Sandy Spring Bancorp Reports Net Income of $8.3 Million for the Fourth Quarter

2017 Net Income Reached Record Levels While Also Recognizing the Impact of Recently Enacted Tax Legislation in the Fourth Quarter

OLNEY, Md., Jan. 18, 2018 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR), the parent company of Sandy Spring Bank, today reported net income for the fourth quarter of 2017 of $8.3 million ($0.34 per diluted share) compared to net income of $13.3 million ($0.55 per diluted share) for the fourth quarter of 2016 and net income of $15.1 million ($0.62 per diluted share) for the third quarter of 2017. The current quarter’s results included $5.6 million in additional income tax expense from the revaluation of deferred tax assets as a result of the reduction in the corporate income tax rate under the recently enacted Tax Cuts and Jobs Act, as well as $1.8 million in post-tax merger expenses. The combined impact of these items resulted in a reduction to quarterly earnings per share of approximately $0.30 per share. 

Net income for the full year 2017 was a record $53.2 million ($2.20 per diluted share) after the inclusion of the additional tax expense and the expenses associated with the acquisition of WashingtonFirst Bankshares. The additional income tax and merger expenses, net of tax, resulted in a reduction of earnings per share of approximately $0.34 per share for full-year-2017.    

“This has been an outstanding year in terms of core performance and our ability to grow our franchise organically. Even in light of the inclusion of the increased tax expense and merger costs, net income for 2017 reached record levels. Core earnings for the fourth quarter continued to positively reflect the effects of loan and deposit growth that we have been experiencing. With the acquisition of WashingtonFirst Bankshares, which became effective on January 1, 2018, we enter the year as one of the premier banks in the region, and with the same steadfast commitment to delivering personalized service to our clients and serving our communities. It’s this commitment that has helped us grow to better serve our clients, employees, and shareholders. We continue to be encouraged by the current economic environment and the prospects for our ongoing growth,” said Daniel J. Schrider, President and Chief Executive Officer.  

Fourth Quarter Highlights:   

• Total loans increased 10% compared to the fourth quarter of 2016 and 3% compared to the third quarter of 2017. The year-over-year increase was driven primarily by year-over-year growth of 11% in the commercial loan portfolio.
   
• Total deposits grew 11% from the prior year quarter.
   
• The net interest margin was 3.57% for the fourth quarter of 2017, compared to 3.52% for the fourth quarter of 2016 and 3.54% for the third quarter of 2017.  Net interest income from the fourth quarter of 2017 included $0.4 million recovery of interest income from a previously charged-off loan.  Exclusive of this item, the quarter’s margin would have been 3.53%.
   
• Pre-tax merger expenses recognized in the fourth quarter of 2017 totaled $2.9 million.
   
• The tax rate reduction associated with the recently enacted tax reform legislation caused a revaluation of net deferred tax assets and resulted in $5.6 million of additional income tax expense in the fourth quarter of 2017.
   
• Pre-tax, pre-provision income increased 14% compared with the fourth quarter of 2016.
   
• The Non-GAAP efficiency ratio which excludes merger costs was 55.69% for the current quarter as compared to 57.54% for the fourth quarter of 2016 and 53.76% for the third quarter of 2017. 

Review of Balance Sheet and Credit Quality

At December 31, 2017, total assets were $5.4 billion, a 7% increase compared to $5.1 billion at December 31, 2016.  Loan growth continues to be the driver of asset growth as total loans ended the period at $4.3 billion compared to $3.9 billion at December 31, 2016. The growth in the loan portfolio was funded primarily by an 11% increase in total deposits from December 31, 2016, to December 31, 2017.

Combined noninterest-bearing and interest-bearing checking account balances at December 31, 2017, an important performance driver of multiple-product banking relationships with clients, increased by 10% compared to balances at December 31, 2016.

Tangible common equity totaled $484 million at December 31, 2017, compared to $454 million at December 31, 2016. As a result of asset growth over the preceding 12 months, the ratio of tangible common equity to tangible assets decreased to 9.04% at December 31, 2017, from 9.07% at December 31, 2016.  At December 31, 2017, the Company had a total risk-based capital ratio of 11.85%, a common equity tier 1 risk-based capital ratio of 10.84%, a tier 1 risk-based capital ratio of 10.84% and a tier 1 leverage ratio of 9.24%. These ratios reflect the application of the currently applicable authoritative guidance.

The level of non-performing loans to total loans decreased to 0.68% at December 31, 2017, compared to 0.81% at December 31, 2016, as a result of the growth in the loan portfolio and a reduction in non-performing loans.  At December 31, 2017, non-performing loans totaled $29.3 million compared to $31.9 million at December 31, 2016, and $30.2 million at September 30, 2017. Non-performing loans include accruing loans 90 days or more past due and restructured loans. 

Loan charge-offs, net of recoveries, totaled $0.2 million for the fourth quarter of 2017 compared to $0.4 million for the fourth quarter of 2016.  The allowance for loan losses represented 1.05% of outstanding loans and 154% of non-performing loans at December 31, 2017, compared to 1.12% of outstanding loans and 138% of non-performing loans at December 31, 2016. The decline in the allowance to outstanding loans ratio is a reflection of improved credit quality and growth of the loan portfolio over the past year. 

Income Statement Review

Net interest income for the fourth quarter of 2017 increased 12% compared to the fourth quarter of 2016 as average loans compared to the prior year quarter increased 10%. The net interest margin improved to 3.57% for the fourth quarter of 2017 compared to 3.52% for the fourth quarter of 2016.  Exclusive of the recovered interest income, the net interest margin would have been 3.53%. The maintenance of the current quarter’s margin compared to the prior year’s quarter, exclusive of the recovered interest, reflects the impact of loan growth coupled with rate increases during the year, benefits associated with the execution of funding strategies and higher yields associated with the investment portfolio that offset the increased funding costs for the current quarter compared to the prior year quarter.

The provision for loan losses was $0.5 million for the fourth quarter of 2017 compared to $0.6 million for the fourth quarter of 2016 and $0.9 million for the third quarter of 2017. The relative stability in the provision reflects the improved credit quality of the growing loan portfolio. 

Non-interest income remained stable for the fourth quarter of 2017 as compared to the fourth quarter of 2016.  Wealth management income increased 10% while deposit service charges and insurance commissions both increased 6% for the fourth quarter compared to the same period of the prior year.  These results were offset by a 49% decline in mortgage banking income from the prior year as mortgage loan origination activity declined in the current quarter compared to the prior year quarter.

Non-interest expenses increased 15% to $35.1 million for the fourth quarter of 2017 compared to $30.5 million in the fourth quarter of 2016.  The increase in the current quarter compared to the prior year quarter was driven primarily by a $2.9 million in merger related expenses and $0.6 million increase in salary and benefit costs.  The non-GAAP efficiency ratio was 55.69% for the fourth quarter of 2017 compared to 57.54% for the fourth quarter of 2016 as a result of the growth in net interest income. 

Due to the recently enacted tax legislation that results in a rate reduction in future years, authoritative guidance requires a revaluation of the deferred tax assets in 2017.  Accordingly, this revaluation resulted in $5.6 million in additional income tax expense in the fourth quarter of 2017. The impact of the additional tax expense and the post-tax effect of the merger expenses resulted in a $0.30 per share reduction in quarterly earnings per share.

Net interest income for the year ended December 31, 2017, increased 13% compared to 2016 due primarily to an increase in average loans and investments, which was funded primarily by an 11% increase in average deposits. As a result, the net interest margin was 3.55% for 2017 compared to 3.49% for the prior year. Net interest income for 2017 included $1.1 million in interest recoveries. Exclusive of these recoveries the net interest margin would have been 3.53%.   

The provision for loan losses was $3.0 million for the year ended December 31, 2017, compared to $5.5 million for 2016 reflecting the effect of improved credit quality of the loan portfolio that offset the impact of the growth of the loan portfolio from the prior year.

Non-interest income was $51.2 million for 2017 compared to $51.0 million for 2016.  The year ended December 31, 2017, included gains of $1.3 million on sales of investment securities while the prior year included a $1.2 million gain on the extinguishment of subordinated debentures and $1.9 million in gains on the sales of investment securities.  Excluding these gains, non-interest income increased 4% compared to the prior year primarily due to increases in wealth management income, insurance agency commissions and deposit service charges.

Non-interest expenses increased 5% to $129.1 million for the year ended December 31, 2017, compared to $123.1 million for the prior year. Included in 2017 were increases from the prior year of $1.8 million in salaries and benefits, $0.6 million in FDIC insurance as a result of asset growth, and $4.3 million in merger expenses.  These increases were partially offset by the decrease in prepayment penalties of $1.9 million for the early payoff of high-rate FHLB advances as compared to the year ended December 31, 2016.  Excluding the impact of the FHLB prepayment penalties from the current and prior year’s results and the exclusion of merger expenses for 2017, non-interest expense increased 3%. The non-GAAP efficiency ratio decreased to 54.59% for 2017 compared to 58.66% for 2016 as a direct result of the growth in net interest income.

The additional income tax expense of $5.6 million and merger expenses, net of tax, resulted in a reduction of earnings per share of approximately $0.34 per share for full- year 2017. Pre-tax, pre-provision income, which adjusts for these items, increased 23% from full-year 2016 to full-year 2017 to a record $95.2 million.

Conference Call

The Company’s management will host a conference call to discuss its second quarter results today at 2:00 P.M. (ET).  A live Webcast of the conference call is available through the Investor Relations’ section of the Sandy Spring Website at www.sandyspringbank.com.  Participants may call 1-866-235-9910. A password is not necessary.  Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call.  An internet-based replay will be available at the Web site until 9:00 am (ET) February 1, 2018.  A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10115505.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank. Independent and community-oriented, Sandy Spring Bank offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. Through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services. Visit www.sandyspringbank.com for more information.

For additional information or questions, please contact:
Daniel J. Schrider, President & Chief Executive Officer, 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:
Amalia Kastberg
Division Executive, Marketing
Sandy Spring Bank
301-774-8465
akastberg@sandyspringbank.com 

Forward-Looking Statements

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

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

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; 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, 2016, including in the Risk Factors section of that report, and in its other SEC reports.  Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov. 

Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
		Three Months Ended									Twelve Months Ended
		December 31,						%			December 31,						%
(Dollars in thousands, except per share data)			2017			2016		Change				2017			2016		Change
Results of Operations:
Net interest income		$	43,492		$	38,967		12	%		$	168,768		$	149,552		13	%
Provision for loan losses			527			572		(8	)			2,977			5,546		(46	)
Non-interest income			12,294			12,344		-				51,243			51,042		-
Non-interest expenses			35,059			30,544		15				129,099			123,058		5
Income before income taxes			20,200			20,195		-				87,935			71,990		22
Net income			8,267			13,316		(38	)			53,209			48,250		10
Pre-tax pre-provision income		$	23,647		$	20,767		14			$	95,164		$	77,536		23
Return on average assets			0.61	%		1.09	%					1.02	%		1.02	%
Return on average common equity			5.82	%		9.92	%					9.66	%		9.15	%
Net interest margin			3.57	%		3.52	%					3.55	%		3.49	%
Efficiency ratio - GAAP basis  (1)			62.85	%		59.53	%					58.68	%		61.35	%
Efficiency ratio - Non-GAAP basis  (1)			55.69	%		57.54	%					54.59	%		58.66	%
Per share data:
Basic net income		$	0.34		$	0.55		(38	)%		$	2.20		$	2.00		10	%
Diluted net income		$	0.34		$	0.55		(38	)		$	2.20		$	2.00		10
Average fully diluted shares			24,228,471			24,140,534		-				24,207,728			24,149,121		-
Dividends declared per share		$	0.26		$	0.26		-			$	1.04		$	0.98		6
Book value per share			23.50			22.32		5				23.50			22.32		5
Tangible book value per share			20.18			18.98		6				20.18			18.98		6
Outstanding shares			23,996,293			23,901,084		-				23,996,293			23,901,084		-
Financial Condition at period-end:
Investment securities		$	775,025		$	779,648		(1	)%		$	775,025		$	779,648		(1	)%
Loans			4,314,248			3,927,808		10				4,314,248			3,927,808		10
Interest-earning assets			5,155,928			4,801,613		7				5,155,928			4,801,613		7
Assets			5,446,675			5,091,383		7				5,446,675			5,091,383		7
Interest-bearing liabilities			3,584,462			3,384,524		6				3,584,462			3,384,524		6
Stockholders' equity			563,816			533,572		6				563,816			533,572		6
Capital ratios:
Tier 1 leverage  (4)			9.24	%		10.14	%					9.24	%		10.14	%
Tier 1 capital to risk-weighted assets  (4)			10.84	%		11.74	%					10.84	%		11.74	%
Total regulatory capital to risk-weighted assets  (4)			11.85	%		12.80	%					11.85	%		12.80	%
Common equity tier 1 capital to risk-weighted assets  (4)			10.84	%		11.01	%					10.84	%		11.01	%
Tangible common equity to tangible assets  (2)			9.04	%		9.07	%					9.04	%		9.07	%
Average equity to average assets			10.54	%		10.95	%					10.51	%		11.12	%
Credit quality ratios:
Allowance for loan losses to loans			1.05	%		1.12	%					1.05	%		1.12	%
Non-performing loans to total loans			0.68	%		0.81	%					0.68	%		0.81	%
Non-performing assets to total assets			0.58	%		0.66	%					0.58	%		0.66	%
Allowance for loan losses to non-performing loans			154.20	%		138.00	%					154.20	%		138.00	%
Annualized net charge-offs to average loans  (3)			0.02	%		0.05	%					0.04	%		0.06	%
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization from non-interest expense; securities gains (losses) from non-interest income; OTTI; and the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets and other comprehensive gains (losses).  See the Reconciliation Table included with these Financial Highlights.
(3) Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.
(4) Estimated ratio at December 31, 2017 based on current authoritative guidance.

  

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
(Dollars in thousands)			2017				2016				2017				2016
Pre-tax pre-provision income:
Net income		$	8,267			$	13,316			$	53,209			$	48,250
Plus non-GAAP adjustment:
Merger expenses			2,920				-				4,252				-
Income taxes			11,933				6,879				34,726				23,740
Provision for loan losses			527				572				2,977				5,546
Pre-tax pre-provision income		$	23,647			$	20,767			$	95,164			$	77,536
Efficiency ratio - GAAP basis:
Non-interest expenses		$	35,059			$	30,544			$	129,099			$	123,058
Net interest income plus non-interest income		$	55,786			$	51,311			$	220,011			$	200,594
Efficiency ratio - GAAP basis			62.85	%			59.53	%			58.68	%			61.35	%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses		$	35,059			$	30,544			$	129,099			$	123,058
Less non-GAAP adjustment:
Amortization of intangible assets			25				36				101				130
Loss on FHLB Redemption			-				-				1,275				3,167
Merger expenses			2,920				-				4,252				-
Non-interest expenses -  as adjusted		$	32,114			$	30,508			$	123,471			$	119,761
Net interest income plus non-interest income		$	55,786			$	51,311			$	220,011			$	200,594
Plus non-GAAP adjustment:
Tax-equivalent income			1,874				1,718				7,459				6,711
Less non-GAAP adjustments:
Securities gains (losses)			(2	)			13				1,273				1,932
Gain on redemption of subordinated debentures			-				-				-				1,200
Net interest income plus non-interest income - as adjusted		$	57,662			$	53,016			$	226,197			$	204,173
Efficiency ratio - Non-GAAP basis			55.69	%			57.54	%			54.59	%			58.66	%
Tangible common equity ratio:
Total stockholders' equity		$	563,816			$	533,572			$	563,816			$	533,572
Accumulated other comprehensive income			6,857				6,614				6,857				6,614
Goodwill			(85,768	)			(85,768	)			(85,768	)			(85,768	)
Other intangible assets, net			(580	)			(680	)			(580	)			(680	)
Tangible common equity		$	484,325			$	453,738			$	484,325			$	453,738
Total assets		$	5,446,675			$	5,091,383			$	5,446,675			$	5,091,383
Goodwill			(85,768	)			(85,768	)			(85,768	)			(85,768	)
Other intangible assets, net			(580	)			(680	)			(580	)			(680	)
Tangible assets		$	5,360,327			$	5,004,935			$	5,360,327			$	5,004,935
Tangible common equity ratio			9.04	%			9.07	%			9.04	%			9.07	%
Outstanding common shares			23,996,293				23,901,084				23,996,293				23,901,084
Tangible book value per common share		$	20.18			$	18.98			$	20.18			$	18.98

  

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION  - UNAUDITED
		December 31,				December 31,
(Dollars in thousands)			2017				2016
Assets
Cash and due from banks		$	55,693			$	53,190
Federal funds sold			2,845				1,953
Interest-bearing deposits with banks			53,962				78,982
Cash and cash equivalents			112,500				134,125
Residential mortgage loans held for sale (at fair value)			9,848				13,222
Investments available-for-sale (at fair value)			729,507				733,554
Other equity securities			45,518				46,094
Total loans			4,314,248				3,927,808
Less: allowance for loan losses			(45,257	)			(44,067	)
Net loans			4,268,991				3,883,741
Premises and equipment, net			54,761				53,562
Other real estate owned			2,253				1,911
Accrued interest receivable			15,480				14,589
Goodwill			85,768				85,768
Other intangible assets, net			580				680
Other assets			121,469				124,137
Total assets		$	5,446,675			$	5,091,383
Liabilities
Noninterest-bearing deposits		$	1,264,392			$	1,138,139
Interest-bearing deposits			2,699,270				2,439,405
Total deposits			3,963,662				3,577,544
Securities sold under retail repurchase agreements and federal funds purchased			119,359				125,119
Advances from FHLB			765,833				790,000
Subordinated debentures			-				30,000
Accrued interest payable and other liabilities			34,005				35,148
Total liabilities			4,882,859				4,557,811
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding
23,996,293 and 23,901,084 at December 31, 2017 and December 31, 2016, respectively			23,996				23,901
Additional paid in capital			168,188				165,871
Retained earnings			378,489				350,414
Accumulated other comprehensive loss			(6,857	)			(6,614	)
Total stockholders' equity			563,816				533,572
Total liabilities and stockholders' equity		$	5,446,675			$	5,091,383

  

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
		Three Months Ended							Twelve Months Ended
		December 31,							December 31,
(Dollars in thousands, except per share data)			2017				2016			2017			2016
Interest Income:
Interest and fees on loans		$	45,230			$	39,510		$	172,091		$	150,868
Interest on loans held for sale			6				93			279			387
Interest on deposits with banks			121				57			410			213
Interest and dividends on investment securities:
Taxable			3,309				2,751			13,881			11,500
Exempt from federal income taxes			2,001				1,830			8,111			7,583
Interest on federal funds sold			9				2			27			5
Total interest income			50,676				44,243			194,799			170,556
Interest Expense:
Interest on deposits			4,044				2,155			13,256			8,161
Interest on retail repurchase agreements and federal funds purchased			99				78			337			290
Interest on advances from FHLB			3,041				2,798			12,426			11,610
Interest on subordinated debt			-				245			12			943
Total interest expense			7,184				5,276			26,031			21,004
Net interest income			43,492				38,967			168,768			149,552
Provision for loan losses			527				572			2,977			5,546
Net interest income after provision for loan losses			42,965				38,395			165,791			144,006
Non-interest Income:
Investment securities gains (losses)			(2	)			13			1,273			1,932
Service charges on deposit accounts			2,177				2,059			8,298			7,953
Mortgage banking activities			654				1,279			2,734			4,049
Wealth management income			5,054				4,605			19,146			17,805
Insurance agency commissions			1,307				1,228			6,231			5,408
Income from bank owned life insurance			595				616			2,403			2,462
Bank card fees			1,218				1,176			4,827			4,674
Other income			1,291				1,368			6,331			6,759
Total non-interest income			12,294				12,344			51,243			51,042
Non-interest Expenses:
Salaries and employee benefits			18,607				18,055			73,132			71,354
Occupancy expense of premises			3,146				3,195			13,053			12,960
Equipment expenses			1,802				1,781			7,015			6,883
Marketing			896				880			3,119			2,851
Outside data services			1,441				1,310			5,486			5,377
FDIC insurance			827				729			3,305			2,741
Amortization of intangible assets			25				36			101			130
Merger expenses			2,920				-			4,252			-
Other expenses			5,395				4,558			19,636			20,762
Total non-interest expenses			35,059				30,544			129,099			123,058
Income before income taxes			20,200				20,195			87,935			71,990
Income tax expense			11,933				6,879			34,726			23,740
Net income		$	8,267			$	13,316		$	53,209		$	48,250
Net Income Per Share Amounts:
Basic net income per share		$	0.34			$	0.55		$	2.20		$	2.00
Diluted net income per share		$	0.34			$	0.55		$	2.20		$	2.00
Dividends declared per share		$	0.26			$	0.26		$	1.04		$	0.98

  

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
			2017																2016
(Dollars in thousands, except per share data)		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Profitability for the Quarter:
Tax-equivalent interest income		$	52,550			$	51,477			$	50,477			$	47,754			$	45,961			$	44,545			$	43,443			$	43,317
Interest expense			7,184				6,892				6,250				5,705				5,276				5,126				5,071				5,531
Tax-equivalent net interest income			45,366				44,585				44,227				42,049				40,685				39,419				38,372				37,786
Tax-equivalent adjustment			1,874				1,888				1,901				1,796				1,718				1,688				1,640				1,664
Provision for loan losses			527				934				1,322				194				572				781				2,957				1,236
Non-interest income			12,294				12,746				13,571				12,632				12,344				12,584				12,751				13,363
Non-interest expenses			35,059				31,191				32,868				29,981				30,544				29,326				30,871				32,317
Income before income taxes			20,200				23,318				21,707				22,710				20,195				20,208				15,655				15,932
Income tax expense			11,933				8,229				6,966				7,598				6,879				6,734				5,008				5,119
Net income		$	8,267			$	15,089			$	14,741			$	15,112			$	13,316			$	13,474			$	10,647			$	10,813
Financial Performance:
Pre-tax pre-provision income		$	23,647			$	24,597			$	24,016			$	22,904			$	20,767			$	20,989			$	18,612			$	17,168
Return on average assets			0.61	%			1.13	%			1.14	%			1.20	%			1.09	%			1.13	%			0.92	%			0.93	%
Return on average common equity			5.82	%			10.74	%			10.80	%			11.45	%			9.92	%			10.11	%			8.21	%			8.29	%
Net interest margin			3.57	%			3.54	%			3.60	%			3.51	%			3.52	%			3.50	%			3.51	%			3.44	%
Efficiency ratio - GAAP basis (1)			62.85	%			56.26	%			58.80	%			56.69	%			59.53	%			58.28	%			62.39	%			65.31	%
Efficiency ratio - Non-GAAP basis (1)			55.69	%			53.76	%			54.10	%			54.78	%			57.54	%			56.33	%			59.12	%			61.84	%
Per Share Data:
Basic net income per share		$	0.34			$	0.62			$	0.61			$	0.63			$	0.55			$	0.56			$	0.45			$	0.45
Diluted net income per share		$	0.34			$	0.62			$	0.61			$	0.63			$	0.55			$	0.56			$	0.44			$	0.45
Average fully diluted shares			24,228,471				24,223,004				24,262,745				24,158,566				24,140,534				24,122,923				24,108,668				24,222,940
Dividends declared per common share		$	0.26			$	0.26			$	0.26			$	0.26			$	0.26			$	0.24			$	0.24			$	0.24
Non-interest Income:
Securities gains (losses)		$	(2	)		$	-			$	1,273			$	2			$	13			$	-			$	150			$	1,769
Service charges on deposit accounts			2,177				2,140				2,017				1,964				2,059				2,035				1,956				1,903
Mortgage banking activities			654				632				840				608				1,279				1,129				1,106				535
Wealth management income			5,054				4,864				4,744				4,484				4,605				4,347				4,448				4,405
Insurance agency commissions			1,307				1,950				1,222				1,752				1,228				1,786				949				1,445
Income from bank owned life insurance			595				609				605				594				616				616				615				615
Bank card fees			1,218				1,211				1,253				1,145				1,176				1,189				1,220				1,089
Other income			1,291				1,340				1,617				2,083				1,368				1,482				2,307				1,602
Total Non-interest Income		$	12,294			$	12,746			$	13,571			$	12,632			$	12,344			$	12,584			$	12,751			$	13,363
Non-interest Expense:
Salaries and employee benefits		$	18,607			$	18,442			$	18,282			$	17,801			$	18,055			$	17,848			$	17,221			$	18,230
Occupancy expense of premises			3,146				3,294				3,211				3,402				3,195				3,130				3,162				3,473
Equipment expenses			1,802				1,722				1,767				1,724				1,781				1,745				1,693				1,664
Marketing			896				784				776				663				880				628				662				681
Outside data services			1,441				1,286				1,367				1,392				1,310				1,349				1,355				1,363
FDIC insurance			827				850				823				805				729				726				649				637
Amortization of intangible assets			25				25				25				26				36				34				28				32
Merger expenses			2,920				345				987				-				-				-				-				-
Professional fees			1,439				1,053				1,045				955				1,268				987				1,447				1,138
Other real estate owned expenses			14				4				(6	)			5				2				5				(5	)			17
Other expenses			3,942				3,386				4,591				3,208				3,288				2,874				4,659				5,082
Total Non-interest Expense		$	35,059			$	31,191			$	32,868			$	29,981			$	30,544			$	29,326			$	30,871			$	32,317
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income. The traditional, efficiency ratio - non-GAAP basis excludes intangible asset amortization from non-interest expense; 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
			2017																2016
(Dollars in thousands)		Q4				Q3				Q2				Q1				Q4				Q3				Q2				Q1
Balance Sheets at Quarter End:
Residential mortgage loans		$	921,435			$	882,890			$	871,766			$	848,814			$	841,692			$	854,055			$	820,618			$	804,105
Residential construction loans			176,687				171,814				169,901				170,285				150,229				144,998				142,710				138,221
Commercial AD&C loans			292,443				295,222				314,259				309,350				308,279				302,522				285,585				261,204
Commercial investor real estate loans			1,112,710				1,104,669				1,069,988				979,410				928,113				847,946				824,252				783,161
Commercial owner occupied real estate loans			857,196				831,461				797,629				772,443				775,552				736,744				700,599				675,560
Commercial business loans			497,948				451,667				451,570				457,216				467,286				444,129				451,711				451,239
Consumer loans			455,829				456,395				458,058				455,478				456,657				450,113				447,149				447,198
Total loans			4,314,248				4,194,118				4,133,171				3,992,996				3,927,808				3,780,507				3,672,624				3,560,688
Allowance for loan losses			(45,257	)			(44,924	)			(45,079	)			(43,861	)			(44,067	)			(43,942	)			(43,384	)			(41,766	)
Loans held for sale			9,848				7,084				5,743				17,717				13,222				15,822				13,490				27,806
Investment securities			775,025				795,922				821,491				855,707				779,648				691,471				734,828				742,401
Interest-earning assets			5,155,928				5,049,229				4,988,704				4,919,927				4,801,613				4,537,331				4,461,180				4,447,063
Total assets			5,446,675				5,334,788				5,270,521				5,201,164				5,091,383				4,810,611				4,739,449				4,716,608
Noninterest-bearing demand deposits			1,264,392				1,312,710				1,302,536				1,234,505				1,138,139				1,154,227				1,176,135				1,084,746
Total deposits			3,963,662				3,955,792				3,885,445				3,799,198				3,577,544				3,537,157				3,510,141				3,412,308
Customer repurchase agreements			119,359				146,569				127,312				141,244				125,119				124,205				117,887				121,043
Total interest-bearing liabilities			3,584,462				3,422,568				3,380,221				3,380,937				3,384,524				3,087,135				2,996,893				3,073,605
Total stockholders' equity			563,816				564,480				554,683				544,261				533,572				536,655				529,479				522,392
Quarterly Average Balance Sheets:
Residential mortgage loans		$	903,660			$	880,782			$	860,081			$	847,896			$	848,399			$	836,452			$	811,705			$	807,443
Residential construction loans			171,239				172,921				169,130				157,152				148,248				147,602				142,854				134,708
Commercial AD&C loans			289,737				291,569				302,924				310,325				310,110				287,836				272,090				261,687
Commercial investor real estate loans			1,114,960				1,090,641				1,010,389				945,080				878,511				832,529				788,785				750,821
Commercial owner occupied real estate loans			842,642				808,802				776,279				774,964				750,679				717,371				684,907				677,786
Commercial business loans			454,330				459,779				454,724				462,444				452,195				446,123				453,459				460,903
Consumer loans			458,378				457,526				461,672				458,162				454,349				450,171				449,594				451,075
Total loans			4,234,946				4,162,020				4,035,199				3,956,023				3,842,491				3,718,084				3,603,394				3,544,423
Loans held for sale			5,862				7,093				7,077				7,402				12,454				10,207				8,326				14,036
Investment securities			780,522				813,179				842,837				818,287				703,574				709,527				739,132				810,593
Interest-earning assets			5,061,075				5,019,133				4,922,389				4,829,208				4,599,426				4,477,438				4,394,879				4,411,796
Total assets			5,346,625				5,297,368				5,202,398				5,111,698				4,878,660				4,747,020				4,664,343				4,685,747
Noninterest-bearing demand deposits			1,322,157				1,293,470				1,251,396				1,159,715				1,167,379				1,131,739				1,082,762				1,021,471
Total deposits			3,991,936				3,916,657				3,810,180				3,673,731				3,582,437				3,528,665				3,429,897				3,300,131
Customer repurchase agreements			139,125				133,145				132,552				128,485				128,471				120,702				122,597				110,862
Total interest-bearing liabilities			3,419,669				3,407,279				3,360,128				3,375,002				3,138,420				3,045,998				3,020,505				3,103,710
Total stockholders' equity			563,506				557,282				547,229				535,308				534,057				530,241				521,387				524,309
Financial Measures:
Average equity to average assets			10.54	%			10.52	%			10.52	%			10.47	%			10.95	%			11.17	%			11.18	%			11.19	%
Investment securities to earning assets			15.03	%			15.76	%			16.47	%			17.39	%			16.24	%			15.24	%			16.47	%			16.69	%
Loans to earning assets			83.68	%			83.06	%			82.85	%			81.16	%			81.80	%			83.32	%			82.32	%			80.07	%
Loans to assets			79.21	%			78.62	%			78.42	%			76.77	%			77.15	%			78.59	%			77.49	%			75.49	%
Loans to deposits			108.85	%			106.02	%			106.38	%			105.10	%			109.79	%			106.88	%			104.63	%			104.35	%
Capital Measures:
Tier 1 leverage  (1)			9.24	%			9.28	%			9.26	%			9.26	%			10.14	%			10.25	%			10.29	%			10.23	%
Tier 1 capital to risk-weighted assets  (1)			10.84	%			10.99	%			10.96	%			11.02	%			11.74	%			12.17	%			12.42	%			12.74	%
Total regulatory capital to risk-weighted assets  (1)			11.85	%			12.01	%			12.00	%			12.06	%			12.80	%			13.29	%			13.57	%			13.86	%
Common equity tier 1 capital to risk-weighted assets  (1)			10.84	%			10.99	%			10.96	%			11.02	%			11.01	%			11.41	%			11.63	%			11.79	%
Book value per share		$	23.50			$	23.53			$	23.13			$	22.74			$	22.32			$	22.47			$	22.18			$	21.92
Outstanding shares			23,996,293				23,990,370				23,983,997				23,930,165				23,901,084				23,886,651				23,874,650				23,827,305
(1) Estimated ratio at December 31, 2017 based on current authoritative guidance.

  

Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
			2017																2016
(Dollars in thousands)		December 31,				September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
Non-Performing Assets:
Loans 90 days past due:
Commercial business		$	-			$	-			$	-			$	-			$	-			$	163			$	-			$	-
Commercial real estate:
Commercial AD&C			-				-				-				-				-				-				-				-
Commercial investor real estate			-				-				-				-				-				-				-				-
Commercial owner occupied real estate			-				-				424				-				-				-				-				-
Consumer			-				1				4				-				-				-				2				1
Residential real estate:
Residential mortgage			225				225				-				232				232				-				-				-
Residential construction			-				-				-				-				-				-				-				-
Total loans 90 days past due			225				226				428				232				232				163				2				1
Non-accrual loans:
Commercial business			6,703				6,091				6,807				4,849				5,833				4,140				4,263				3,741
Commercial real estate:
Commercial AD&C			136				137				137				137				137				137				137				147
Commercial investor real estate			5,575				5,589				6,934				7,970				8,107				9,189				8,868				7,885
Commercial owner occupied real estate			3,582				5,012				4,926				5,106				4,823				5,591				5,678				7,149
Consumer			2,967				3,152				3,111				3,058				2,859				2,726				2,600				2,715
Residential real estate:
Residential mortgage			7,196				7,345				7,101				6,908				7,257				7,321				6,186				9,329
Residential construction			177				182				187				189				195				199				202				412
Total non-accrual loans			26,336				27,508				29,203				28,217				29,211				29,303				27,934				31,378
Total restructured loans - accruing			2,788				2,471				2,569				2,409				2,489				2,512				3,420				4,716
Total non-performing loans			29,349				30,205				32,200				30,858				31,932				31,978				31,356				36,095
Other assets and real estate owned (OREO)			2,253				1,448				1,460				1,294				1,911				1,274				1,311				2,414
Total non-performing assets		$	31,602			$	31,653			$	33,660			$	32,152			$	33,843			$	33,252			$	32,667			$	38,509
		For the Quarter Ended,
		December 31,				September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2017				2017				2017				2017				2016				2016				2016				2016
Analysis of Non-accrual Loan Activity:
Balance at beginning of period		$	27,508			$	29,203			$	28,217			$	29,211			$	29,303			$	27,934			$	31,378			$	30,031
Non-accrual balances transferred to OREO			(888	)			(411	)			(175	)			(113	)			(637	)			(38	)			-				-
Non-accrual balances charged-off			(446	)			(1,127	)			(179	)			(391	)			(390	)			(245	)			(1,305	)			(274	)
Net payments or draws			(1,707	)			(1,869	)			(1,804	)			(1,382	)			(1,547	)			(525	)			(4,810	)			(914	)
Loans placed on non-accrual			2,504				1,712				3,144				1,461				2,482				2,486				2,671				2,535
Non-accrual loans brought current			(635	)			-				-				(569	)			-				(309	)			-				-
Balance at end of period		$	26,336			$	27,508			$	29,203			$	28,217			$	29,211			$	29,303			$	27,934			$	31,378
Analysis of Allowance for Loan Losses:
Balance at beginning of period		$	44,924			$	45,079			$	43,861			$	44,067			$	43,942			$	43,384			$	41,766			$	40,895
Provision for loan losses			527				934				1,322				194				572				781				2,957				1,236
Less loans charged-off, net of recoveries:
Commercial business			48				1,029				107				260				285				95				106				67
Commercial real estate:
Commercial AD&C			-				-				(103	)			-				(18	)			(22	)			-				48
Commercial investor real estate			(8	)			(10	)			(78	)			(5	)			(9	)			(12	)			(107	)			192
Commercial owner occupied real estate			243				5				-				-				-				(1	)			(1	)			(3	)
Consumer			(71	)			103				189				167				177				145				364				54
Residential real estate:
Residential mortgage			(12	)			(32	)			(3	)			(16	)			18				24				989				15
Residential construction			(6	)			(6	)			(8	)			(6	)			(6	)			(6	)			(12	)			(8	)
Net charge-offs			194				1,089				104				400				447				223				1,339				365
Balance at end of period		$	45,257			$	44,924			$	45,079			$	43,861			$	44,067			$	43,942			$	43,384			$	41,766
Asset Quality Ratios:
Non-performing loans to total loans			0.68	%			0.72	%			0.78	%			0.77	%			0.81	%			0.85	%			0.85	%			1.01	%
Non-performing assets to total assets			0.58	%			0.59	%			0.64	%			0.62	%			0.66	%			0.69	%			0.69	%			0.82	%
Allowance for loan losses to loans			1.05	%			1.07	%			1.09	%			1.10	%			1.12	%			1.16	%			1.18	%			1.17	%
Allowance for loan losses to non-performing loans			154.20	%			148.73	%			140.00	%			142.14	%			138.00	%			137.41	%			138.36	%			115.72	%
Annualized net charge-offs to average loans			0.02	%			0.10	%			0.01	%			0.04	%			0.05	%			0.02	%			0.15	%			0.04	%

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
		Three Months Ended December 31,
		2017											2016
										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		$	903,660			$	7,997			3.54	%		$	848,399			$	7,321			3.45	%
Residential construction loans			171,239				1,636			3.79				148,248				1,365			3.66
Total mortgage loans			1,074,899				9,633			3.58				996,647				8,686			3.48
Commercial AD&C loans			289,737				3,718			5.09				310,110				3,688			4.73
Commercial investor real estate loans			1,114,960				12,580			4.48				878,511				10,023			4.54
Commercial owner occupied real estate loans			842,642				10,258			4.83				750,679				8,891			4.71
Commercial business loans			454,330				5,264			4.60				452,195				4,931			4.34
Total commercial loans			2,701,669				31,820			4.67				2,391,495				27,533			4.58
Consumer loans			458,378				4,438			3.88				454,349				3,905			3.45
Total loans (2)			4,234,946				45,891			4.31				3,842,491				40,124			4.16
Loans held for sale			5,862				6			0.38				12,454				93			2.98
Taxable securities			489,020				3,428			2.80				435,129				2,850			2.62
Tax-exempt securities (3)			291,502				3,095			4.25				268,445				2,835			4.22
Total investment securities			780,522				6,523			3.34				703,574				5,685			3.23
Interest-bearing deposits with banks			36,904				121			1.30				39,471				57			0.57
Federal funds sold			2,841				9			1.21				1,436				2			0.53
Total interest-earning assets			5,061,075				52,550			4.13				4,599,426				45,961			3.98
Less:  allowance for loan losses			(45,247	)										(43,298	)
Cash and due from banks			50,489											50,090
Premises and equipment, net			54,741											53,588
Other assets			225,567											218,854
Total assets		$	5,346,625										$	4,878,660
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	625,502				135			0.09	%		$	589,259				111			0.08	%
Regular savings deposits			323,367				53			0.07				306,261				45			0.06
Money market savings deposits			1,027,365				1,698			0.66				936,880				505			0.21
Time deposits			693,545				2,158			1.23				582,658				1,494			1.02
Total interest-bearing deposits			2,669,779				4,044			0.60				2,415,058				2,155			0.36
Other borrowings			139,125				99			0.28				128,471				78			0.24
Advances from FHLB			610,765				3,041			1.98				564,891				2,798			1.97
Subordinated debentures			-				-			-				30,000				245			3.27
Total interest-bearing liabilities			3,419,669				7,184			0.83				3,138,420				5,276			0.67
Noninterest-bearing demand deposits			1,322,157											1,167,379
Other liabilities			41,293											38,804
Stockholders' equity			563,506											534,057
Total liabilities and stockholders' equity		$	5,346,625										$	4,878,660
Net interest income and spread						$	45,366			3.30	%						$	40,685			3.31	%
Less: tax-equivalent adjustment							1,874											1,718
Net interest income						$	43,492										$	38,967
Interest income/earning assets										4.13	%										3.98	%
Interest expense/earning assets										0.56											0.46
Net interest margin										3.57	%										3.52	%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2017 and 2016. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.9 million and $1.7 million in 2017 and 2016, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
		Twelve Months Ended December 31,
		2017											2016
										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		$	873,278			$	30,648			3.51	%		$	826,089			$	28,331			3.43	%
Residential construction loans			167,664				6,292			3.75				143,378				5,169			3.61
Total mortgage loans			1,040,942				36,940			3.55				969,467				33,500			3.46
Commercial AD&C loans			298,563				14,844			4.97				283,018				13,199			4.66
Commercial investor real estate loans			1,040,871				46,558			4.47				812,896				37,110			4.57
Commercial owner occupied real estate loans			800,879				38,759			4.84				707,830				33,837			4.78
Commercial business loans			457,802				20,585			4.50				453,148				19,750			4.36
Total commercial loans			2,598,115				120,746			4.65				2,256,892				103,896			4.60
Consumer loans			458,931				16,934			3.72				451,303				15,596			3.48
Total loans (2)			4,097,988				174,620			4.26				3,677,662				152,992			4.16
Loans held for sale			6,855				279			4.06				11,256				387			3.44
Taxable securities			517,375				14,372			2.78				461,973				11,923			2.58
Tax-exempt securities (3)			296,226				12,550			4.24				278,546				11,747			4.22
Total investment securities			813,601				26,922			3.31				740,519				23,670			3.20
Interest-bearing deposits with banks			37,728				410			1.09				40,940				213			0.52
Federal funds sold			2,581				27			1.03				876				5			0.50
Total interest-earning assets			4,958,753				202,258			4.08				4,471,253				177,267			3.96
Less:  allowance for loan losses			(44,557	)										(42,487	)
Cash and due from banks			48,765											47,219
Premises and equipment, net			53,947											53,386
Other assets			223,012											214,004
Total assets		$	5,239,920										$	4,743,375
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	616,524				507			0.08	%		$	581,185				446			0.08	%
Regular savings deposits			322,856				216			0.07				300,035				182			0.06
Money market savings deposits			1,000,965				5,031			0.50				920,125				1,951			0.21
Time deposits			651,610				7,502			1.15				558,355				5,582			1.00
Total interest-bearing deposits			2,591,955				13,256			0.51				2,359,700				8,161			0.35
Other borrowings			133,356				337			0.25				120,711				290			0.24
Advances from FHLB			664,966				12,426			1.87				565,342				11,610			2.05
Subordinated debentures			411				12			2.94				31,489				943			3.00
Total interest-bearing liabilities			3,390,688				26,031			0.77				3,077,242				21,004			0.68
Noninterest-bearing demand deposits			1,257,231											1,101,104
Other liabilities			41,075											37,505
Stockholders' equity			550,926											527,524
Total liabilities and stockholders' equity		$	5,239,920										$	4,743,375
Net interest income and spread						$	176,227			3.31	%						$	156,263			3.28	%
Less: tax-equivalent adjustment							7,459											6,711
Net interest income						$	168,768										$	149,552
Interest income/earning assets										4.08	%										3.96	%
Interest expense/earning assets										0.53											0.47
Net interest margin										3.55	%										3.49	%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2017 and 2016. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $7.5 million and $6.7 million in 2017 and 2016, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.