflecting a decrease in efficiency) from the first quarter of the prior year to the current year quarter was primarily the result of the 7% decline in non-GAAP revenue, driven chiefly by the decrease in non-GAAP non-interest income, and to a lesser degree, the decline in net interest income, while non-GAAP expenses rose 7%. ROA for the first quarter ended March 31, 2023 was 1.49% and ROTCE was 19.10% compared to 0.98% and 12.91%, respectively, for the fourth quarter of 2022. On a non-GAAP basis, the current quarter's core ROA was 1.52% and core ROTCE was 19.11% compared to core ROA of 1.02% and core ROTCE of 13.02% for the fourth quarter of 2022.

Explanation of Non-GAAP Financial Measures

This news release contains financial information and performance measures determined by methods other than in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management believes that the supplemental non-GAAP information provides a better comparison of 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. Non-GAAP measures used in this release consist of the following:

• Tangible common equity and related measures are non-GAAP measures that exclude the impact of goodwill and other intangible assets.

• The non-GAAP efficiency ratio excludes amortization of intangible assets, investment securities gains/(losses) and contingent payment expense, and includes tax-equivalent income.

• Core earnings and the related measures of core earnings per diluted common share, core return on average assets and core return on average tangible common equity reflect net income exclusive of amortization of intangible assets, investment securities gains/(losses), and contingent payment expense, on a net of tax basis.

• Pre-tax pre-provision net income excludes income tax expense and the provision (credit) for credit losses.

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 the non-GAAP Reconciliation tables included with this release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.

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 1-833-470-1428. Please use the following access code: 929546. 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 May 4, 2023. A replay of the teleconference will be available through the same time period by calling 1-866-813-9403 under conference call number 941985.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank, a premier community bank in the Greater Washington, D.C. region. With over 50 locations, the bank offers a broad range of commercial and retail banking, mortgage, private banking, and trust services throughout Maryland, Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton Jackson and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of wealth management services.

Category: Webcast
Source: Sandy Spring Bancorp, Inc.
Code: SASR-E

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

Website: www.sandyspringbank.com
Media Contact:
Diane Deskins Hicks
240-608-3020
dhicks@sandyspringbank.com

Forward-Looking Statements

Sandy Spring Bancorp’s forward-looking statements are subject to significant risks and uncertainties that may cause actual results to differ materially from those in such statements. These risks and uncertainties include, but are not limited to, the risks identified in our quarterly and annual reports and the following: changes in general business and economic conditions nationally or in the markets that we serve; changes in consumer and business confidence, investor sentiment, or consumer spending or savings behavior; changes in the level of inflation; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; the impact of the interest rate environment on our business, financial condition and results of operations; the impact of compliance with changes in laws, regulations and regulatory interpretations, including changes in income taxes; changes in credit ratings assigned to us or our subsidiaries; the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; the impact of changes in accounting policies, including the introduction of new accounting standards; the impact of judicial or regulatory proceedings; the impact of fiscal and governmental policies of the United States federal government; the impact of health emergencies, epidemics or pandemics; the effects of climate change; and the impact of natural disasters, extreme weather events, military conflict, terrorism or other geopolitical events. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2022, 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 March 31,								% Change
(Dollars in thousands, except per share data)			2023				2022
Results of operations:
Net interest income		$	97,302			$	101,451			(4	)%
Provision/ (credit) for credit losses			(21,536	)			1,635			N/M
Non-interest income			15,951				20,595			(23	)
Non-interest expense			66,305				62,147			7
Income before income tax expense			68,484				58,264			18
Net income			51,253				43,935			17
Net income attributable to common shareholders		$	51,084			$	43,667			17
Pre-tax pre-provision net income (1)		$	46,948			$	59,899			(22	)
Return on average assets			1.49	%			1.42	%
Return on average common equity			13.93	%			11.83	%
Return on average tangible common equity (1)			19.10	%			16.45	%
Net interest margin			2.99	%			3.49	%
Efficiency ratio - GAAP basis (2)			58.55	%			50.92	%
Efficiency ratio - Non-GAAP basis (2)			56.87	%			49.34	%
Per share data:
Basic net income per common share		$	1.14			$	0.97			18	%
Diluted net income per common share		$	1.14			$	0.96			18
Weighted average diluted common shares			44,872,582				45,333,292			(1	)
Dividends declared per share		$	0.34			$	0.34			—
Book value per common share		$	34.37			$	32.97			4
Tangible book value per common share (1)		$	25.83			$	24.23			7
Outstanding common shares			44,712,497				45,162,908			(1	)
Financial condition at period-end:
Investment securities		$	1,528,336			$	1,586,441			(4	)%
Loans			11,395,241				10,144,328			12
Assets			14,129,007				12,967,416			9
Deposits			11,075,991				10,852,794			2
Stockholders' equity			1,536,865				1,488,910			3
Capital ratios:
Tier 1 leverage (3)			9.44	%			9.66	%
Common equity tier 1 capital to risk-weighted assets (3)			10.53	%			12.03	%
Tier 1 capital to risk-weighted assets (3)			10.53	%			12.03	%
Total regulatory capital to risk-weighted assets (3)			14.43	%			16.77	%
Tangible common equity to tangible assets (4)			8.40	%			8.70	%
Average equity to average assets			10.70	%			11.98	%
Credit quality ratios:
Allowance for credit losses to loans			1.03	%			1.09	%
Non-performing loans to total loans			0.41	%			0.46	%
Non-performing assets to total assets			0.34	%			0.37	%
Allowance for credit losses to non-performing loans			248.93	%			238.72	%
Annualized net charge-offs/ (recoveries) to average loans (5)		(0.01)%					0.01	%

(1)		Represents a non-GAAP measure.
(2)		The efficiency ratio - GAAP basis is non-interest expense 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 and contingent payment expense from non-interest expense; and investment 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.
(3)		Estimated ratio at March 31, 2023.
(4)		The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding goodwill and other intangible assets into stockholders' equity after deducting goodwill and other intangible assets. See the Reconciliation Table included with these Financial Highlights.
(5)		Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.

Sandy Spring Bancorp, Inc. and Subsidiaries RECONCILIATION TABLE - UNAUDITED (CONTINUED) OPERATING EARNINGS - METRICS
		Three Months Ended March 31,
(Dollars in thousands)			2023				2022
Core earnings (non-GAAP):
Net income (GAAP)		$	51,253			$	43,935
Plus/ (less) non-GAAP adjustments (net of tax)(1):
Amortization of intangible assets			973				1,121
Investment securities gains			—				(6	)
Contingent payment expense			27				—
Core earnings (Non-GAAP)		$	52,253			$	45,050
Core earnings per diluted common share (non-GAAP):
Weighted average common shares outstanding - diluted (GAAP)			44,872,582				45,333,292
Earnings per diluted common share (GAAP)		$	1.14			$	0.96
Core earnings per diluted common share (non-GAAP)		$	1.16			$	0.99
Core return on average assets (non-GAAP):
Average assets (GAAP)		$	13,949,276			$	12,576,089
Return on average assets (GAAP)			1.49	%			1.42	%
Core return on average assets (non-GAAP)			1.52	%			1.45	%
Return/ Core return on average tangible common equity (non-GAAP):
Net Income (GAAP)		$	51,253			$	43,935
Plus: Amortization of intangible assets (net of tax)			973				1,121
Net income before amortization of intangible assets		$	52,226			$	45,056
Average total stockholders' equity (GAAP)		$	1,491,929			$	1,506,516
Average goodwill			(363,436	)			(370,223	)
Average other intangible assets, net			(19,380	)			(25,368	)
Average tangible common equity (non-GAAP)		$	1,109,113			$	1,110,925
Return on average tangible common equity (non-GAAP)			19.10	%			16.45	%
Core return on average tangible common equity (non-GAAP)			19.11	%			16.45	%

(1)

Tax adjustments have been determined using the combined marginal federal and state rate of 25.47% and 25.64% for 2023 and 2022, respectively.

 

Sandy Spring Bancorp, Inc. and Subsidiaries RECONCILIATION TABLE - UNAUDITED
		Three Months Ended March 31,
(Dollars in thousands)			2023				2022
Pre-tax pre-provision net income:
Net income (GAAP)		$	51,253			$	43,935
Plus/ (less) non-GAAP adjustments:
Income tax expense			17,231				14,329
Provision/ (credit) for credit losses			(21,536	)			1,635
Pre-tax pre-provision net income (non-GAAP)		$	46,948			$	59,899
Efficiency ratio (GAAP):
Non-interest expense		$	66,305			$	62,147
Net interest income plus non-interest income		$	113,253			$	122,046
Efficiency ratio (GAAP)			58.55	%			50.92	%
Efficiency ratio (Non-GAAP):
Non-interest expense		$	66,305			$	62,147
Less non-GAAP adjustments:
Amortization of intangible assets			1,306				1,508
Contingent payment expense			36				—
Non-interest expense - as adjusted		$	64,963			$	60,639
Net interest income plus non-interest income		$	113,253			$	122,046
Plus non-GAAP adjustment:
Tax-equivalent income			970				866
Less/ (plus) non-GAAP adjustment:
Investment securities gains			—				8
Net interest income plus non-interest income - as adjusted		$	114,223			$	122,904
Efficiency ratio (Non-GAAP)			56.87	%			49.34	%
Tangible common equity ratio:
Total stockholders' equity		$	1,536,865			$	1,488,910
Goodwill			(363,436	)			(370,223	)
Other intangible assets, net			(18,549	)			(24,412	)
Tangible common equity		$	1,154,880			$	1,094,275
Total assets		$	14,129,007			$	12,967,416
Goodwill			(363,436	)			(370,223	)
Other intangible assets, net			(18,549	)			(24,412	)
Tangible assets		$	13,747,022			$	12,572,781
Tangible common equity ratio			8.40	%			8.70	%
Outstanding common shares			44,712,497				45,162,908
Tangible book value per common share		$	25.83			$	24.23

Sandy Spring Bancorp, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED
(Dollars in thousands)		March 31, 2023				December 31, 2022				March 31, 2022
Assets
Cash and due from banks		$	92,771			$	88,152			$	96,074
Federal funds sold			240				193				370
Interest-bearing deposits with banks			402,704				103,887				456,382
Cash and cash equivalents			495,715				192,232				552,826
Residential mortgage loans held for sale (at fair value)			16,262				11,706				17,537
Investments held-to-maturity (fair values of $219,417, $220,123 and $275,834 at March 31, 2023, December 31, 2022 and March 31, 2022, respectively)			254,219				259,452				285,339
Investments available-for-sale (at fair value)			1,195,728				1,214,538				1,259,945
Other investments, at cost			78,389				69,218				41,157
Total loans			11,395,241				11,396,706				10,144,328
Less: allowance for credit losses - loans			(117,613	)			(136,242	)			(110,588	)
Net loans			11,277,628				11,260,464				10,033,740
Premises and equipment, net			69,227				67,070				61,434
Other real estate owned			645				645				1,034
Accrued interest receivable			42,232				41,172				33,528
Goodwill			363,436				363,436				370,223
Other intangible assets, net			18,549				19,855				24,412
Other assets			316,977				333,331				286,241
Total assets		$	14,129,007			$	13,833,119			$	12,967,416
Liabilities
Noninterest-bearing deposits		$	3,228,678			$	3,673,300			$	4,039,797
Interest-bearing deposits			7,847,313				7,280,121				6,812,997
Total deposits			11,075,991				10,953,421				10,852,794
Securities sold under retail repurchase agreements and federal funds purchased			252,627				321,967				130,784
Advances from FHLB			750,000				550,000				—
Subordinated debt			370,354				370,205				370,002
Total borrowings			1,372,981				1,242,172				500,786
Accrued interest payable and other liabilities			143,170				153,758				124,926
Total liabilities			12,592,142				12,349,351				11,478,506
Stockholders' equity
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 44,712,497, 44,657,054 and 45,162,908 at March 31, 2023, December 31, 2022 and March 31, 2022, respectively			44,712				44,657				45,163
Additional paid in capital			735,509				734,273				752,671
Retained earnings			872,635				836,789				760,347
Accumulated other comprehensive loss			(115,991	)			(131,951	)			(69,271	)
Total stockholders' equity			1,536,865				1,483,768				1,488,910
Total liabilities and stockholders' equity		$	14,129,007			$	13,833,119			$	12,967,416

Sandy Spring Bancorp, Inc. and Subsidiaries CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
		Three Months Ended March 31,
(Dollars in thousands, except per share data)			2023				2022
Interest income:
Interest and fees on loans		$	139,727			$	99,494
Interest on loans held for sale			152				198
Interest on deposits with banks			2,686				113
Interest and dividend income on investment securities:
Taxable			7,008				4,107
Tax-advantaged			1,770				2,124
Interest on federal funds sold			4				—
Total interest income			151,347				106,036
Interest Expense:
Interest on deposits			40,788				2,293
Interest on retail repurchase agreements and federal funds purchased			2,104				54
Interest on advances from FHLB			7,207				—
Interest on subordinated debt			3,946				2,238
Total interest expense			54,045				4,585
Net interest income			97,302				101,451
Provision/ (credit) for credit losses			(21,536	)			1,635
Net interest income after provision/ (credit) for credit losses			118,838				99,816
Non-interest income:
Investment securities gains			—				8
Service charges on deposit accounts			2,388				2,326
Mortgage banking activities			1,245				2,298
Wealth management income			8,992				9,337
Insurance agency commissions			—				2,115
Income from bank owned life insurance			907				795
Bank card fees			418				1,668
Other income			2,001				2,048
Total non-interest income			15,951				20,595
Non-interest expense:
Salaries and employee benefits			38,926				39,373
Occupancy expense of premises			4,847				5,034
Equipment expenses			4,117				3,536
Marketing			1,543				1,193
Outside data services			2,514				2,419
FDIC insurance			2,138				984
Amortization of intangible assets			1,306				1,508
Professional fees and services			3,684				2,017
Other expenses			7,230				6,083
Total non-interest expense			66,305				62,147
Income before income tax expense			68,484				58,264
Income tax expense			17,231				14,329
Net income		$	51,253			$	43,935
Net income per share amounts:
Basic net income per common share		$	1.14			$	0.97
Diluted net income per common share		$	1.14			$	0.96
Dividends declared per share		$	0.34			$	0.34

Sandy Spring Bancorp, Inc. and Subsidiaries HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
			2023				2022
(Dollars in thousands, except per share data)		Q1				Q4				Q3				Q2				Q1
Profitability for the quarter:
Tax-equivalent interest income		$	152,317			$	146,332			$	131,373			$	114,901			$	106,902
Interest expense			54,045				38,657				17,462				7,959				4,585
Tax-equivalent net interest income			98,272				107,675				113,911				106,942				102,317
Tax-equivalent adjustment			970				1,032				951				992				866
Provision/ (credit) for credit losses			(21,536	)			10,801				18,890				3,046				1,635
Non-interest income			15,951				14,297				16,882				35,245				20,595
Non-interest expense			66,305				64,375				65,780				64,991				62,147
Income before income tax expense			68,484				45,764				45,172				73,158				58,264
Income tax expense			17,231				11,784				11,588				18,358				14,329
Net income		$	51,253			$	33,980			$	33,584			$	54,800			$	43,935
GAAP financial performance:
Return on average assets			1.49	%			0.98	%			0.99	%			1.69	%			1.42	%
Return on average common equity			13.93	%			9.23	%			8.96	%			14.97	%			11.83	%
Return on average tangible common equity			19.10	%			12.91	%			12.49	%			20.83	%			16.45	%
Net interest margin			2.99	%			3.26	%			3.53	%			3.49	%			3.49	%
Efficiency ratio - GAAP basis			58.55	%			53.23	%			50.66	%			46.03	%			50.92	%
Non-GAAP financial performance:
Pre-tax pre-provision net income		$	46,948			$	56,565			$	64,062			$	76,204			$	59,899
Core after-tax earnings		$	52,253			$	35,322			$	35,695			$	44,238			$	45,050
Core return on average assets			1.52	%			1.02	%			1.05	%			1.37	%			1.45	%
Core return on average common equity			14.20	%			9.60	%			9.53	%			12.09	%			12.13	%
Core return on average tangible common equity			19.11	%			13.02	%			12.86	%			16.49	%			16.45	%
Core earnings per diluted common share		$	1.16			$	0.79			$	0.80			$	0.98			$	0.99
Efficiency ratio - Non-GAAP basis			56.87	%			51.46	%			48.18	%			49.79	%			49.34	%
Per share data:
Net income attributable to common shareholders		$	51,084			$	33,866			$	33,470			$	54,606			$	43,667
Basic net income per common share		$	1.14			$	0.76			$	0.75			$	1.21			$	0.97
Diluted net income per common share		$	1.14			$	0.76			$	0.75			$	1.21			$	0.96
Weighted average diluted common shares			44,872,582				44,828,827				44,780,560				45,111,693				45,333,292
Dividends declared per share		$	0.34			$	0.34			$	0.34			$	0.34			$	0.34
Non-interest income:
Securities gains/ (losses)		$	—			$	(393	)		$	2			$	38			$	8
Gain/ (loss) on disposal of assets			—				—				(183	)			16,699				—
Service charges on deposit accounts			2,388				2,419				2,591				2,467				2,326
Mortgage banking activities			1,245				783				1,566				1,483				2,298
Wealth management income			8,992				8,472				8,867				9,098				9,337
Insurance agency commissions			—				—				—				812				2,115
Income from bank owned life insurance			907				950				693				703				795
Bank card fees			418				463				438				1,810				1,668
Other income			2,001				1,603				2,908				2,135				2,048
Total non-interest income		$	15,951			$	14,297			$	16,882			$	35,245			$	20,595
Non-interest expense:
Salaries and employee benefits		$	38,926			$	39,455			$	40,126			$	39,550			$	39,373
Occupancy expense of premises			4,847				4,728				4,759				4,734				5,034
Equipment expenses			4,117				3,859				3,825				3,559				3,536
Marketing			1,543				1,354				1,370				1,280				1,193
Outside data services			2,514				2,707				2,509				2,564				2,419
FDIC insurance			2,138				1,462				1,268				1,078				984
Amortization of intangible assets			1,306				1,408				1,432				1,466				1,508
Merger, acquisition and disposal expense			—				—				1				1,067				—
Professional fees and services			3,684				2,573				2,207				2,372				2,017
Other expenses			7,230				6,829				8,283				7,321				6,083
Total non-interest expense		$	66,305			$	64,375			$	65,780			$	64,991			$	62,147

Sandy Spring Bancorp, Inc. and Subsidiaries HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
			2023			2022
(Dollars in thousands, except per share data)		Q1				Q4				Q3				Q2				Q1
Balance sheets at quarter end:
Commercial investor real estate loans		$	5,167,456			$	5,130,094			$	5,066,843			$	4,761,658			$	4,388,275
Commercial owner-occupied real estate loans			1,769,928				1,775,037				1,743,724				1,767,326				1,692,253
Commercial AD&C loans			1,046,665				1,090,028				1,143,783				1,094,528				1,089,331
Commercial business loans			1,437,478				1,455,885				1,393,634				1,353,380				1,349,602
Residential mortgage loans			1,328,524				1,287,933				1,218,552				1,147,577				1,000,697
Residential construction loans			223,456				224,772				229,243				235,486				204,259
Consumer loans			421,734				432,957				423,034				426,335				419,911
Total loans			11,395,241				11,396,706				11,218,813				10,786,290				10,144,328
Allowance for credit losses - loans			(117,613	)			(136,242	)			(128,268	)			(113,670	)			(110,588	)
Loans held for sale			16,262				11,706				11,469				23,610				17,537
Investment securities			1,528,336				1,543,208				1,587,279				1,595,424				1,586,441
Total assets			14,129,007				13,833,119				13,765,597				13,303,009				12,967,416
Noninterest-bearing demand deposits			3,228,678				3,673,300				3,993,480				4,129,440				4,039,797
Total deposits			11,075,991				10,953,421				10,749,486				10,969,461				10,852,794
Customer repurchase agreements			47,627				61,967				91,287				110,744				130,784
Total stockholders' equity			1,536,865				1,483,768				1,451,862				1,477,169				1,488,910
Quarterly average balance sheets:
Commercial investor real estate loans		$	5,136,204			$	5,082,697			$	4,898,683			$	4,512,937			$	4,220,246
Commercial owner-occupied real estate loans			1,769,680				1,753,351				1,755,891				1,727,325				1,683,557
Commercial AD&C loans			1,082,791				1,136,780				1,115,531				1,096,369				1,102,660
Commercial business loans			1,444,588				1,373,565				1,327,218				1,334,350				1,372,755
Residential mortgage loans			1,307,761				1,251,829				1,177,664				1,070,836				964,056
Residential construction loans			223,313				231,318				235,123				221,031				197,366
Consumer loans			424,122				426,134				422,963				421,022				424,859
Total loans			11,388,459				11,255,674				10,933,073				10,383,870				9,965,499
Loans held for sale			8,324				10,901				15,211				12,744				17,594
Investment securities			1,679,593				1,717,455				1,734,036				1,686,181				1,617,615
Interest-earning assets			13,316,165				13,134,234				12,833,758				12,283,834				11,859,803
Total assets			13,949,276				13,769,472				13,521,595				12,991,692				12,576,089
Noninterest-bearing demand deposits			3,480,433				3,833,275				3,995,702				4,001,762				3,758,732
Total deposits			11,049,991				11,025,843				10,740,999				10,829,221				10,542,029
Customer repurchase agreements			60,626				74,797				104,742				122,728				131,487
Total interest-bearing liabilities			8,806,720				8,310,278				7,892,230				7,377,045				7,163,641
Total stockholders' equity			1,491,929				1,460,254				1,486,427				1,468,036				1,506,516
Financial measures:
Average equity to average assets			10.70	%			10.61	%			10.99	%			11.30	%			11.98	%
Average investment securities to average earning assets			12.61	%			13.08	%			13.51	%			13.73	%			13.64	%
Average loans to average earning assets			85.52	%			85.70	%			85.19	%			84.53	%			84.03	%
Loans to assets			80.65	%			82.39	%			81.50	%			81.08	%			78.23	%
Loans to deposits			102.88	%			104.05	%			104.37	%			98.33	%			93.47	%
Assets under management		$	5,477,560			$	5,255,306			$	4,969,092			$	5,171,321			$	5,793,787
Capital measures:
Tier 1 leverage(1)			9.44	%			9.33	%			9.33	%			9.53	%			9.66	%
Common equity tier 1 capital to risk-weighted assets(1)			10.53	%			10.23	%			10.18	%			10.42	%			10.78	%
Tier 1 capital to risk-weighted assets(1)			10.53	%			10.23	%			10.18	%			10.42	%			10.78	%
Total regulatory capital to risk-weighted assets(1)			14.43	%			14.20	%			14.15	%			14.46	%			15.02	%
Book value per common share		$	34.37			$	33.23			$	32.52			$	33.10			$	32.97
Outstanding common shares			44,712,497				44,657,054				44,644,269				44,629,697				45,162,908

(1)

Estimated ratio at March 31, 2023.

 

Sandy Spring Bancorp, Inc. and Subsidiaries LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
			2023			2022
(Dollars in thousands)		March 31,				December 31,				September 30,				June 30,				March 31,
Non-performing assets:
Loans 90 days past due:
Commercial real estate:
Commercial investor real estate		$	215			$	—			$	—			$	—			$	—
Commercial owner-occupied real estate			—				—				—				—				—
Commercial AD&C			—				—				—				—				—
Commercial business			3,002				1,002				1,966				—				—
Residential real estate:
Residential mortgage			352				—				167				353				296
Residential construction			—				—				—				—				—
Consumer			—				—				34				—				—
Total loans 90 days past due			3,569				1,002				2,167				353				296
Non-accrual loans:
Commercial real estate:
Commercial investor real estate			15,451				9,943				14,038				11,245				11,743
Commercial owner-occupied real estate			4,949				5,019				6,294				7,869				8,083
Commercial AD&C			—				—				—				1,353				1,081
Commercial business			9,443				7,322				7,198				7,542				8,357
Residential real estate:
Residential mortgage			8,935				7,439				7,514				7,305				8,148
Residential construction			—				—				—				1				51
Consumer			4,900				5,059				5,173				5,692				6,406
Total non-accrual loans			43,678				34,782				40,217				41,007				43,869
Total restructured loans - accruing (1)			—				3,575				2,077				2,119				2,161
Total non-performing loans			47,247				39,359				44,461				43,479				46,326
Other assets and other real estate owned (OREO)			645				645				739				739				1,034
Total non-performing assets		$	47,892			$	40,004			$	45,200			$	44,218			$	47,360

		For the Quarter Ended,
(Dollars in thousands)		March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Analysis of non-accrual loan activity:
Balance at beginning of period		$	34,782			$	40,217			$	41,007			$	43,869			$	46,086
Non-accrual balances transferred to OREO			—				—				—				—				—
Non-accrual balances charged-off			(126	)			(22	)			(197	)			(376	)			(265	)
Net payments or draws			(10,212	)			(9,535	)			(3,509	)			(3,234	)			(2,787	)
Loans placed on non-accrual			19,714				5,467				4,212				948				1,503
Non-accrual loans brought current			(480	)			(1,345	)			(1,296	)			(200	)			(668	)
Balance at end of period		$	43,678			$	34,782			$	40,217			$	41,007			$	43,869
Analysis of allowance for credit losses - loans:
Balance at beginning of period		$	136,242			$	128,268			$	113,670			$	110,588			$	109,145
Provision/ (credit) for credit losses - loans			(18,945	)			7,907				14,092				3,046				1,635
Less loans charged-off, net of recoveries:
Commercial real estate:
Commercial investor real estate			(5	)			(1	)			—				(300	)			(19	)
Commercial owner-occupied real estate			(26	)			(27	)			(10	)			(12	)			—
Commercial AD&C			—				—				—				—				—
Commercial business			(127	)			(13	)			(512	)			331				111
Residential real estate:
Residential mortgage			21				(50	)			(8	)			(9	)			120
Residential construction			—				—				(3	)			(5	)			—
Consumer			(179	)			24				27				(41	)			(20	)
Net charge-offs/ (recoveries)			(316	)			(67	)			(506	)			(36	)			192
Balance at the end of period		$	117,613			$	136,242			$	128,268			$	113,670			$	110,588
Asset quality ratios:
Non-performing loans to total loans			0.41	%			0.35	%			0.40	%			0.40	%			0.46	%
Non-performing assets to total assets			0.34	%			0.29	%			0.33	%			0.33	%			0.37	%
Allowance for credit losses to loans			1.03	%			1.20	%			1.14	%			1.05	%			1.09	%
Allowance for credit losses to non-performing loans			248.93	%			346.15	%			288.50	%			261.44	%			238.72	%
Annualized net charge-offs/ (recoveries) to average loans		(0.01)%					—	%			(0.02	)%			—	%			0.01	%

(1)

Effective January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting and recognition of troubled debt restructurings ("TDRs").

 

Sandy Spring Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
		Three Months Ended March 31,
			2023										2022
(Dollars in thousands and tax-equivalent)		Average Balances				Interest (1)			Annualized Average Yield/Rate			Average Balances				Interest (1)			Annualized Average Yield/Rate
Assets
Commercial investor real estate loans		$	5,136,204			$	57,801		4.56	%		$	4,220,246			$	41,634		4.00	%
Commercial owner-occupied real estate loans			1,769,680				19,598		4.49				1,683,557				18,432		4.44
Commercial AD&C loans			1,082,791				19,839		7.43				1,102,660				10,593		3.90
Commercial business loans			1,444,588				22,200		6.23				1,372,755				16,354		4.83
Total commercial loans			9,433,263				119,438		5.13				8,379,218				87,013		4.21
Residential mortgage loans			1,307,761				11,418		3.49				964,056				7,774		3.23
Residential construction loans			223,313				1,814		3.29				197,366				1,557		3.20
Consumer loans			424,122				7,587		7.25				424,859				3,589		3.43
Total residential and consumer loans			1,955,196				20,819		4.29				1,586,281				12,920		3.28
Total loans (2)			11,388,459				140,257		4.99				9,965,499				99,933		4.06
Loans held for sale			8,324				152		7.29				17,594				198		4.50
Taxable securities			1,297,769				7,008		2.16				1,165,041				4,107		1.41
Tax-advantaged securities			381,824				2,210		2.32				452,574				2,551		2.26
Total investment securities (3)			1,679,593				9,218		2.20				1,617,615				6,658		1.65
Interest-bearing deposits with banks			239,459				2,686		4.55				258,273				113		0.18
Federal funds sold			330				4		4.69				822				—		0.21
Total interest-earning assets			13,316,165				152,317		4.63				11,859,803				106,902		3.65
Less: allowance for credit losses - loans			(136,899	)									(109,933	)
Cash and due from banks			95,057										66,466
Premises and equipment, net			67,696										61,036
Other assets			607,257										698,717
Total assets		$	13,949,276									$	12,576,089
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	1,381,858			$	2,630		0.77	%		$	1,501,658			$	158		0.04	%
Regular savings deposits			505,364				363		0.29				546,893				19		0.01
Money market savings deposits			3,299,794				21,338		2.62				3,426,817				625		0.07
Time deposits			2,382,542				16,457		2.80				1,307,929				1,491		0.46
Total interest-bearing deposits			7,569,558				40,788		2.19				6,783,297				2,293		0.14
Federal funds purchased			171,222				2,083		4.93				45,444				15		0.13
Repurchase agreements			60,626				21		0.14				131,487				39		0.12
Advances from FHLB			635,056				7,207		4.60				—				—		—
Subordinated debt			370,258				3,946		4.26				203,413				2,238		4.40
Total borrowings			1,237,162				13,257		4.35				380,344				2,292		2.44
Total interest-bearing liabilities			8,806,720				54,045		2.49				7,163,641				4,585		0.26
Noninterest-bearing demand deposits			3,480,433										3,758,732
Other liabilities			170,194										147,200
Stockholders' equity			1,491,929										1,506,516
Total liabilities and stockholders' equity		$	13,949,276									$	12,576,089
Tax-equivalent net interest income and spread						$	98,272		2.14	%						$	102,317		3.39	%
Less: tax-equivalent adjustment							970										866
Net interest income						$	97,302									$	101,451
Interest income/earning assets									4.63	%									3.65	%
Interest expense/earning assets									1.64										0.16
Net interest margin									2.99	%									3.49	%

(1)		Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 25.47% and 25.64% for 2023 and 2022, respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.0 million and $0.9 million in 2023 and 2022, respectively.
(2)		Non-accrual loans are included in the average balances.
(3)		Available-for-sale investments are presented at amortized cost.