Sandy Spring Bancorp Reports Record Net Income of $13.5 Million for the Third Quarter

OLNEY, Md., Oct. 20, 2016 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the third quarter of 2016 of $13.5 million ($0.56 per diluted share) compared to net income of $11.0 million ($0.45 per diluted share) for the third quarter of 2015 and net income of $10.6 million ($0.44 per diluted share) for the second quarter of 2016.

For the nine months ended September 30, 2016, net income was $34.9 million ($1.45 per diluted share) compared to net income of $32.6 million ($1.31 per diluted share) for the same period of the prior year.

“The record earnings for the current quarter were the direct result of strong core operating performance from multiple business lines. Balanced loan and deposit growth continue to be a fundamental strength and the margin increase reflects the redeployment of earning assets from the investment portfolio into higher yielding loans,” said Daniel J. Schrider, President and Chief Executive Officer.

Third Quarter Highlights: 

• Pre-tax, pre-provision income increased 16% compared with the third quarter of 2015 and 13% compared to the second quarter of 2016.
  
  
• The net interest margin was 3.50% for the third quarter of 2016, compared to 3.43% for the third quarter of 2015 and 3.51% for the second quarter of 2016.
  
  
• The Non-GAAP efficiency ratio was 56.33% for the current quarter as compared to 59.73% for the third quarter of 2015 and 59.12% for the second quarter of 2016.
  
  
• Total loans increased 11% compared to the third quarter of 2015 and 3% compared to the second quarter of 2016.  Commercial loans increased 13% and residential loans increased 9% over the prior year.
  
  
• Total deposits grew 8% from the prior year and 1% from the prior quarter.

Review of Balance Sheet and Credit Quality

Total assets grew 4% to $4.8 billion at September 30, 2016 compared to $4.6 billion at September 30, 2015.  This growth was driven by the 11% increase in the loan portfolio as total loans ended the period at $3.8 billion. 

At September 30, 2016, combined noninterest-bearing and interest-bearing checking account balances, an important performance driver of multiple-product banking relationships with clients, increased 8% compared to balances at September 30, 2015. Total deposits and certain other short-term borrowings that comprise the funding sources derived from customers, increased 8% compared to September 30, 2015.

Tangible common equity totaled $446 million at September 30, 2016 compared to $437 million at September 30, 2015. The ratio of tangible common equity to tangible assets decreased to 9.43% at September 30, 2016 from 9.66% at September 30, 2015 due to the combined impact of the growth in assets and share repurchases over the preceding 12 months. Dividends per common share were $0.72 per share for the first nine months of 2016 compared to $0.66 per common share for the first nine months of 2015, a 9% increase.  At September 30, 2016, the Company had a total risk-based capital ratio of 13.29%, a common equity tier 1 risk-based capital ratio of 11.41%, a tier 1 risk-based capital ratio of 12.17% and a tier 1 leverage ratio of 10.25%.

Non-performing loans totaled $32.0 million at September 30, 2016 compared to $36.9 million at September 30, 2015 and $31.4 million at June 30, 2016. The level of non-performing loans to total loans decreased to 0.85% at September 30, 2016 compared to 1.08% at September 30, 2015 as a result of the growth in the loan portfolio and a concurrent decrease in the level of non-performing loans.

Loan charge-offs, net of recoveries, totaled $0.2 million for the third quarter of 2016 compared to $0.8 million for the third quarter of 2015 and $1.3 million in charge-offs for the second quarter of 2016. The allowance for loan losses represented 1.16% of outstanding loans and 137% of non-performing loans at September 30, 2016 compared to 1.16% of outstanding loans and 107% of non-performing loans at September 30, 2015. 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 2016 increased 7% compared to the third quarter of 2015. The net interest margin improved to 3.50% for the third quarter of 2016 compared to 3.43% for the third quarter of 2015.  This improvement reflects the impact of loan growth over the preceding year combined with the positive benefits associated with the prepayment of FHLB advances and subordinated debentures, and the shift from lower yielding investments to the higher yielding loan portfolio in the first nine months of 2016.  

The provision for loan losses was $0.8 million for the third quarter of 2016 compared to a charge of $1.7 million for the third quarter of 2015 and $3.0 million for the second quarter of 2016. The decrease in the current quarter’s charge versus the prior year’s quarter reflects lower net-charge offs during the quarter and the reduced level of non-performing assets.

Non-interest income increased to $12.6 million for the third quarter of 2016 compared to $12.4 million for the third quarter of 2015 due to higher mortgage banking income from increased loan sales volume that more than offset the decrease in income from wealth management due to the sale of a portion of the assets under management which occurred in the first quarter of 2016.

Non-interest expenses decreased 1% to $29.3 million for the third quarter of 2016 compared to $29.6 million in the third quarter of 2015 due to lower other non-interest expenses. The non-GAAP efficiency ratio was 56.33% for the third quarter of 2016 compared to 59.73% for the third quarter of 2015 as a result of the combined growth in the net interest income and the effects of expense control discipline. 

Net interest income for the first nine months of 2016 increased 8% compared to the first nine months of 2015 due primarily to an increase in average loans, which was funded, in part, by a decrease in lower-yielding investment securities. As a result, the net interest margin was 3.49% for the first nine months of 2016 compared to 3.43% for the prior year period. 

The provision for loan losses was a charge of $5.0 million for the first nine months of 2016 compared to a charge of $3.5 million for the first nine months of 2015 primarily reflecting the growth in the loan portfolio over the prior year period.

Non-interest income increased 3% to $38.7 million for the first nine months of 2016 compared to $37.7 million for the first nine months of 2015.  This increase was driven by $1.9 million in gains on securities sales and a gain of $1.2 million due to the extinguishment of subordinated debentures during the first half of 2016. Excluding these transactions, non-interest income decreased 6% due to a decrease in income from wealth management resulting from the sale of a portion of the assets under management. 

Non-interest expenses increased 5% to $92.5 million for the first nine months of 2016 compared to $88.4 million for the prior year period. This increase was due largely to prepayment penalties of $3.2 million for the early payoff of $75 million in high-rate FHLB advances. Excluding the prepayment penalties, non-interest expenses increased 1% over the prior year period. The current year-to-date period included increases in salaries and benefits and equipment expenses.  The non-GAAP efficiency ratio was 59.05% for the first nine months of 2016 compared to 60.41% for the first nine months of 2015.

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 1-866-235-9910. 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 3, 2016.  A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10093850.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank. Independent and community-oriented, Sandy Spring Bank offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. Through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services. With $4.8 billion in assets, the bank operates 44 community offices and six financial centers across the region. Visit www.sandyspringbank.com for more information.

Forward-Looking Statements

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

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

Sandy Spring Bancorp’s forward-looking statements are subject to the following principal risks and uncertainties: general economic conditions and trends, either nationally or locally; conditions in the securities markets; changes in interest rates; changes in deposit flows, and in the demand for deposit, loan, and investment products and other financial services; changes in real estate values; changes in the quality or composition of the Company’s loan or investment portfolios; changes in competitive pressures among financial institutions or from non-financial institutions; the Company’s ability to retain key members of management; changes in legislation, regulations, and policies; and a variety of other matters which, by their nature, are subject to significant uncertainties.  Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2015, 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.