Sandy Spring Bancorp Reports Net Income of $7.0 Million for the Second Quarter

Sandy Spring Bancorp Reports Net Income of $7.0 Million for the Second Quarter  OLNEY, Md., July 17, 2014 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the second quarter of 2014 of $7.0 million ($0.28 per diluted share) compared to net income of $12.2 million ($0.49 per diluted share) for the second quarter of 2013 and net income of $10.9 million ($0.43 per diluted share) for the first quarter of 2014.  For the six-months ended June 30, 2014, net income was $17.9 million ($0.71 per diluted share) compared to net income of $22.7 million ($0.91 per diluted share) for the same period of the prior year.  "Exclusive of the impact of the litigation expenses incurred during the second quarter, our pre-tax pre-provision income increased from the prior year. This core performance was evidenced in a stable margin, controlled expense growth and continued strength in our wealth management and card based businesses," said Daniel J. Schrider, President and Chief Executive Officer.  "Our underlying performance in the second quarter was also driven by the impact of balanced loan growth and the resulting increase in interest income. This more than offset the decline in mortgage banking revenues as originations were lower than prior year levels," said Schrider.  Second Quarter Highlights:    *Total loans increased 12% compared to the second quarter of 2013 and 3%     compared to the first quarter of 2014 due to significant loan growth in     the commercial investor real estate portfolio and due to the retention of     a greater portion of mortgage originations over the past year.        *The provision for loan and lease losses for the second quarter of 2014 was     a charge of $0.2 million compared to a credit of $2.9 million for the     second quarter of 2013 and a credit of $1.0 million for the first quarter     of 2014. The current quarter's provision reflects the stability in the     credit quality of the loan portfolio as outstanding loans continued to     grow from the prior year.        *The net interest margin was 3.48% for the second quarter of 2014, compared     to 3.51% for the second quarter of 2013 and 3.47% for the first quarter of     2014. The decline compared to the prior year was the result of declining     loan yields during the period that exceeded the reduction in rates paid on     interest-bearing liabilities.        *Non-interest income decreased 4% for the quarter compared to the prior     year quarter due to the decline in income from mortgage banking caused by     a significantly lower volume of saleable mortgage loan     originations.During this same period wealth management income increased     5%.        *Non-performing loans totaled $41.7 million at June 30, 2014 compared to     $46.2 million at June 30, 2013 and $38.7 million at March 31, 2014. The     coverage ratio of the allowance for loan and lease losses to     non-performing loans was 91% at June 30, 2014 compared to a coverage ratio     of 84% at June 30, 2013 and 98% at March 31, 2014.        *Litigation expenses of $6.1 million were accrued during the quarter as a     result of an adverse jury verdict associated with the actions of a former     employee of CommerceFirst Bank which was acquired in 2012.  Review of Balance Sheet and Credit Quality  Total assets grew 4% to $4.2 billion at June 30, 2014 compared to $4.1 billion at June 30, 2013.This growth was driven by a 12% increase in the loan portfolio as total loans and leases ended the period at $2.9 billion.As previously noted, solid increases occurred in the residential mortgage and commercial investor real estate portfolios.  Deposits and certain other short-term borrowings that comprise all the funding sources derived from customers, increased 4% compared to June 30, 2013. An important performance metric involves checking accounts as they are considered to be primary drivers of growth in multiple-product banking relationships with clients.At June 30, 2014, the combined noninterest-bearing and interest-bearing checking account balances increased 10% compared to the balances at June 30, 2013.  Tangible common equity totaled $427.1 million at June 30, 2014 compared to $401.7 million at June 30, 2013, resulting in an increase in the ratio of tangible common equity to tangible assets to 10.29% at June 30, 2014 from 10.08% at June 30, 2013. This increase in tangible common equity occurred during the period that dividends per common share were raised from $0.30 per share to $0.36 per common share, a 20% increase. At June 30, 2014, the Company had a total risk-based capital ratio of 15.66%, a tier 1 risk-based capital ratio of 14.48% and a tier 1 leverage ratio of 11.37%.  Non-performing loans totaled $41.7 million at June 30, 2014 compared to $46.2 million at June 30, 2013 and $38.7 million at March 31, 2014. The level of non-performing loans to total loans decreased to 1.43% at June 30, 2014 compared to 1.77% at June 30, 2013.This improvement in credit quality has occurred concurrent with the year-over-year 12% growth in the loan portfolio.  Net loan charge-offs totaled $0.2 million for the second quarter of 2014 compared to net recoveries of $0.6 million for the second quarter of 2013 and net loan recoveries of $0.2 million for the first quarter of 2014. The allowance for loan and lease losses represented 1.30% of outstanding loans and leases and 91% of non-performing loans at June 30, 2014 compared to 1.50% of outstanding loans and leases and 84% of non-performing loans at June 30, 2013. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.  Income Statement Review  Net interest income for the second quarter of 2014 increased 4% compared to the second quarter of 2013. This increase was due to the impact of the growth in average loans and a reduction in funding costs despite a modest decline in loan yields.This activity resulted in a net interest margin of 3.48% for the second quarter of 2014 compared to 3.51% for the second quarter of 2013.  The provision for loan and lease losses was $0.2 million for the second quarter of 2014 compared to a credit of $2.9 million for the second quarter of 2013 and a credit of $1.0 million for the first quarter of 2014. The current quarter's provision reflects the stability in the credit quality of the loan portfolio as outstanding loans continued to grow from the prior year.The credits to the provision for loan and lease losses in prior quarters reflected the impact of declining charge-offs and improved credit metrics in the loan portfolio over the past 12 months that more than offset the effects of the loan growth during the past year.  Non-interest income decreased 4% to $11.7 million for the second quarter of 2014 compared to $12.2 million for the second quarter of 2013.This decrease was driven by a reduction in mortgage banking income due primarily to lower mortgage origination volumes and a decline in client refinancing activity. This decrease was partially offset by a 5% increase in wealth management income due to higher assets under management.  Non-interest expenses increased 24% to $34.1 million for the second quarter of 2014 compared to $27.5 million in the second quarter of 2013. The current quarter included $6.1 million in the previously mentioned litigation expenses.Exclusive of these costs, non-interest expense would have been $28.0 million, an increase of 2% from the second quarter of 2013.This increase was driven by increased staffing costs.The non-GAAP efficiency ratio was 61.30% for the second quarter of 2014 compared to 60.92% for the second quarter of 2013.  Net interest income for the first six months of 2014 increased 3% compared to the first six months of 2013 due to an increase in average loans and lower funding costs. The net interest margin decreased to 3.48% for the first six months of 2014 compared to 3.55% for the first six months of 2013 due largely to the factors cited previously with respect to the second quarter of 2014.  The provision for loan and lease losses was a credit of $0.8 million for the first six months of 2014 compared to a credit of $2.8 million for first six months of 2013. The change in the provision for the period was driven by a decline in historical losses, a lower level of problem loans and loan recoveries during the period whose impact more than offset the effect of loan growth over the same period.  Non-interest income decreased 7% to $22.9 million for the first six months of 2014 compared to $24.6 million for the first six months of 2013.This decrease was driven primarily by a 68% decrease in income from mortgage banking activities due to the decline in loan origination volumes. The impact of this decrease was partially mitigated by increases in wealth management income that increased 7% due to higher assets under management while insurance agency commissions increased 9%. Other non-interest income decreased 14% due to a decline in gains on sales and dispositions of loans compared to the prior year and last year's inclusion of a non-recurring legal settlement.  Non-interest expenses increased to $61.7 million for the first six months of 2014 compared to $55.3 million in the first six months of 2013 due to the aforementioned impact of the litigation expenses. Excluding the impact of the litigation expenses, non-interest expense for the six months ended June 30, 2014 was $55.6 million compared to $55.3 million for the six months ended June 30, 2013.The non-GAAP efficiency ratio was 61.45% for the first six months of 2014 compared to 60.86% for the first six months of 2013.  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 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 1-888-317-6016. 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) July 31, 2014.A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10048612.  About Sandy Spring Bancorp, Inc.  With $4.2 billion in assets, Sandy Spring Bancorp, Inc. 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 46 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.comfor more information about Sandy Spring Bank.  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, 2013, 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             Six Months Ended                          June 30,                 %      June 30,                 % (Dollars in thousands,       2014        2013         Change 2014        2013         Change except per share data) Results of                                                            Operations: Net interest     $32,309   $30,932    4%     $63,901   $62,258    3% income Provision for loan and lease   158        (2,876)      (105)  (824)       (2,798)      (71) losses Non-interest     11,694     12,215      (4)    22,943     24,634      (7) income Non-interest     34,141     27,508      24     61,690     55,331      11 expenses Income before    9,704      18,515      (48)   25,978     34,359      (24) income taxes Net income      6,982      12,162      (43)   17,910     22,720      (21)                                                                      Pre-tax pre-provision    $15,990   $15,639    2      $31,282   $31,561    (1) income                                                                      Return on        0.67%      1.23%             0.87%      1.16%        average assets Return on average common   5.47%      9.98%             7.11%      9.42%        equity Net interest     3.48%      3.51%             3.48%      3.55%        margin Efficiency ratio 77.59%     63.75%            71.04%     63.68%       - GAAP basis(1) Efficiency ratio - Non-GAAP       61.30%     60.92%            61.45%     60.86%       basis(1)                                                                      Per share data:                                                       Basic net income $0.28     $0.49      (43)%  $0.72     $0.91      (21)% Diluted net      $0.28     $0.49      (43)   $0.71     $0.91      (22) income Average fully    25,127,036 25,009,092  --    25,126,369 25,006,161  -- diluted shares Dividends declared per     $0.18     $0.16      13     $0.36     $0.30      20 share Book value per   20.63      19.45        6      20.63      19.45        6 share Tangible book    17.04      16.09        6      17.04      16.09        6 value per share Outstanding      25,069,700 24,967,558  --    25,069,700 24,967,558  -- shares                                                                      Financial Condition at                                                          period-end: Investment       $980,530  $1,102,209 (11)%  $980,530  $1,102,209 (11)% securities Loans and leases 2,910,944  2,605,458   12     2,910,944  2,605,458   12 Interest-earning 3,945,643  3,802,682   4      3,945,643  3,802,682   4 assets Assets           4,234,342  4,072,617   4      4,234,342  4,072,617   4 Deposits         3,038,670  2,926,650   4      3,038,670  2,926,650   4 Interest-bearing 2,698,887  2,678,490   1      2,698,887  2,678,490   1 liabilities Stockholders'    517,269    485,643     7      517,269    485,643     7 equity                                                                      Capital ratios:                                                       Tier 1           11.37%     11.28%             11.37%     11.28%       leverage(4) Tier 1 capital to risk-weighted 14.48%     14.30%             14.48%     14.30%       assets(4) Total regulatory capital to       15.66%     15.55%             15.66%     15.55%       risk-weighted assets(4) Tangible common equity to        10.29%     10.08%             10.29%     10.08%       tangible assets(2) Average equity to average       12.31%     12.35%             12.29%     12.30%       assets                                                                      Credit quality                                                        ratios: Allowance for loan and lease   1.30%      1.50%             1.30%      1.50%        losses to loans and leases Non-performing loans to total   1.43%      1.77%             1.43%      1.77%        loans Non-performing assets to total  1.03%      1.25%             1.03%      1.25%        assets Allowance for loan and lease losses to        90.99%     84.46%            90.99%     84.46%       non-performing loans Annualized net charge-offs to   0.03%      (0.10)%           --%       0.09%        average loans and leases(3)                                                                      (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 and leases, excluding residential   mortgage loans held-for-sale. (4) Estimated ratio at June 30, 2014                                                                                                                                                              Sandy Spring Bancorp, Inc. and Subsidiaries                                RECONCILIATION TABLE -                                      UNAUDITED                                                                                  Three Months Ended        Six Months Ended                       June 30,                  June 30, (Dollars in thousands) 2014         2013         2014         2013 Pre-tax pre-provision                                       income: Net income             $6,982     $12,162    $17,910    $22,720 Plus non-GAAP                                               adjustment: Litigation expenses    6,128       --         6,128       -- Income taxes           2,722       6,353       8,068       11,639 Provision (credit) for 158         (2,876)     (824)       (2,798) loan and lease losses Pre-tax pre-provision  $15,990    $15,639    $31,282    $31,561 income                                                            Efficiency ratio -                                          GAAP basis: Non-interest expenses $34,141    $27,508    $61,690    $55,331                                                            Net interest income plus non-interest      $44,003    $43,147    $86,844    $86,892 income                                                            Efficiency ratio -     77.59%       63.75%       71.04%       63.68% GAAP basis                                                                                                                       Efficiency ratio -                                          Non-GAAP basis: Non-interest expenses $34,141    $27,508    $61,690    $55,331 Less non-GAAP                                               adjustment: Amortization of        224         461         594         922 intangible assets Litigation expenses    6,128       --          6,128       -- Non-interest expenses  $27,789    $27,047    $54,968    $54,409 --as adjusted                                                            Net interest income plus non-interest      $44,003    $43,147    $86,844    $86,892 income Plus non-GAAP                                               adjustment: Tax-equivalent income  1,331       1,312       2,613       2,623 Less non-GAAP                                               adjustments: Securities gains       --          62          --          118 Net interest income plus non-interest      $45,334    $44,397    $89,457    $89,397 income - as adjusted                                                            Efficiency ratio -     61.30%       60.92%       61.45%       60.86% Non-GAAP basis                                                            Tangible common equity                                      ratio: Total stockholders'    $517,269   $485,643   $517,269   $485,643 equity Accumulated other comprehensive (income) (5,233)     2,425       (5,233)     2,425 loss Goodwill               (84,171)    (84,171)    (84,171)    (84,171) Other intangible       (737)       (2,241)     (737)       (2,241) assets, net Tangible common equity $427,128   $401,656   $427,128   $401,656                                                            Total assets           $ 4,234,342 $4,072,617 $ 4,234,342 $4,072,617 Goodwill               (84,171)    (84,171)    (84,171)    (84,171) Other intangible       (737)       (2,241)     (737)       (2,241) assets, net Tangible assets        $ 4,149,434 $3,986,205 $ 4,149,434 $3,986,205                                                            Tangible common equity 10.29%       10.08%       10.29%       10.08% ratio                                                            Outstanding common     25,069,700  24,967,558  25,069,700  24,967,558 shares Tangible book value    $17.04     $16.09     $17.04     $16.09 per common share                                                                                                                              Sandy Spring Bancorp, Inc. and Subsidiaries                                 CONDENSED CONSOLIDATED STATEMENTS OF CONDITION-                            UNAUDITED                                                                                                    June 30,     December 31, June 30, (Dollars in thousands)                2014         2013         2013 Assets                                                         Cash and due from banks               $65,674    $46,755    $41,525 Federal funds sold                    474         475         475 Interest-bearing deposits with banks  44,653      27,197      65,507 Cash and cash equivalents             110,801     74,427      107,507 Residential mortgage loans held for   9,042       8,365       29,033 sale (at fair value) Investments available-for-sale (at    720,885     751,284     838,440 fair value) Investments held-to-maturity -- fair value of $224,313, $216,007 and                                220,838 at June 30, 2014, December 31, 2013 and June 30, 2013,  223,518     224,638     226,457 respectively Other equity securities               36,127      40,687      37,312 Total loans and leases                2,910,944   2,784,266   2,605,458 Less: allowance for loan and lease    (37,959)    (38,766)    (39,015) losses Net loans and leases                  2,872,985   2,745,500   2,566,443 Premises and equipment, net           45,296      45,916      46,901 Other real estate owned               1,967       1,338       4,831 Accrued interest receivable           12,271      12,532      13,071 Goodwill                              84,171      84,171      84,171 Other intangible assets, net         737         1,330       2,241 Other assets                          116,542     115,912     116,210 Total assets                          $4,234,342 $4,106,100 $4,072,617                                                               Liabilities                                                    Noninterest-bearing deposits          $984,700   $836,198   $877,891 Interest-bearing deposits             2,053,970   2,041,027   2,048,759 Total deposits                        3,038,670   2,877,225   2,926,650 Securities sold under retail repurchase agreements and federal     72,917      53,842      54,731 funds purchased Advances from FHLB                    537,000     615,000     540,000 Subordinated debentures               35,000      35,000      35,000 Accrued interest payable and other    33,486      25,670      30,593 liabilities Total liabilities                     3,717,073   3,606,737   3,586,974                                                               Stockholders' Equity                                           Common stock -- par value $1.00; shares authorized 50,000,000; shares                           issued and outstanding 25,069,700, 24,990,021 and 24,967,558 at June 30, 2014, December 31, 2013 and June 30,  25,070      24,990      24,968 2013, respectively Additional paid in capital            194,252     193,445     192,327 Retained earnings                     292,714     283,898     270,773 Accumulated other comprehensive       5,233       (2,970)     (2,425) income (loss) Total stockholders' equity            517,269     499,363     485,643 Total liabilities and stockholders'   $4,234,342 $4,106,100 $4,072,617 equity                                                                                                                              Sandy Spring Bancorp, Inc. and Subsidiaries                                CONDENSED CONSOLIDATED STATEMENTS OF INCOME -                              UNAUDITED                                                                                                 Three Months Ended  Six Months Ended                                   June 30,            June 30, (Dollars in thousands, except per  2014      2013      2014      2013 share data) Interest Income:                                               Interest and fees on loans and     $30,706 $29,212 $60,440 $58,858 leases Interest on loans held for sale    71       309      130      662 Interest on deposits with banks    22       24       42       43 Interest and dividends on                                      investment securities: Taxable                            3,876    3,919    7,992    7,853 Exempt from federal income taxes   2,316    2,315    4,637    4,642 Total interest income              36,991   35,779   73,241   72,058 Interest Expense:                                              Interest on deposits               1,193    1,396    2,377    2,851 Interest on retail repurchase agreements and federal funds       37       38       75       87 purchased Interest on advances from FHLB     3,233    3,189    6,451    6,412 Interest on subordinated debt      219      224      437      450 Total interest expense             4,682    4,847    9,340    9,800 Net interest income                32,309   30,932   63,901   62,258 Provision (credit) for loan and    158      (2,876)  (824)    (2,798) lease losses Net interest income after provision (credit) for loan and    32,151   33,808   64,725   65,056 lease losses Non-interest Income:                                           Investment securities gains       --       62       --       118 Service charges on deposit        2,089    2,150    4,061    4,219 accounts Mortgage banking activities       570      1,237    886      2,764 Wealth management income          4,741    4,532    9,207    8,574 Insurance agency commissions      961      1,036    2,601    2,385 Income from bank owned life       608      623      1,206    1,235 insurance Bank card fees                    1,169    1,079    2,147    2,036 Other income                      1,556    1,496    2,835    3,303 Total non-interest income          11,694   12,215   22,943   24,634 Non-interest Expenses:                                         Salaries and employee benefits    16,474   16,163   32,829   32,509 Occupancy expense of premises     3,274    2,996    6,746    6,178 Equipment expenses                1,262    1,227    2,518    2,476 Marketing                         802      755      1,344    1,270 Outside data services             1,216    1,114    2,432    2,266 FDIC insurance                    573      581      1,093    1,177 Amortization of intangible assets 224      461      594      922 Litigation expenses               6,128    --       6,128    -- Other expenses                    4,188    4,211    8,006    8,533 Total non-interest expenses        34,141   27,508   61,690   55,331 Income before income taxes         9,704    18,515   25,978   34,359 Income tax expense                 2,722    6,353    8,068    11,639 Net income                         $6,982  $12,162 $17,910 $22,720                                                               Net Income Per Share Amounts:                                  Basic net income per share         $0.28   $0.49   $0.72   $0.91 Diluted net income per share       $0.28   $0.49   $0.71   $0.91 Dividends declared per share       $0.18   $0.16   $0.36   $0.30                                                                                                                                    Sandy Spring Bancorp, Inc. and Subsidiaries                                        HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED                                                                                                          2014                  2013 (Dollars in thousands,     Q2         Q1         Q4         Q3         Q2         Q1 except per share data) Profitability for the                                                           quarter: Tax-equivalent interest       $38,322  $37,532  $38,434  $41,524  $37,091  $37,590 income Interest       4,682     4,658     4,759     4,874     4,847     4,953 expense Tax-equivalent net interest   33,640    32,874    33,675    36,650    32,244    32,637 income Tax-equivalent 1,331     1,282     1,325     1,344     1,312     1,311 adjustment Provision for loan and lease 158       (982)     586       1,128     (2,876)   78 losses Non-interest   11,694    11,249    11,654    11,223    12,215    12,419 income Non-interest   34,141    27,549    29,300    26,893    27,508    27,823 expenses Income before  9,704     16,274    14,118    18,508    18,515    15,844 income taxes Income tax     2,722     5,346     4,505     6,419     6,353     5,286 expense Net income    $6,982   $10,928  $9,613   $12,089  $12,162  $10,558 Financial                                                         performance: Pre-tax pre-provision  $15,990  $15,292  $14,704  $19,636  $15,639  $15,922 income Return on      0.67%      1.08%      0.93%      1.19%      1.23%      1.08% average assets Return on average common 5.47%      8.80%      7.71%      9.91%      9.98%      8.85% equity Net interest   3.48%      3.47%      3.53%      3.88%      3.51%      3.59% margin Efficiency ratio - GAAP   77.59%     64.31%     66.59%     57.80%     63.75%     63.60% basis (1) Efficiency ratio -        61.30%     61.60%     63.62%     55.21%     60.92%     60.80% Non-GAAP basis (1) Per share                                                         data: Basic net income per     $0.28    $0.44    $0.38    $0.48    $0.49    $0.42 share Diluted net income per     $0.28    $0.43    $0.38    $0.48    $0.49    $0.42 share Average fully  25,127,036 25,124,206 25,108,109 25,070,506 25,009,092 25,002,612 diluted shares Dividends declared per   $0.18    $0.18    $0.18    $0.16    $0.16    $0.14 common share Non-interest                                                      income: Securities     $--      $--      $(3)     $--      $62      $56 gains (losses) Service charges on     2,089     1,972     2,143     2,171     2,150     2,069 deposit accounts Mortgage banking        570       316       356       (26)      1,237     1,527 activities Wealth management     4,741     4,466     4,508     4,503     4,532     4,042 income Insurance agency         961       1,640     1,243     1,193     1,036     1,349 commissions Income from bank owned     608       598       635       629       623       612 life insurance Bank card fees 1,169     978       1,052     1,077     1,079     957 Other income   1,556     1,279     1,720     1,676     1,496     1,807 Total non-interest   $11,694  $11,249  $11,654  $11,223  $12,215  $12,419 income Non-interest                                                      expense: Salaries and employee       $16,474  $16,355  $16,707  $16,382  $16,163  $16,346 benefits Occupancy expense of     3,274     3,472     3,844     3,149     2,996     3,182 premises Equipment      1,262     1,256     1,264     1,200     1,227     1,249 expenses Marketing      802       542       897       713       755       515 Outside data   1,216     1,216     1,162     1,152     1,114     1,152 services FDIC insurance 573       520       445       678       581       596 Amortization of intangible  224       370       461       462       461       461 assets Litigation     6,128     --        --        --        --       -- expenses Professional   1,292     914       1,386     511       1,332      1,250 fees Other real estate owned   9         --        91        (150)     (281)      37 expenses Other expenses 2,887     2,904     3,043     2,796     3,160      3,035 Total non-interest   $34,141  $27,549  $29,300  $26,893  $27,508  $27,823 expense                                                                  (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                                                                                               2014                    2013 (Dollars in         Q2          Q1          Q4          Q3          Q2          Q1 thousands) Balance sheets at                                                           quarter end: Residential         $668,536  $640,939  $618,381  $595,180  $565,282  $538,346 mortgage loans Residential         149,321     143,109     129,177     118,316     116,736     122,698 construction loans Commercial ADC      178,972     163,343     160,696     158,739     163,309     150,599 loans Commercial investor 577,813     573,634     552,178     518,029     497,365     487,802 real estate loans Commercial owner occupied real       581,795     582,472     592,823     569,350     563,258     565,820 estate loans Commercial business 357,472     348,180     356,651     332,670     334,979     344,489 loans Leasing             260         439         703         962         1,415       1,974 Consumer loans      396,775     380,697     373,657     368,764     363,114     353,341 Total loans and     2,910,944   2,832,813   2,784,266   2,662,010   2,605,458   2,565,069 leases Allowance for loan  (37,959)    (38,026)    (38,766)    (39,422)    (39,015)    (41,246) and lease losses Investment          980,530     997,584     1,016,609   1,077,951   1,102,209   1,008,693 securities Interest-earning    3,945,643   3,891,223   3,836,912   3,771,825   3,802,682   3,660,809 assets Total assets        4,234,342   4,168,998   4,106,100   4,052,969   4,072,617   3,932,026 Noninterest-bearing 984,700     882,169     836,198     890,319     877,891     832,679 demand deposits Total deposits      3,038,670   2,959,195   2,877,225   2,916,466   2,926,650   2,919,208 Customer repurchase 72,917      67,038      53,842      53,177      54,731      50,302 agreements Total interest-bearing    2,698,887   2,748,064   2,744,869   2,634,324   2,678,490   2,576,831 liabilities Total stockholders' 517,269     510,386     499,363     493,882     485,643     488,947 equity Quarterly average                                                           balance sheets: Residential         $659,172  $633,160  $614,698  $593,335  $579,899  $575,889 mortgage loans Residential         145,968    134,261    125,744    120,676    119,197    120,283 construction loans Commercial ADC      168,063    162,544    156,558    158,557    160,483    148,749 loans Commercial investor 575,283    557,168    522,085    499,896    485,630    474,062 real estate loans Commercial owner occupied real       579,953    584,155    580,808    566,366    561,249    567,723 estate loans Commercial business 348,597    349,734    357,455    331,374    337,843    347,569 loans Leasing             352        567        817        1,152      1,644      2,510 Consumer loans      390,076    377,822    373,017    366,562    360,842    357,366 Total loans and     2,867,464  2,799,411  2,731,182  2,637,918  2,606,787  2,594,151 leases Investment          991,135     1,012,701   1,055,432   1,097,643   1,047,726   1,051,769 securities Interest-earning    3,893,843   3,845,513   3,817,033   3,770,855   3,692,215   3,677,444 assets Total assets        4,157,559   4,105,225   4,082,839   4,039,069   3,959,907   3,946,578 Noninterest-bearing 899,287     825,968     872,532     862,046     838,502     797,926 demand deposits Total deposits      2,965,329   2,876,641   2,901,814   2,903,926   2,892,704   2,860,451 Customer repurchase 68,880     62,864     57,682     56,766     55,941     52,622 agreements Total interest-bearing    2,716,537   2,749,459   2,679,812   2,659,406   2,599,704   2,631,198 liabilities Total stockholders' 511,738     503,851     494,779     483,811     489,014     483,664 equity Financial Measures                                                          Average equity to   12.31%      12.27%      12.12%      11.98%      12.35%      12.26% average assets Investment securities to       24.85%      25.64%      26.50%      28.58%      28.99%      27.55% earning assets Loans to earning    73.78%      72.80%      72.57%      70.58%      68.52%      70.07% assets Loans to assets     68.75%      67.95%      67.81%      65.68%      63.98%      65.24% Loans to deposits   95.80%      95.73%      96.77%      91.28%      89.03%      87.87% Capital measures:                                                           Tier 1 leverage(1) 11.37%      11.43%      11.32%      11.29%      11.28%      11.07% Tier 1 capital to risk-weighted       14.48%      14.64%      14.42%      14.45%      14.30%      14.23% assets(1) Total regulatory capital to          15.66%      15.85%      15.65%      15.70%      15.55%      15.48% risk-weighted assets(1) Book value per      $20.63    $20.38    $19.98    $19.77    $19.45    $19.59 share Outstanding shares  25,069,700 25,043,482 24,990,021 24,985,146 24,967,558 24,954,892 (1) Estimated ratio                                                         at June 30, 2014                                                                                                                                      Sandy Spring Bancorp, Inc. and                                     Subsidiaries LOAN PORTFOLIO QUALITY DETAIL -                                    UNAUDITED                                                                                  2014                2013 (Dollars in       June 30, March 31, December  September  June 30, March 31, thousands)                            31,       30, Non-Performing                                                   Assets: Loans and leases                                                 90 days past due: Commercial        $1      $--     $--     $--      $15     $-- business Commercial real                                                  estate: Commercial AD&C   --       --       --       --        --       -- Commercial investor real     --       --       --       --        --       -- estate Commercial owner occupied real     --       --       --       --        --       -- estate Leasing           --       --       --       --        --       -- Consumer          3        --       1        10        --       54 Residential real                                                 estate: Residential       --       --       --       --        --       -- mortgage Residential       --       --       --       --        --       -- construction Total loans and leases 90 days    4        --       1        10        15       54 past due Non-accrual loans                                                and leases: Commercial        4,309    3,272    3,400    4,050     4,483    4,012 business Commercial real                                                  estate: Commercial AD&C   3,739    4,133    4,127    5,086     5,885    5,826 Commercial investor real     6,731    7,284    6,802    6,877     11,741   12,353 estate Commercial owner occupied real     10,868   7,150    5,936    4,202     5,413    5,346 estate Leasing           --       --       --       --        --       -- Consumer          2,058    2,115    2,259    2,004     2,305    2,388 Residential real                                                 estate: Residential       4,501    5,025    5,735    5,643     5,581    5,393 mortgage Residential       2,143    2,304    2,315    2,327     2,558    3,258 construction Total non-accrual 34,349   31,283   30,574   30,189    37,966   38,576 loans and leases Total restructured      7,364    7,411    9,459    8,054     8,213    10,839 loans - accruing Total non-performing    41,717   38,694   40,034   38,253    46,194   49,469 loans and leases Other assets and real estate owned 1,967    1,619    1,338    1,662     4,831    5,250 (OREO) Total non-performing    $43,684 $40,313 $41,372 $39,915  $51,025 $54,719 assets                                                                                  For the quarter ended,                  June 30,  March 31, December September June 30,  March 31,                                       31,      30, (Dollars in       2014      2014      2013      2013       2013      2013 thousands) Analysis of Non-accrual Loan                                                 and Lease Activity: Balance at beginning of      $31,283 $30,574 $30,189 $37,966  $38,576 $47,548 period Non-accrual balances          (390)    (281)    (365)    (723)     (1,426)  (92) transferred to OREO Non-accrual balances          (357)    (513)    (922)    (4,995)   (668)    (2,175) charged-off Net payments or   (1,580)  (1,073)  (971)    (13,547)  (3,560)  (11,768) draws Loans placed on   5,393    2,576    3,546    11,488    5,044    5,493 non-accrual Non-accrual loans --       --       (903)    --        --       (430) brought current Balance at end of $34,349 $31,283 $30,574 $30,189  $37,966 $38,576 period                                                                 Analysis of Allowance for                                                    Loan Losses: Balance at beginning of      $38,026 $38,766 $39,422 $39,015  $41,246 $42,957 period Provision (credit) for loan 158      (982)    586      1,128     (2,876)  78 and lease losses Less loans charged-off, net                                                 of recoveries: Commercial        28       (768)    384      1         (32)     1,744 business Commercial real                                                  estate: Commercial AD&C   --       --       85       (616)     (1,444)  (1,020) Commercial investor real     (23)     (5)      23       1,243     123      31 estate Commercial owner occupied real     265      --       (82)     (284)     100      81 estate Leasing           --       --       --       (6)       (4)      -- Consumer          11       331      488      169       490      508 Residential real                                                 estate: Residential       (27)     203      347      216       22       447 mortgage Residential       (29)     (3)      (3)      (2)       100      (2) construction Net charge-offs   225      (242)    1,242    721       (645)    1,789 Balance at end of $37,959 $38,026 $38,766 $39,422  $39,015 $41,246 period                                                                 Asset Quality                                                    Ratios: Non-performing loans to total    1.43%     1.37%     1.44%     1.44%      1.77%     1.93% loans Non-performing assets to total   1.03%     0.97%     1.01%     0.98%      1.25%     1.39% assets Allowance for loan losses to    1.30%     1.34%     1.39%     1.48%      1.50%     1.61% loans Allowance for loan losses to    90.99%    98.27%    96.83%    103.06%    84.46%    83.38% non-performing loans Net charge-offs in quarter to     0.03%     (0.04)%   0.18%     0.11%      (0.10)%   0.28% average loans    Sandy Spring Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED                                                                                           Three Months Ended June 30,                    2014                               2013                                         Annualized                    Annualized                    Average      (1)     Average     Average    (1)     Average (Dollars in thousands and       Balances     Interest  Yield/Rate  Balances   Interest  Yield/Rate tax-equivalent) Assets                                                                  Residential         $659,172   $5,685  3.45%       $579,899 $5,310  3.68% mortgage loans (2) Residential         145,968      1,359     3.73        119,197    1,032     3.47 construction loans Commercial ADC      168,063      2,180     5.20        160,483    2,106     5.26 loans Commercial investor 575,283      7,139     4.98        485,630    6,184     5.11 real estate loans Commercial owner occupied real       579,953      7,146     5.09        561,249    7,302     5.34 estate loans Commercial business 348,597      4,054     4.69        337,843    4,456     5.15 loans Leasing             352          6         6.30        1,644      30        7.22 Consumer loans      390,076      3,208     3.32        360,842    3,101     3.47 Total loans and     2,867,464    30,777    4.34        2,606,787  29,521    4.57 leases (3) Taxable securities  688,793      4,263     2.48        746,266    4,289     2.30 Tax-exempt          302,342      3,260     4.32        301,460    3,257     4.32 securities (4) Interest-bearing    34,770       22        0.25        37,227     24        0.25 deposits with banks Federal funds sold  474          --       0.22        475        --       0.22 Total interest-earning    3,893,843    38,322    3.97        3,692,215  37,091    4.03 assets                                                                        Less:allowance for loan and lease      (38,342)                         (41,605)             losses Cash and due from   44,987                           45,603               banks Premises and        45,696                           47,501               equipment, net Other assets        211,375                          216,193              Total assets        $4,157,559                     $                                                                          3,959,907                                                                        Liabilities and Stockholders'                                                           Equity Interest-bearing    $477,018   102      0.09%       $442,808 91       0.08% demand deposits Regular savings     262,078      49       0.07        240,410    58       0.10 deposits Money market        865,134      273       0.13        875,282    378       0.17 savings deposits Time deposits       461,812      769       0.67        495,702    869       0.70 Total interest-bearing    2,066,042    1,193     0.23        2,054,202  1,396     0.27 deposits Other borrowings    68,880       37        0.22        56,711     38        0.27 Advances from FHLB  546,615      3,233     2.37        453,791    3,189     2.82 Subordinated        35,000       219       2.50        35,000     224       2.56 debentures Total interest-bearing    2,716,537    4,682     0.69        2,599,704  4,847     0.75 liabilities                                                                        Noninterest-bearing 899,287                          838,502              demand deposits Other liabilities   29,997                           32,687               Stockholders'       511,738                          489,014              equity Total liabilities                                      $ and stockholders'   $4,157,559                     3,959,907            equity                                                                        Net interest income             $33,640 3.28%                 $32,244 3.28% and spread Less: tax-equivalent                  1,331                         1,312     adjustment Net interest income             $32,309                      $30,932                                                                         Interest income/earning                           3.97%                          4.03% assets Interest expense/earning                          0.49                           0.52 assets Net interest margin                      3.48%                          3.51%                                                                         (1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.3 million and $1.3 million in 2014 and 2013, 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                                                                                         Six Months Ended June 30,                    2014                             2013                                       Annualized                    Annualized                    Average    (1)     Average     Average    (1)     Average (Dollars in thousands and       Balances   Interest  Yield/Rate  Balances   Interest  Yield/Rate tax-equivalent) Assets                                                                Residential         $646,238 $11,191 3.46%       $577,905 $10,686 3.70% mortgage loans (2) Residential         140,147    2,612     3.76        119,737    2,036     3.43 construction loans Commercial ADC      165,319    4,253     5.19        154,648    4,102     5.35 loans Commercial investor 566,275    13,872    4.94        479,878    12,319    5.18 real estate loans Commercial owner occupied real       582,042    14,213    5.08        564,468    15,103    5.53 estate loans Commercial business 349,162    8,091     4.67        342,679    9,042     5.18 loans Leasing             459        12        5.22        2,075      68        6.53 Consumer loans      383,983    6,326     3.34        359,114    6,164     3.49 Total loans and     2,833,625  60,570    4.34        2,600,504  59,520    4.64 leases (3) Taxable securities  699,460    8,715     2.49        750,167    8,594     2.29 Tax-exempt          302,398    6,527     4.32        299,569    6,524     4.36 securities (4) Interest-bearing    33,853     42        0.25        34,156     43        0.25 deposits with banks Federal funds sold  475        --       0.22        475        --       0.22 Total interest-earning    3,869,811  75,854    3.96        3,684,871  74,681    4.08 assets                                                                      Less:allowance for loan and lease      (38,864)                       (42,650)             losses Cash and due from   45,268                         46,242               banks Premises and        45,787                         47,832               equipment, net Other assets        209,535                        216,984              Total assets        $                             $                                       4,131,537                        3,953,279                                                                      Liabilities and Stockholders'                                                         Equity Interest-bearing    $468,677 194      0.08%       $433,200 183      0.09% demand deposits Regular savings     255,667    97       0.08        237,467    106      0.09 deposits Money market        871,464    546       0.13        883,765    789       0.18 savings deposits Time deposits       462,591    1,540     0.67        503,908    1,773     0.71 Total interest-bearing    2,058,399  2,377     0.23        2,058,340  2,851     0.28 deposits Other borrowings    65,889     75        0.23        61,132     87        0.29 Advances from FHLB  573,619    6,451     2.27        460,892    6,412     2.81 Subordinated        35,000     437       2.50        35,000     450       2.57 debentures Total interest-bearing    2,732,907  9,340     0.69        2,615,364  9,800     0.76 liabilities                                                                      Noninterest-bearing 862,830                        818,326              demand deposits Other liabilities   27,984                         33,235               Stockholders'       507,816                        486,354              equity Total liabilities   $                               $ and stockholders'   4,131,537                      3,953,279            equity                                                                      Net interest income           $66,514 3.27%                 $64,881 3.32% and spread Less: tax-equivalent                2,613                         2,623     adjustment Net interest income           $63,901                      $62,258                                                                       Interest income/earning                         3.96%                          4.08% assets Interest expense/earning                        0.48                           0.53 assets Net interest margin                    3.48%                          3.55%                                                                      (1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 39.88% for 2014 and2013. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $2.6 million and $2.6 million in 2014 and 2013, 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.  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          Web site: www.sandyspringbank.com  Sandy Spring Bank Logo  
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