Sandy Spring Bancorp Reports Net Income of $10.8 Million for the First Quarter
Company Release - 04/21/2016 07:00
OLNEY, Md., April 21, 2016 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the first quarter of 2016 of $10.8 million ($0.45 per diluted share) compared to net income of $11.2 million ($0.45 per diluted share) for the first quarter of 2015 and net income of $12.8 million ($0.52 per diluted share) for the fourth quarter of 2015.
“Our financial performance in the first quarter was driven by our consistently balanced growth in all lending areas and ongoing deposit gathering efforts. Because of this growth and its positive impact on our net interest income, it allowed us to execute on certain initiatives that initially reflect a lower net income for the quarter when compared to the prior year quarter,” said Daniel J. Schrider, President and Chief Executive Officer.
“We expect these initiatives, such as the early payoff of $40 million in high cost FHLB advances and the sale of a portfolio of wealth assets under management, to make a positive contribution to future earnings and also improve our ability to deliver our products and services in a more efficient manner,” said Schrider.
First Quarter Highlights:
- Total loans increased 13% compared to the first quarter of 2015 and 2% compared to the fourth quarter of 2015. Growth over the prior year was 10% or better in both the residential mortgage and commercial loan portfolios.
- Combined noninterest-bearing and interest-bearing transaction account balances increased 7% to $1.7 billion at March 31, 2016 as compared to $1.5 billion at March 31, 2015.
- The net interest margin was 3.44% for the first quarter of 2016, compared to 3.44% for the first quarter of 2015 and 3.45% for the fourth quarter of 2015.
- During the quarter, the Company prepaid $40 million in FHLB advances and incurred prepayment penalties of $1.8 million. This transaction was funded primarily by the sale of available-for-sale mortgage-backed securities. While the combination of these transactions was revenue neutral with respect to the first quarter results, the Company expects to realize a positive impact to its net interest margin in future periods.
- In February, the Company completed the sale of a portion of its wealth assets under management, which was accompanied by the reduction in advisor headcount by eight persons, as the Company took steps to improve the profitability of its wealth management business.
- During the first quarter of 2016, the Company repurchased 512,000 shares at an average price of $25.90 per share as part of its existing share repurchase program.
Review of Balance Sheet and Credit Quality
Total assets grew 7% to $4.7 billion at March 31, 2016 compared to $4.4 billion at March 31, 2015. This growth was driven by a 13% increase in the loan portfolio as total loans and leases ended the period at $3.6 billion.
At March 31, 2016, combined noninterest-bearing and interest-bearing checking account balances, an important performance driver of multiple-product banking relationships with clients, increased 7% compared to balances at March 31, 2015. Total deposits and certain other short-term borrowings that comprise the funding sources derived from customers, increased 10% compared to March 31, 2015.
Tangible common equity totaled $434 million at March 31, 2016 compared to $435 million at March 31, 2015. The ratio of tangible common equity to tangible assets decreased to 9.37% at March 31, 2016 from 10.08% at March 31, 2015 due primarily to the growth in assets and share repurchases. Dividends per common share were $0.24 per share for the quarter compared to $0.22 per common share for the first quarter of 2015, a 9% increase. At March 31, 2016, the Company had a total risk-based capital ratio of 14.02%, a common equity tier 1 risk-based capital ratio of 11.92%, a tier 1 risk-based capital ratio of 12.88% and a tier 1 leverage ratio of 10.23%.
Non-performing loans totaled $36.1 million at March 31, 2016 compared to $36.0 million at March 31, 2015 and $34.5 million at December 31, 2015. The level of non-performing loans to total loans decreased to 1.01% at March 31, 2016 compared to 1.14% at March 31, 2015 due to growth in the overall loan portfolio.
Loan charge-offs, net of recoveries, totaled $0.4 million for the first quarter of 2016 compared to $0.9 million for the first quarter of 2015 and $0.6 million for the fourth quarter of 2015. The allowance for loan and lease losses represented 1.17% of outstanding loans and leases and 116% of non-performing loans at March 31, 2016 compared to 1.18% of outstanding loans and leases and 104% of non-performing loans at March 31, 2015. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.
During the first quarter of 2016, the Company transferred its investments held-to-maturity portfolio, which totaled $208.3 million at December 31, 2015, to available-for-sale. These securities will provide it with additional liquidity to fund future loan growth and other corporate activities.
Income Statement Review
Net interest income for the first quarter of 2016 increased 8% compared to the first quarter of 2015. The net interest margin was 3.44% for the first quarter of both 2016 and 2015 as growth in earning assets was offset by higher funding costs.
The provision for loan and lease losses was a charge of $1.2 million for the first quarter of 2016 compared to a charge of $0.6 million for the first quarter of 2015 and a charge of $1.9 million for the fourth quarter of 2015. The current quarter’s charge reflects the growth in the loan portfolio over the prior year quarter.
Non-interest income increased to $13.4 million for the first quarter of 2016 compared to $13.2 million for the first quarter of 2015. The increase in non-interest income for the quarter compared to the prior year quarter was due primarily to $1.8 million in gains on investments securities from sales of $40 million in securities to fund the prepayment of FHLB advances discussed previously. Excluding this transaction, non-interest income decreased 12% due to a decrease in income from wealth management due to the sale of a portion of the assets under management and a decrease in income from mortgage banking due primarily to lower mortgage sales volumes.
Non-interest expenses increased 11% to $32.3 million for the first quarter of 2016 compared to $29.2 million in the first quarter of 2015. This increase was due mainly to prepayment penalties of $1.8 million for the early payoff of $40 million in high-rate FHLB advances. Excluding the prepayment penalties, non-interest expenses increased 5% due primarily to higher salaries and benefits. The non-GAAP efficiency ratio was 61.84% for the first quarter of 2016 compared to 60.53% for the first quarter of 2015.
Conference Call
The Company’s management will host a conference call to discuss its first 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) May 5, 2016. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10083087.
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