Sandy Spring Bancorp Reports Third Quarter Profit of $11.0 Million


OLNEY, Md., Oct. 18, 2012 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today announced net income for the third quarter of 2012 of $11.0 million ($.44 per diluted share) compared to net income of $11.3 million ($0.47 per diluted share) for the third quarter of 2011 and net income of $7.2 million ($0.30 per diluted share) for the second quarter of 2012.

Net income for the nine-month period ended September 30, 2012 totaled $26.7 million ($1.09 per diluted share) compared to net income of $26.8 million ($1.11 per diluted share) for the prior year period.

"Our strong third quarter results were driven by the accretive effect on the net interest margin from the CommerceFirst acquisition, completed in the prior quarter," said Daniel J. Schrider, President and Chief Executive Officer. "Together with continued improvement to our deposit mix, these factors produced a 12% increase in net interest income over the prior year quarter."

"While the struggling economy and intense competition in our markets limited our loan growth during the quarter, non-interest income benefited from an increased volume of mortgage originations, most of which were sold in the secondary market," said Schrider.

Third Quarter Highlights:

  • Pre-tax pre-provision income, a non-GAAP measure, was $17.0 million for the third quarter of 2012, a 23% increase over the third quarter of 2011 and a 16% increase over the second quarter of 2012.
     
  • The net interest margin was 3.67% for the third quarter of 2012, compared to 3.53% for the third quarter of 2011 and 3.62% for the second quarter of 2012.
     
  • Non-interest income increased 8% for the quarter compared to the prior year quarter due primarily to higher income from mortgage banking activities.
     
  • Non-performing loans decreased to $59.9 million at September 30, 2012 compared to $82.8 million at September 30, 2011 and $64.5 million at June 30, 2012. The decrease in the third quarter was due to a lower level of non-accrual loans.  

Review of Balance Sheet and Credit Quality

Total assets increased 7% to $3.9 billion at September 30, 2012 compared to balances at September 30, 2011. Total loans and leases increased 15% to $2.5 billion compared to the prior year.This increase consisted of $157.2 million in loans from the acquisition of CommerceFirst and $166.4 million of internally-generated loan growth, primarily in the commercial loan portfolio. Total loans increased 10% compared to balances at December 31, 2011. Excluding the loans acquired in the CommerceFirst acquisition, total loans increased 8% compared to September 30, 2011 and 3% compared to December 31, 2011.

Customer funding sources, which include deposits and other short-term borrowings from customers, increased 8% compared to September 30, 2011. This increase was due primarily to a 22% increase in noninterest-bearing and interest-bearing checking accounts. The Company views the growth in checking accounts as an especially valuable metric as it provides additional opportunities to grow multiple product banking relationships with clients.  Excluding the deposits acquired in the CommerceFirst acquisition, total customer funding sources increased 4% while certificates of deposit declined 17% at September 30, 2012 compared to balances at September 30, 2011, as the Company managed its deposit mix to maintain the net interest margin.

Tangible common equity, a non-GAAP metric, totaled $379.8 million at September 30, 2012 compared to $345.6 million at September 30, 2011 resulting in an increase in the ratio of tangible common equity to tangible assets from 9.75% at September 30, 2011 to 9.99% at September 30, 2012. This increase was due primarily to stock issued in connection with the CommerceFirst acquisition and net income earned during the period.  At September 30, 2012, the Company had a total risk-based capital ratio of 15.56%, a tier 1 risk-based capital ratio of 14.31% and a tier 1 leverage ratio of 10.99%.

Non-performing loans decreased to $59.9 million at September 30, 2012 compared to $82.8 million at September 30, 2011 and $64.5 million at June 30, 2012. The Company's credit quality metrics showed continued improvement due to resolution of existing problem credits and limited migration of new credits to non-performing status.

The provision for loan and lease losses was a charge of $0.2 million for the third quarter of 2012 compared to a credit of $3.5 million for the third quarter of 2011 and a charge of $1.6 million for the second quarter of 2012. The increase in the provision for the third quarter of 2012 compared to the third quarter of 2011 was due primarily to a decline in historical losses at September 30, 2011 which caused a credit balance in the provision for the third quarter of 2011. The decrease in the provision for the third quarter of 2012 compared to the second quarter of 2012 was largely due to a decline in total non-performing loans and related specific reserves.

Loan charge-offs, net of recoveries, totaled $2.9 million for the third quarter of 2012 compared to net charge-offs of $2.0 million for the third quarter of 2011 and $1.4 million for the second quarter of 2012. The allowance for loan and lease losses represented 1.73% of outstanding loans and leases and 71% of non-performing loans at September 30, 2012 compared to 2.32% of outstanding loans and leases and 60% of non-performing loans at September 30, 2011 and 1.83% of outstanding loans and leases and 70% of non-performing loans at June 30, 2012. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

Income Statement Review

Net interest income for the third quarter of 2012 increased by $3.5 million or 12% compared to the third quarter of 2011 due to an increase in average interest-earning assets resulting from the CommerceFirst transaction and organic growth. Combined with a lower cost deposit mix, these factors resulted in an increase in the net interest margin to 3.67% for the third quarter of 2012 compared to 3.53% for the third quarter of 2011.

Non-interest income increased $0.9 million or 8% to $12.2 million for the third quarter of 2012 compared to $11.3 million for the third quarter of 2011. This increase was due primarily to growth in income from mortgage banking activities of $0.8 million due to higher loan origination volumes and higher average gains on sales, both due to increased refinancing activity during the quarter. In addition, Visa check fees increased 6% over the prior year quarter due to a higher volume of electronic transactions.

Non-interest expenses were $27.2 million for the third quarter of 2012 compared to $25.8 million in the third quarter of 2011, an increase of $1.4 million or 5%. This increase was driven by higher salaries and benefits, occupancy and marketing expenses. The non-GAAP efficiency ratio improved to 58.9% for the third quarter of 2012 compared to 62.0% for the third quarter of 2011.

Net interest income for the first nine months of 2012 increased by $5.8 million or 7% compared to the first nine months of 2011 due to an increase in average earning assets resulting from organic loan growth, loans acquired in the CommerceFirst acquisition and an increased level of noninterest-bearing deposits, which more than offset lower earning asset yields. These factors, together with a decline in the cost of funds, resulted in an increase in the net interest margin to 3.62% for the first nine months of 2012 compared to 3.59% for the first nine months of 2011.

Non-interest income increased $2.6 million or 8% to $34.7 million for the first nine months of 2012 as compared to $32.1 million for 2011. This increase was due primarily to an increase of $1.9 million or 79% in income from mortgage banking activities due to higher volumes and increased average gains from refinancing activity. Revenue from wealth management services increased $0.3 million or 3% due primarily to higher assets under management.

Non-interest expenses were $82.7 million for the first nine months of 2012 compared to $77.7 million for the first nine months of 2011, an increase of $5.0 million or 6%. This increase was driven by a 7% increase in salaries and benefits expense due to merit salary increases, a larger staff and higher cost of health benefits. These expenses were partially offset by a 21% decrease in FDIC insurance premiums due to a change in calculation of such premiums effective in the third quarter of 2011. Excluding one-time merger expenses of $2.7 million in the first nine months of 2012, non-interest expenses increased only 3% over the prior year period. The non-GAAP efficiency ratio was 61.1% for the first nine months of 2012 compared to 63.3% for the first nine months of 2011.

Conference Call

The Company's management will host a conference call to discuss its third quarter results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations' section of the Sandy Spring Web site at www.sandyspringbank.com.  Participants may call 1-877-317-6789. A password is not necessary. Visitors to the Web site are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available at the Web site until 9:00 am (ET) November 19, 2012. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10018787.

About Sandy Spring Bancorp/Sandy Spring Bank

With $3.9 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. Sandy Spring is a community banking organization that focuses its lending and other services on businesses and consumers in the local market area. Independent and community-oriented, Sandy Spring Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 49 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George's counties in Maryland, and Arlington, Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of insurance and investment management services. Visit www.sandyspringbank.com to locate an ATM near you or for more information about Sandy Spring Bank.

The Sandy Spring Bancorp, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=4138

Forward-Looking Statements

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

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

Sandy Spring Bancorp's forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company's loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company's ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2011, including in the Risk Factors section of that report, and in its other SEC reports. Sandy Spring Bancorp's forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC's Web site at www.sec.gov.

Sandy Spring Bancorp, Inc. and Subsidiaries            
FINANCIAL HIGHLIGHTS - UNAUDITED            
             
             
         
  Three Months Ended    Nine Months Ended  
  September 30, % September 30, %    
(Dollars in thousands, except per share data) 2012 2011 Change 2012 2011 Change
Results of Operations:            
 Net interest income  $ 31,785  $ 28,330 12%  $ 90,299  $ 84,494 7%
 Provision for loan and lease losses  232 (3,520) (107) 2,481 (854)  --
 Non-interest income  12,242  11,336 8  34,709  32,130 8
 Non-interest expenses  27,167  25,848 5  82,708  77,748 6
 Income before income taxes  16,628  17,338 (4)  39,819  39,730  --
 Net income   10,990  11,257 (2)  26,673  26,844 (1)
             
 Pre-tax pre-provision pre-merger expense income   $ 16,996  $ 13,818 23  $ 45,008  $ 38,876 16
             
 Return on average assets  1.13%  1.24%    0.95%  1.01%  
 Return on average common equity  9.22%  10.42%    7.74%  8.61%  
 Net interest margin  3.67%  3.53%    3.62%  3.59%  
 Efficiency ratio - GAAP (1)  61.70%  65.16%    66.16%  66.67%  
 Efficiency ratio - Non-GAAP (1)  58.91%  62.02%    61.08%  63.29%  
             
Per share data:            
 Basic net income  $ 0.44  $ 0.47 (6)%  $ 1.09  $ 1.11 (2)%
 Diluted net income  0.44  0.47 (6)  1.09 1.11 (2)
 Average fully diluted shares  24,949,205  24,142,137 3  24,535,439  24,127,814 2
 Dividends declared per share  0.12  0.08 50 0.34 0.24 42
 Book value per share 19.35 18.31 6 19.35 18.31 6
 Tangible book value per share 15.26 14.35 6 15.26 14.35 6
 Outstanding shares  24,896,136  24,079,204 3  24,896,136  24,079,204 3
             
Financial Condition at period-end:            
 Investment securities  $1,074,918  $ 1,174,180 (8)%  $1,074,918  $ 1,174,180 (8)%
 Loans and leases 2,468,985 2,145,403 15 2,468,985 2,145,403 15
 Interest-earning assets 3,614,310 3,370,360 7 3,614,310 3,370,360 7
 Assets 3,887,427 3,626,043 7 3,887,427 3,626,043 7
 Deposits 2,880,262 2,640,324 9 2,880,262 2,640,324 9
 Interest-bearing liabilities 2,560,040 2,517,180 2 2,560,040 2,517,180 2
 Stockholders' equity 481,810 440,791 9 481,810 440,791 9
             
Capital ratios:            
 Tier 1 leverage   10.99 10.79%    10.99%  10.79%  
 Tier 1 capital to risk-weighted assets  14.31 14.96%    14.31%  14.96%  
 Total regulatory capital to risk-weighted assets  15.56 16.21%    15.56%  16.21%  
 Tangible common equity to tangible assets (2)  9.99 9.75%    9.99%  9.75%  
 Average equity to average assets  12.27 11.87%    12.31%  11.71%  
             
Credit quality ratios:            
 Allowance for loan and lease losses to loans and leases  1.73  2.32    1.73%  2.32%  
 Non-performing loans to total loans  2.42  3.86    2.42%  3.86%  
 Non-performing assets to total assets  1.78  2.50    1.78%  2.50%  
 Allowance for loan and lease losses to non-performing loans  71.18  60.01    71.18%  60.01%  
 Annualized net charge-offs to average loans and leases (3)  0.46  0.37    0.53%  0.72%  
             
(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Consolidated Statements of Income. The traditional,
 non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; securities gains (losses) from non-interest income; OTTI; and
 the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.    
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and
 other comprehensive gains (losses). See the Reconciliation Table included with these Financial Highlights.        
(3) Calculation utilizes average loans and leases, excluding residential mortgage loans held-for-sale.        
Sandy Spring Bancorp, Inc. and Subsidiaries        
RECONCILIATION TABLE - UNAUDITED        
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
(Dollars in thousands) 2012 2011 2012 2011
Pre-tax pre-provision pre-merger expense income:      
Net income  $ 10,990  $ 11,257  $ 26,673  $ 26,844
 Plus non-GAAP adjustment:        
 Merger expenses  136  --   2,708  -- 
 Income taxes  5,638  6,081  13,146  12,886
 Provision (credit) for loan and lease losses  232  (3,520)  2,481  (854)
Pre-tax pre-provision pre-merger expense income  $ 16,996  $ 13,818  $ 45,008  $ 38,876
         
GAAP efficiency ratio:        
Non-interest expenses   $ 27,167  $ 25,848  $ 82,708  $ 77,748
         
Net interest income plus non-interest income  $ 44,027  $ 39,666  $ 125,008  $ 116,624
         
GAAP Efficiency ratio 61.70% 65.16% 66.16% 66.67%
         
         
Non-GAAP efficiency ratio:        
Non-interest expenses   $ 27,167  $ 25,848  $ 82,708  $ 77,748
 Less non-GAAP adjustment:        
 Amortization of intangible assets  476  461  1,403  1,384
 Merger expenses  136  --   2,708  -- 
Non-interest expenses -- as adjusted  $ 26,555  $ 25,387  $ 78,597  $ 76,364
         
Net interest income plus non-interest income   $ 44,027  $ 39,666  $ 125,008  $ 116,624
 Plus non-GAAP adjustment:        
 Tax-equivalent income  1,324  1,420  4,040  4,154
 Less non-GAAP adjustments:        
 Securities gains  296  231  459  283
 OTTI recognized in earnings  (23)  (76)  (95)  (160)
Net interest income plus non-interest income - as adjusted  $ 45,078  $ 40,931  $ 128,684  $ 120,655
         
Non-GAAP Efficiency ratio 58.91% 62.02% 61.08% 63.29%
         
Tangible common equity ratio:        
Total stockholders' equity  $ 481,810  $ 440,791  $ 481,810  $ 440,791
Accumulated other comprehensive income (loss)  (16,433)  (13,147)  (16,433)  (13,147)
Goodwill  (81,892)  (76,816)  (81,892)  (76,816)
Other intangible assets, net  (3,641)  (5,195)  (3,641)  (5,195)
Tangible common equity  $ 379,844  $ 345,633  $ 379,844  $ 345,633
         
Total assets  $ 3,887,427  $ 3,626,043  $ 3,887,427  $ 3,626,043
Goodwill  (81,892)  (76,816)  (81,892)  (76,816)
Other intangible assets, net  (3,641)  (5,195)  (3,641)  (5,195)
Tangible assets  $ 3,801,894  $ 3,544,032  $ 3,801,894  $ 3,544,032
         
Tangible common equity ratio 9.99% 9.75% 9.99% 9.75%
         
Outstanding common shares  24,896,136  24,079,204  24,896,136  24,079,204
Tangible book value per common share  $ 15.26  $ 14.35  $ 15.26  $ 14.35
Sandy Spring Bancorp, Inc. and Subsidiaries      
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED    
       
  September 30, December 31, September 30,
(Dollars in thousands) 2012 2011 2011
Assets      
 Cash and due from banks  $ 48,744  $ 49,832  $ 43,132
 Federal funds sold  466  1,006  1,146
 Interest-bearing deposits with banks  30,057  21,476  26,535
 Cash and cash equivalents  79,267  72,314  70,813
 Residential mortgage loans held for sale (at fair value)   39,884  25,341  23,096
 Investments available-for-sale (at fair value)  834,665  951,301  952,074
 Investments held-to-maturity --- fair value of $213,235, $184,167 and $193,432      
 at September 30, 2012, December 31, 2011 and September 30, 2011, respectively  206,613  178,465  189,520
 Other equity securities  33,640  34,933  32,586
 Total loans and leases  2,468,985  2,239,692  2,145,403
 Less: allowance for loan and lease losses  (42,618)  (49,426)  (49,720)
 Net loans and leases  2,426,367  2,190,266  2,095,683
 Premises and equipment, net  48,784  48,483  48,750
 Other real estate owned  9,291  4,431  7,938
 Accrued interest receivable  12,813  12,898  12,382
 Goodwill  81,892  76,816  76,816
 Other intangible assets, net   3,641  4,734  5,195
 Other assets  110,570  111,388  111,190
Total assets  $ 3,887,427  $ 3,711,370  $ 3,626,043
       
Liabilities      
 Noninterest-bearing deposits  $ 818,674  $ 650,377  $ 643,169
 Interest-bearing deposits  2,061,588  2,006,143  1,997,155
 Total deposits  2,880,262  2,656,520  2,640,324
 Securities sold under retail repurchase agreements and federal funds purchased  58,306  143,613  79,529
 Advances from FHLB  405,146  405,408  405,496
 Subordinated debentures  35,000  35,000  35,000
 Accrued interest payable and other liabilities  26,903  24,720  24,903
 Total liabilities  3,405,617  3,265,261  3,185,252
       
Stockholders' Equity      
 Common stock --- par value $1.00; shares authorized 50,000,000; shares issued       
 and outstanding 24,896,136, 24,091,042 and 24,079,204 at September 30, 2012,      
 December 31, 2011 and September 30, 2011, respectively  24,896  24,091  24,079
 Additional paid in capital  191,237  177,828  177,451
 Retained earnings  249,244  230,942  226,114
 Accumulated other comprehensive income  16,433  13,248  13,147
 Total stockholders' equity  481,810  446,109  440,791
Total liabilities and stockholders' equity  $ 3,887,427  $ 3,711,370  $ 3,626,043
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) 2012 2011 2012 2011
Interest Income:        
 Interest and fees on loans and leases  $ 30,697  $ 26,791  $ 86,164  $ 80,597
 Interest on loans held for sale  248  142  587  388
 Interest on deposits with banks  38  23  83  62
 Interest and dividends on investment securities:        
 Taxable  4,204  5,693  13,809  16,782
 Exempt from federal income taxes  2,308  2,355  7,024  6,932
 Interest on federal funds sold  --  --  1  1
 Total interest income  37,495  35,004  107,668  104,762
Interest Expense:        
Interest on deposits  1,823  2,773  5,707  8,673
Interest on retail repurchase agreements and federal funds purchased  46  49  158  155
Interest on advances from FHLB  3,599  3,628  10,772  10,769
Interest on subordinated debt  242  224  732  671
 Total interest expense  5,710  6,674  17,369  20,268
Net interest income  31,785  28,330  90,299  84,494
Provision (credit) for loan and lease losses  232  (3,520)  2,481  (854)
 Net interest income after provision (credit) for loan and lease losses  31,553  31,850  87,818  85,348
Non-interest Income:        
 Investment securities gains  296  231  459  283
 Total other-than-temporary impairment ("OTTI") losses  (23)  (76)  (95)  (178)
 Portion of OTTI losses recognized in other comprehensive income, before taxes  --  --  --  18
 Net OTTI recognized in earnings  (23)  (76)  (95)  (160)
 Service charges on deposit accounts  2,230  2,444  6,713  7,133
 Mortgage banking activities  1,981  1,141  4,294  2,404
 Wealth management income  3,858  3,937  11,949  11,605
 Insurance agency commissions  1,020  1,044  3,156  3,177
 Income from bank owned life insurance  660  662  1,954  1,962
 Visa check fees  984  927  2,844  2,710
 Other income  1,236  1,026  3,435  3,016
 Total non-interest income  12,242  11,336  34,709  32,130
Non-interest Expenses:        
 Salaries and employee benefits  15,476  14,892  47,104  44,192
 Occupancy expense of premises  3,106  2,784  8,895  8,717
 Equipment expenses  1,237  1,143  3,682  3,413
 Marketing  764  468  1,824  1,662
 Outside data services  1,076  1,073  4,183  3,067
 FDIC insurance  667  709  1,972  2,489
 Amortization of intangible assets  476  461  1,403  1,384
 Other expenses  4,365  4,318  13,645  12,824
 Total non-interest expenses  27,167  25,848  82,708  77,748
Income before income taxes  16,628  17,338  39,819  39,730
Income tax expense  5,638  6,081  13,146  12,886
 Net income  $ 10,990  $ 11,257  $ 26,673  $ 26,844
         
Net Income Per Share Amounts:        
Basic net income per share  $ 0.44  $ 0.47  $ 1.09  $ 1.11
Diluted net income per share  $ 0.44  $ 0.47  $ 1.09  $ 1.11
Dividends declared per share  $ 0.12  $ 0.08  $ 0.34  $ 0.24
Sandy Spring Bancorp, Inc. and Subsidiaries              
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED        
               
  2012 2011
(Dollars in thousands, except per share data) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Profitability for the quarter:              
Tax-equivalent interest income  $ 38,819  $ 36,898  $ 35,991  $ 36,156  $ 36,424  $ 36,435  $ 36,057
Interest expense 5,710 5,749 5,910 6,256 6,674 6,854 6,740
Tax-equivalent net interest income 33,109 31,149 30,081 29,900 29,750 29,581 29,317
 Tax-equivalent adjustment 1,324 1,340 1,376 1,448 1,420 1,427 1,307
Provision for loan and lease losses 232 1,585 664 2,282 (3,520) 1,151 1,515
Non-interest income 12,242 11,493 10,974 11,370 11,336 10,802 9,992
Non-interest expenses 27,167 28,858 26,683 27,323 25,848 25,838 26,062
Income before income taxes 16,628 10,859 12,332 10,217 17,338 11,967 10,425
Income tax expense  5,638 3,652 3,856 2,959 6,081 3,671 3,134
Net income   $ 10,990  $ 7,207  $ 8,476  $ 7,258  $ 11,257  $ 8,296  $ 7,291
Financial performance:              
Pre-tax pre-provision pre-merger expense income  $ 16,996  $ 14,642  $ 13,370  $ 12,499  $ 13,818  $ 13,118  $ 11,940
Return on average assets 1.13% 0.78% 0.94% 0.79% 1.24% 0.93% 0.84%
Return on average common equity 9.22% 6.34% 7.60% 6.54% 10.42% 8.03% 7.26%
Net interest margin 3.67% 3.62% 3.56% 3.51% 3.53% 3.58% 3.65%
Efficiency ratio - GAAP (1) 61.70% 69.87% 67.25% 68.61% 65.16% 66.33% 68.58%
Efficiency ratio - Non-GAAP (1) 58.91% 61.54% 63.88% 65.10% 62.02% 62.82% 65.09%
Per share data:              
Basic net income per share  $ 0.44  $ 0.30  $ 0.35  $ 0.30  $ 0.47  $ 0.34  $ 0.30
Diluted net income per share  $ 0.44  $ 0.30  $ 0.35  $ 0.30  $ 0.47  $ 0.34  $ 0.30
Average fully diluted shares 24,949,205 24,423,236 24,180,501 24,141,084 24,142,137 24,130,357 24,115,906
Dividends declared per common share  $ 0.12  $ 0.12  $ 0.10  $ 0.10  $ 0.08  $ 0.08  $ 0.08
Non-interest income:              
Securities gains  $ 296  $ 90  $ 73  $ 9  $ 231  $ 32  $ 20
Net OTTI recognized in earnings  (23)  (8)  (64)  --  (76)  (43)  (41)
Service charges on deposit accounts 2,230 2,283 2,200 2,394  2,444  2,437  2,252
Mortgage banking activities 1,981 1,288 1,025 824  1,141  808  455
Wealth management income 3,858 4,034 4,057 4,041  3,937  4,023  3,645
Insurance agency commissions 1,020 934 1,202 1,473  1,044  953  1,180
Income from bank owned life insurance 660 660 634 674  662  654  646
Visa check fees 984 962 898 927  927  949  834
Other income 1,236 1,250 949 1,028  1,026  989  1,001
 Total non-interest income  $ 12,242  $ 11,493  $ 10,974  $ 11,370  $ 11,336  $ 10,802  $ 9,992
Non-interest expense:              
Salaries and employee benefits  $ 15,476  $ 15,927  $ 15,701  $ 15,433  $ 14,892  $ 14,676  $ 14,624
Occupancy expense of premises  3,106  2,943  2,846  2,802  2,784 2,790 3,143
Equipment expenses  1,237  1,255  1,190  1,292  1,143 1,128 1,142
Marketing  764  565  495  727  468 709 485
Outside data services  1,076  1,828  1,279  1,092  1,073 999 995
FDIC insurance  667  653  652  698  709 736 1,044
Amortization of intangible assets  476  466  461  461  461 462 461
Professional fees 1,282 2,156  1,287 1,414  1,314 1,088 1,126
Other real estate owned expenses 174 351  64 604  383 726 699
Other expenses 2,909 2,714  2,708 2,800  2,621 2,524 2,343
 Total non-interest expense  $ 27,167  $ 28,858  $ 26,683  $ 27,323  $ 25,848  $ 25,838  $ 26,062
               
(1) The GAAP efficiency ratio is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of  
Income. The traditional, non-GAAP efficiency ratio excludes intangible asset amortization and merger expenses from non-interest expense; excludes securities gains; OTTI losses from non-interest income; and adds the tax-equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.  
   
               
Sandy Spring Bancorp, Inc. and Subsidiaries              
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED        
               
  2012 2011
(Dollars in thousands) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Balance sheets at quarter end:              
Residential mortgage loans  $ 499,806  $ 472,426  $ 465,204  $ 448,662  $ 440,606  $ 445,605  $ 444,519
Residential construction loans 128,606 130,791 122,841 108,699 90,727 81,425 84,939
Commercial ADC loans 133,007 151,620 149,814 160,946 141,576 149,215 151,135
Commercial investor real estate loans 447,536 443,237 392,626 371,948 357,358 353,749 355,967
Commercial owner occupied real estate loans 579,711 579,812 525,022 522,076 519,837 511,271 509,215
Commercial business loans 322,087 334,040 253,827 260,327 226,528 225,624 231,448
Leasing 4,233 5,618 5,843 6,954 8,484 10,200 12,477
Consumer loans 353,999 357,534 356,215 360,080 360,287 360,831 360,349
 Total loans and leases 2,468,985 2,475,078 2,271,392 2,239,692 2,145,403 2,137,920 2,150,049
Allowance for loan and lease losses (42,618) (45,265) (45,061) (49,426) (49,720) (55,246) (58,918)
Investment securities 1,074,918 1,006,743 1,067,462 1,164,699 1,174,180 1,128,589 1,087,620
Interest-earning assets 3,614,310 3,584,480 3,416,136 3,452,214 3,370,360 3,322,317 3,283,819
Total assets 3,887,427 3,855,177 3,668,273 3,711,370 3,626,043 3,612,016 3,549,533
Noninterest-bearing demand deposits 818,674 763,566 685,770 650,377 643,169 648,605 619,905
Total deposits 2,880,262 2,852,055 2,681,075 2,656,520 2,640,324 2,657,861 2,599,634
Customer repurchase agreements 58,306 64,779 73,130 63,613 79,529 65,214 75,516
Total interest-bearing liabilities 2,560,040 2,593,501 2,508,756 2,590,164 2,517,180 2,515,053 2,495,916
Total stockholders' equity 481,810 471,464 451,917 446,109 440,791 423,684 409,076
Quarterly average balance sheets:              
Residential mortgage loans  $ 510,475  $ 488,644  $ 474,149  $ 463,754  $ 453,645  $ 455,803  $ 458,329
Residential construction loans  133,236  125,582  116,630  99,983 89,128 84,144 85,891
Commercial ADC loans  142,870  151,374  159,769  153,598 145,835 149,773 149,071
Commercial investor real estate loans  445,012  410,258  377,072  353,975 350,925 352,668 340,008
Commercial owner occupied real estate loans  580,994  539,590  518,763  521,212 515,185 509,273 500,875
Commercial business loans  332,364  284,271  258,099  231,773 225,041 225,646 236,949
Leasing  4,858  5,528  6,325  7,671 9,269 11,154 14,009
Consumer loans  357,135  359,008  358,783  361,888 360,875 362,098 367,261
 Total loans and leases  2,506,945  2,364,255  2,269,590  2,193,854 2,149,903 2,150,559 2,152,393
Investment securities 1,038,586 1,052,502  1,086,295 1,173,418 1,168,712 1,121,325 1,054,740
Interest-earning assets 3,599,715 3,453,590  3,389,843 3,392,773 3,355,937 3,305,059 3,237,556
Total assets 3,863,951 3,708,622  3,637,674 3,647,291 3,610,219 3,566,278 3,500,807
Noninterest-bearing demand deposits 774,215 699,638  641,477 655,381 631,192 607,092 582,441
Total deposits 2,857,523 2,714,980  2,642,634 2,658,676 2,640,729 2,607,854 2,548,117
Customer repurchase agreements  62,693  66,674  65,195 74,267 72,646 70,313 79,067
Total interest-bearing liabilities 2,587,815 2,526,541  2,523,394 2,525,128 2,524,728 2,519,114 2,485,451
Total stockholders' equity 474,231 457,338  448,406 440,154 428,511 414,624 407,007
Financial Measures              
Average equity to average assets 12.27% 12.33% 12.33% 12.07% 11.87% 11.63% 11.63%
Investment securities to earning assets 29.74% 28.09% 31.25% 33.74% 34.84% 33.97% 33.12%
Loans to earnings assets 68.31% 69.05% 66.49% 64.88% 63.66% 64.35% 65.47%
Loans to assets 63.51% 64.20% 61.92% 60.35% 59.17% 59.19% 60.57%
Loans to deposits 85.72% 86.78% 84.72% 84.31% 81.26% 80.44% 82.71%
Capital measures:              
Tier 1 leverage  10.99% 11.21% 11.05% 10.84% 10.79% 10.64% 10.63%
Tier 1 capital to risk-weighted assets 14.31% 14.12% 14.89% 14.57% 14.96% 14.75% 14.21%
Total regulatory capital to risk-weighted assets 15.56% 15.36% 16.14% 15.83% 16.21% 16.01% 15.48%
Book value per share  $ 19.35  $ 18.94  $ 18.72  $ 18.52  $ 18.31  $ 17.58  $ 16.99
Outstanding shares  24,896,136  24,886,724  24,143,985  24,091,042  24,079,204 24,095,123 24,084,423
Sandy Spring Bancorp, Inc. and Subsidiaries              
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED              
               
   2012  2011
(Dollars in thousands)  September 30,  June 30,  March 31,  December 31,  September 30,  June 30,  March 31,
Non-Performing Assets:              
Loans and leases 90 days past due:              
 Commercial business  $44  $70  $40 $ --  $-- $ -- $ --
 Commercial real estate:              
 Commercial AD&C  --  342  --  --  --  --  --
 Commercial investor real estate  --  --  --  --  --  --  --
 Commercial owner occupied real estate  --  --  --  --  --  --  --
 Leasing  127  96  --  2  63  20  24
 Consumer  18  5  89  165  373  337  169
 Residential real estate:              
 Residential mortgage  116  91  167  167  2,291  3,820  4,616
 Residential construction  --  --  --  243  --  --  2,367
Total loans and leases 90 days past due  305  604  296  577  2,727  4,177  7,176
Non-accrual loans and leases:              
 Commercial business  4,919  4,583  6,542  7,226  8,038  8,288  9,649
 Commercial real estate:              
 Commercial AD&C  8,957  13,055  14,303  18,702  24,481  26,133  28,310
 Commercial investor real estate  12,345  13,327  13,893  16,963  16,118  2,975  2,519
 Commercial owner occupied real estate  13,742  15,146  16,295  14,709  11,847  13,019  12,304
 Leasing  834  872  858  853  956  1,017  1,529
 Consumer  1,607  1,651  1,700  1,786  1,478  590  720
 Residential real estate:              
 Residential mortgage  3,644  2,600  4,818  5,722  6,081  6,295  6,652
 Residential construction  3,236  4,333  4,929  5,719  5,034  5,701  5,222
Total non-accrual loans and lease  49,284  55,567  63,338  71,680  74,033  64,018  66,905
Total restructured loans - accruing  10,283  8,285  8,547  6,881  6,088  8,299  14,266
Total non-performing loans and leases  59,872  64,456  72,181  79,138  82,848  76,494  88,347
Other assets and real estate owned (OREO)  9,291  9,553  4,834  4,431  7,938  6,951  7,960
Total non-performing assets  $69,163  $74,009  $77,015  $83,569  $90,786  $83,445 $96,307
               
   For the quarter ended,
   September 30, June 30,   March 31,  December 31,  September 30,  June 30,  March 31,
(Dollars in thousands)  2012  2012  2012  2011  2011  2011  2011
Analysis of Non-accrual Loan and Lease Activity:            
Balance at beginning of period  $55,567  $63,338  $71,680  $74,033  $64,018 $66,905  $63,327
 Non-accrual balances transferred to OREO  (232)  (2,131)  --  (511)  (142)  (791)  (535)
 Non-accrual balances charged-off  (3,697)  (1,663)  (4,965)  (2,758)  (1,375)  (2,112)  (2,701)
 Net payments or draws  (6,342)  (4,149)  (5,061)  (6,724)  (4,839)  (8,016)  (2,531)
 Loans placed on non-accrual  3,988  1,261  1,809  8,640  17,226  8,032  9,526
 Non-accrual loans brought current  --  (1,089)  (125)  (1,000)  (855)  --  (181)
Balance at end of period  $49,284  $55,567 $63,338  $71,680  $74,033  $64,018  $66,905
               
Analysis of Allowance for Loan Losses:              
Balance at beginning of period  45,265  45,061  49,426  49,720  55,246  58,918  62,135
Provision for loan and lease losses  232  1,585  664  2,282  (3,520)  1,151  1,515
Less loans charged-off, net of recoveries:              
 Commercial business  (225)  (185)  (39)  (65)  397  769  790
 Commercial real estate:              
 Commercial AD&C  1,983  (59)  1,076  275  151  253  (137)
 Commercial investor real estate  123  140  3,219  335  30  504  (4)
 Commercial owner occupied real estate  653  484  --  329  45  113  --
 Leasing  (17)  (3)  5  181  85  455  333
 Consumer  111  228  348  352  375  713  1,091
 Residential real estate:              
 Residential mortgage  253  713  420  792  751  1,319  2,095
 Residential construction  (2)  63  --  377  172  697  564
Net charge-offs  2,879  1,381  5,029  2,576  2,006  4,823  4,732
Balance at end of period  $42,618  $45,265  $45,061  $49,426  $49,720  $55,246  $58,918
               
Asset Quality Ratios:              
Non-performing loans to total loans 2.42% 2.60% 3.18% 3.53% 3.86% 3.58% 4.11%
Non-performing assets to total assets 1.78% 1.92% 2.10% 2.25% 2.50% 2.31% 2.71%
Allowance for loan losses to loans 1.73% 1.83% 1.98% 2.21% 2.32% 2.58% 2.74%
Allowance for loan losses to non-performing loans 71.18% 70.23% 62.43% 62.46% 60.01% 72.22% 66.69%
Net charge-offs in quarter to average loans 0.46% 0.23% 0.89% 0.47% 0.37% 0.90% 0.89%
Sandy Spring Bancorp, Inc. and Subsidiaries          
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED    
             
  Three Months Ended September 30,
    2012     2011  
       Annualized      Annualized 
  Average  (1)  Average Average  (1)  Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets            
Residential mortgage loans (2)  $ 510,475  $ 5,262 4.15%  $ 453,645  $ 5,373 4.74%
Residential construction loans 133,236 1,214 3.63 89,128 899 4.00
Commercial ADC loans 142,870 1,965 5.47 145,835 1,688 4.59
Commercial investor real estate loans 445,012 6,161 5.51 350,925 4,908 5.49
Commercial owner occupied real estate loans 580,994 7,938 5.56 515,185 7,760 6.01
Commercial business loans 332,364 5,172 5.97 225,041 2,845 5.01
Leasing 4,858 79 6.51 9,269 157 6.79
Consumer loans 357,135 3,154 3.54 360,875 3,303 3.63
 Total loans and leases (3) 2,506,945 30,945 4.93 2,149,903 26,933 4.98
Taxable securities 745,475 4,508 2.42 916,982 6,044 2.64
Tax-exempt securities (4) 293,111 3,328 4.54 251,730 3,424 5.44
Interest-bearing deposits with banks 53,717 38 0.29 35,992 23 0.25
Federal funds sold 466  --  0.22 1,330  --  0.13
 Total interest-earning assets 3,599,715 38,819 4.30 3,355,937 36,424 4.32
             
Less: allowance for loan and lease losses (45,467)     (55,980)    
Cash and due from banks 46,583     47,421    
Premises and equipment, net 49,234     49,037    
Other assets 213,887     213,804    
 Total assets  $3,863,951      $3,610,219    
             
Liabilities and Stockholders' Equity            
Interest-bearing demand deposits  $ 392,117  85 0.09%  $ 346,941  102 0.12%
Regular savings deposits 216,249  51 0.09 187,060  47 0.10
Money market savings deposits 894,708 488 0.22 865,492 909 0.42
Time deposits 580,234 1,199 0.82 610,044 1,715 1.12
 Total interest-bearing deposits 2,083,308 1,823 0.35 2,009,537 2,773 0.55
Other borrowings 64,324 46 0.29 74,657 49 0.26
Advances from FHLB 405,184 3,599 3.53 405,534 3,628 3.55
Subordinated debentures 35,000 242 2.77 35,000 224 2.55
 Total interest-bearing liabilities 2,587,815 5,710 0.88 2,524,728 6,674 1.05
             
Noninterest-bearing demand deposits 774,215     631,192    
Other liabilities 27,689     25,788    
Stockholders' equity 474,231     428,511    
 Total liabilities and stockholders' equity  $3,863,951      $3,610,219    
             
Net interest income and spread    $ 33,109 3.42%    $ 29,750 3.27%
 Less: tax-equivalent adjustment    1,324      1,420  
Net interest income    $ 31,785      $ 28,330  
             
Interest income/earning assets     4.30%     4.32%
Interest expense/earning assets     0.63     0.79
 Net interest margin     3.67%     3.53%
             
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.4 million in 2012 and 2011, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.      
(3) Non-accrual loans are included in the average balances.            
(4) Includes only investments that are exempt from federal taxes.          
Sandy Spring Bancorp, Inc. and Subsidiaries          
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED    
             
  Nine Months Ended September 30,
    2012     2011  
       Annualized      Annualized 
  Average  (1)  Average Average  (1)  Average
(Dollars in thousands and tax-equivalent) Balances Interest Yield/Rate Balances Interest Yield/Rate
Assets            
Residential mortgage loans (2)  $ 491,160  $ 16,003 4.37%  $ 455,909  $ 16,747 4.89%
Residential construction loans 125,179 3,505 3.74 86,399 2,448 3.79
Commercial ADC loans 151,307 5,855 5.17 148,215 4,813 4.34
Commercial investor real estate loans 410,905 16,925 5.50 347,926 15,236 5.94
Commercial owner occupied real estate loans 546,575 22,722 5.64 508,478 22,686 6.05
Commercial business loans 291,727 11,988 5.33 229,168 8,493 4.95
Leasing 5,568 272 6.52 11,460 576 6.70
Consumer loans 358,304 9,481 3.56 363,388 9,986 3.70
 Total loans and leases (3) 2,380,725 86,751 4.88 2,150,943 80,985 5.03
Taxable securities 775,916 14,761 2.54 879,230 17,810 2.70
Tax-exempt securities (4) 283,137 10,112 4.76 236,113 10,058 5.68
Interest-bearing deposits with banks 40,892 83 0.27 32,257 62 0.25
Federal funds sold 811  1 0.17 1,408  1 0.14
 Total interest-earning assets 3,481,481 111,708 4.28 3,299,951 108,916 4.41
             
Less: allowance for loan and lease losses (47,442)     (58,672)    
Cash and due from banks 45,844     45,587    
Premises and equipment, net 48,959     49,130    
Other assets 208,371     223,506    
 Total assets  $3,737,213      $3,559,502    
             
Liabilities and Stockholders' Equity            
Interest-bearing demand deposits  $ 379,910  256 0.09%  $ 336,020  278 0.11%
Regular savings deposits 209,920  155 0.10 182,424 142 0.10
Money market savings deposits 869,675 1,471 0.23 855,458 2,865 0.45
Time deposits 573,946 3,825 0.89 618,250 5,388 1.17
 Total interest-bearing deposits 2,033,451 5,707 0.37 1,992,152 8,673 0.58
Other borrowings 72,347 158 0.29 77,135 155 0.27
Advances from FHLB 405,271 10,772 3.55 405,621 10,769 3.55
Subordinated debentures 35,000 732 2.79 35,000 671 2.55
 Total interest-bearing liabilities 2,546,069 17,369 0.91 2,509,908 20,268 1.08
             
Noninterest-bearing demand deposits 705,362     607,087    
Other liabilities 25,738     25,714    
Stockholders' equity 460,044     416,793    
 Total liabilities and stockholders' equity  $3,737,213      $3,559,502    
             
Net interest income and spread    $ 94,339 3.37%    $ 88,648 3.33%
 Less: tax-equivalent adjustment    4,040      4,154  
Net interest income    $ 90,299      $ 84,494  
             
Interest income/earning assets     4.28%     4.41%
Interest expense/earning assets     0.66     0.82
 Net interest margin     3.62%     3.59%
             
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2012 and 2011. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $4.0 million and $4.2 million in 2012 and 2011, respectively.
(2) Includes residential mortgage loans held for sale. Home equity loans and lines are classified as consumer loans.      
(3) Non-accrual loans are included in the average balances.            
(4) Includes only investments that are exempt from federal taxes.          

            

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