Sandy Spring Bancorp Reports Net Income of $9.1 Million for the Fourth Quarter and $38.2 Million for the Full Year
Company Release - 01/22/2015 10:32
OLNEY, Md., Jan. 22, 2015 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today reported net income for the fourth quarter of 2014 of $9.1 million ($0.36 per diluted share) compared to net income of $9.6 million ($0.38 per diluted share) for the fourth quarter of 2013 and net income of $11.1 million ($0.44 per diluted share) for the third quarter of 2014.
Net income for the year ended December 31, 2014 was $38.2 million ($1.52 per diluted share) compared to net income of $44.4 million ($1.77 per diluted share) for the prior year. For comparison purposes, the current year includes $6.5 million in litigation expenses associated with a particular legal action while the prior year's results includes a benefit of $4.5 million in interest income and professional fees associated with the resolution of a non-performing loan relationship.
"Considering the impact on operating results of the items mentioned above, the Company produced solid core results in 2014 driven by notable growth in its loan and deposit portfolios and the strong performance of its wealth management business. We are proud of our accomplishments considering the market volatility and extremely competitive environment that existed throughout the year," said Daniel J. Schrider, President and Chief Executive Officer.
"Looking to the future, we are making appropriate investments in our client-facing facilities and systems as we adapt our delivery channels to the preferences of our clients. We anticipate this will provide the opportunity for further growth in our franchise while we continue to render outstanding service to our clients," said Schrider.
Fourth Quarter Highlights:
- Total loans increased 12% compared to the fourth quarter of 2013 and 5% compared to the third quarter of 2014. Growth over the prior year exceeded 10% in each of the three major portfolio segments. Overall the entire portfolio grew $343 million from the prior year.
- Combined noninterest-bearing and interest-bearing transaction account balances increased 18% to $1.5 billion at December 31, 2014 as compared to $1.3 billion at December 31, 2013.
- The provision for loan and lease losses for the fourth quarter of 2014 was a charge of $0.9 million compared to a charge of $0.6 million for the fourth quarter of 2013 and a credit of $0.2 million for the third quarter of 2014. The credit quality of the loan portfolio continues to exhibit stability while outstanding loans increased significantly over the prior year.
- The net interest margin was 3.44% for the fourth quarter of 2014, compared to 3.53% for the fourth quarter of 2013 and 3.42% for the third quarter of 2014.
- Non-interest income decreased 3% for the quarter compared to the prior year quarter primarily due to a decrease in other non-interest income. This decrease was somewhat offset by a 9% increase in income from wealth management activities.
- Non-interest expense for the quarter increased 4% over the prior year quarter due mainly to $1.1 million in non-recurring expenses in the quarter for bankcard losses and an adjustment to insurance receivables.
Review of Balance Sheet and Credit Quality
Total assets grew 7% to $4.4 billion at December 31, 2014 compared to $4.1 billion at December 31, 2013. This growth was driven by a 12% increase in the loan portfolio as total loans and leases ended the period at $3.1 billion.
Deposits and certain other short-term borrowings that comprise all the funding sources derived from customers, increased 7% compared to the prior year end. At December 31, 2014, combined noninterest-bearing and interest-bearing checking account balances, an important performance driver of multiple-product banking relationships with clients, increased 18% compared to balances at December 31, 2013.
Tangible common equity totaled $438 million at December 31, 2014 compared to $417 million at December 31, 2013, resulting in a decrease in the ratio of tangible common equity to tangible assets to 10.15% at December 31, 2014 from 10.37% at December 31, 2013. Dividends per common share were $0.76 per share for the year compared to $0.64 per common share for 2013, a 19% increase. At December 31, 2014, the Company had a total risk-based capital ratio of 15.06%, a tier 1 risk-based capital ratio of 13.95% and a tier 1 leverage ratio of 11.26%.
Non-performing loans totaled $34.0 million at December 31, 2014 compared to $40.0 million at December 31, 2013 and $43.7 million at September 30, 2014. The level of non-performing loans to total loans decreased to 1.09% at December 31, 2014 compared to 1.44% at December 31, 2013. The year-over-year decrease was driven primarily by loan pay-offs and a reduction in restructured loans as such loans have performed to allow them to no longer be classified as non-performing.
Loan charge-offs, net of recoveries, totaled $0.6 million for the fourth quarter of 2014 compared to net loan charge-offs of $1.2 million for the fourth quarter of 2013 and net loan charge-offs of $0.2 million for the third quarter of 2014. The allowance for loan and lease losses represented 1.21% of outstanding loans and leases and 111% of non-performing loans at December 31, 2014 compared to 1.39% of outstanding loans and leases and 97% of non-performing loans at December 31, 2013. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.
Income Statement Review
Net interest income for the fourth quarter of 2014 increased 3% compared to the fourth quarter of 2013. The net interest margin was 3.44% for the fourth quarter of 2014 compared to 3.53% for the fourth quarter of 2013.
The provision for loan and lease losses was a charge of $0.9 million for the fourth quarter of 2014 compared to a charge of $0.6 million for the fourth quarter of 2013 and a credit of $0.2 million for the third quarter of 2014. The current quarter's charge reflects the growth in the loan portfolio over the prior quarters. This growth in the loan portfolio produced an effect that more than offset the lower charge-offs and reduced problem loan migration into non-performing status during the past twelve months.
Non-interest income decreased 3% to $11.3 million for the fourth quarter of 2014 compared to $11.7 million for the fourth quarter of 2013. The decrease in non-interest income for the quarter compared to the prior year quarter was due primarily to lower other non-interest income from sales and dispositions of loans and fixed assets which occurred in the prior year quarter.
Non-interest expenses increased 4% to $30.5 million for the fourth quarter of 2014 compared to $29.3 million in the fourth quarter of 2013. The current quarter included increases in other non-interest expenses for bankcard losses and an adjustment to uncollectible insurance receivables. The non-GAAP efficiency ratio was 65.89% for the fourth quarter of 2014 compared to 63.62% for the fourth quarter of 2013.
Net interest income for the year ended December 31, 2014 was relatively level compared to the prior year. Excluding interest recoveries of $3.7 million in the prior year, net interest income would have increased 3%. The net interest margin decreased to 3.45% in 2014 compared to 3.63% in 2013. The prior year's margin was positively impacted by loan recoveries on commercial loans. Exclusive of those recoveries the net interest margin for 2013 would have been 3.53%
The provision for loan and lease losses was a credit of $0.2 million for the year ended December 31, 2014 compared to a credit of $1.1 million for the year ended December 31, 2013. The credits in the provision for each year were driven by a decline in historical losses, improvement in the overall credit quality of the loan portfolio and problem loan resolutions and recoveries whose impact more than offset the effect of loan growth.
Non-interest income decreased 1% to $46.9 million for 2014 compared to $47.5 million for 2013. This decrease was driven primarily by the decrease in income from mortgage banking activities as loan origination volumes declined. Other non-interest income also decreased due to sales and dispositions of loans and fixed assets and a non-recurring legal settlement, all of which occurred in the prior year. The impact of these decreases was somewhat mitigated by an increase in wealth management income of 9% due to higher assets under management.
Non-interest expenses increased to $120.8 million for 2014 compared to $111.5 million for 2013 due primarily to the impact of $6.5 million in litigation expenses. Excluding the impact of the litigation expenses related to an adverse jury verdict, non-interest expense for the year ended December 31, 2014 was $114.3 million. This increase was driven mainly by higher bankcard losses and an adjustment to uncollectible insurance receivables. The non-GAAP efficiency ratio was 62.48% for 2014 compared to 60.06% for 2013. Excluding the loan interest recoveries in 2013, the non-GAAP efficiency ratio was 61.71%.
Conference Call
The Company's management will host a conference call to discuss its fourth 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. Participants may call 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) February 2, 2015. A replay of the teleconference will be available through the same time period by calling 877.344.7529 under conference call number 10058497.
About Sandy Spring Bancorp, Inc.
With $4.4 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 Bank traces its origin to 1868, making it among the oldest banking institutions in the region. 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 offers a broad range of commercial banking, retail banking and trust services through 44 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.
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