Sandy Spring Bancorp Reports Net Income of $10.6 Million for the Second Quarter
Company Release - 07/21/2016 07:00
OLNEY, Md., July 21, 2016 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the second quarter of 2016 of $10.6 million ($0.44 per diluted share) compared to net income of $10.3 million ($0.42 per diluted share) for the second quarter of 2015 and net income of $10.8 million ($0.45 per diluted share) for the first quarter of 2016.
For the six months ended June 30, 2016, net income was $21.5 million ($0.89 per diluted share) compared to net income of $21.6 million ($0.87 per diluted share) for the first six months of 2015.
“During the second quarter, pre-tax, pre-provision income climbed to its highest level since the third quarter of 2013, a quarter which included the effect of significant loan related recoveries. This quarter’s pre-tax, pre-provision income was driven by significant loan and deposit growth. This growth enabled us to shift assets from the investment portfolio to higher yielding loans during the quarter,” said Dan Schrider, President and Chief Executive Officer.
“These core activities coupled with the restructuring of borrowings with lower rates and a reduced reliance on borrowed funds during the quarter should make a positive contribution to our prospective earnings run rate,” said Schrider.
Second Quarter Highlights:
- Pre-tax, pre-provision income increased 11% compared with the second quarter of 2015 and 8% compared to the first quarter of 2016.
- Total loans increased 12% compared to the second quarter of 2015 and 3% compared to the first quarter of 2016. Commercial loans increased 15% and residential loans increased 9% over the prior year.
- Total deposits grew 8% from the prior year and 3% from the prior quarter.
- The net interest margin was 3.51% for the second quarter of 2016, compared to 3.42% for the second quarter of 2015 and 3.44% for the first quarter of 2016.
- During the second quarter, the Company prepaid $35 million in FHLB advances and extinguished $5 million in subordinated debentures. These transactions were essentially neutral with respect to net income for the quarter; however, they will have a positive impact on future interest expense.
Review of Balance Sheet and Credit Quality
Total assets grew 5% to $4.7 billion at June 30, 2016 compared to $4.5 billion at June 30, 2015. This growth was driven by a 12% increase in the loan portfolio as total loans ended the period at $3.7 billion.
At June 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 June 30, 2015. Total deposits and certain other short-term borrowings that comprise the funding sources derived from customers, increased 8% compared to June 30, 2015.
Tangible common equity totaled $439 million at June 30, 2016 compared to $435 million at June 30, 2015. The ratio of tangible common equity to tangible assets decreased to 9.44% at June 30, 2016 from 9.84% at June 30, 2015 due primarily to the growth in assets and share repurchases over the preceding 12 months. Dividends per common share were $0.48 per share for the first six months of 2016 compared to $0.44 per common share for the first six months of 2015, a 9% increase. At June 30, 2016, the Company had a total risk-based capital ratio of 13.57%, a common equity tier 1 risk-based capital ratio of 11.63%, a tier 1 risk-based capital ratio of 12.42% and a tier 1 leverage ratio of 10.29%.
Non-performing loans totaled $31.4 million at June 30, 2016 compared to $37.3 million at June 30, 2015 and $34.5 million at December 31, 2015. The level of non-performing loans to total loans decreased to 0.85% at June 30, 2016 compared to 1.13% at June 30, 2015 primarily due to the growth in the overall loan portfolio.
Loan charge-offs, net of recoveries, totaled $1.3 million for the second quarter of 2016 compared to negligible net recoveries for the second quarter of 2015 and $0.4 million in charge-offs for the first quarter of 2016. The allowance for loan and lease losses represented 1.18% of outstanding loans and leases and 138% of non-performing loans at June 30, 2016 compared to 1.18% of outstanding loans and leases and 104% of non-performing loans at June 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 second quarter of 2016 increased 8% compared to the second quarter of 2015. The net interest margin was 3.51% for the second quarter of 2016 compared to 3.42% for the second quarter of 2015 due primarily to a combination of loan growth and the previously mentioned prepayment of FHLB advances and subordinated debentures.
The provision for loan and lease losses was $3.0 million for the second quarter of 2016 compared to a charge of $1.2 million for the second quarter of 2015 and $1.2 million for the first quarter of 2016. The increase in the current quarter’s charge versus the prior year’s quarter reflects the growth in the loan portfolio.
Non-interest income increased to $12.8 million for the second quarter of 2016 compared to $12.1 million for the second quarter of 2015. The increase in non-interest income for the quarter compared to the prior year quarter was due primarily to a $1.2 million gain on the extinguishment of $5 million in subordinated debentures. Excluding this transaction, non-interest income decreased 5% as income from wealth management decreased due to the sale of a portion of the assets under management which occurred in the first quarter of 2016.
Non-interest expenses increased 5% to $30.9 million for the second quarter of 2016 compared to $29.5 million in the second quarter of 2015. This increase was driven by the prepayment penalties of $1.4 million for the early payoff of $35 million in high-rate FHLB advances during the second quarter. Excluding the prepayment penalties, non-interest expenses remained level compared to the prior year quarter. The non-GAAP efficiency ratio was 59.12% for the second quarter of 2016 compared to 61.35% for the second quarter of 2015.
Net interest income for the first six months of 2016 increased 8% compared to the first six 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, net interest margin was 3.47% for the first six months of 2016 compared to 3.43% for the first six months of 2015.
The provision for loan and lease losses was a charge of $4.2 million for the first six months of 2016 compared to a charge of $1.8 million for the first six months of 2015 reflecting the growth in the loan portfolio over the prior year period.
Non-interest income increased 3% to $26.1 million for the first six months of 2016 compared to $25.3 million for the first six months of 2015. This increase was driven by $1.9 million in gains on securities sales and the extinguishment of subordinated debentures discussed previously. Excluding these transactions, non-interest income decreased 9% due to a decrease in income from wealth management resulting from the sale of a portion of the assets under management and a decrease in income from mortgage banking as mortgage sales volumes declined.
Non-interest expenses increased 8% to $63.2 million for the first six months of 2016 compared to $58.7 million for the first six months of 2015. 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 2% 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 60.47% for the first six months of 2016 compared to 60.75% for the first six months of 2015.
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 1-866-235-9910. 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) August 4, 2016. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10088183.
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 $4.7 billion in assets, the bank operates 45 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 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, 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.
Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED