Sandy Spring Bancorp Reports Second Quarter Results

Company Reports Strong Growth in Operating Earnings Following the Revere Bank and Rembert Pendleton Jackson Acquisitions

Company Release - 7/23/2020 7:00 AM ET

OLNEY, Md., July 23, 2020 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq-SASR), the parent company of Sandy Spring Bank, today reported a $14.3 million net loss ($0.31 per share) for the second quarter of 2020.  The loss was the result of the combination of merger and acquisition expense, the impact of the current economic forecast in the determination of the allowance for credit losses and the additional provision for credit losses associated with the acquisition of Revere Bank (“Revere”), which closed on April 1, 2020.   The 2020 second quarter’s result compares to net income of $28.3 million ($0.79 per diluted share) for the second quarter of 2019 and $10.0 million ($0.28 per diluted share) for the first quarter of 2020. 

Operating earnings for the current quarter, which exclude the impact of merger and acquisition expense, the provision for credit losses and the effects from the PPP program, each on an after-tax basis, were $42.0 million ($0.88 per diluted share), compared to $29.5 million ($0.82 per diluted share) for the quarter ended June 30, 2019. 

The current quarter’s results included $22.5 million for merger and acquisition expense related to the Revere acquisition.  Additionally, earnings for the second quarter were negatively impacted by a $58.7 million provision for credit losses.  Of this amount, approximately $33.8 million was related to the change in the current quarter’s economic forecast.  In addition, as required by generally accepted accounting principles (“GAAP”), the initial allowance for credit losses on Revere’s acquired non-purchased credit deteriorated loans was recognized through provision for credit losses in the amount of $17.5 million.  Comparatively, the provision for credit losses for the first quarter of 2020 was $24.5 million. The Company’s participation in the Paycheck Protection Program (“PPP” or “PPP program”) and the associated funding program had a net positive impact of $4.1 million, net of tax, in the current quarter. 

“We successfully completed the acquisition of Revere Bank and we are poised for long-term earnings growth,” said Daniel J. Schrider, President and Chief Executive Officer. “Despite the challenging rate and economic environment, our ability to close our transaction and increase our operating earnings distinguishes us during this unprecedented time. We remain focused on strategically moving our company forward and preparing for future profitable growth, while continuing to help our clients and community navigate the many challenges caused by the global pandemic.”

Second Quarter Highlights: 

  • Total assets at June 30, 2020, grew 58% to $13.3 billion compared to June 30, 2019, as a result of the Revere acquisition and participation in the PPP. Loans and deposits also each grew by 58%.  Revere’s loans and deposits on the date of acquisition were $2.5 billion and $2.3 billion, respectively.  Additionally, the Company’s participation in the PPP resulted in the addition of $1.1 billion in commercial business loans during the second quarter of 2020.
     
  • The net interest margin was 3.47% for the second quarter of 2020, compared to 3.54% for the second quarter of 2019 and 3.29% for the first 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 3.19%, compared to 3.49% for the second quarter of 2019 and 3.27% for the first quarter of 2020.
     
  • The provision for credit losses of $58.7 million for the second quarter reflected the change in economic forecast for the current quarter, resulting in an addition of $33.8 million, and the $17.5 million initial provision for credit losses on the acquired Revere non-purchased credit deteriorated loans. 
     
  • Non-interest income increased 38% from the prior year quarter, driven by income from mortgage banking activities, which benefited from higher refinance activity and growth in wealth management income as a result of the first quarter acquisition of Rembert Pendleton Jackson (“RPJ”).
     
  • Non-interest expense grew 95% or $41.6 million from the prior year quarter.  Excluding the impact of merger and acquisition expense and early prepayment of acquired FHLB borrowings, the year-over-year growth rate of in non-interest expense would have been 27%.  
     
  • Tangible book value per share declined by 4% to $20.61 at June 30, 2020 compared to $21.54 at June 30, 2019.  During this period, the Company recorded additional goodwill and intangible assets in connection with the acquisitions of Revere and RPJ and repurchased $50 million of common stock.             

Acquisition of Revere Bank

The results of operations from the Revere acquisition have been included in the consolidated results of operations from the date of the acquisition.  At the acquisition date, Revere had assets of $2.8 billion, loans of $2.5 billion and deposits of $2.3 billion.  As a result of the growth in the balance sheet, interest income and expense increased from the prior year’s quarter.  Cost savings from the synergies resulting from the combination of the institutions will continue to be realized throughout 2020 and into 2021.

The valuation of acquired loans resulted in an estimated discount of $12.0 million. The initial allowance for credit losses established on $975 million of purchased credit deteriorated (“PCD”) loans was approximately $18.6 million.  The amount of PCD loans was directly attributable to the current market conditions in the economy.  Additionally, included in the acquired assets was the core deposit intangible asset valued at approximately $18.4 million.  Interest-bearing liabilities valuation resulted in a $20.8 million premium.

Response to COVID-19

The Company continues to focus on protecting the health and well-being of its employees and clients and assisting clients who have been impacted by the COVID-19 pandemic. A substantial majority of non-branch employees continue to work remotely and clients are served at branches primarily through drive-thru facilities and limited lobby access. As area jurisdictions relax their stay at home orders, the Company is cautiously executing the first phase of its return to work plan.

The Company’s participation in the Small Business Administration’s Paycheck Protection Program has resulted in the approval of over 5,200 loans for a total of $1.1 billion in loans to businesses to assist them in maintaining their payroll of an estimated 112,000 employees and cover applicable overhead. 

Applying a set of developed guidelines, the Company has provided for deferment of certain loan payments up to 90 days to provide relief to our qualified commercial and mortgage/consumer loan customers.  From March through July 14, the Company had granted approvals for payment modifications/deferrals on over 2,400 loans with an aggregate balance of $2.0 billion.

For additional information about the Company’s response to the COVID-19 pandemic, segments of the Company’s loan portfolio exposed to industries adversely impacted by the pandemic, and our response to clients who sought loan payment deferral, we have provided supplemental materials available at the Investor Relations section of the Sandy Spring Website at www.sandyspringbank.com.

Balance Sheet and Credit Quality

Total assets grew to $13.3 billion at June 30, 2020, as compared to $8.4 billion at June 30, 2019, primarily as a result of the acquisition of Revere during the current quarter. In addition, the Company’s participation in the PPP program had a further positive impact on the asset growth year-over-year.  During this period, total loans grew by 58% to $10.3 billion at June 30, 2020, compared to $6.6 billion at June 30, 2019. Excluding PPP loans, total loans grew 42% to $9.3 billion at June 30, 2020. Commercial loans, excluding PPP loans, grew 58% or $2.7 billion while the remainder of the portfolio grew 2%.  The majority of the commercial loan growth was driven by the acquisition of Revere.  The year-over-year decline in the mortgage loan portfolio resulted from mortgage loan refinance activity driven by the low interest rate environment and the strategic decision to sell the majority of new mortgage loan production.  Overall, consumer loans grew 14% due to the Revere acquisition.  However, organic consumer loans experienced a 10% decline as borrowers reduced their home equity borrowings through the refinancing of their mortgage loans.  Deposit growth was 58% from June 30, 2019 to June 30, 2020, as noninterest-bearing deposits experienced growth of 70% and interest-bearing deposits grew 52%. This growth was driven primarily by the Revere acquisition. 

Tangible common equity increased to $1.0 billion at June 30, 2020, compared to $767.0 million at June 30, 2019, as a result of the equity issuance associated with the Revere acquisition. The year-over-year change in tangible common equity also reflects the effects of the repurchase of $50 million of common stock, an increase in dividends beginning in the second quarter of 2019 and the increase in intangible assets and goodwill associated with the two acquisitions during the past twelve months.  At June 30, 2020, the Company had a total risk-based capital ratio of 13.79%, a common equity tier 1 risk-based capital ratio of 10.23%, a tier 1 risk-based capital ratio of 10.23% and a tier 1 leverage ratio of 8.35%.

The level of non-performing loans to total loans increased to 0.77% at June 30, 2020, compared to 0.58% at June 30, 2019, and 0.80% at March 31, 2020.  At June 30, 2020, non-performing loans totaled $79.9 million, compared to $37.7 million at June 30, 2019, and $54.0 million at March 31, 2020. Non-performing loans include accruing loans 90 days or more past due and restructured loans. The year-over-year growth in non-performing loans was driven by three major components: loans placed in non-accrual status, acquired Revere non-accrual loans, and loans previously accounted for as purchased credit impaired loans that have been designated as non-accrual loans as a result of the Company’s adoption of the accounting standard for expected credit losses at the beginning of the year.  Loans placed on non-accrual during the current quarter amounted to $27.3 million compared to $3.4 million for the prior year quarter and $2.4 million for the first quarter of 2020. Acquired Revere non-accrual loans were $11.3 million.  Excluding the impact of the acquisition of Revere, the current quarter’s growth in non-accrual loans was primarily the result of three large relationships.

The Company recorded net recoveries of $0.4 million for the second quarter of 2020 as compared to net charge-offs of $0.7 million and $0.5 million for the second quarter of 2019 and the first quarter of 2020, respectively.

The allowance for credit losses was $163.5 million or 1.58% of outstanding loans and 205% of non-performing loans at June 30, 2020, compared to $85.8 million or 1.28% of outstanding loans and 159% of non-performing loans at March 31, 2020.  The acquisition of Revere’s PCD loans resulted in an increase to the allowance for credit losses of $18.6 million, which did not affect the current quarter’s provision expense.  The remaining growth in the allowance was attributable to the provision for credit losses during the current quarter.     

Income Statement Review

Quarterly Results

Net interest income for the second quarter of 2020 increased 53% compared to the second quarter of 2019, primarily driven by the acquisition of Revere.  The PPP program and its associated funding contributed a net of $5.5 million to net interest income for the quarter.  The net interest margin declined to 3.47% for the second quarter of 2020 compared to 3.54% for the second quarter of 2019. Excluding the net $8.6 million impact of the amortization of the fair value marks derived from acquisitions, the net interest margin would have been 3.19%. Included in the current quarter is the accelerated amortization of the $5.8 million purchase premium on FHLB advances as a result of the prepayment of those borrowings.  The effect of the accelerated amortization accounts for approximately 20 basis points in the current quarter’s net interest margin.   

The provision for credit losses was $58.7 million for the second quarter of 2020, compared to $1.7 million for the second quarter of 2019 and $24.5 million for the first quarter of 2020.  The provision for credit losses during the quarter reflects the results of the impact of economic developments during the quarter ($33.8 million), the initial allowance required on non-purchased credit deteriorated loans ($17.5 million) and various qualitative adjustments to the allowance ($3.6 million). The change in the portfolio mix adjustments resulted in the remainder of provision growth for the period.

Non-interest income increased $6.4 million or 38% from the prior year quarter. Income from mortgage banking activities increased $5.2 million as a result of a high level of refinancing activity, while wealth management income increased $2.1 million as a result of the first quarter acquisition of RPJ. This growth more than compensated for the $1.4 million of the combined decline in service and bank card fees as compared to the prior year quarter as a result of the decline in consumer activity.

Non-interest expense grew 95% or $41.6 million from the prior year quarter.  Merger and acquisition expense accounted for $22.5 million of the growth of non-interest expense.  The non-interest expense growth also included $5.9 million in prepayment penalties from the liquidation of the acquired FHLB borrowings.  These prepayment penalties offset the impact of the accelerated amortization noted previous in the discussion on net interest income.  Excluding the impact of these non-core expenses, the year-over-year growth rate would have been 27% as a result of the operational cost of the Revere and RPJ acquisitions, increased compensation expense related to the high level of mortgage loan originations and annual employee merit increases.

The non-GAAP efficiency ratio was 43.85% for the current quarter as compared to 51.71% for the second quarter of 2019 and 54.76% for the first quarter of 2020.  The decrease in the efficiency ratio (reflecting an increase in efficiency) from the second quarter of last year to the current year was the result of the rate of growth in non-GAAP revenue, at 50%, outpacing the non-GAAP non-interest expense growth of 27%.

Year to Date Results

Net interest income for the six months ended June 30, 2020 increased 25% or $32.9 million compared to the same period of 2019.  This increase was driven primarily by the acquisition of Revere in the second quarter of the current year.  Additionally, the income generated by the PPP program net of its associated funding contributed a net of $5.5 million to the growth in net interest income year-over-year.  The net interest margin declined to 3.39% for the six months ended June 30, 2020 compared to 3.58% for the same period of the prior year. Excluding the net $8.6 million impact of the amortization of the fair value marks derived from acquisitions, the net interest margin would have been 3.23%. Included in the current period is the accelerated amortization of the $5.8 million purchase premium on FHLB advances as a result of the prepayment of those borrowings. The effect of the accelerated amortization accounts for approximately 6 basis points in the net interest margin for the six months ended June 30, 2020.  

The provision for credit losses for the six months ended June 30, 2020 amounted to $83.2 million as compared to $1.5 million for the same period in 2019.  The provision for credit losses under the CECL standard reflects the combined results of the impact of the deteriorated economic forecasts during the year ($53.8 million) and the initial allowance on acquired Revere non-purchased credit deteriorated loans ($17.5 million). The change in the portfolio mix and various qualitative adjustments resulted in the remainder of provision growth for the period.

Non-interest income rose $7.6 million or 23% above prior year levels.  Income from mortgage banking activities increased $5.3 million as a result of the high levels of refinancing activity and wealth management income increased $3.8 million as a result of the first quarter acquisition of RPJ.  These increases more than offset declines in deposit and bank card fees and the reduction in BOLI income due to the absence of mortality income that occurred in 2019. 

Non-interest expense increased 51% or $45.1 million for the first six months of 2020, compared to the first six months of 2019.  Merger and acquisition expense accounted for $23.9 million of the growth of non-interest expense.  The non-interest expense growth also included $5.9 million in prepayment penalties resulting from the liquidation of acquired FHLB borrowings.  Excluding the impact of these items results in a year-over-year growth rate of 17%. This growth rate was driven by operational and compensation cost associated with the Revere and RPJ acquisitions, increased incentive expense related to the significant level of mortgage loan originations and annual employee merit increases. 

The increase in the effective tax rate for the six months ended June 30, 2020 was the result of the impact of the amount of tax-advantaged income in proportion to the net loss before taxes as compared to the prior year period.  Additionally, recent changes to tax laws expand the time permitted to utilize previous net operating losses. The Company applied this change to the 2018 acquisition of WashingtonFirst Bankshares, Inc. to realize a tax benefit of $1.8 million for the current year. 

The non-GAAP efficiency ratio for the current year-to-date was 48.21% compared to 51.57% for the prior year period.  The improvement in the current year’s efficiency ratio compared to the prior year was the result of the 24% rate of growth in non-GAAP revenue which outpaced the non-GAAP non-interest expense 16% rate of growth.

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 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 securities gains and includes tax-equivalent income.
  • Operating earnings, operating earnings per share, operating return on average assets and operating return on average tangible common equity.  Operating earnings reflect net income exclusive of the provision for credit losses, merger and acquisition expense and the income and expense associated with the PPP program, 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 second 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 9:00 am (ET)August 7, 2020.  A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10145405.

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 65 locations, the bank offers a broad range of commercial and retail bankingmortgageprivate banking, and trust services throughout Maryland, Northern Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton JacksonSandy 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:  [email protected]
 [email protected]
  
 Website: www.sandyspringbank.com
 Media Contact:
 Jen Schell
 301-570-8331
 [email protected]

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, 2019, 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, except per share data)  2020   2019 Change   2020   2019 Change  
Results of Operations:               
Net interest income $ 101,514  $66,185 53 % $ 165,848  $132,935 25 % 
Provision for credit losses  58,686   1,633 n.m    83,155   1,505 n.m   
Non-interest income  22,924   16,556 38    41,092   33,525 23   
Non-interest expense  85,438   43,887 95    133,184   88,079 51   
Income/ (loss) before income taxes  (19,686)  37,221 (153)   (9,399)  76,876 (112)  
Net income/ (loss)  (14,338)  28,276 (151)   (4,351)  58,593 (107)  
                
Pre-tax pre-provision pre-merger income (1) $ 61,454  $38,854 58   $ 97,664  $78,381 25   
                
Return on average assets  (0.45)% 1.37%    (0.08)% 1.43%   
Return on average common equity  (4.15)% 10.32%    (0.69)% 10.88%   
Return on average tangible common equity  (5.80)% 15.10%    (1.00)% 15.95%   
Net interest margin  3.47 % 3.54%    3.39 % 3.58%   
Efficiency ratio - GAAP basis (2)  68.66 % 53.04%    64.36 % 52.91%   
Efficiency ratio - Non-GAAP basis (2)  43.85 % 51.71%    48.21 % 51.57%   
                
Per share data:               
Basic net income/ (loss) $ (0.31) $0.79 (139)% $ (0.11) $1.64 (107)% 
Diluted net income/ (loss) $ (0.31) $0.79 (139)  $ (0.11) $1.63 (107)  
Average fully diluted shares (3)  46,988,351   35,890,437 31    40,826,748   35,865,518 14   
Dividends declared per share $ 0.30  $0.30 -   $ 0.60  $0.58 3   
Book value per share  29.58   31.43 (6)   29.58   31.43 (6)  
Tangible book value per share (1)  20.61   21.54 (4)   20.61   21.54 (4)  
Outstanding shares  47,001,022   35,614,953 32    47,001,022   35,614,953 32   
                
Financial Condition at period-end:               
Investment securities $ 1,424,652  $955,715 49 % $ 1,424,652  $955,715 49 % 
Loans  10,343,043   6,551,243 58    10,343,043   6,551,243 58   
Interest-earning assets  12,447,146   7,713,364 61    12,447,146   7,713,364 61   
Assets  13,290,447   8,398,519 58    13,290,447   8,398,519 58   
Deposits  10,076,834   6,389,749 58    10,076,834   6,389,749 58   
Interest-bearing liabilities  8,313,546   5,136,860 62    8,313,546   5,136,860 62   
Stockholders' equity  1,390,093   1,119,445 24    1,390,093   1,119,445 24   
                
Capital ratios:               
Tier 1 leverage (4)  8.35 % 9.80%    8.35 % 9.80%   
Common equity tier 1 capital to risk-weighted assets (4)  10.23 % 11.43%    10.23 % 11.43%   
Tier 1 capital to risk-weighted assets (4)  10.23 % 11.59%    10.23 % 11.59%   
Total regulatory capital to risk-weighted assets (4)  13.79 % 12.79%    13.79 % 12.79%   
Tangible common equity to tangible assets (5)  7.52 % 9.54%    7.52 % 9.54%   
Average equity to average assets  10.78 % 13.25%    11.67 % 13.12%   
                
Credit quality ratios:               
Allowance for credit losses to total loans  1.58 % 0.82%    1.58 % 0.82%   
Non-performing loans to total loans  0.77 % 0.58%    0.77 % 0.58%   
Non-performing assets to total assets  0.61 % 0.47%    0.61 % 0.47%   
Allowance for credit losses to non-performing loans  204.56 % 143.33%    204.56 % 143.33%   
Annualized net charge-offs/ (recoveries) to average loans (6)  (0.01)% 0.04%    0.00 % 0.03%   
                
(1) Represents a Non-GAAP measure. See the Reconciliation Table included with these Financial Highlights. 
(2) 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; 
  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) Average fully diluted shares for the three and six months ended June 30, 2020, exclude potential common shares that are antidilutive due to the net loss for the three and six months ended June 30, 2020. 
(4) Estimated ratio at June 30, 2020 
(5) 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.
(6) Calculation utilizes average loans, excluding residential mortgage loans held-for-sale. 
 



Sandy Spring Bancorp, Inc. and Subsidiaries         
RECONCILIATION TABLE - UNAUDITED         
          
  Three Months Ended Six Months Ended 
  June 30, June 30, 
(Dollars in thousands)  2020   2019   2020   2019  
Pre-tax pre-provision pre-merger income:         
Net income/ (loss) $ (14,338) $28,276  $ (4,351) $58,593  
Plus non-GAAP adjustments:         
Merger and acquisition expense  22,454   -   23,908   -  
Income taxes/ (benefit)  (5,348)  8,945   (5,048)  18,283  
Provision for credit losses  58,686   1,633   83,155   1,505  
Pre-tax pre-provision pre-merger income $ 61,454  $38,854  $ 97,664  $78,381  
          
Efficiency ratio - GAAP basis:         
Non-interest expense $ 85,438  $43,887  $ 133,184  $88,079  
          
Net interest income plus non-interest income $ 124,438  $82,741  $ 206,940  $166,460  
          
Efficiency ratio - GAAP basis  68.66%  53.04%  64.36%  52.91% 
          
          
Efficiency ratio - Non-GAAP basis:         
Non-interest expense $ 85,438  $43,887  $ 133,184  $88,079  
Less non-GAAP adjustments:         
Amortization of intangible assets  1,998   483   2,598   974  
Loss on FHLB redemption  5,928   -   5,928   -  
Merger and acquisition expense  22,454   -   23,908   -  
Non-interest expense - as adjusted $ 55,058  $43,404  $ 100,750  $87,105  
          
Net interest income plus non-interest income $ 124,438  $82,741  $ 206,940  $166,460  
Plus non-GAAP adjustment:         
Tax-equivalent income  1,325   1,209   2,433   2,450  
Less non-GAAP adjustment:         
Securities gains  212   5   381   5  
Net interest income plus non-interest income - as adjusted $ 125,551  $83,945  $ 208,992  $168,905  
          
Efficiency ratio - Non-GAAP basis  43.85%  51.71%  48.21%  51.57% 
          
Tangible common equity ratio:         
Total stockholders' equity $ 1,390,093  $1,119,445  $ 1,390,093  $1,119,445  
Accumulated other comprehensive (income)/ loss  (14,824)  3,565   (14,824)  3,565  
Goodwill  (370,547)  (347,149)  (370,547)  (347,149) 
Other intangible assets, net  (36,143)  (8,813)  (36,143)  (8,813) 
Tangible common equity $ 968,579  $767,048  $ 968,579  $767,048  
          
Total assets $ 13,290,447  $8,398,519  $ 13,290,447  $8,398,519  
Goodwill  (370,547)  (347,149)  (370,547)  (347,149) 
Other intangible assets, net  (36,143)  (8,813)  (36,143)  (8,813) 
Tangible assets $ 12,883,757  $8,042,557  $ 12,883,757  $8,042,557  
          
Tangible common equity ratio  7.52%  9.54%  7.52%  9.54% 
          
Outstanding common shares  47,001,022   35,614,953   47,001,022   35,614,953  
Tangible book value per common share $ 20.61  $21.54  $ 20.61  $21.54  
          



Sandy Spring Bancorp, Inc. and Subsidiaries         
NON-GAAP METRICS - UNAUDITED         
  Three Months Ended Six Months Ended 
  June 30, June 30, 
(Dollars in thousands)  2020   2019   2020   2019  
Operating earnings (non-GAAP):         
Net income/ (loss) $ (14,338) $28,276  $ (4,351) $58,593  
Plus non-GAAP adjustments:         
Provision for credit losses - net of tax  43,750   1,217   61,992   1,122  
Merger and acquisition expense - net of tax  16,739   -   17,823   -  
PPLF funding expense - net of tax  368   -   368   -  
Less non-GAAP adjustment:         
PPP interest income and net deferred fee - net of tax  4,483   -   4,483   -  
Operating earnings (non-GAAP) $ 42,036  $29,493  $ 71,349  $59,715  
          
Operating earnings per share (non-GAAP):         
Weighted-average common shares outstanding - diluted (GAAP)  46,988,351   35,890,437   40,826,748   35,865,518  
Shares antidilutive due to net loss  539,473   -   504,266   -  
Weighted-average common shares outstanding - diluted (non-GAAP)  47,527,824   35,890,437   41,331,014   35,865,518  
          
Earnings/ (loss) per diluted common share (GAAP) $ (0.31) $0.79  $ (0.11) $1.63  
Operating earnings per diluted common share (non-GAAP) $ 0.88  $0.82  $ 1.73  $1.66  
          
Operating return on average assets (non-GAAP):         
Average assets (GAAP) $ 12,903,156  $8,294,883  $ 10,799,840  $8,276,601  
Average PPP loans  713,584   -   356,792   -  
Adjusted average assets (non-GAAP) $ 12,189,572  $8,294,883  $ 10,443,048  $8,276,601  
          
Return on average assets (GAAP)  (0.45)%  1.37%  (0.08)%  1.43% 
Operating return on adjusted average assets (non-GAAP)  1.39%  1.43%  1.37%  1.45% 
          
Operating return on average tangible common equity (non-GAAP):         
Average total stockholders equity (GAAP) $ 1,390,544  $1,099,078  $ 1,260,298  $1,086,256  
Average accumulated other comprehensive (income)/ loss  (8,722)  8,244   (5,528)  11,285  
Average goodwill  (355,054)  (347,149)  (360,549)  (347,149) 
Average other intangible assets, net  (32,337)  (9,123)  (22,074)  (9,367) 
Average tangible common equity (non-GAAP) $ 994,431  $751,050  $ 872,147  $741,025  
          
Return on average tangible common equity (GAAP)  (5.80)%  15.10%  (1.00)%  15.95% 
Operating return on average tangible common equity (non-GAAP)  17.00%  15.75%  16.45%  16.25% 
          



Sandy Spring Bancorp, Inc. and Subsidiaries      
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED      
       
  June 30, December 31, June 30,
(Dollars in thousands)  2020   2019   2019 
Assets      
Cash and due from banks $ 224,037  $82,469  $75,781 
Federal funds sold  401   208   583 
Interest-bearing deposits with banks  610,285   63,426   155,312 
Cash and cash equivalents  834,723   146,103   231,676 
Residential mortgage loans held for sale (at fair value)  68,765   53,701   50,511 
Investments available-for-sale (at fair value)  1,355,799   1,073,333   901,025 
Other equity securities  68,853   51,803   54,690 
Total loans  10,343,043   6,705,232   6,551,243 
Less: allowance for credit losses  (163,481)  (56,132)  (54,024)
Net loans  10,179,562   6,649,100   6,497,219 
Premises and equipment, net  59,391   58,615   60,372 
Other real estate owned  1,389   1,482   1,486 
Accrued interest receivable  48,109   23,282   26,148 
Goodwill  370,547   347,149   347,149 
Other intangible assets, net  36,143   7,841   8,813 
Other assets  267,166   216,593   219,430 
Total assets $ 13,290,447  $8,629,002  $8,398,519 
       
Liabilities      
Noninterest-bearing deposits $ 3,434,038  $1,892,052  $2,023,614 
Interest-bearing deposits  6,642,796   4,548,267   4,366,135 
Total deposits  10,076,834   6,440,319   6,389,749 
Securities sold under retail repurchase agreements and federal funds purchased  988,605   213,605   150,604 
Advances from FHLB  451,844   513,777   582,768 
Subordinated debentures  230,301   209,406   37,353 
Total borrowings  1,670,750   936,788   770,725 
Accrued interest payable and other liabilities  152,770   118,921   118,600 
Total liabilities  11,900,354   7,496,028   7,279,074 
       
Stockholders' Equity      
Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 47,001,022,   34,970,370 and 35,614,953 at June 30, 2020, December 31, 2019 and June 30, 2019, respectively  47,001   34,970   35,615 
Additional paid in capital  843,876   586,622   608,006 
Retained earnings  484,392   515,714   479,389 
Accumulated other comprehensive income/ (loss)  14,824   (4,332)  (3,565)
Total stockholders' equity  1,390,093   1,132,974   1,119,445 
Total liabilities and stockholders' equity $ 13,290,447  $8,629,002  $8,398,519 
       



Sandy Spring Bancorp, Inc. and Subsidiaries        
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/ (LOSS) - UNAUDITED     
         
  Three Months Ended Six Months Ended
 June 30,June 30,
(Dollars in thousands, except per share data)  2020   2019  2020   2019
Interest Income:        
Interest and fees on loans $ 106,279  $79,464 $ 182,161  $159,861
Interest on loans held for sale  405   381  696   573
Interest on deposits with banks  155   428  335   622
Interest and dividends on investment securities:        
Taxable  6,650   5,396  12,782   11,081
Exempt from federal income taxes  1,438   1,544  2,810   3,254
Interest on federal funds sold  -   1  1   6
Total interest income  114,927   87,214  198,785   175,397
Interest Expense:        
Interest on deposits  12,284   16,146  25,802   30,626
Interest on retail repurchase agreements and federal funds purchased  600   290  1,180   688
Interest on advances from FHLB  (2,123)  4,103  1,022   10,167
Interest on subordinated debt  2,652   490  4,933   981
Total interest expense  13,413   21,029  32,937   42,462
Net interest income  101,514   66,185  165,848   132,935
Provision for credit losses  58,686   1,633  83,155   1,505
Net interest income after provision for credit losses  42,828   64,552  82,693   131,430
Non-interest Income:        
Investment securities gains  212   5  381   5
Service charges on deposit accounts  1,223   2,442  3,476   4,749
Mortgage banking activities  8,426   3,270  11,459   6,133
Wealth management income  7,604   5,539  14,570   10,775
Insurance agency commissions  1,188   1,265  3,317   3,165
Income from bank owned life insurance  809   654  1,454   1,843
Bank card fees  1,257   1,467  2,577   2,719
Other income  2,205   1,914  3,858   4,136
Total non-interest income  22,924   16,556  41,092   33,525
Non-interest Expense:        
Salaries and employee benefits  34,297   25,489  62,350   51,465
Occupancy expense of premises  5,991   4,760  10,572   9,991
Equipment expenses  3,219   2,712  5,970   5,288
Marketing  729   887  1,918   1,830
Outside data services  2,169   1,962  3,751   3,740
FDIC insurance  1,378   1,084  1,860   2,220
Amortization of intangible assets  1,998   483  2,598   974
Merger and acquisition expense  22,454   -  23,908