Sandy Spring Bancorp Reports Net Income of $14.7 Million for the Second Quarter

7/20/17

OLNEY, Md., July 20, 2017 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR), the parent company of Sandy Spring Bank, today reported net income for the second quarter of 2017 of $14.7 million ($0.61 per diluted share) compared to net income of $10.6 million ($0.44 per diluted share) for the second quarter of 2016 and net income of $15.1 million ($0.63 per diluted share) for the first quarter of 2017.

“The current quarter reflects strong core performance driven by loan and deposit growth. We continue our efforts to create new and deepen existing client relationships to improve the financial performance of the Company. As part of those efforts, during the current quarter we were extremely pleased to announce a definitive agreement for the acquisition of WashingtonFirst Bankshares, Inc. and its banking unit, WashingtonFirst Bank, a well-regarded bank in northern Virginia. We believe that the creation of the region’s largest locally headquartered community bank will offer complementary products and the best possible experience for our combined clients and greater value to our shareholders,” said Daniel J. Schrider, President and Chief Executive Officer.

Second Quarter Highlights:

  • Total loans increased 13% compared to the second quarter of 2016 and 4% compared to the first quarter of 2017. These increases were driven primarily by year-over-year growth of 16% in the commercial loan portfolio.
  • Total deposits grew 11% from the prior year quarter and 2% from the prior quarter.
  • The net interest margin was 3.60% for the second quarter of 2017, compared to 3.51% for the second quarter of 2016 and 3.51% for the first quarter of 2017. The quarter’s margin was positively impacted by an interest income recovery of $0.7 million. Exclusive of this non-core item, the margin would have been 3.54%.
  • Return on average common equity increased 32% to 10.80% as compared to 8.21% from the prior year.
  • On May 16, 2017, the Company announced it had entered into a definitive agreement and plan of merger pursuant to which WashingtonFirst Bankshares, Inc., the parent company for WashingtonFirst Bank, will merge with and into the Company in a transaction valued at approximately $498 million. WashingtonFirst, headquartered in Reston, Virginia, has 19 community banking offices and more than $2.1 billion in assets (as of March 31, 2017).
  • The Non-GAAP efficiency ratio was 54.10% for the current quarter as compared to 59.12% for the second quarter of 2016 and 54.78% for the first quarter of 2017.
  • Pre-tax, pre-provision income increased 29% compared with the second quarter of 2016.

Review of Balance Sheet and Credit Quality

At June 30, 2017, total assets were $5.3 billion, an 11% increase compared to $4.7 billion at June 30, 2016. Loan growth continues to be the driver of asset growth as total loans ended the period at $4.1 billion compared to $3.7 billion at June 30, 2016. The growth in the loan portfolio was funded primarily by an 11% increase in total deposits from June 30, 2016 to June 30, 2017.

Combined noninterest-bearing and interest-bearing checking account balances at June 30, 2017, an important performance driver of multiple-product banking relationships with clients, increased by 9% compared to balances at June 30, 2016.

Tangible common equity totaled $472 million at June 30, 2017, compared to $439 million at June 30, 2016. The ratio of tangible common equity to tangible assets decreased to 9.10% at June 30, 2017, from 9.44% at June 30, 2016, as a result of asset growth over the preceding 12 months. Dividends per common share were $0.26 per share for the second quarter of 2017 compared to $0.24 per share for the second quarter of 2016, an 8% increase. At June 30, 2017, the Company had a total risk-based capital ratio of 12.00%, a common equity tier 1 risk-based capital ratio of 10.96%, a tier 1 risk-based capital ratio of 10.96% and a tier 1 leverage ratio of 9.26%.

The level of non-performing loans to total loans decreased to 0.78% at June 30, 2017, compared to 0.85% at June 30, 2016, as a result of the growth in the loan portfolio. Non-performing loans totaled $32.2 million at June 30, 2017, compared to $31.4 million at June 30, 2016, and $30.9 million at March 31, 2017. Non-performing loans include accruing loans 90 days or more past due and restructured loans.

Loan charge-offs, net of recoveries, totaled $0.1 million for the second quarter of 2017 compared to $1.3 million for the second quarter of 2016. Charge-offs for the second quarter of 2016 were affected by a single large charge-off related to a residential mortgage loan. The allowance for loan losses represented 1.09% of outstanding loans and 140% of non-performing loans at June 30, 2017, compared to 1.18% of outstanding loans and 138% of non-performing loans at June 30, 2016. The decline in the allowance to outstanding loans ratio is a reflection of improved credit quality and growth of the loan portfolio over the past year.

Income Statement Review

Net interest income for the second quarter of 2017 increased 15% compared to the second quarter of 2016 as average loans from quarter to quarter increased 12%. The net interest margin improved to 3.60% for the second quarter of 2017 compared to 3.51% for the second quarter of 2016. Net interest income for the second quarter of 2017 included $0.7 million from the full payoff during the quarter of a previously acquired credit impaired loan. Exclusive of the recovered interest income, the net interest margin would have been 3.54% based on an adjusted net interest income of $41.6 million. The margin improvement reflects the impact of loan growth, the cumulative benefits associated with the execution of funding strategies and the shift from lower yielding investments to the higher yielding loan portfolio during the past 12 months.

The provision for loan losses was $1.3 million for the second quarter of 2017 compared to $3.0 million for the second quarter of 2016 and $0.2 million for the first quarter of 2017. The decrease in the current quarter’s charge versus the prior year’s quarter reflects improved loan portfolio credit quality, which partially offset the effects of loan growth on the provision over the past year.

Non-interest income increased to $13.6 million for the second quarter of 2017 compared to $12.8 million for the second quarter of 2016. The second quarter of 2017 included gains of $1.3 million on sales of investment securities. The second quarter of 2016 included a $1.2 million gain on the extinguishment of subordinated debentures and $0.2 million in gains on the sales of investment securities. Excluding these gains, non-interest income increased 8% compared to the prior year quarter due to increases in insurance agency commissions and other non-interest income.

Non-interest expenses increased 6% to $32.9 million for the second quarter of 2017 compared to $30.9 million in the second quarter of 2016. The second quarter of 2017 included $1.3 million in penalties on the early payoff of high-rate FHLB advances and $1.0 million in merger expenses. The comparable period for 2016 included $1.4 million in prepayment penalties. Excluding these transactions, non-interest expenses increased 4% compared to the second quarter of 2016 due to merit increases, performance incentives and volume driven compensation costs. The non-GAAP efficiency ratio was 54.10% for the second quarter of 2017 compared to 59.12% for the second quarter of 2016 as a result of the growth in net interest income.

Net interest income for the first six months of 2017 increased 13% compared to the first six months of 2016 due primarily to an increase in average loans, which was funded primarily by an 11% increase in average deposits. As a result, the net interest margin was 3.56% for the first six months of 2017 compared to 3.47% for the prior year period. The first six months net interest income included the previously mentioned $0.7 million recovery of interest income. Exclusive of this recovery the net interest margin would have been 3.54%.

The provision for loan losses was $1.5 million for the first six months of 2017 compared to $4.2 million for the first six months of 2016 primarily reflecting the growth in the loan portfolio over the prior year period offset by the effects of improved credit quality of the loan portfolio.

Non-interest income was $26.2 million for the first six months of 2017 compared to $26.1 million for the first six months of 2016. The first six months of 2017 included gains of $1.3 million on sales of investment securities. The same prior year period included a $1.2 million gain on the extinguishment of subordinated debentures and $2.0 million in gains on the sales of investment securities. Excluding these gains, non-interest income increased 8% compared to the prior year period primarily due to increases in insurance agency commissions and other non-interest income.

Non-interest expenses decreased 1% to $62.8 million for the first six months of 2017 compared to $63.2 million for the prior year period. For the six months ended June 30, 2017, the decrease in prepayment penalties of $1.9 million for the early payoff of high-rate FHLB advances as compared to the six months ended June 30, 2016, offset increases in salaries and benefits, FDIC insurance due to asset growth and $1.0 million in merger expenses. Excluding the impact of prepayment penalties and merger expenses, non-interest expenses increased 1% over the prior year period. The non-GAAP efficiency ratio decreased to 54.44% for the first six months of 2017 compared to 60.47% for the first six months of 2016 as a direct result of the growth in net interest income.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank. Independent and community-oriented, Sandy Spring Bank offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. Through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services. With $5.3 billion in assets, the bank operates 44 community offices and six financial centers across the region. Visit www.sandyspringbank.com for more information.

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