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Sandy Spring Bancorp Reports Net Income of $15.1 Million for the Third Quarter

OLNEY, Md., Oct. 19, 2017 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (SASR), the parent company of Sandy Spring Bank, today reported net income for the third quarter of 2017 of $15.1 million ($0.62 per diluted share) compared to net income of $13.5 million ($0.56 per diluted share) for the third quarter of 2016 and net income of $14.7 million ($0.61 per diluted share) for the second quarter of 2017.

“Our solid core performance this quarter was once again driven by the loan and deposit growth that we’ve achieved over the past year. We continue to focus on building relationships with our clients and within the communities we serve to grow the company. We look forward to completing the acquisition of WashingtonFirst Bankshares, Inc. This acquisition will create the largest, locally headquartered community bank in the Greater Washington, D.C. region. It will expand access to the bank’s expertise and services, and ultimately benefit our clients and shareholders,” said Daniel J. Schrider, President and Chief Executive Officer. 

Third Quarter Highlights: 

  • Total loans increased 11% compared to the third quarter of 2016 and 1% compared to the second quarter of 2017. The year-over-year increase was driven primarily by year-over-year growth of 15% in the commercial loan portfolio.
     
  • Total deposits grew 12% from the prior year quarter and 2% from the prior quarter.
     
  • The net interest margin was 3.54% for the third quarter of 2017, compared to 3.50% for the third quarter of 2016 and 3.60% for the second quarter of 2017.  Net interest income from the second quarter of 2017 included $0.7 million from the full payoff of a previously acquired credit impaired loan.  Exclusive of this non-core item, the previous quarter’s margin would have been 3.54%.
     
  • Return on average common equity was 10.74% as compared to 10.11% from the prior year.

  • The Non-GAAP efficiency ratio was 53.76% for the current quarter as compared to 56.33% for the third quarter of 2016 and 54.10% for the second quarter of 2017.
     
  • Pre-tax, pre-provision income increased 17% compared with the third quarter of 2016.

Review of Balance Sheet and Credit Quality

At September 30, 2017, total assets were $5.3 billion, an 11% increase compared to $4.8 billion at September 30, 2016.  Loan growth continues to be the driver of asset growth as total loans ended the period at $4.2 billion compared to $3.8 billion at September 30, 2016. The growth in the loan portfolio was funded primarily by a 12% increase in total deposits from September 30, 2016, to September 30, 2017.

Combined noninterest-bearing and interest-bearing checking account balances at September 30, 2017, an important performance driver of multiple-product banking relationships with clients, increased by 11% compared to balances at September 30, 2016.

Tangible common equity totaled $482 million at September 30, 2017, compared to $446 million at September 30, 2016. As a result of asset growth over the preceding 12 months, the ratio of tangible common equity to tangible assets decreased to 9.18% at September 30, 2017, from 9.43% at September 30, 2016. Dividends at $0.26 per common share were 8% higher in the third quarter of 2017 compared to the $0.24 per common share of third quarter of 2016.  At September 30, 2017, the Company had a total risk-based capital ratio of 12.01%, a common equity tier 1 risk-based capital ratio of 10.99%, a tier 1 risk-based capital ratio of 10.99% and a tier 1 leverage ratio of 9.28%.

The level of non-performing loans to total loans decreased to 0.72% at September 30, 2017, compared to 0.85% at September 30, 2016, as a result of the growth in the loan portfolio and a reduction in non-performing loans.  At September 30, 2017, non-performing loans totaled $30.2 million compared to $32.0 million at September 30, 2016, and $32.2 million at June 30, 2017. Non-performing loans include accruing loans 90 days or more past due and restructured loans.

Loan charge-offs, net of recoveries, totaled $1.1 million for the third quarter of 2017 compared to $0.2 million for the third quarter of 2016. The increase in charge-offs was the result of a commercial loan charge-off taken during the current quarter.  The allowance for loan losses represented 1.07% of outstanding loans and 149% of non-performing loans at September 30, 2017, compared to 1.16% of outstanding loans and 137% of non-performing loans at September 30, 2016. The decline in the allowance to outstanding loans ratio is a reflection of improved credit quality and growth of the loan portfolio over the past year.

Income Statement Review

Net interest income for the third quarter of 2017 increased 13% compared to the third quarter of 2016 as average loans from quarter to quarter increased 12%. The net interest margin improved to 3.54% for the third quarter of 2017 compared to 3.50% for the third quarter of 2016.  The margin improvement reflects the impact of loan growth, the cumulative benefits associated with the execution of funding strategies and higher yields associated with the investment portfolio.

The provision for loan losses was $0.9 million for the third quarter of 2017 compared to $0.8 million for the third quarter of 2016 and $1.3 million for the second quarter of 2017. The current quarter’s provision increase as compared to the prior year quarter was the result of qualitative adjustments related to composition and concentration of loan credits which offset the impact of lower quarterly loan growth in 2017 versus 2016.

Non-interest income increased to $12.7 million for the third quarter of 2017 compared to $12.6 million for the third quarter of 2016.  Wealth management income for the third quarter of 2017 increased to $4.9 million or 12% as compared to $4.3 million for the third quarter of 2016.  Insurance agency commissions increased 9% for the third quarter compared to same period of the prior year as a result last year’s agency acquisition.  These results were offset by the $0.5 million decline in mortgage banking income from the prior year’s results as mortgage loan originations declined in the current quarter compared to the prior year.  

Non-interest expenses increased 6% to $31.2 million for the third quarter of 2017 compared to $29.3 million in the third quarter of 2016.  The increase in the current quarter compared to the prior year quarter was driven primarily by a $0.6 million increase in salary costs related to performance incentives and volume driven compensation costs, $0.3 million in merger related expenses and $0.6 million in other expenses.  The non-GAAP efficiency ratio was 53.76% for the third quarter of 2017 compared to 56.33% for the third quarter of 2016 as a result of the growth in net interest income. 

Net interest income for the first nine months of 2017 increased 13% compared to the first nine months of 2016 due primarily to an increase in average loans, which was funded primarily by an 11% increase in average deposits. As a result, the net interest margin was 3.55% for the first nine months of 2017 compared to 3.49% for the prior year period. Net interest income for the first nine months of 2017 included $0.7 million from the full payoff of a previously acquired credit impaired loan.  Exclusive of this recovery the net interest margin would have been 3.54%.   

The provision for loan losses was $2.5 million for the first nine months of 2017 compared to $5.0 million for the first nine months of 2016 primarily reflecting the growth in the loan portfolio over the prior year period offset by the effects of improved credit quality of the loan portfolio.

Non-interest income was $38.9 million for the first nine months of 2017 compared to $38.7 million for the first nine months of 2016.  The first nine months of 2017 included gains of $1.3 million on sales of investment securities. The same prior year period included a $1.2 million gain on the extinguishment of subordinated debentures and $1.9 million in gains on the sales of investment securities.  Excluding these gains, non-interest income increased 6% compared to the prior year period primarily due to increases in wealth management income, insurance agency commissions and other non-interest income.

Non-interest expenses increased 2% to $94.0 million for the first nine months of 2017 compared to $92.5 million for the prior year period. The nine months ended September 30, 2017, included increases from the prior year of $1.2 million in salaries and benefits, $0.5 million in FDIC insurance as a result of asset growth, and $1.3 million in merger expenses.  These increases were partially offset by the decrease in prepayment penalties of $1.9 million for the early payoff of high-rate FHLB advances as compared to the nine months ended September 30, 2016.  The non-GAAP efficiency ratio decreased to 54.21% for the first nine months of 2017 compared to 59.05% for the first nine months of 2016 as a direct result of the growth in net interest income.

Conference Call

The Company’s management will host a conference call to discuss its second quarter results today at 2:00 P.M. (ET).  A live Webcast of the conference call is available through the Investor Relations’ section of the Sandy Spring Website at www.sandyspringbank.com.  Participants may call 1-866-235-9910. A password is not necessary.  Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call.  An internet-based replay will be available at the Website until 9:00 am (ET) November 2, 2017.  A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10112289.

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. With $5.3 billion in assets, the bank operates 44 community offices and six financial centers across the region. Visit www.sandyspringbank.com for more information.

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

Media Contact:
Jen Schell
301-570-8331
jschell@sandyspringbank.com

Forward-Looking Statements

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

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

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties.  Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2016, including in the Risk Factors section of that report, and in its other SEC reports.  Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Website at www.sec.gov.


 
Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
                           
    Three Months Ended         Nine Months Ended    
    September 30,   %
  September 30,   %
(Dollars in thousands, except per share data)   2017   2016   Change
  2017   2016   Change
Results of Operations:                          
Net interest income   $   42,697   $ 37,731   13 %   $   125,276   $ 110,585   13 %
Provision for loan losses       934     781   20         2,450     4,974   (51 )
Non-interest income       12,746     12,584   1         38,949     38,698   1  
Non-interest expenses       31,191     29,326   6         94,040     92,514   2  
Income before income taxes       23,318     20,208   15         67,735     51,795   31  
Net income       15,089     13,474   12         44,942     34,934   29  
                           
Pre-tax pre-provision income   $   24,597   $ 20,989   17     $   71,517   $ 56,769   26  
                           
Return on average assets       1.13 %   1.13 %           1.15 %   0.99 %  
Return on average common equity       10.74 %   10.11 %           10.99 %   8.88 %  
Net interest margin       3.54 %   3.50 %           3.55 %   3.49 %  
Efficiency ratio - GAAP basis  (1)       56.26 %   58.28 %           57.26 %   61.97 %  
Efficiency ratio - Non-GAAP basis  (1)       53.76 %   56.33 %           54.21 %   59.05 %  
                           
Per share data:                          
Basic net income   $   0.62   $ 0.56   11 %   $   1.86   $ 1.45   28 %
Diluted net income   $   0.62   $ 0.56   11     $   1.86   $ 1.45   28  
Average fully diluted shares      24,223,004     24,122,923   -        24,201,448     24,151,622   -  
Dividends declared per share   $   0.26   $ 0.24   8     $   0.78   $ 0.72   8  
Book value per share       23.53     22.47   5         23.53     22.47   5  
Tangible book value per share       20.07     18.66   8         20.07     18.66   8  
Outstanding shares      23,990,370     23,886,651   -        23,990,370     23,886,651   -  
                           
Financial Condition at period-end:                          
Investment securities   $   795,922   $ 691,471   15 %   $   795,922   $ 691,471   15 %
Loans       4,194,118     3,780,507   11         4,194,118     3,780,507   11  
Interest-earning assets       5,049,229     4,537,331   11         5,049,229     4,537,331   11  
Assets       5,334,788     4,810,611   11         5,334,788     4,810,611   11  
Deposits       3,955,792     3,537,157   12         3,955,792     3,537,157   12  
Interest-bearing liabilities       3,422,568     3,087,135   11         3,422,568     3,087,135   11  
Stockholders' equity       564,480     536,655   5         564,480     536,655   5  
                           
Capital ratios:                          
Tier 1 leverage  (4)       9.28 %   10.25 %           9.28 %   10.25 %  
Tier 1 capital to risk-weighted assets  (4)       10.99 %   12.17 %           10.99 %   12.17 %  
Total regulatory capital to risk-weighted assets  (4)       12.01 %   13.29 %           12.01 %   13.29 %  
Common equity tier 1 capital to risk-weighted assets  (4)       10.99 %   11.41 %           10.99 %   11.41 %  
Tangible common equity to tangible assets  (2)       9.18 %   9.43 %           9.18 %   9.43 %  
Average equity to average assets       10.52 %   11.17 %           10.50 %   11.18 %  
                           
Credit quality ratios:                          
Allowance for loan losses to loans       1.07 %   1.16 %           1.07 %   1.16 %  
Non-performing loans to total loans       0.72 %   0.85 %           0.72 %   0.85 %  
Non-performing assets to total assets       0.59 %   0.69 %           0.59 %   0.69 %  
Allowance for loan losses to non-performing loans       148.73 %   137.41 %           148.73 %   137.41 %  
Annualized net charge-offs to average loans  (3)       0.10 %   0.02 %           0.05 %   0.07 %  
                           
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income.
The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization from non-interest expense; securities gains (losses) from non-interest income; OTTI;
and the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets
and other comprehensive gains (losses).  See the Reconciliation Table included with these Financial Highlights.
(3) Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.
(4) Estimated ratio at September 30, 2017
 


 
Sandy Spring Bancorp, Inc. and Subsidiaries                
RECONCILIATION TABLE - UNAUDITED                
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
(Dollars in thousands)   2017
  2016
  2017
  2016
Pre-tax pre-provision income:                
Net income   $   15,089     $ 13,474     $   44,942     $ 34,934  
Plus non-GAAP adjustment:                
Merger expenses       345       -         1,332       -  
Income taxes       8,229       6,734         22,793       16,861  
Provision for loan losses       934       781         2,450       4,974  
Pre-tax pre-provision income   $   24,597     $ 20,989     $   71,517     $ 56,769  
                 
Efficiency ratio - GAAP basis:                
Non-interest expenses   $   31,191     $ 29,326     $   94,040     $ 92,514  
                 
Net interest income plus non-interest income   $   55,443     $ 50,315     $   164,225     $ 149,283  
                 
Efficiency ratio - GAAP basis     56.26 %     58.28 %     57.26 %     61.97 %
                 
                 
Efficiency ratio - Non-GAAP basis:                
Non-interest expenses   $   31,191     $ 29,326     $   94,040     $ 92,514  
Less non-GAAP adjustment:                
Amortization of intangible assets       25       34         76       94  
Loss on FHLB Redemption       -       -         1,275       3,167  
Merger expenses       345       -         1,332       -  
Non-interest expenses -  as adjusted   $   30,821     $ 29,292     $   91,357     $ 89,253  
                 
Net interest income plus non-interest income   $   55,443     $ 50,315     $   164,225     $ 149,283  
Plus non-GAAP adjustment:                
Tax-equivalent income       1,888       1,688         5,585       4,993  
Less non-GAAP adjustments:                
Securities gains       -       -         1,275       1,919  
Gain on redemption of subordinated debentures       -       -         -       1,200  
Net interest income plus non-interest income - as adjusted   $   57,331     $ 52,003     $   168,535     $ 151,157  
                 
Efficiency ratio - Non-GAAP basis     53.76 %     56.33 %     54.21 %     59.05 %
                 
Tangible common equity ratio:                
Total stockholders' equity   $   564,480     $ 536,655     $   564,480     $ 536,655  
Accumulated other comprehensive income       3,477       (4,465 )       3,477       (4,465 )
Goodwill       (85,768 )     (85,768 )       (85,768 )     (85,768 )
Other intangible assets, net       (604 )     (716 )       (604 )     (716 )
Tangible common equity   $   481,585     $ 445,706     $   481,585     $ 445,706  
                 
Total assets   $   5,334,788     $ 4,810,611     $   5,334,788     $ 4,810,611  
Goodwill       (85,768 )     (85,768 )       (85,768 )     (85,768 )
Other intangible assets, net       (604 )     (716 )       (604 )     (716 )
Tangible assets   $   5,248,416     $ 4,724,127     $   5,248,416     $ 4,724,127  
                 
Tangible common equity ratio     9.18 %     9.43 %     9.18 %     9.43 %
                 
Outstanding common shares       23,990,370       23,886,651         23,990,370       23,886,651  
Tangible book value per common share   $   20.07     $ 18.66     $   20.07     $ 18.66  
 


 
Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION  - UNAUDITED
             
    September 30,   December 31,   September 30,
(Dollars in thousands)   2017
  2016
  2016
Assets            
Cash and due from banks   $   50,076     $ 53,190     $ 48,666  
Federal funds sold       2,838       1,953       1,106  
Interest-bearing deposits with banks       49,267       78,982       48,425  
Cash and cash equivalents       102,181       134,125       98,197  
Residential mortgage loans held for sale (at fair value)       7,084       13,222       15,822  
Investments available-for-sale (at fair value)       756,069       733,554       655,642  
Other equity securities       39,853       46,094       35,829  
Total loans       4,194,118       3,927,808       3,780,507  
Less: allowance for loan losses       (44,924 )     (44,067 )     (43,942 )
Net loans       4,149,194       3,883,741       3,736,565  
Premises and equipment, net       54,108       53,562       53,356  
Other real estate owned       1,448       1,911       1,274  
Accrued interest receivable       16,045       14,589       13,123  
Goodwill       85,768       85,768       85,768  
Other intangible assets, net       604       680       716  
Other assets       122,434       124,137       114,319  
Total assets   $   5,334,788     $ 5,091,383     $ 4,810,611  
             
Liabilities            
Noninterest-bearing deposits   $   1,312,710     $ 1,138,139     $ 1,154,227  
Interest-bearing deposits       2,643,082       2,439,405       2,382,930  
Total deposits       3,955,792       3,577,544       3,537,157  
Securities sold under retail repurchase agreements and federal funds purchased       146,569       125,119       124,205  
Advances from FHLB       632,917       790,000       550,000  
Subordinated debentures       -       30,000       30,000  
Accrued interest payable and other liabilities       35,030       35,148       32,594  
Total liabilities       4,770,308       4,557,811       4,273,956  
             
Stockholders' Equity            
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 23,990,370,            
23,901,084 and 23,886,651 at September 30, 2017, December 31, 2016 and September 30, 2016, respectively       23,990       23,901       23,887  
Additional paid in capital       167,455       165,871       164,937  
Retained earnings       376,512       350,414       343,366  
Accumulated other comprehensive loss       (3,477 )     (6,614 )     4,465  
Total stockholders' equity       564,480       533,572       536,655  
Total liabilities and stockholders' equity   $   5,334,788     $ 5,091,383     $ 4,810,611  
             


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Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
                 
    Three Months Ended   Nine Months Ended
  September 30, September 30,
(Dollars in thousands, except per share data)   2017   2016   2017   2016
Interest Income:                
Interest and fees on loans   $   43,891   $ 38,224   $   126,861   $ 111,358
Interest on loans held for sale       119     96       273     294
Interest on deposits with banks       108     49       289     156
Interest and dividends on investment securities:                
Taxable       3,410     2,623       10,572     8,749
Exempt from federal income taxes       2,053     1,864       6,110     5,753
Interest on federal funds sold       8     1       18     3
Total interest income       49,589     42,857       144,123     126,313
Interest Expense:                
Interest on deposits       3,701     2,128       9,212     6,006
Interest on retail repurchase agreements and federal funds purchased       83     74       238     212
Interest on advances from FHLB       3,108     2,699       9,385     8,812
Interest on subordinated debt       -     225