Sandy Spring Bancorp Reports Quarterly Earnings of $57.3 Million

·29 min read

Core Earnings Increase One Year After Acquisitions

OLNEY, Md., July 22, 2021 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq-SASR), the parent company of Sandy Spring Bank, today reported net income of $57.3 million ($1.19 per diluted common share) for the quarter ended June 30, 2021. The current quarter’s result compares to net loss of $14.3 million ($0.31 per diluted common share) for the second quarter of 2020 and net income of $75.5 million ($1.58 per diluted common share) for the first quarter of 2021. The results from the second quarter of the prior year reflected the combined impact of merger and acquisition expense associated with the acquisition of Revere Bank ("Revere") in that quarter, the impact of the Covid-19 pandemic on the economic forecast used in the determination of the allowance for credit losses, and the provision for credit losses associated with the Revere acquisition.

For the current quarter, core earnings, which exclude the impact of the provision for credit losses and provision on unfunded loan commitments, merger and acquisition expense, loss on FHLB redemptions, amortization of intangibles and investment securities gains, each on an after-tax basis, were $55.1 million ($1.16 per diluted common share), compared to $51.9 million ($1.10 per diluted common share) for the quarter ended June 30, 2020 and $56.9 million ($1.20 per diluted common share) for the quarter ended March 31, 2021.

The current quarter's provision for credit losses was a credit of $4.2 million as compared to a credit of $34.7 million for the first quarter of 2021. The current and prior quarter's credits for the provision for credit losses were principally the result of the decline in the forecasted unemployment rate and, to a lesser degree, improvements in other forecasted macroeconomic indicators.

“Our acquisitions of Revere Bank and Rembert Pendleton Jackson continue to contribute to our strong financial performance,” said Daniel J. Schrider, President and CEO. “This quarter marks one year since Revere Bank became part of Sandy Spring Bank. Our increased size and scale, and our unwavering commitment to personalized service, continue to deliver results for our company and our clients. Our wealth group, which includes Rembert Pendleton Jackson, West Financial Services and Sandy Spring Trust, has also achieved significant year over year growth.”

Second Quarter Highlights:

  • Core operating earnings increased 6% to $55.1 million for the second quarter of 2021, compared to $51.9 million for the prior year quarter.

  • Total assets at June 30, 2021, declined 3% to $12.9 billion compared to $13.3 billion at June 30, 2020. The decline in total assets, year-over-year was primarily the result of the $179.2 million net reduction in loans originated under the Paycheck Protection Program ("PPP" or "PPP Program") and the $251.5 million decline in the residential mortgage loan portfolio. While the total loan portfolio, excluding PPP loans, decreased 1% due to the combined run-off of residential mortgage and consumer loans, year-over-year organic commercial real estate loan growth was 6%.

  • Excluding PPP loans, total loan growth during the current quarter compared to the first quarter of 2021 was 1%, with organic commercial loan growth during the quarter of 2%. Deposits increased 2% during the linked quarter, driven by 6% growth in noninterest-bearing deposits.

  • The net interest margin was 3.63% for the second quarter of 2021, compared to 3.47% for the same quarter of 2020, and 3.56% for the first quarter of 2021. Excluding the impact of the amortization of the fair value marks derived from acquisitions, the current quarter’s net interest margin would have been 3.60%, compared to 3.19% for second quarter of 2020, and 3.46% for the first quarter of 2021.

  • The provision for credit losses was a credit of $4.2 million for the current quarter compared to the prior quarter’s credit to the provision of $34.7 million. The credits to the provision continue to be the result of improvements in forecasted economic metrics. The overall credit to the provision for the quarter was partially mitigated by increases in non-PPP loan balances, individual reserves assessed on a few non-accrual loans in the hospitality industry and adjustments to qualitative factors.

  • Non-interest income for the current quarter increased by 15% or $3.3 million compared to the prior year quarter, as wealth management income grew 20% and service charges on deposit accounts increased 62%. Bank card fees grew 42% compared to the prior year quarter as a result of transaction volume. Other non-interest income also grew significantly compared to the prior year as a result of the combination of the full payoff of a purchased credit deteriorated loan and activity-based contractual vendor incentives.

  • Non-interest expense decreased $22.5 million or 26% for the second quarter of 2021, compared to the prior year quarter. The prior year's quarter included $22.5 million in merger and acquisition expense, in addition to $5.9 million in prepayment penalties from the liquidation of acquired FHLB borrowings. These reductions from the prior year more than offset the increase in salary and benefit expense in the current year quarter as a result of staffing increases associated with strategic business initiatives.

  • Return on average assets (“ROA”) for the quarter ended June 30, 2021 was 1.79% and return on average tangible common equity (“ROTCE”) was 20.44% compared, to 2.39% and 28.47%, respectively, for the first quarter of 2021. On a non-GAAP basis, the current quarter's core ROA was 1.73% and core ROTCE was 19.68% compared to core ROA of 1.80% and core ROTCE of 21.48% for the prior quarter of 2021. The non-GAAP efficiency ratio for the second quarter of 2021 was 45.36% compared to 42.65% for the first quarter of 2021. The change in the efficiency ratio reflects the impact of the decrease in mortgage banking income and the increase in costs related to various strategic initiatives during the current quarter.

Balance Sheet and Credit Quality

Total assets declined 3% to $12.9 billion at June 30, 2021, as compared to $13.3 billion at June 30, 2020. During this period, total loans declined by 2% to $10.1 billion at June 30, 2021, compared to $10.3 billion at June 30, 2020. Excluding PPP loans, total loans declined 1% to $9.2 billion at June 30, 2021 as compared to the prior year quarter. The year-over-year decline in the total loan portfolio was primarily the result of the $179.2 million net reduction of loans originated under the PPP Program and the $251.5 million decline in the residential mortgage loan portfolio, which was partially offset by year-over-year non-PPP commercial loan growth of $276.9 million or 4%. The year-over-year decline in the mortgage loan portfolio resulted from mortgage loan refinance activity driven by the low interest rate environment and the strategic decision to sell the majority of new mortgage loan production.

Compared to March 31, 2021, total loans, excluding PPP, increased 1% or $69.1 million at June 30, 2021. During this same period, commercial real estate loans increased $178.9 million or 3% and non-PPP commercial business loans declined $13.3 million or 1%.

Deposit growth was 8% during the past twelve months, as noninterest-bearing deposits experienced growth of 16% and interest-bearing deposits grew 3%. This growth was driven primarily by the impact of the PPP program and, to a lesser extent, growth in core deposit relationships.

At June 30, 2021 the remaining outstanding principal balance of PPP loans was $897.2 million. As of July 9, 2021, 4,126 PPP loans totaling $651.2 million have been forgiven and an additional $49.1 million have been repaid by borrowers. At the end of the current quarter, loans with an aggregate balance of $124.2 million remain in deferral status, of which non-accrual loans comprised $56.0 million. Currently, the 93% of loans that had been granted modifications/deferrals due to pandemic-related financial stress have returned to their original payment plans.

Tangible common equity increased to $1.2 billion or 9.28% of tangible assets at June 30, 2021, compared to $983.4 million or 7.63% at June 30, 2020 as a result of accumulated earnings over the preceding twelve months. Excluding the impact of the PPP program from tangible assets at June 30, 2021, the tangible common equity ratio would be 9.98%. At June 30, 2021, the Company had a total risk-based capital ratio of 15.82%, a common equity tier 1 risk-based capital ratio of 12.47%, a tier 1 risk-based capital ratio of 12.47%, and a tier 1 leverage ratio of 9.49%.

The level of non-performing loans to total loans was 0.93% at June 30, 2021, compared to 0.77% at June 30, 2020, and 0.94% at March 31, 2021. At June 30, 2021, non-performing loans totaled $94.3 million, compared to $79.9 million at June 30, 2020, and $98.7 million at March 31, 2021. Non-performing loans include non-accrual loans, accruing loans 90 days or more past due and restructured loans. Loans placed on non-accrual during the current quarter amounted to $1.5 million compared to $27.3 million for the prior year quarter and $0.4 million for the first quarter of 2021. Loans in non-accrual status at quarter end included a few large borrowings within the hospitality sector with an aggregate balance of $40.9 million. These large loans, which are collateral dependent, had individual reserves amounting to $5.7 million at June 30, 2021.

The Company recorded net charge-offs of $2.2 million for the second quarter of 2021, as compared to net recoveries of $0.4 million for the second quarter of 2020 and net charge-offs of $0.3 million for the first quarter of 2021. The increase in charge-offs in the current quarter compared to the prior quarter and the prior year quarter was primarily the result of the charge-off of an acquired pre-pandemic problem credit.

At June 30, 2021, the allowance for credit losses was $124.0 million or 1.23% of outstanding loans and 131% of non-performing loans, compared to $130.4 million or 1.25% of outstanding loans and 132% of non-performing loans at March 31, 2021. Excluding PPP loans, the allowance for credit losses to outstanding loans was 1.34% and 1.43%, at June 30, 2021 and March 31, 2021, respectively.

Income Statement Review

Quarterly Results

The Company recorded net income of $57.3 million for the three months ended June 30, 2021, compared to a net loss of $14.3 million for the prior year quarter. The current quarter's results include a credit to the provision for credit losses, the continued positive impact of reduced funding cost, and a 15% increase in non-interest income. The second quarter of the prior year's results reflected the combined impact of merger and acquisition expense associated with the Revere acquisition, the impact of the Covid-19 pandemic on the economic forecast used in the determination of the allowance for credit losses, and the additional provision for credit losses associated with the Revere acquisition. Pre-tax, pre-provision, pre-merger income was $71.3 million for the three months ended June 30, 2021 compared to $61.5 million for the prior year quarter.

Net interest income increased $6.5 million or 6% for the second quarter of 2021 compared to the second quarter of 2020, as a result of the significant reduction in interest expense during the preceding twelve months. During this period, as general market interest rates declined significantly, interest income remained stable while interest expense on deposits, notably money market and time deposits, declined, resulting in a $6.6 million decrease in interest expense. Interest expense on interest-bearing deposits declined $8.4 million, which was partially offset by the $1.8 million increase in interest expense on borrowings. The increase in borrowing costs occurred due to the prior year's inclusion of $5.8 million for accelerated amortization of the purchase premium on FHLB advances due to the prepayment of those borrowings. Excluding the accelerated amortization, borrowing cost would have been lower by $4.0 million in the second quarter of 2021. The PPP program contributed $13.2 million to net interest income for the quarter, of which $10.4 million represented origination fees. The net interest margin for the second quarter of 2021 was 3.63% as compared to 3.47% for the same quarter of the prior year as a result of the decreased funding cost during the period. Excluding the net $0.8 million impact of the amortization of the fair value marks derived from acquisitions, the net interest margin for the current quarter would have been 3.60% compared to the adjusted net interest margin of 3.19% for the second quarter of 2020.

The provision for credit losses was a credit of $4.2 million for the second quarter of 2021 compared to a charge of $58.7 million for the second quarter of 2020. The provision for credit losses for the first quarter of 2021 was a credit of $34.7 million. The credits to the provision during 2021 continue to be the result of the improvement in forecasted economic metrics, predominantly the projected unemployment and business bankruptcies rates. The overall credit to the provision for the second quarter of 2021 was partially mitigated by increases in non-PPP loan balances, individual reserves assessed on a few non-accrual loans in the hospitality industry and adjustments to various qualitative factors.

Non-interest income increased $3.3 million or 15% during the current quarter compared to the same quarter of the prior year, as wealth management income grew 20% and service charges on deposit accounts increased 62%. The growth in wealth management income reflects the continued positive impact of the Rembert Pendleton Jackson ("RPJ") acquisition in 2020 in addition to the performance in the financial markets and the expansion of the wealth management client base. The growth in service charge income reflects the impact of the prior year's temporary suspension of certain service fees as well as lower transaction volume, both a resulting reaction to the Covid-19 pandemic. Bank card fees grew 42% compared to the prior year quarter as a result of transaction volume. Other non-interest income also grew significantly compared to the prior year as a result of the combination of the full payoff of a purchased credit deteriorated loan and activity-based contractual vendor incentives.

Non-interest expense decreased $22.5 million or 26% for the second quarter of 2021, compared to the prior year quarter. The prior year's non-interest expense included $22.5 million in merger and acquisition expense, as well as $5.9 million in prepayment penalties from the liquidation of acquired FHLB borrowings. Salary and benefit expense increased $4.7 million as a result of staffing increases associated with strategic business initiatives and the $1.3 million increase in professional fees and services, primarily consulting fees. Occupancy and equipment expense decreased 8% compared to the prior year due to decreased depreciation and rental expense due to the post-acquisition reduction of banking locations. The cost savings from the post-acquisition location rationalization was offset by increases in advertising costs, outside data services and FDIC insurance.

The non-GAAP efficiency ratio was 45.36% for the current quarter as compared to 43.85% for the second quarter of 2020, and 42.65% for the first quarter of 2021. The modest increase in the efficiency ratio (reflecting a decrease in efficiency) from the second quarter of the prior year to the current year quarter was the result of the 11% growth in non-GAAP expense outpacing the 8% growth in non-GAAP revenue. ROA for the quarter ended June 30, 2021 was 1.79% and ROTCE was 20.44% compared, respectively, to 2.39% and 28.47% for the first quarter of 2021. On a non-GAAP basis, the current quarter's core ROA was 1.73% and core ROTCE was 19.68% compared to core ROA of 1.80% and core ROTCE of 21.48% for the prior quarter of 2021.

Year to Date Results

The Company recorded net income of $132.7 million for the six months ended June 30, 2021 compared to net loss of $4.4 million for the same period in the prior year. Pre-tax, pre-provision, pre-merger income was $136.7 million for the six months ended June 30, 2021 compared to $97.7 million for the prior year. The second quarter of the current year benefited from post-acquisition increased net interest income, a $38.9 million credit to the provision for credit losses, and a 34% increase in non-interest income driven primarily by mortgage banking and wealth management income. The prior year's results reflected the combined impact of merger and acquisition expense associated with the Revere acquisition, the impact of the Covid-19 pandemic on economic forecast used in the determination of the allowance for credit losses and the additional provision for credit losses associated with the acquisition of Revere during that period.

Net interest income for the six months ended June 30, 2021 increased 28% or $46.8 million compared to the prior year. This increase was driven primarily by the acquisition of Revere in the second quarter of 2020 as interest income grew $30.3 million and, to a lesser extent, reduced funding costs as interest expense declined $16.5 million. Contributing to the growth in net interest income, the PPP program generated $18.6 million, net of its associated funding costs, year-over-year. The net interest margin improved to 3.60% for the six months ended June 30, 2021, compared to 3.39% for the prior year. Excluding the net $3.8 million impact of the amortization of the fair value marks derived from acquisitions, the net interest margin for the current year would have been 3.53%. The net interest margin for 2020, excluding the amortization of fair value marks, would have been 3.23%.

The provision for credit losses for the six months ended June 30, 2021 amounted to a credit of $38.9 million as compared to a charge of $83.2 million for the same period in 2020. For the six months ended June 30, 2021, the credit for the provision for credit losses, compared to the prior year's charge to the provision, reflects the impact of the improvement in the most recent forecasted economic metrics, most notably the rate of unemployment and anticipated business bankruptcies. Other economic metrics and factors also contributed to growth in the current period's credit to the provision, which were partially offset by qualitative factors applied in the determination of the allowance. The charge to the provision for credit losses for the same period in 2020 predominantly reflected the combined results of the impact of the deteriorated economic forecasts during the first six months of 2020 and the initial allowance on acquired Revere non-purchased credit deteriorated loans.

Non-interest income increased 34% to $55.1 million for the six months ended June 30, 2021, compared to $41.1 million for 2020. During the current year, income from mortgage banking activities increased $4.5 million as a result of the high levels of new mortgage and refinancing activity resulting from historically low mortgage lending rates. Additionally, wealth management income increased $3.3 million year over year as a result of the first quarter 2020 acquisition of RPJ, in addition to the $818 million growth in assets under management during the past twelve months. Service charge income also increased 10% as customer activity increased. As a result of increased transaction volume, bank card fees grew 28% compared to the prior year period. Other non-interest income also grew significantly compared to the prior year as a result of the combination of the full payoff of a purchased credit deteriorated loan and activity-based contractual vendor incentives.

Non-interest expense decreased 2% to $131.1 million for the six months ended June 30, 2021, compared to $133.2 million for 2020. The current year included $9.1 million in prepayment penalties on FHLB borrowings compared to $5.9 million in prepayment penalties in the prior year. The prior year also included $23.9 million in merger and acquisition expense. Excluding the impact of these items results in a year-over-year growth rate in non-interest expense of 18%. This growth rate was driven by operational and compensation costs associated with the 2020 acquisitions and staffing increases associated with certain strategic initiatives, increased incentive expense associated with mortgage lending and other volume based activities, increased intangible asset amortization, higher FDIC insurance premiums and a rise in professional fees and services.

The effective tax rate for the six months ended June 30, 2021 was 24.39%, compared to a tax benefit rate of 53.71% for the same period in 2020. The current year's effective tax rate reflects a more normalized rate while the prior year's rate reflected the favorable result of the changes to tax laws in 2020 that expanded the time permitted to utilize previous net operating losses. The Company applied this change to the 2018 acquisition of WashingtonFirst Bankshares, Inc. to realize a tax benefit of $1.8 million for 2020, resulting in a greater proportional benefit from the operating loss in the first six months of 2020.

The non-GAAP efficiency ratio for the first half of the current year was 44.01% compared to 48.21% for the same period in the prior year. The improvement in the current year’s efficiency ratio compared to the prior year was the result of the 29% growth in non-GAAP revenue, which outpaced the 18% growth in non-GAAP non-interest expense.

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, loss on FHLB redemption, merger and acquisition expense and investment securities gains and includes tax-equivalent income.

  • Core earnings and the related measures of core earnings per share, core return on average assets and core return on average tangible common equity reflect net income exclusive of the provision/(credit) for credit losses, provision/(credit) for credit losses on unfunded loan commitments, merger and acquisition expense, amortization of intangible assets, loss on FHLB redemption, and investment securities gains, on a net of tax basis.

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 which 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 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 on the website until August 5, 2021. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10157804.

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 60 locations, the bank offers a broad range of commercial and retail banking, mortgage, private banking, and trust services throughout Maryland, Northern Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton Jackson, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services.

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’s forward-looking statements are subject to the following principal risks and uncertainties: risks, uncertainties and other factors relating to the COVID-19 pandemic, including the effect of the pandemic on our borrowers and their ability to make payments on their obligations, the effectiveness of vaccination programs, and the effect of remedial actions and stimulus measures adopted by federal, state and local governments; 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, 2020, 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
June 30,

%

Six Months Ended
June 30,

%

(Dollars in thousands, except per share data)

2021

2020

Change

2021

2020

Change

Results of operations:

Net interest income

$

108,046

$

101,514

6

%

$

212,646

$

165,848

28

%

Provision/ (credit) for credit losses

(4,204

)

58,686

n/m

(38,912

)

83,155

n/m

Non-interest income

26,259

22,924

15

55,125

41,092

34

Non-interest expense

62,975

85,438

(26

)

131,148

133,184

(2

)

Income/ (loss) before income tax expense/ (benefit)

75,534

(19,686

)

n/m

175,535

(9,399

)

n/m

Net income/ (loss)

57,263

(14,338

)

n/m

132,727

(4,351

)

n/m

Net income/ (loss) attributable to common shareholders

$

56,782

$

(14,458

)

n/m

$

131,606

$

(4,539

)

n/m

Pre-tax pre-provision pre-merger income (1)

$

71,330

$

61,454

16

$

136,668

$

97,664

40

Return on average assets

1.79

%

(0.45

)%

2.09

%

(0.08

)%

Return on average common equity

15.07

%

(4.15

)%

17.84

%

(0.69

)%

Return on average tangible common equity

20.44

%

(5.80

)%

24.35

%

(1.00

)%

Net interest margin

3.63

%

3.47

%

3.60

%

3.39

%

Efficiency ratio - GAAP basis (2)

46.89

%

68.66

%

48.98

%

64.36

%

Efficiency ratio - Non-GAAP basis (2)

45.36

%

43.85

%

44.01

%

48.21

%

Per share data:

Basic net income/ (loss) per common share

$

1.20

$

(0.31

)

n/m

$

2.79

$

(0.11

)

n/m

Diluted net income/ (loss) per common share

$

1.19

$

(0.31

)

n/m

$

2.77

$

(0.11

)

n/m

Weighted average diluted common shares

47,523,198

46,988,351

1

%

47,469,470

40,826,748

16

%

Dividends declared per share

$

0.32

$

0.30

7

$

0.64

$

0.60

7

Book value per common share

$

33.02

$

29.58

12

$

33.02

$

29.58

12

Tangible book value per common share (1)

$

24.58

$

20.92

17

$

24.58

$

20.92

17

Outstanding common shares

47,312,982

47,001,022

1

47,312,982

47,001,022

1

Financial condition at period-end:

Investment securities

$

1,482,123

$

1,424,652

4

%

$

1,482,123

$

1,424,652

4

%

Loans

10,092,515

10,343,043

(2

)

10,092,515

10,343,043

(2

)

Interest-earning assets

12,167,067

12,447,146

(2

)

12,167,067

12,447,146

(2

)

Assets

12,925,577

13,290,447

(3

)

12,925,577

13,290,447

(3

)

Deposits

10,866,466

10,076,834

8

10,866,466

10,076,834

8

Interest-bearing liabilities

7,233,536

8,313,546

(13

)

7,233,536

8,313,546

(13

)

Stockholders' equity

1,562,280

1,390,093

12

1,562,280

1,390,093

12

Capital ratios:

Tier 1 leverage (3)

9.49

%

8.35

%

9.49

%

8.35

%

Common equity tier 1 capital to risk-weighted assets (3)

12.47

%

10.23

%

12.47

%

10.23

%

Tier 1 capital to risk-weighted assets (3)

12.47

%

10.23

%

12.47

%

10.23

%

Total regulatory capital to risk-weighted assets (3)

15.82

%

13.79

%

15.82

%

13.79

%

Tangible common equity to tangible assets (4)

9.28

%

7.63

%

9.28

%

7.63

%

Average equity to average assets

11.91

%

10.78

%

11.73

%

11.67

%

Credit quality ratios:

Allowance for credit losses to loans

1.23

%

1.58

%

1.23

%

1.58

%

Non-performing loans to total loans

0.93

%

0.77

%

0.93

%

0.77

%

Non-performing assets to total assets

0.74

%

0.61

%

0.74

%

0.61

%

Allowance for credit losses to non-performing loans

131.44

%

204.56

%

131.44

%

204.56

%

Annualized net charge-offs to average loans (5)

0.09

%

(0.01

)%

0.05

%

%

n/m - not meaningful
(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 Consolidated Statements of Income. The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization, loss on FHLB redemption, and merger and acquisition expense from non-interest expense; securities gains 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 June 30, 2021.
(4) 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. 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

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in thousands)

2021

2020

2021

2020

Pre-tax pre-provision pre-merger income:

Net income/ (loss)

$

57,263

$

(14,338

)

$

132,727

$

(4,351

)

Plus/ (less) non-GAAP adjustments:

Merger and acquisition expense

22,454

45

23,908

Income tax expense/ (benefit)

18,271

(5,348

)

42,808

(5,048

)

Provision/ (credit) for credit losses

(4,204

)

58,686

(38,912

)

83,155

Pre-tax pre-provision pre-merger income

$

71,330

$

61,454

$

136,668

$

97,664

Efficiency ratio (GAAP):

Non-interest expense

$

62,975

$

85,438

$

131,148

$

133,184

Net interest income plus non-interest income

$

134,305

$

124,438

$

267,771

$

206,940

Efficiency ratio (GAAP)

46.89

%

68.66

%

48.98

%

64.36

%

Efficiency ratio (Non-GAAP):

Non-interest expense

$

62,975

$

85,438

$

131,148

$

133,184

Less non-GAAP adjustments:

Amortization of intangible assets

1,659

1,998

3,356

2,598

Loss on FHLB redemption

5,928

9,117

5,928

Merger and acquisition expense

22,454

45

23,908

Non-interest expense - as adjusted

$

61,316

$

55,058

$

118,630

$

100,750

Net interest income plus non-interest income

$

134,305

$

124,438

$

267,771

$

206,940

Plus non-GAAP adjustment:

Tax-equivalent income

930

1,325

1,910

2,433

Less non-GAAP adjustment:

Investment securities gains

71

212

129

381

Net interest income plus non-interest income - as adjusted

$

135,164

$

125,551

$

269,552

$

208,992

Efficiency ratio (Non-GAAP)

45.36

%

43.85

%

44.01

%

48.21

%

Tangible common equity ratio:

Total stockholders' equity

$

1,562,280

$

1,390,093

$

1,562,280

$

1,390,093

Goodwill

(370,223

)

(370,547

)

(370,223

)

(370,547

)

Other intangible assets, net

(29,165

)

(36,143

)

(29,165

)

(36,143

)

Tangible common equity

$

1,162,892

$

983,403

$

1,162,892

$

983,403

Total assets

$

12,925,577

$

13,290,447

$

12,925,577

$

13,290,447

Goodwill

(370,223

)

(370,547

)

(370,223

)

(370,547

)

Other intangible assets, net

(29,165

)

(36,143

)

(29,165

)

(36,143

)

Tangible assets

$

12,526,189

$

12,883,757

$

12,526,189

$

12,883,757

Tangible common equity ratio

9.28

%

7.63

%

9.28

%

7.63

%

Outstanding common shares

47,312,982

47,001,022

47,312,982

47,001,022

Tangible book value per common share

$

24.58

$

20.92

$

24.58

$

20.92

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED (CONTINUED)
OPERATING EARNINGS - METRICS

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in thousands)

2021

2020

2021

2020

Core earnings (non-GAAP):

Net income/ (loss)

$

57,263

$

(14,338

)

$

132,727

$

(4,351

)

Plus/ (less) non-GAAP adjustments (net of tax):

Provision/ (credit) for credit losses

(3,132

)

43,750

(28,989

)

61,992

Provision/ (credit) for credit losses on unfunded loan commitments

(181

)

(886

)

Merger and acquisition expense

16,739

34

17,823

Amortization of intangible assets

1,236

1,490

2,500

1,937

Loss on FHLB redemption

4,419

6,792

4,419

Investment securities gains

(53

)

(158

)

)

(284

)

Core earnings (Non-GAAP)

$

55,133

$

51,902

$

112,082

$

81,536

Core earnings per common share (non-GAAP):

Weighted average common shares outstanding - diluted (GAAP)

47,523,198

46,988,351

47,469,470

40,826,748

Earnings per diluted common share (GAAP)

$

1.19

$

(0.31

)

$

2.77

$

(0.11

)

Core earnings per diluted common share (non-GAAP)

$

1.16

$

1.10

$

2.36

$

2.00

Core return on average assets (non-GAAP):

Average assets (GAAP)

$

12,798,355

$

12,903,156

$

12,797,068

$

10,799,840

Return on average assets (GAAP)

1.79

%

(0.45

)%

2.09

%

(0.08

)%

Core return on average assets (non-GAAP)

1.73

%

1.62

%

1.77

%

1.52

%

Core return on average tangible common equity (non-GAAP):

Average total stockholders' equity (GAAP)

$

1,523,875

$

1,390,544

$

1,500,642

$

1,260,298

Average goodwill

(370,223

)

(355,054

)

(370,223

)

(360,549

)

Average other intangible assets, net

(30,224

)

(32,337

)

(31,056

)

(22,074

)

Average tangible common equity (non-GAAP)

$

1,123,428

$

1,003,153

$

1,099,363

$

877,675

Return on average tangible common equity (GAAP)

20.44

%

(5.80

)%

24.35

%

(1.00

)%

Core return on average tangible common equity (non-GAAP)

19.68

%

20.81

%

20.56

%

18.68

%

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED

(Dollars in thousands)

June 30,
2021

December 31,
2020

June 30,
2020

Assets

Cash and due from banks

$

109,147

$

93,651

$

224,037

Federal funds sold

358

291

401

Interest-bearing deposits with banks

520,989

203,061

610,285

Cash and cash equivalents

630,494

297,003

834,723

Residential mortgage loans held for sale (at fair value)

71,082

78,294

68,765

Investments available-for-sale (at fair value)

1,441,026

1,348,021

1,355,799

Other equity securities

41,097

65,760

68,853

Total loans

10,092,515

10,400,509

10,343,043

Less: allowance for credit losses

(123,961

)

(165,367

)

(163,481

)

Net loans

9,968,554

10,235,142

10,179,562

Premises and equipment, net

55,592

57,720

59,391

Other real estate owned

1,234

1,455

1,389

Accrued interest receivable

40,630

46,431

48,109

Goodwill

370,223

370,223

370,547

Other intangible assets, net

29,165

32,521

36,143

Other assets

276,480

265,859

267,166

Total assets

$

12,925,577

$

12,798,429

$

13,290,447

Liabilities

Noninterest-bearing deposits

$

4,000,636

$

3,325,547

$

3,434,038

Interest-bearing deposits

6,865,830

6,707,522

6,642,796

Total deposits

10,866,466

10,033,069

10,076,834

Securities sold under retail repurchase agreements and federal funds purchased

140,708

543,157

988,605

Advances from FHLB

379,075

451,844

Subordinated debt

226,998

227,088

230,301

Total borrowings

367,706

1,149,320

1,670,750

Accrued interest payable and other liabilities

129,125

146,085

152,770

Total liabilities

11,363,297

11,328,474

11,900,354

Stockholders' equity

Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 47,312,982, 47,056,777 and 47,001,022 at June 30, 2021, December 31, 2020 and June 30, 2020, respectively

47,313

47,057

47,001

Additional paid in capital

850,555

846,922

843,876

Retained earnings

659,578

557,271

484,392

Accumulated other comprehensive income

4,834

18,705

14,824

Total stockholders' equity

1,562,280

1,469,955

1,390,093

Total liabilities and stockholders' equity

$

12,925,577

$

12,798,429

$

13,290,447

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS) - UNAUDITED

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in thousands, except per share data)

2021

2020

2021

2020

Interest income:

Interest and fees on loans

$

107,751

$

106,279

$

215,179

$

182,161

Interest on loans held for sale

549

405

1,086

696

Interest on deposits with banks

47

155

93

335

Interest and dividends on investment securities:

Taxable

4,373

6,650

8,272

12,782

Tax-advantaged

2,103

1,438

4,454

2,810

Interest on federal funds sold

1

Total interest income

114,823

114,927

229,084

198,785

Interest Expense:

Interest on deposits

3,851

12,284

8,681

25,802

Interest on retail repurchase agreements and federal funds purchased

43

600

96

1,180

Interest on advances from FHLB

373

(2,123

)

2,649

1,022

Interest on subordinated debt

2,510

2,652

5,012

4,933

Total interest expense

6,777

13,413

16,438

32,937

Net interest income

108,046

101,514

212,646

165,848

Provision/ (credit) for credit losses

(4,204

)

58,686

(38,912

)

83,155

Net interest income after provision/ (credit) for credit losses

112,250

42,828

251,558

82,693

Non-interest income:

Investment securities gains

71

212

129

381

Service charges on deposit accounts

1,976

1,223

3,828

3,476

Mortgage banking activities

5,776

8,426

15,945

11,459

Wealth management income

9,121

7,604

17,851

14,570

Insurance agency commissions

1,247

1,188

3,400

3,317

Income from bank owned life insurance

705

809

1,385

1,454

Bank card fees

1,785

1,257

3,303

2,577

Other income

5,578

2,205

9,284

3,858

Total non-interest income

26,259

22,924

55,125

41,092

Non-interest expense:

Salaries and employee benefits

38,990

34,297

75,642

62,350

Occupancy expense of premises

5,497

5,991

10,984

10,572

Equipment expenses

3,020

3,219

6,242

5,970

Marketing

1,052

729

2,264

1,918

Outside data services

2,260

2,169

4,543

3,751

FDIC insurance

1,450

1,378

2,942

1,860

Amortization of intangible assets

1,659

1,998

3,356

2,598

Merger and acquisition expense

22,454

45

23,908

Professional fees and services

3,165

1,840

4,896

3,666

Other expenses

5,882

11,363

20,234

16,591

Total non-interest expense

62,975

85,438

131,148

133,184

Income/ (loss) before income tax expense/ (benefit)

75,534

(19,686

)

175,535

(9,399

)

Income tax expense/ (benefit)

18,271

(5,348

)

42,808

(5,048

)

Net income/ (loss)

$

57,263

$

(14,338

)

$

132,727

$

(4,351

)

Net income per share amounts:

Basic net income/ (loss) per common share

$

1.20

$

(0.31

)

$

2.79

$

(0.11

)

Diluted net income/ (loss) per common share

$

1.19

$

(0.31

)

$

2.77

$

(0.11

)

Dividends declared per share

$

0.32

$

0.30

$

0.64

$

0.60

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED

2021

2020

(Dollars in thousands, except per share data)

Q2

Q1

Q4

Q3

Q2

Q1

Profitability for the quarter:

Tax-equivalent interest income

$

115,753

$

115,241

$

112,843

$

113,627

$

116,252

$

84,966

Interest expense

6,777

9,661

11,964

15,500

13,413

19,524

Tax-equivalent net interest income

108,976

105,580

100,879

98,127

102,839

65,442

Tax-equivalent adjustment

930

980

1,052

643

1,325

1,108

Provision/ (credit) for credit losses

(4,204

)

(34,708

)

(4,489

)

7,003

58,686

24,469

Non-interest income

26,259

28,866

32,234

29,390

22,924

18,168

Non-interest expense

62,975

68,173

61,661

60,937

85,438

47,746

Income/ (loss) before income tax expense/ (benefit)

75,534

100,001

74,889

58,934

(19,686

)

10,287

Income tax expense/ (benefit)

18,271

24,537

18,227

14,292

(5,348

)

300

Net income/ (loss)

$

57,263

$

75,464

$

56,662

$

44,642

$

(14,338

)

$

9,987

Financial performance:

Pre-tax pre-provision pre-merger income

$

71,330

$

65,338

$

70,403

$

67,200

$

61,454

$

36,210

Return on average assets

1.79

%

2.39

%

1.78

%

1.38

%

(0.45

)%

0.46

%

Return on average common equity

15.07

%

20.72

%

15.72

%

12.67

%

(4.15

)%

3.55

%

Return on average tangible common equity

20.44

%

28.47

%

21.89

%

17.84

%

(5.80

)%

5.34

%

Net interest margin

3.63

%

3.56

%

3.38

%

3.24

%

3.47

%

3.29

%

Efficiency ratio - GAAP basis (1)

46.89

%

51.08

%

46.69

%

48.03

%

68.66

%

57.87

%

Efficiency ratio - Non-GAAP basis (1)

45.36

%

42.65

%

45.09

%

45.27

%

43.85

%

54.76

%

Per share data:

Net income/ (loss) attributable to common shareholders

$

56,782

$

74,824

$

56,194

$

44,268

$

(14,458

)

$

9,919

Basic net income/ (loss) per common share

$

1.20

$

1.59

$

1.19

$

0.94

$

(0.31

)

$

0.29

Diluted net income/ (loss) per common share

$

1.19

$

1.58

$

1.19

$

0.94

$

(0.31

)

$

0.28

Weighted average diluted common shares

47,523,198

47,415,060

47,284,808

47,175,071

46,988,351

34,743,623

Dividends declared per share

$

0.32

$

0.32

$

0.30

$

0.30

$

0.30

$

0.30

Non-interest income:

Securities gains

$

71

$

58

$

35

$

51

$

212

$

169

Service charges on deposit accounts

1,976

1,852

1,917

1,673

1,223

2,253

Mortgage banking activities

5,776

10,169

14,491

14,108

8,426

3,033

Wealth management income

9,121

8,730

8,215

7,785

7,604

6,966

Insurance agency commissions

1,247

2,153

1,356

2,122

1,188

2,129

Income from bank owned life insurance

705

680

705

708

809

645

Bank card fees

1,785

1,518

1,570

1,525

1,257

1,320

Other income

5,578

3,706

3,945

1,418

2,205

1,653

Total non-interest income

$

26,259

$

28,866

$

32,234

$

29,390

$

22,924

$

18,168

Non-interest expense:

Salaries and employee benefits

$

38,990

$

36,652

$

36,080

$

36,041

$

34,297

$

28,053

Occupancy expense of premises

5,497

5,487

5,236

5,575

5,991

4,581

Equipment expenses

3,020

3,222

3,121

3,133

3,219

2,751

Marketing

1,052

1,212

1,058

1,305

729

1,189

Outside data services

2,260

2,283

2,394

2,614

2,169

1,582

FDIC insurance

1,450

1,492

1,527

1,340

1,378

482

Amortization of intangible assets

1,659

1,697

1,655

1,968

1,998

600

Merger and acquisition expense

45

3

1,263

22,454

1,454

Professional fees and services

3,165

1,731

2,473

1,800

1,840

1,826

Other expenses

5,882

14,352

8,114

5,898

11,363

5,228

Total non-interest expense

$

62,975

$

68,173

$

61,661

$

60,937

$

85,438

$

47,746

(1) 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, loss on FHLB redemption, and merger and acquisition expense from non-interest expense; investment securities gains 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

2021

2020

(Dollars in thousands, except per share data)

Q2

Q1

Q4

Q3

Q2

Q1

Balance sheets at quarter end:

Commercial investor real estate loans

$

3,712,374

$

3,652,418

$

3,634,720

$

3,588,702

$

3,581,778

$

2,241,240

Commercial owner-occupied real estate loans

1,687,843

1,644,848

1,642,216

1,652,208

1,601,803

1,305,682

Commercial AD&C loans

1,126,960

1,051,013

1,050,973

994,800

997,423

643,114

Commercial business loans

1,974,366

2,411,109

2,267,548

2,227,246

2,222,810

813,525

Residential mortgage loans

960,527

1,022,546

1,105,179

1,173,857

1,211,745

1,116,512

Residential construction loans

172,869

171,028

182,619

175,123

169,050

149,573

Consumer loans

457,576

493,904

517,254

521,999

558,434

453,346

Total loans

10,092,515

10,446,866

10,400,509

10,333,935

10,343,043

6,722,992

Allowance for credit losses

(123,961

)

(130,361

)

(165,367

)

(170,314

)

(163,481

)

(85,800

)

Loans held for sale

71,082

84,930

78,294

88,728

68,765

67,114

Investment securities

1,482,123

1,472,727

1,413,781

1,425,733

1,424,652

1,250,560

Interest-earning assets

12,167,067

12,132,405

12,095,936

11,965,915

12,447,146

8,222,589

Total assets

12,925,577

12,873,366

12,798,429

12,678,131

13,290,447

8,929,602

Noninterest-bearing demand deposits

4,000,636

3,770,852

3,325,547

3,458,804

3,434,038

1,939,937

Total deposits

10,866,466

10,677,752

10,033,069

9,964,969

10,076,834

6,593,874

Customer repurchase agreements

140,708

129,318

153,157

142,287

143,579

125,305

Total interest-bearing liabilities

7,233,536

7,423,262

7,856,842

7,643,381

8,313,546

5,732,349

Total stockholders' equity

1,562,280

1,511,694

1,469,955

1,424,749

1,390,093

1,116,334

Quarterly average balance sheets:

Commercial investor real estate loans

$

3,675,119

$

3,634,174

$

3,599,648

$

3,582,751

$

3,448,882

$

2,202,461

Commercial owner-occupied real estate loans

1,663,543

1,638,885

1,643,817

1,628,474

1,681,674

1,285,257

Commercial AD&C loans

1,089,287

1,049,597

1,017,304

977,607

969,251

659,494

Commercial business loans

2,225,885

2,291,097

2,189,828

2,207,388

1,899,264

819,133

Residential mortgage loans

994,899

1,066,714

1,136,989

1,189,452

1,208,566

1,139,786

Residential construction loans

176,135

179,925

180,494

173,280

162,978

145,266

Consumer loans

468,686

496,578

515,202

543,242

575,734

465,314

Total loans

10,293,554

10,356,970

10,283,282

10,302,194

9,946,349

6,716,711

Loans held for sale

66,958

82,263

68,255

54,784

53,312

35,030

Investment securities

1,482,905

1,407,455

1,418,683

1,404,238

1,398,586

1,179,084

Interest-earning assets

12,037,701

12,029,424

11,882,542

12,049,463

11,921,132

7,994,618

Total assets

12,798,355

12,801,539

12,645,329

12,835,893

12,903,156

8,699,342

Noninterest-bearing demand deposits

3,763,135

3,394,110

3,424,729

3,281,607

3,007,222

1,797,227

Total deposits

10,663,346

10,343,190

9,999,144

9,862,639

9,614,176

6,433,694

Customer repurchase agreements

136,286

148,195

146,685

142,694

144,050

135,652

Total interest-bearing liabilities

7,356,656

7,742,987

7,609,829

7,969,487

8,326,909

5,612,056

Total stockholders' equity

1,523,875

1,477,150

1,433,900

1,401,746

1,390,544

1,130,051

Financial measures:

Average equity to average assets

11.91

%

11.54

%

11.34

%

10.92

%

10.78

%

12.99

%

Investment securities to earning assets

12.18

%

12.14

%

11.69

%

11.91

%

11.45

%

15.21

%

Loans to earning assets

82.95

%

86.11

%

85.98

%

86.36

%

83.10

%

81.76

%

Loans to assets

78.08

%

81.15

%

81.26

%

81.51

%

77.82

%

75.29

%

Loans to deposits

92.88

%

97.84

%

103.66

%

103.70

%

102.64

%

101.96

%

Capital measures:

Tier 1 leverage (1)

9.49

%

9.14

%

8.92

%

8.65

%

8.35

%

8.78

%

Common equity tier 1 capital to risk-weighted assets (1)

12.47

%

12.09

%

10.58

%

10.45

%

10.23

%

10.23

%

Tier 1 capital to risk-weighted assets (1)

12.47

%

12.09

%

10.58

%

10.45

%

10.23

%

10.23

%

Total regulatory capital to risk-weighted assets (1)

15.82

%

15.49

%

13.93

%

14.02

%

13.79

%

14.09

%

Book value per common share

$

33.02

$

32.04

$

31.24

$

30.30

$

29.58

$

32.68

Outstanding common shares

47,312,982

47,187,389

47,056,777

47,025,779

47,001,022

34,164,672

(1) Estimated ratio at June 30, 2021.

Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

2021

2020

(Dollars in thousands)

June 30,

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

$

$

$

133

$

$

775

$

Commercial owner-occupied real estate

515

Commercial AD&C

Commercial business

31

161

93

Residential real estate:

Residential mortgage

680

398

480

320

138

8

Residential construction

Consumer

1

Total loans 90 days past due

680

429

774

414

1,428

8

Non-accrual loans:

Commercial real estate:

Commercial investor real estate

42,072

42,776

45,227

26,784

26,482

17,770

Commercial owner-occupied real estate

8,183

8,316

11,561

6,511

6,729

4,074

Commercial AD&C

14,489

14,975

15,044

1,678

2,957

829

Commercial business

9,435

13,147

22,933

17,659

20,246

10,834

Residential real estate:

Residential mortgage

9,440

9,593

10,212

11,296

11,724

12,271

Residential construction

62

Consumer

7,718

7,193

7,384

7,493

7,800

5,596

Total non-accrual loans

91,399

96,000

112,361

71,421

75,938

51,374

Total restructured loans - accruing

2,228

2,271

2,317

2,854

2,553

2,575

Total non-performing loans

94,307

98,700

115,452

74,689

79,919

53,957

Other assets and other real estate owned (OREO)

1,234

1,354

1,455

1,389

1,389

1,416

Total non-performing assets

$

95,541

$

100,054

$

116,907

$

76,078

$

81,308

$

55,373


For the Quarter Ended,

(Dollars in thousands)

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

March 31,
2020

Analysis of non-accrual loan activity:

Balance at beginning of period

$

96,000

$

112,361

$

71,421

$

75,938

$

51,374

$

38,632

Purchased credit deteriorated loans designated as non-accrual

13,084

Non-accrual balances transferred to OREO

(257

)

(70

)

Non-accrual balances charged-off

(2,166

)

(699

)

(513

)

(144

)

(162

)

(575

)

Net payments or draws

(3,693

)

(16,028

)

(13,212

)

(4,248

)

(1,881

)

(1,860

)

Loans placed on non-accrual

1,515

421

54,735

893

27,289

2,369

Non-accrual loans brought current

(55

)

(1,018

)

(682

)

(276

)

Balance at end of period

$

91,399

$

96,000

$

112,361

$

71,421

$

75,938

$

51,374

Analysis of allowance for credit losses:

Balance at beginning of period

$

130,361

$

165,367

$

170,314

$

163,481

$

85,800

$

56,132

Transition impact of adopting ASC 326

2,983

Initial allowance on purchased credit deteriorated loans

2,762

Initial allowance on acquired PCD loans

18,628

Provision/ (credit) for credit losses

(4,204

)

(34,708

)

(4,489

)

7,003

58,686

24,469

Less loans charged-off, net of recoveries:

Commercial real estate:

Commercial investor real estate

(144

)

(27

)

379

21

(4

)

Commercial owner-occupied real estate

Commercial AD&C

Commercial business

2,359

634

56

88

(463

)

108

Residential real estate:

Residential mortgage

(11

)

(270

)

37

(6

)

15

333

Residential construction

(1

)

(1

)

(2

)

(1

)

(2

)

Consumer

(7

)

(39

)

(13

)

69

86

107

Net charge-offs/ (recoveries)

2,196

298

458

170

(367

)

546

Balance at the end of period

$

123,961

$

130,361

$

165,367

$

170,314

$

163,481

$

85,800

Asset quality ratios:

Non-performing loans to total loans

0.93

%

0.94

%

1.11

%

0.72

%

0.77

%

0.80

%

Non-performing assets to total assets

0.74

%

0.78

%

0.91

%

0.60

%

0.61

%

0.62

%

Allowance for credit losses to loans

1.23

%

1.25

%

1.59

%

1.65

%

1.58

%

1.28

%

Allowance for credit losses to non-performing loans

131.44

%

132.08

%

143.23

%

228.03

%

204.56

%

159.02

%

Annualized net charge-offs/ (recoveries) to average loans

0.09

%

0.01

%

0.02

%

0.01

%

(0.01

)%

0.03

%

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED

Three Months Ended June 30,

2021

2020

(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

$

3,675,119

$

38,411

4.19

%

$

3,448,882

$

38,426

4.48

%

Commercial owner-occupied real estate loans

1,663,543

19,360

4.67

1,681,674

19,794

4.73

Commercial AD&C loans

1,089,287

10,819

3.98

969,251

10,886

4.52

Commercial business loans

2,225,885

25,248

4.55

1,899,264

19,426

4.11

Total commercial loans

8,653,834

93,838

4.35

7,999,071

88,532

4.45

Residential mortgage loans

994,899

8,634

3.47

1,208,566

11,259

3.73

Residential construction loans

176,135

1,562

3.56

162,978

1,691

4.17

Consumer loans

468,686

4,183

3.58

575,734

5,341

3.73

Total residential and consumer loans

1,639,720

14,379

3.51

1,947,278

18,291

3.78

Total loans (2)

10,293,554

108,217

4.22

9,946,349

106,823

4.32

Loans held for sale

66,958

549

3.28

53,312

405

3.04

Taxable securities

1,052,229

4,373

1.66

1,164,490

7,045

2.42

Tax-advantaged securities

430,676

2,567

2.38

234,096

1,824

3.12

Total investment securities (3)

1,482,905

6,940

1.87

1,398,586

8,869

2.54

Interest-bearing deposits with banks

193,749

47

0.10

522,469

155

0.12

Federal funds sold

535

0.10

416

0.10

Total interest-earning assets

12,037,701

115,753

3.86

11,921,132

116,252

3.92

Less: allowance for credit losses

(130,734

)

(118,863

)

Cash and due from banks

97,813

181,991

Premises and equipment, net

55,718

60,545

Other assets

737,857

858,351

Total assets

$

12,798,355

$

12,903,156

Liabilities and Stockholders' Equity

Interest-bearing demand deposits

$

1,400,661

$

226

0.06

%

$

1,067,487

$

457

0.17

%

Regular savings deposits

476,999

66

0.06

367,191

73

0.08

Money market savings deposits

3,364,348

1,254

0.15

2,890,842

3,396

0.47

Time deposits

1,658,203

2,305

0.56

2,281,434

8,358

1.47

Total interest-bearing deposits

6,900,211

3,851

0.22

6,606,954

12,284

0.75

Other borrowings

155,792

43

0.11

713,965

600

0.34

Advances from FHLB

73,626

373

2.03

775,767

(2,123

)

(1.08

)

Subordinated debt

227,027

2,510

4.42

230,223

2,652

4.61

Total borrowings

456,445

2,926

2.57

1,719,955

1,129

0.27

Total interest-bearing liabilities

7,356,656

6,777

0.37

8,326,909

13,413

0.65

Noninterest-bearing demand deposits

3,763,135

3,007,222

Other liabilities

154,689

178,481

Stockholders' equity

1,523,875

1,390,544

Total liabilities and stockholders' equity

$

12,798,355

$

12,903,156

Tax-equivalent net interest income and spread

$

108,976

3.49

%

$

102,839

3.27

%

Less: tax-equivalent adjustment

930

1,325

Net interest income

$

108,046

$

101,514

Interest income/earning assets

3.86

%

3.92

%

Interest expense/earning assets

0.23

0.45

Net interest margin

3.63

%

3.47

%

(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 25.50% and 25.45% for 2021 and 2020, respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $0.9 million and $1.3 million in 2021 and 2020, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Available for sale investments are presented at amortized cost.

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED

Six Months Ended June 30,

2021

2020

(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

$

3,654,760

$

76,765

4.24

%

$

2,825,672

$

63,691

4.53

%

Commercial owner-occupied real estate loans

1,651,282

38,040

4.65

1,483,465

35,000

4.74

Commercial AD&C loans

1,069,552

21,215

4.00

814,372

19,215

4.74

Commercial business loans

2,258,311

50,042

4.47

1,359,199

29,603

4.38

Total commercial loans

8,633,905

186,062

4.35

6,482,708

147,509

4.58

Residential mortgage loans

1,030,608

18,178

3.53

1,174,176

22,000

3.75

Residential construction loans

178,020

3,168

3.59

154,122

3,252

4.24

Consumer loans

482,555

8,728

3.65

520,524

10,497

4.06

Total residential and consumer loans

1,691,183

30,074

3.57

1,848,822

35,749

3.89

Total loans (2)

10,325,088

216,136

4.22

8,331,530

183,258

4.42

Loans held for sale

74,568

1,086

2.91

44,171

696

3.15

Taxable securities

984,305

8,272

1.68

1,068,549

13,367

2.50

Tax-advantaged securities

461,084

5,407

2.35

220,286

3,561

3.23

Total investment securities (3)

1,445,389

13,679

1.89

1,288,835

16,928

2.63

Interest-bearing deposits with banks

187,954

93

0.10

293,001

335

0.23

Federal funds sold

588

0.09

338

1

0.53

Total interest-earning assets

12,033,587

230,994

3.87

9,957,875

201,218

4.06

Less: allowance for credit losses

(146,892

)

(90,412

)

Cash and due from banks

102,013

125,805

Premises and equipment, net

56,042

59,445

Other assets

752,318

747,127

Total assets

$

12,797,068

$

10,799,840

Liabilities and Stockholders' Equity

Interest-bearing demand deposits

$

1,383,253

$

462

0.07

%

$

953,951

$

1,154

0.24

%

Regular savings deposits

460,738

122

0.05

349,155

146

0.08

Money market savings deposits

3,387,341

2,717

0.16

2,369,566

8,046

0.68

Time deposits

1,693,179

5,380

0.64

1,949,039

16,456

1.70

Total interest-bearing deposits

6,924,511

8,681

0.25

5,621,711

25,802

0.92

Other borrowings

172,727

96

0.11

475,386

1,180

0.50

Advances from FHLB

224,467

2,649

2.38

653,878

1,022

0.32

Subordinated debt

227,050

5,012

4.41

218,508

4,933

4.52

Total borrowings

624,244

7,757

2.51

1,347,772

7,135

1.07

Total interest-bearing liabilities

7,548,755

16,438

0.44

6,969,483

32,937

0.95

Noninterest-bearing demand deposits

3,579,642

2,402,225

Other liabilities

168,029

167,834

Stockholders' equity

1,500,642

1,260,298

Total liabilities and stockholders' equity

$

12,797,068

$

10,799,840

Tax-equivalent net interest income and spread

$

214,556

3.43

%

$

168,281

3.11

%

Less: tax-equivalent adjustment

1,910

2,433

Net interest income

$

212,646

$

165,848

Interest income/earning assets

3.87

%

4.06

%

Interest expense/earning assets

0.27

0.67

Net interest margin

3.60

%

3.39

%

(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 25.50% and 25.45% for 2021 and 2020, respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.9 million and $2.4 million in 2021 and 2020, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Available-for-sale investments are presented at amortized cost.