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Sandy Spring Bancorp Reports First Quarter Earnings of $75.5 Million

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OLNEY, Md., April 22, 2021 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq-SASR), the parent company of Sandy Spring Bank, today reported net income of $75.5 million ($1.58 per diluted common share) for the first quarter of 2021. The current quarter's result compares to net income of $10.0 million ($0.28 per diluted common share) for the first quarter of 2020 and net income of $56.7 million ($1.19 per diluted common share) for the fourth quarter of 2020. 

Core earnings for the current quarter, which exclude the impact of the provision for credit losses and provision on unfunded loan commitments, merger and acquisition expense, loss on FHLB redemptions, amortization of intangibles and investment securities gains, each on an after-tax basis, were $56.9 million ($1.20 per diluted common share), compared to $29.6 million ($0.85 per diluted common share) for the quarter ended March 31, 2020 and $55.7 million ($1.18 per diluted common share) for the quarter ended December 31, 2020.

The current quarter's provision for credit losses was a credit of $34.7 million as compared to a credit of $4.5 million for the fourth quarter of 2020. The current quarter's large credit for the provision for credit losses compared to the prior quarter is principally the result of a decline in the forecasted unemployment rate and, to a lesser degree, improvements in other forecasted macroeconomic indicators. 

"We delivered a solid first quarter. We are pleased with the stability in the margin, the contributions of our fee-based lines of business, the improved economic forecast and the resiliency of our loan portfolio's credit quality. Our credit outlook is strong, and we are ready to help our clients reopen, recover and emerge stronger than ever," said Daniel J. Schrider, President and CEO.

"We also look forward to entering the next phase of our return-to-work plan. We will apply the lessons we have learned about remote work and how we can use technology to do our jobs more effectively, but it is our goal to welcome our employees back to our offices in the months ahead. As a company that prioritizes people and relationships, we believe that in-person collaboration is what is best for our culture and how we do business."

First Quarter Highlights:

  • Total assets at March 31, 2021, grew 44% to $12.9 billion compared to March 31, 2020, primarily due to the Revere Bank ("Revere") acquisition in the second quarter of 2020. During this period, the participation in the Paycheck Protection Program ("PPP" or "PPP Program") resulted in the addition of $1.3 billion in outstanding commercial business loans. As a result of these strategic initiatives, loans and deposits grew by 55% and 62%, respectively. 
     
  • The net interest margin was 3.56% for the first quarter of 2021, compared to 3.29% for the same quarter of 2020, and 3.38% for the fourth quarter of 2020. Excluding the impact of the amortization of the fair value marks derived from acquisitions, the current quarter's net interest margin would have been 3.46%, compared to 3.27% for first quarter of 2020, and 3.31% for the fourth quarter of 2020.
     
  • The provision for credit losses was a credit of $34.7 million for the current quarter compared to the prior quarter's credit to the provision of $4.5 million. The significant credit to the provision was primarily the result of the improvement in the forecasted unemployment rate.
     
  • Non-interest income for the current quarter increased by 59% or $10.7 million compared to the prior year quarter, as a result of a 235% increase in income from mortgage banking activities and 25% growth in wealth management income as a result of the acquisition of Rembert Pendleton Jackson ("RPJ") in the first quarter of the prior year.
     
  • Non-interest expense increased $20.4 million or 43% for the first quarter of 2021, compared to the prior year quarter. This increase was driven primarily by two factors: the impact of the acquisitions of Revere and RPJ, which increased compensation and operational costs, in addition to intangible asset amortization, and $9.1 million in prepayment penalties incurred on the early redemption of FHLB advances in the first quarter of the current year.
     
  • Return on average assets ("ROA") for the quarter ended March 31, 2021 was 2.39% and return on average tangible common equity ("ROTCE") was 28.47%. This compares to ROA of 1.78% and ROTCE of 21.89% for the prior quarter. The non-GAAP efficiency ratio for the first quarter of 2021 was 42.65% compared to 45.09% for the fourth quarter of 2020.
     
  • During the quarter, the dividend was increased to $0.32 from $0.30 per common share.

Balance Sheet and Credit Quality

Total assets grew to $12.9 billion at March 31, 2021, as compared to $8.9 billion at March 31, 2020. Year-over-year asset growth was primarily the result of the acquisition of Revere in April 2020, in addition to the Company's participation in the PPP program. During this period, total loans grew by 55% to $10.4 billion at March 31, 2021, compared to $6.7 billion at March 31, 2020. Excluding PPP loans, total loans grew 36% to $9.1 billion at March 31, 2021 as compared to the prior year quarter. The 2020 acquisition of Revere drove the majority of the increase in commercial loans, which, excluding PPP loans, grew 49% or $2.5 billion. The residential mortgage loan portfolio decreased 8% year-over-year as the majority of loan originations during the past year were sold in the secondary market. Consumer loan growth during the year was 9%, also a result of the acquisition. Deposit growth was 62% during the past twelve months, as noninterest-bearing deposits experienced growth of 94% and interest-bearing deposits grew 48%. This growth was driven primarily by the Revere acquisition and, to a lesser extent, the PPP program.

During the current quarter the Company originated $446.0 million in first and second draw loans under the reinitiated PPP program. During the quarter, the Company recognized $7.9 million of fees into interest income from the total fees received under the program. In addition to processing applications for new loans under the reinitiated PPP program, the Company began accepting digital PPP forgiveness applications. As of April 9, 2021, $218.2 million of the Company's PPP loans have been granted forgiveness by the SBA. 

During the first quarter of 2021, total loans, excluding PPP, declined $194.7 million as compared to December 31, 2020. This decline was a reflection of the high level of early pay-offs coupled with lower seasonally affected loan production. It is believed that this trend is temporary, and that due to the current credit resiliency of the portfolio and significant availability of liquidity, that the Company is well positioned for future loan growth.

At the end of the current quarter, 176 loans with an aggregate balance of $233.0 million remain in deferral status, of which non-accrual loans comprised $56.7 million. Currently, the vast majority of loans that had been granted modifications/deferrals due to pandemic related financial stress have returned to their original payment plans.

Tangible common equity increased to $1.1 billion or 8.90% of tangible assets at March 31, 2021, compared to $726.8 million or 8.51% at March 31, 2020, as a result of the equity issuance in the Revere acquisition. The year-over-year change in tangible common equity also reflects the increase in intangible assets and goodwill associated with the Revere acquisition. Excluding the impact of the PPP program from tangible assets at March 31, 2021, the tangible common equity ratio would be 9.94%. At March 31, 2021, the Company had a total risk-based capital ratio of 15.49%, a common equity tier 1 risk-based capital ratio of 12.09%, a tier 1 risk-based capital ratio of 12.09%, and a tier 1 leverage ratio of 9.14%.

The level of non-performing loans to total loans was 0.94% at March 31, 2021, compared to 0.80% at March 31, 2020, and 1.11% at December 31, 2020. At March 31, 2021, non-performing loans totaled $98.7 million, compared to $54.0 million at March 31, 2020, and $115.5 million at December 31, 2020. During the current quarter, the Company realized the full settlement of $16.0 million in non-accrual loans and recognized $1.3 million in interest income. Non-performing loans include non-accrual loans, accruing loans 90 days or more past due and restructured loans. The year-over-year growth in non-performing loans was driven by two major components: loans placed on non-accrual status and acquired Revere non-accrual loans. Loans placed on non-accrual during the current quarter amounted to $0.4 million compared to $2.4 million for the prior year quarter and $54.7 million for the fourth quarter of 2020. Loans in non-accrual status at quarter end included a small number of large borrowing relationships within the hospitality sector with an aggregate balance of $43.8 million. These large relationships are collateral dependent and required no individual reserves due to sufficient values of the underlying collateral.

The Company recorded net charge-offs of $0.3 million for the first quarter of 2021, as compared to net charge-offs of $0.5 million for both the first quarter of 2020 and fourth quarter of 2020.

At March 31, 2021, the allowance for credit losses was $130.4 million or 1.25% of outstanding loans and 132% of non-performing loans, compared to $165.4 million or 1.59% of outstanding loans and 143% of non-performing loans at December 31, 2020. Excluding PPP loans, the allowance for credit losses to outstanding loans was 1.43% and 1.77%, at March 31, 2021 and December 31, 2020, respectively.

Income Statement Review

Quarterly Results

Net interest income for the first quarter of 2021 increased 63% compared to the first quarter of 2020, driven primarily by the acquisition of Revere. The PPP program contributed $10.9 million to net interest income for the quarter, of which $7.9 million represented PPP fees. The net interest margin for the first quarter of 2021 was 3.56% as compared to 3.29% for the same quarter of the prior year. Excluding the net $2.9 million impact of the amortization of the fair value marks derived from acquisitions, the net interest margin for the current quarter would have been 3.46% compared to the adjusted net interest margin of 3.27% for the first quarter of 2020.

The provision for credit losses was a credit of $34.7 million for the first quarter of 2021, compared to a charge of $24.5 million for the first quarter of 2020, and a credit of $4.5 million for the fourth quarter of 2020. The significant credit in the current quarter's provision for credit losses, compared to the prior quarter's credit to the provision, reflects the impact of the improvement in the most recent forecasted unemployment rate. Other economic metrics and factors also contributed to benefit the current quarter's credit to the provision, which were partially offset by qualitative factors applied in the determination of the allowance.

Non-interest income increased $10.7 million or 59% during the current quarter compared to the same quarter of the prior year. Income from mortgage banking activities increased by $7.1 million during the current quarter compared to the prior year quarter. Mortgage banking income declined to $10.2 million for the three months ended March 31, 2021 compared to $14.5 million for the previous quarter as a result of decreasing margins on mortgages sold during the quarter. Additionally, wealth management income increased $1.8 million as a result of the first quarter 2020 acquisition of RPJ. During the quarter, other non-interest income increased $2.1 million compared to the same quarter of last year due to income from loan pay-off activity. The growth of these three categories of non-interest income more than compensated for the decline in service fee income from the prior year quarter.

Non-interest expense increased 43% or $20.4 million compared to the prior year quarter. The current quarter's results contained prepayment penalties of $9.1 million from the early redemption of $279.0 million of FHLB advances with an average rate of 2.63%. Excluding the impact of the prepayment penalties and merger and acquisition expense, non-interest expense grew 27% year-over-year primarily as a result of the compensation and operational costs relating to the 2020 Revere and RPJ acquisitions, in addition to an increase in FDIC insurance and the amortization of intangible assets.

The effective tax rate for the current quarter was significantly higher compared to the prior year quarter. The first quarter of 2020 included the impact of a tax provision contained in the Coronavirus Aid, Relief, and Economic Security Act that expanded the time permitted to utilize previous net operating losses. The Company applied this change in conjunction with 2018 acquisition of WashingtonFirst Bankshares, Inc. to realize a tax benefit of $1.8 million in the prior year quarter.

The non-GAAP efficiency ratio was 42.65% for the current quarter as compared to 54.76% for the first quarter of 2020, and 45.09% for the fourth quarter of 2020. The decrease in the efficiency ratio (reflecting an increase in efficiency) from the first quarter of last year to the current year quarter was the result of the $50.9 million growth in non-GAAP revenue outpacing the $11.6 million growth in non-GAAP non-interest expense.

Explanation of Non-GAAP Financial Measures

This news release contains financial information and performance measures determined by methods other than in accordance with generally accepted accounting principles in the United States ("GAAP"). The Company's management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. Non-GAAP measures used in this release consist of the following:

  • Tangible common equity and related measures are non-GAAP measures that exclude the impact of goodwill and other intangible assets.
  • The non-GAAP efficiency ratio is non-GAAP in that it excludes amortization of intangible assets, loss on FHLB redemption, merger and acquisition expense and investment securities gains and includes tax-equivalent income.
  • Core earnings and the related measures of core earnings per share, core return on average assets and core return on average tangible common equity reflect net income exclusive of the provision/(credit) for credit losses, provision/(credit) for credit losses on unfunded loan commitments, merger and acquisition expense, amortization of intangible assets, loss on FHLB redemption, and investment securities gains, in each case net of tax. 

These disclosures should not be viewed as a substitute for financial results in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Please refer to the non-GAAP Reconciliation tables included with this release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.

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 Webcast of the conference call is available through the Investor Relations section of the Sandy Spring Website at www.sandyspringbank.com. Participants may call 1-866-235-9910. A password is not necessary. Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available on the website until May 6, 2021. A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10153566.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring Bank, a premier community bank in the Greater Washington, D.C. region. With over 60 locations, the bank offers a broad range of commercial and retail banking, mortgage, private banking, and trust services throughout Maryland, Northern Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton Jackson, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services.

For additional information or questions, please 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
  Website: www.sandyspringbank.com

Media Contact:
Jen Schell
301-570-8331
jschell@sandyspringbank.com

Forward-Looking Statements

Sandy Spring Bancorp's forward-looking statements are subject to the following principal risks and uncertainties: risks, uncertainties and other factors relating to the COVID-19 pandemic, including the length of time that the pandemic continues, the imposition or re-imposition of stay-at-home orders and restrictions on business activities or travel; the effect of the pandemic on the general economy and on the businesses of our borrowers and their ability to make payments on their obligations; the remedial actions and stimulus measures adopted by federal, state and local governments; the inability of employees to work due to illness, quarantine, or government mandates; 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; the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period; 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, 2020, 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
March 31,
  %
(Dollars in thousands, except per share data)   2021   2020   Change  
Results of operations:              
Net interest income   $ 104,600     $ 64,334   63 %
Provision/ (credit) for credit losses   (34,708 )   24,469   n/m  
Non-interest income   28,866     18,168   59  
Non-interest expense   68,173     47,746   43  
Income before income tax expense   100,001     10,287   872  
Net income   75,464     9,987   656  
               
Net income attributable to common shareholders   $ 74,824     $ 9,919   654  
Pre-tax pre-provision pre-merger income (1)   $ 65,338     $ 36,210   80  
               
Return on average assets   2.39
%   0.46 %    
Return on average common equity   20.72
%   3.55 %    
Return on average tangible common equity   28.47
%   5.34 %    
Net interest margin   3.56
%   3.29 %    
Efficiency ratio - GAAP basis (2)   51.08
%   57.87 %    
Efficiency ratio - Non-GAAP basis (2)   42.65
%   54.76 %    
               
Per share data:              
Basic net income per common share   $ 1.59     $ 0.29   448 %
Diluted net income per common share   $ 1.58     $ 0.28   464  
Weighted average diluted common shares   47,415,060     34,743,623   36  
Dividends declared per share   $ 0.32     $ 0.30   7  
Book value per common share   $ 32.04     $ 32.68   (2 )
Tangible book value per common share (1)   $ 23.54     $ 21.27   11  
Outstanding common shares   47,187,389     34,164,672   38  
               
Financial condition at period-end:              
Investment securities   $ 1,472,727     $ 1,250,560   18 %
Loans   10,446,866     6,722,992   55  
Interest-earning assets   12,132,405     8,222,589   48  
Assets   12,873,366     8,929,602   44  
Deposits   10,677,752     6,593,874   62  
Interest-bearing liabilities   7,423,262     5,732,349   29  
Stockholders' equity   1,511,694     1,116,334   35  
               
Capital ratios:              
Tier 1 leverage (3)   9.14
%   8.78 %    
Common equity tier 1 capital to risk-weighted assets (3)   12.09
%   10.23 %    
Tier 1 capital to risk-weighted assets (3)   12.09
%   10.23 %    
Total regulatory capital to risk-weighted assets (3)   15.49
%   14.09 %    
Tangible common equity to tangible assets (4)   8.90
%   8.51 %    
Average equity to average assets   11.54
%   12.99 %    
               
Credit quality ratios:              
Allowance for credit losses to loans   1.25
%   1.28 %    
Non-performing loans to total loans   0.94
%   0.80 %    
Non-performing assets to total assets   0.78
%   0.62 %    
Allowance for credit losses to non-performing loans   132.08
%   159.02 %    
Annualized net charge-offs to average loans (5)   0.01
%   0.03 %    


  n/m - not meaningful
  (1)   Represents a non-GAAP measure.
  (2)   The efficiency ratio - GAAP basis is non-interest expense divided by net interest income plus non-interest income from the Consolidated Statements of Income. The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization, loss on FHLB redemption, and merger and acquisition expense from non-interest expense; securities gains from non-interest income and adds the tax- equivalent adjustment to net interest income. See the Reconciliation Table included with these Financial Highlights.
  (3)   Estimated ratio at March 31, 2021.
  (4)   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. See the Reconciliation Table included with these Financial Highlights.
  (5)   Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.
       

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED

    Three Months Ended
March 31,
(Dollars in thousands)   2021   2020
Pre-tax pre-provision pre-merger income:        
Net income   $ 75,464     $ 9,987  
Plus/ (less)  non-GAAP adjustments:        
Merger and acquisition expense   45     1,454  
Income tax expense   24,537     300  
Provision/ (credit) for credit losses   (34,708 )   24,469  
Pre-tax pre-provision pre-merger income   $ 65,338     $ 36,210  
         
Efficiency ratio (GAAP):        
Non-interest expense   $ 68,173     $ 47,746  
         
Net interest income plus non-interest income   $ 133,466     $ 82,502  
         
Efficiency ratio (GAAP)   51.08
%   57.87 %
         
Efficiency ratio (Non-GAAP):        
Non-interest expense   $ 68,173     $ 47,746  
Less non-GAAP adjustments:        
Amortization of intangible assets   1,697     600  
Loss on FHLB redemption   9,117      
Merger and acquisition expense   45     1,454  
Non-interest expense - as adjusted   $ 57,314     $ 45,692  
         
Net interest income plus non-interest income   $ 133,466     $ 82,502  
Plus non-GAAP adjustment:        
Tax-equivalent income   980     1,108  
Less non-GAAP adjustment:        
Investment securities gains   58     169  
Net interest income plus non-interest income - as adjusted   $ 134,388     $ 83,441  
         
Efficiency ratio (Non-GAAP)   42.65
%   54.76 %
         
Tangible common equity ratio:        
Total stockholders' equity   $ 1,511,694     $ 1,116,334  
Goodwill   (370,223 )   (369,708 )
Other intangible assets, net   (30,824 )   (19,781 )
Tangible common equity   $ 1,110,647     $ 726,845  
         
Total assets   $ 12,873,366     $ 8,929,602  
Goodwill   (370,223 )   (369,708 )
Other intangible assets, net   (30,824 )   (19,781 )
Tangible assets   $ 12,472,319     $ 8,540,113  
         
Tangible common equity ratio   8.90
%   8.51 %
         
Outstanding common shares   47,187,389     34,164,672  
Tangible book value per common share   $ 23.54     $ 21.27  


Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED (CONTINUED)
OPERATING EARNINGS - METRICS

    Three Months Ended
March 31,
(Dollars in thousands)   2021   2020
Core earnings (non-GAAP):        
Net income   $ 75,464     $ 9,987  
Plus/ (less)  non-GAAP adjustments (net of tax):        
Provision/ (credit) for credit losses   (25,857 )   18,242  
Provision/ (credit) for credit losses on unfunded loan commitments   (705 )    
Merger and acquisition expense   34     1,084  
Amortization of intangible assets   1,264     447  
Loss on FHLB redemption   6,792      
Investment securities gains   (43 )   (126 )
Core earnings (Non-GAAP)   $ 56,949     $ 29,634  
         
Core earnings per common share (non-GAAP):        
Weighted average common shares outstanding - diluted (GAAP)   47,415,060     34,743,623  
         
Earnings per diluted common share (GAAP)   $ 1.58     $ 0.28  
Core earnings per diluted common share (non-GAAP)   $ 1.20     $ 0.85  
         
Core return on average assets (non-GAAP):        
Average assets (GAAP)   $ 12,801,539     $ 8,699,342  
         
Return on average assets (GAAP)   2.39
%   0.46 %
Core return on average assets (non-GAAP)   1.80
%   1.37 %
         
Core return on average tangible common equity (non-GAAP):        
Average total stockholders' equity (GAAP)   $ 1,477,150     $ 1,130,051  
Average goodwill   (370,223 )   (366,044 )
Average other intangible assets, net   (31,896 )   (11,810 )
Average tangible common equity (non-GAAP)   $ 1,075,031     $ 752,197  
         
Return on average tangible common equity (GAAP)   28.47
%   5.34 %
Core return on average tangible common equity (non-GAAP)   21.48
%   15.85 %


Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED

(Dollars in thousands)   March 31,
2021
  December 31,
2020
  March 31,
2020
Assets            
Cash and due from banks   $ 100,739     $ 93,651     $ 79,185  
Federal funds sold   285     291     131  
Interest-bearing deposits with banks   127,597     203,061     181,792  
Cash and cash equivalents   228,621     297,003     261,108  
Residential mortgage loans held for sale (at fair value)   84,930     78,294     67,114  
Investments available-for-sale (at fair value)   1,427,880     1,348,021     1,187,607  
Other equity securities   44,847     65,760     62,953  
Total loans   10,446,866     10,400,509     6,722,992  
Less: allowance for credit losses   (130,361 )   (165,367 )   (85,800 )
Net loans   10,316,505     10,235,142     6,637,192  
Premises and equipment, net   55,361     57,720     57,617  
Other real estate owned   1,354     1,455     1,416  
Accrued interest receivable   44,559     46,431     23,870  
Goodwill   370,223     370,223     369,708  
Other intangible assets, net   30,824     32,521     19,781  
Other assets   268,262     265,859     241,236  
Total assets   $ 12,873,366     $ 12,798,429     $ 8,929,602  
             
Liabilities            
Noninterest-bearing deposits   $ 3,770,852     $ 3,325,547     $ 1,939,937  
Interest-bearing deposits   6,906,900     6,707,522     4,653,937  
Total deposits   10,677,752     10,033,069     6,593,874  
Securities sold under retail repurchase agreements and federal funds purchased   189,318     543,157     125,305  
Advances from FHLB   100,000     379,075     754,061  
Subordinated debt   227,044     227,088     199,046  
Total borrowings   516,362     1,149,320     1,078,412  
Accrued interest payable and other liabilities   167,558     146,085     140,982  
Total liabilities   11,361,672     11,328,474     7,813,268  
             
Stockholders' equity            
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 47,187,389, 47,056,777 and 34,164,672 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively   47,187     47,057     34,165  
Additional paid in capital   849,606     846,922     562,891  
Retained earnings   617,553     557,271     512,934  
Accumulated other comprehensive income/ (loss)   (2,652 )   18,705     6,344  
Total stockholders' equity   1,511,694     1,469,955     1,116,334  
Total liabilities and stockholders' equity   $ 12,873,366     $ 12,798,429     $ 8,929,602  


Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

    Three Months Ended
March 31,
(Dollars in thousands, except per share data)   2021   2020
Interest income:        
Interest and fees on loans   $ 107,428     $ 75,882  
Interest on loans held for sale   537     291  
Interest on deposits with banks   46     180  
Interest and dividends on investment securities:        
Taxable   3,899     6,132  
Tax-advantaged   2,351     1,372  
Interest on federal funds sold       1  
Total interest income   114,261     83,858  
Interest Expense:        
Interest on deposits   4,830     13,518  
Interest on retail repurchase agreements and federal funds purchased   53     580  
Interest on advances from FHLB   2,276     3,145  
Interest on subordinated debt   2,502     2,281  
Total interest expense   9,661     19,524  
Net interest income   104,600     64,334  
Provision/ (credit) for credit losses   (34,708 )   24,469  
Net interest income after provision/ (credit) for credit losses   139,308     39,865  
Non-interest income:        
Investment securities gains   58     169  
Service charges on deposit accounts   1,852     2,253  
Mortgage banking activities   10,169     3,033  
Wealth management income   8,730     6,966  
Insurance agency commissions   2,153     2,129  
Income from bank owned life insurance   680     645  
Bank card fees   1,518     1,320  
Other income   3,706     1,653  
Total non-interest income   28,866     18,168  
Non-interest expense:        
Salaries and employee benefits   36,652     28,053  
Occupancy expense of premises   5,487     4,581  
Equipment expenses   3,222     2,751  
Marketing   1,212     1,189  
Outside data services   2,283     1,582  
FDIC insurance   1,492     482  
Amortization of intangible assets   1,697     600  
Merger and acquisition expense   45     1,454  
Professional fees and services   1,731     1,826  
Other expenses   14,352     5,228  
Total non-interest expense   68,173     47,746  
Income before income tax expense   100,001     10,287  
Income tax expense   24,537     300  
Net income   $ 75,464     $ 9,987  
         
Net income per share amounts:        
Basic net income per common share   $ 1.59     $ 0.29  
Diluted net income per common share   $ 1.58     $ 0.28  
Dividends declared per share   $ 0.32     $ 0.30  


Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED

    2021   2020
(Dollars in thousands, except per share data)   Q1   Q4
  Q3
  Q2
  Q1
Profitability for the quarter:                                    
Tax-equivalent interest income   $ 115,241     $ 112,843     $ 113,627     $ 116,252     $ 84,966  
Interest expense   9,661       11,964       15,500       13,413       19,524  
Tax-equivalent net interest income   105,580       100,879       98,127       102,839       65,442  
Tax-equivalent adjustment   980       1,052       643       1,325       1,108  
Provision/ (credit) for credit losses   (34,708 )     (4,489 )     7,003       58,686       24,469  
Non-interest income   28,866       32,234       29,390       22,924       18,168  
Non-interest expense   68,173       61,661       60,937       85,438       47,746  
Income/ (loss) before income tax expense/ (benefit)   100,001       74,889       58,934       (19,686 )     10,287  
Income tax expense/ (benefit)   24,537       18,227       14,292       (5,348 )     300  
Net income/ (loss)   $ 75,464     $ 56,662     $ 44,642     $ (14,338 )   $ 9,987  
Financial performance:                                    
Pre-tax pre-provision pre-merger income   $ 65,338     $ 70,403     $ 67,200     $ 61,454     $ 36,210  
Return on average assets   2.39
%     1.78 %     1.38 %     (0.45 )%     0.46 %
Return on average common equity   20.72
%     15.72 %     12.67 %     (4.15 )%     3.55 %
Return on average tangible common equity   28.47
%     21.89 %     17.84 %     (5.80 )%     5.34 %
Net interest margin   3.56
%     3.38 %     3.24 %     3.47 %     3.29 %
Efficiency ratio - GAAP basis (1)   51.08
%     46.69 %     48.03 %     68.66 %     57.87 %
Efficiency ratio - Non-GAAP basis (1)   42.65
%     45.09 %     45.27 %     43.85 %     54.76 %
Per share data:                                    
Net income/ (loss) attributable to common shareholders   $ 74,824     $ 56,194     $ 44,268     $ (14,458 )   $ 9,919  
Basic net income/ (loss) per common share   $ 1.59     $ 1.19     $ 0.94     $ (0.31 )   $ 0.29  
Diluted net income/ (loss) per common share   $ 1.58     $ 1.19     $ 0.94     $ (0.31 )   $ 0.28  
Weighted average diluted common shares   47,415,060       47,284,808       47,175,071       46,988,351       34,743,623  
Dividends declared per share   $ 0.32     $ 0.30     $ 0.30     $ 0.30     $ 0.30  
Non-interest income:                                    
Securities gains   $ 58     $ 35     $ 51     $ 212     $ 169  
Service charges on deposit accounts   1,852       1,917       1,673       1,223       2,253  
Mortgage banking activities   10,169       14,491       14,108       8,426       3,033  
Wealth management income   8,730       8,215       7,785       7,604       6,966  
Insurance agency commissions   2,153       1,356       2,122       1,188       2,129  
Income from bank owned life insurance   680       705       708       809       645  
Bank card fees   1,518       1,570       1,525       1,257       1,320  
Other income   3,706       3,945       1,418       2,205       1,653  
Total non-interest income   $ 28,866     $ 32,234     $ 29,390     $ 22,924     $ 18,168  
Non-interest expense:                                    
Salaries and employee benefits   $ 36,652     $ 36,080     $ 36,041     $ 34,297     $ 28,053  
Occupancy expense of premises   5,487       5,236       5,575       5,991       4,581  
Equipment expenses   3,222       3,121       3,133       3,219       2,751  
Marketing   1,212       1,058       1,305       729       1,189  
Outside data services   2,283       2,394       2,614       2,169       1,582  
FDIC insurance   1,492       1,527       1,340       1,378       482  
Amortization of intangible assets   1,697       1,655       1,968       1,998       600  
Merger and acquisition expense   45       3       1,263       22,454       1,454  
Professional fees and services   1,731       2,473       1,800       1,840       1,826  
Other expenses   14,352       8,114       5,898       11,363       5,228  
Total non-interest expense   $ 68,173     $ 61,661     $ 60,937     $ 85,438     $ 47,746  

(1) The efficiency ratio - GAAP basis is non-interest expense 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, loss on FHLB redemption, and merger and acquisition expense from non-interest expense; investment securities gains 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

    2021   2020  
(Dollars in thousands, except per share data)   Q1   Q4   Q3   Q2   Q1
Balance sheets at quarter end:                
Commercial investor real estate loans   $ 3,652,418     $ 3,634,720     $ 3,588,702     $ 3,581,778     $ 2,241,240  
Commercial owner-occupied real estate loans   1,644,848     1,642,216     1,652,208     1,601,803     1,305,682  
Commercial AD&C loans   1,051,013     1,050,973     994,800     997,423     643,114  
Commercial business loans   2,411,109     2,267,548     2,227,246     2,222,810     813,525  
Residential mortgage loans   1,022,546     1,105,179     1,173,857     1,211,745     1,116,512  
Residential construction loans   171,028     182,619     175,123     169,050     149,573  
Consumer loans   493,904     517,254     521,999     558,434     453,346  
Total loans   10,446,866     10,400,509     10,333,935     10,343,043     6,722,992  
Allowance for credit losses   (130,361 )   (165,367 )   (170,314 )   (163,481 )   (85,800 )
Loans held for sale   84,930     78,294     88,728     68,765     67,114  
Investment securities   1,472,727     1,413,781     1,425,733     1,424,652     1,250,560  
Interest-earning assets   12,132,405     12,095,936     11,965,915     12,447,146     8,222,589  
Total assets   12,873,366     12,798,429     12,678,131     13,290,447     8,929,602  
Noninterest-bearing demand deposits   3,770,852     3,325,547     3,458,804     3,434,038     1,939,937  
Total deposits   10,677,752     10,033,069     9,964,969     10,076,834     6,593,874  
Customer repurchase agreements   129,318     153,157     142,287     143,579     125,305  
Total interest-bearing liabilities   7,423,262     7,856,842     7,643,381     8,313,546     5,732,349  
Total stockholders' equity   1,511,694     1,469,955     1,424,749     1,390,093     1,116,334  
Quarterly average balance sheets:                
Commercial investor real estate loans   $ 3,634,174     $ 3,599,648     $ 3,582,751     $ 3,448,882     $ 2,202,461  
Commercial owner-occupied real estate loans   1,638,885     1,643,817     1,628,474     1,681,674     1,285,257  
Commercial AD&C loans   1,049,597     1,017,304     977,607     969,251     659,494  
Commercial business loans   2,291,097     2,189,828     2,207,388     1,899,264     819,133  
Residential mortgage loans   1,066,714     1,136,989     1,189,452     1,208,566     1,139,786  
Residential construction loans   179,925     180,494     173,280     162,978     145,266  
Consumer loans   496,578     515,202     543,242     575,734     465,314  
Total loans   10,356,970     10,283,282     10,302,194     9,946,349     6,716,711  
Loans held for sale   82,263     68,255     54,784     53,312     35,030  
Investment securities   1,407,455     1,418,683     1,404,238     1,398,586     1,179,084  
Interest-earning assets   12,029,424     11,882,542     12,049,463     11,921,132     7,994,618  
Total assets   12,801,539     12,645,329     12,835,893     12,903,156     8,699,342  
Noninterest-bearing demand deposits   3,394,110     3,424,729     3,281,607     3,007,222     1,797,227  
Total deposits   10,343,190     9,999,144     9,862,639     9,614,176     6,433,694  
Customer repurchase agreements   148,195     146,685     142,694     144,050     135,652  
Total interest-bearing liabilities   7,742,987     7,609,829     7,969,487     8,326,909     5,612,056  
Total stockholders' equity   1,477,150     1,433,900     1,401,746     1,390,544     1,130,051  
Financial measures:                    
Average equity to average assets   11.54
%   11.34 %   10.92 %   10.78 %   12.99%
Investment securities to earning assets   12.14
%   11.69 %   11.91 %   11.45 %   15.21%
Loans to earning assets   86.11
%   85.98 %   86.36 %   83.10 %   81.76%
Loans to assets   81.15
%   81.26 %   81.51 %   77.82 %   75.29%
Loans to deposits   97.84
%   103.66 %   103.70 %   102.64 %   101.96%
Capital measures:                    
Tier 1 leverage (1)   9.14
%   8.92 %   8.65 %   8.35 %   8.78%
Common equity tier 1 capital to risk-weighted assets (1)   12.09
%   10.58 %   10.45 %   10.23 %   10.23%
Tier 1 capital to risk-weighted assets (1)   12.09
%   10.58 %   10.45 %   10.23 %   10.23%
Total regulatory capital to risk-weighted assets (1)   15.49
%   13.93 %   14.02 %   13.79 %   14.09%
Book value per common share   $ 32.04     $ 31.24     $ 30.30     $ 29.58     $ 32.68  
Outstanding common shares   47,187,389     47,056,777     47,025,779     47,001,022     34,164,672  

(1) Estimated ratio at March 31, 2021.


Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED

    2021   2020
(Dollars in thousands)   March 31,   December 31,   September 30,   June 30,   March 31,
Non-performing  assets:                    
Loans 90 days past due:                    
Commercial real estate:                    
Commercial investor real estate   $     $ 133     $     $ 775     $  
Commercial owner-occupied real estate               515      
Commercial AD&C                    
Commercial business   31     161     93          
Residential real estate:                    
Residential mortgage   398     480     320     138     8  
Residential construction                    
Consumer           1          
Total loans 90 days past due   429     774     414     1,428     8  
Non-accrual loans:                    
Commercial real estate:                    
Commercial investor real estate   42,776     45,227     26,784     26,482     17,770  
Commercial owner-occupied real estate   8,316     11,561     6,511     6,729     4,074  
Commercial AD&C   14,975     15,044     1,678     2,957     829  
Commercial business   13,147     22,933     17,659     20,246     10,834  
Residential real estate:                    
Residential mortgage   9,593     10,212     11,296     11,724     12,271  
Residential construction                    
Consumer   7,193     7,384     7,493     7,800     5,596  
Total non-accrual loans   96,000     112,361     71,421     75,938     51,374  
Total restructured loans - accruing   2,271     2,317     2,854     2,553     2,575  
Total non-performing loans   98,700     115,452     74,689     79,919     53,957  
Other assets and other real estate owned (OREO)   1,354     1,455     1,389     1,389     1,416  
Total non-performing assets   $ 100,054     $ 116,907     $ 76,078     $ 81,308     $ 55,373  


    For the Quarter Ended,
(Dollars in thousands)   March 31,
2021
  December 31,
2020
  September 30,
2020
  June 30,
2020
  March 31,
2020
Analysis of non-accrual loan activity:                    
Balance at beginning of period   $ 112,361     $ 71,421     $ 75,938     $ 51,374     $ 38,632  
Purchased credit deteriorated loans designated as non-accrual                   13,084  
Non-accrual balances transferred to OREO       (70 )            
Non-accrual balances charged-off   (699 )   (513 )   (144 )   (162 )   (575 )
Net payments or draws   (16,028 )   (13,212 )   (4,248 )   (1,881 )   (1,860 )
Loans placed on non-accrual   421     54,735     893     27,289     2,369  
Non-accrual loans brought current   (55 )       (1,018 )   (682 )   (276 )
Balance at end of period   $ 96,000     $ 112,361     $ 71,421     $ 75,938     $ 51,374  
                     
Analysis of allowance for credit losses:                    
Balance at beginning of period   $ 165,367     $ 170,314     $ 163,481     $ 85,800     $ 56,132  
Transition impact of adopting ASC 326                   2,983  
Initial allowance on purchased credit deteriorated loans                   2,762  
Initial allowance on acquired PCD loans               18,628      
Provision/ (credit) for credit losses   (34,708 )   (4,489 )   7,003     58,686     24,469  
Less loans charged-off, net of recoveries:                    
Commercial real estate:                    
Commercial investor real estate   (27 )   379     21     (4 )    
Commercial owner-occupied real estate                    
Commercial AD&C                    
Commercial business   634     56     88     (463 )   108  
Residential real estate:                    
Residential mortgage   (270 )   37     (6 )   15     333  
Residential construction       (1 )   (2 )   (1 )   (2 )
Consumer   (39 )   (13 )   69     86     107  
Net charge-offs/ (recoveries)   298     458     170     (367 )   546  
Balance at the end of period   $ 130,361     $ 165,367     $ 170,314     $ 163,481     $ 85,800  
                     
Asset quality ratios:                    
Non-performing loans to total loans   0.94
%   1.11 %   0.72 %   0.77 %   0.80 %
Non-performing assets to total assets   0.78
%   0.91 %   0.60 %   0.61 %   0.62 %
Allowance for credit losses to loans   1.25
%   1.59 %   1.65 %   1.58 %   1.28 %
Allowance for credit losses to non-performing loans   132.08
%   143.23 %   228.03 %   204.56 %   159.02 %
Annualized net charge-offs/ (recoveries) to average loans   0.01
%   0.02 %   0.01 %   (0.01 )%   0.03 %


Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED

    Three Months Ended March 31,
    2021   2020
(Dollars in thousands and tax-equivalent)   Average
Balances
      Interest (1)   Annualized
Average
Yield/Rate
  Average
Balances
  Interest (1)   Annualized
Average
Yield/Rate
Assets                        
Commercial investor real estate loans   $ 3,634,174       $ 38,354     4.28 %   $ 2,202,461       $ 25,265     4.61 %
Commercial owner-occupied real estate loans   1,638,885       18,680     4.62     1,285,257       15,206     4.76  
Commercial AD&C loans   1,049,597       10,396     4.02     659,494       8,329     5.08  
Commercial business loans   2,291,097       24,794     4.39     819,133       10,177     5.00  
Total commercial loans   8,613,753       92,224     4.34     4,966,345       58,977     4.78  
Residential mortgage loans   1,066,714       9,544     3.58     1,139,786       10,741     3.77  
Residential construction loans   179,925       1,606     3.62     145,266       1,561     4.32  
Consumer loans   496,578       4,545     3.71     465,314       5,156     4.46  
Total residential and consumer loans   1,743,217       15,695     3.62     1,750,366       17,458     4.01  
Total loans (2)   10,356,970       107,919     4.22     6,716,711       76,435     4.57  
Loans held for sale   82,263       537     2.61     35,030       291     3.32  
Taxable securities   915,625       3,899     1.70     972,609       6,322     2.60  
Tax-advantaged securities   491,830       2,840     2.31     206,475       1,737     3.37  
Total investment securities (3)   1,407,455       6,739     1.92     1,179,084       8,059     2.73  
Interest-bearing deposits with banks   182,095       46     0.10     63,533       180     1.14  
Federal funds sold   641           0.09     260       1     1.23  
Total interest-earning assets   12,029,424       115,241     3.88     7,994,618       84,966     4.27  
                         
Less: allowance for credit losses   (163,229 )             (61,962 )          
Cash and due from banks   106,259               69,618            
Premises and equipment, net   56,369               58,346            
Other assets   772,716               638,722            
Total assets   $ 12,801,539               $ 8,699,342            
                         
Liabilities and Stockholders' Equity                        
Interest-bearing demand deposits   $ 1,365,652       $ 236     0.07 %   $ 840,415       $ 697     0.33 %
Regular savings deposits   444,296       56     0.05     331,119       73     0.09  
Money market savings deposits   3,410,589       1,463     0.17     1,848,290       4,650     1.01  
Time deposits   1,728,543       3,075     0.72     1,616,643       8,098     2.01  
Total interest-bearing deposits   6,949,080       4,830     0.28     4,636,467       13,518     1.17  
Other borrowings   189,851       53     0.11     236,806       580     0.99  
Advances from FHLB   376,984       2,276     2.45     531,989       3,145     2.38  
Subordinated debt   227,072       2,502     4.41     206,794       2,281     4.41  
Total borrowings   793,907       4,831     2.47     975,589       6,006     2.48  
Total interest-bearing liabilities   7,742,987       9,661     0.50     5,612,056       19,524     1.40  
                         
Noninterest-bearing demand deposits   3,394,110               1,797,227            
Other liabilities   187,292               160,008            
Stockholders' equity   1,477,150               1,130,051            
Total liabilities and stockholders' equity   $ 12,801,539               $ 8,699,342            
                         
Tax-equivalent net interest income and spread       $ 105,580     3.38 %       $ 65,442     2.87 %
Less: tax-equivalent adjustment       980             1,108      
Net interest income       $ 104,600             $ 64,334      
                         
Interest income/earning assets           3.88 %           4.27 %
Interest expense/earning assets           0.32             0.98  
Net interest margin           3.56 %           3.29 %


  (1)   Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 25.50% and 25.45% for 2021 and 2020, respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.0 million and $1.1 million in 2021 and 2020, respectively.
  (2)   Non-accrual loans are included in the average balances.
  (3)   Available for sale investments are presented at amortized cost.


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