FOR IMMEDIATE RELEASE
SANDY SPRING BANCORP REPORTS THIRD QUARTER RESULTS
OLNEY, MARYLAND, October 22, 2009 — Sandy Spring Bancorp, Inc., (Nasdaq-SASR) the parent company of Sandy Spring Bank, today announced a net loss available to common shareholders for the third quarter of 2009 of $14.8 million (($.90) per diluted share) compared to net income of $5.4 million ($.33 per diluted share) for the third quarter of 2008 and a net loss available to common shareholders of $1.5 million (($.09) per diluted share) for the second quarter of 2009. The loss in the third quarter of 2009 was primarily a result of a $34.5 million provision for loan and lease losses.
Net loss available to common shareholders for the nine-month period ending September 30, 2009 totaled $15.2 million (($.93) per diluted share) compared to net income of $19.2 million ($1.17 per diluted share) for the prior year period. The results for the year-to-date include a provision for loan and lease losses totaling $55.7 million for the first nine months of 2009 and an FDIC special assessment charge of $1.7 million which was recognized in the second quarter of 2009.
“Our results for the quarter declined largely due to a higher provision for loan losses. The main drivers of the higher reserve were: increased non-performing loans as a result of risk-rating downgrades to a combination of previously identified problem credits plus a few newly identified credits; reserve adjustments based on historical experience; and a higher level of overall charge-offs, primarily related to our residential real estate development portfolio. This is logical as we move from the earlier phase where we were focused on identifying problem credits to aggressively managing these credits toward their ultimate resolution,” said Daniel J. Schrider, president and chief executive officer.
“Total loan balances continued to decline for the first nine months of 2009 compared to 2008 due to soft demand and more conservative underwriting standards. Residential mortgage lending continues to be a bright spot as we closed over $320 million in residential mortgage loans during the first nine months of the year compared to $197 million in the first nine months of last year.”
“We have retained a large majority of the deposit growth we experienced earlier in the year. This resulted from our ‘high-touch’ strategy to capitalize on market disruption opportunities resulting from several recent local mergers. Our efforts have produced new multi-product customer relationships that we plan to rely upon for the long term to fund future loan growth as the economy recovers.”
“Additionally, our investment portfolio has grown to nearly $1 billion as we have prudently invested the proceeds of our proactively acquired deposit growth primarily into U. S. government agency instruments. Through conservative and careful asset management, we have experienced no realized losses in the portfolio during the recent economic downturn,” said Schrider.
Third Quarter Highlights:
| | · | The provision for loan and lease losses totaled $34.5 million for the quarter compared to $6.5 million for the third quarter of 2008 and $10.6 million for the second quarter of 2009. The provision was due to continued internal risk rating downgrades, charge-offs and additional specific reserves primarily related to loans in the residential real estate development portfolio. |
| | · | The net interest margin was 3.27% for the third quarter compared to 4.02% for the third quarter of 2008 and 3.11% for the second quarter of 2009. |
| | · | Noninterest expenses increased 5% for the quarter compared to the third quarter of 2008 and decreased 1% versus the second quarter of 2009. Excluding the FDIC special assessment charge of $1.7 million in the second quarter, noninterest expenses increased 5% compared to the second quarter of 2009. |
| | · | Customer funding sources, comprised of deposits and other short-term borrowings from core customers, increased 19% compared to the balance at September 30, 2008, and also increased 1% over the balance at June 30, 2009. These increases were due primarily to growth in the Company’s Premier money market savings product and growth in noninterest-bearing deposits. |
Review of Balance Sheet and Credit Quality
Comparing September 30, 2009 balances to September 30, 2008, total assets increased 13% to $3.6 billion. Asset growth was reflected primarily in increases of 135% in investments and 18% in cash and cash equivalents. This growth was due mainly to a 19% increase in deposits. Total loans and leases decreased 6% to $2.3 billion compared to the prior year. This decrease in loans was due mainly to a net 15% decrease in residential mortgage and residential construction loans. Total loans decreased 2% compared to the second quarter of 2009.
Customer funding sources, which include deposits plus other short-term borrowings from core customers, increased 19% to $2.8 billion at September 30, 2009 compared to the prior year. Such customer funding sources also increased 1% compared to the second quarter of 2009. These increases were due primarily to growth resulting from the Company’s Premier money market account as well as growth in noninterest-bearing deposits.
Stockholders’ equity totaled $380.6 million at September 30, 2009, and represented 10.5% of total assets, compared to 10.0% at September 30, 2008. At September 30, 2009 the Company had a total risk-based capital ratio of 13.23%, a tier 1 risk-based capital ratio of 11.96% and a tier 1 leverage ratio of 9.31% which were all above amounts needed in order to be categorized as “well capitalized” for regulatory purposes.
The provision for loan and lease losses totaled $34.5 million for the third quarter of 2009 compared to $6.5 million for the third quarter of 2008 and $10.6 million for the second quarter of 2009. As discussed above, these increases were primarily due to internal risk rating downgrades, charge-offs and additional specific reserves primarily related to loans in the residential real estate development portfolio.
Loan charge-offs, net of recoveries totaled $29.8 million for the third quarter of 2009 compared to net charge-offs of $1.7 million for the third quarter of 2008 and net charge-offs of $12.1 million for the second quarter of 2009. The allowance for loan and lease losses represented 2.70% of outstanding loans and leases and 44% of non-performing loans at September 30, 2009 compared to 2.44% of outstanding loans and leases and 42% of non-performing loans at June 30, 2009 and 1.54% of outstanding loans and leases and 57% of non-performing loans at September 30, 2008.
Non-performing assets totaled $150.2 million at September 30, 2009 compared to $68.4 million at September 30, 2008 and $146.3 million at June 30, 2009. The increase over the prior year was due primarily to $80.9 million in problem residential real estate development loans which was somewhat offset by charge-offs on existing credits. The increase over the second quarter of 2009 was due primarily to the net effect of adding existing problem credits to nonperforming status.
Income Statement Review
Comparing the third quarter of 2009 and 2008, net interest income decreased by $1.7 million, or 6%, due primarily to the decline in loan demand caused by the current state of the economy. This required the Company to invest the funds generated from deposit growth in investment securities with lower comparative yields thus exerting downward pressure on the net interest margin. Net interest income for the quarter was also negatively affected by the growth in nonperforming loans discussed above. These factors produced a net interest margin decrease to 3.27% in 2009 from 4.02% in 2008.
Noninterest income decreased 2% to $10.7 million in the third quarter of 2009 as compared to $10.9 million in the third quarter of 2008. Service charges on deposit accounts decreased $0.4 million or 13% due primarily to lower overdraft fees. Fees on sales of investment products decreased $0.1 million or 10% compared to the third quarter of 2008 due primarily to a decline in assets under management. In addition, insurance agency commissions decreased $0.2 million or 18% due to the overall effect of the current economy. Other noninterest income also decreased $0.2 million or 12% compared to the third quarter of 2008 due largely to losses on sales of other real estate owned. These decreases were somewhat offset by an increase in gains on sales of mortgage loans of $0.6 million or 155% due largely to higher mortgage refinancing volumes reflecting market conditions.
Noninterest expenses were $26.6 million in the third quarter of 2009 compared to $25.3 million in the third quarter of 2008, an increase of $1.3 million or 5%. This increase was due in large part to an increase of $0.7 million in FDIC insurance expense resulting primarily from higher assessment rates and increased deposit balances. Salaries and benefits expenses increased $2.5 million or 21% due largely to a pre-tax pension credit recognized in the third quarter of 2008. Excluding this credit, salaries and benefits expenses increased $1.0 million or 7%. Occupancy and equipment expenses decreased $0.1 million or 3% compared to the third quarter of 2008. Other noninterest expenses increased $0.7 million or 19% due primarily to higher legal fees necessary to manage nonperforming loan credits and to losses on valuation of loan swaps.
Comparing the first nine months of 2009 and 2008, net interest income decreased by $5.9 million, or 7% due primarily to the downward pressure on the net interest margin resulting from the lack of loan demand which caused the Company to invest the funds generated by the growth in deposits into investment securities which carry a lower yield as mentioned above. Net interest income for the year-to-date was also negatively affected by the growth in nonperforming loans mentioned above. These factors produced a net interest margin decrease to 3.25% in 2009 from 3.99% in 2008.
Noninterest income decreased 5% to $33.7 million for the first nine months of 2009 as compared to $35.3 million in 2008. Service charges on deposit accounts decreased $0.9 million or 10% due primarily to lower overdraft fees while insurance agency commissions decreased $0.6 million or 12%. Fees on sales of investment products decreased $0.5 million or 19% and trust and investment management fees declined $0.2 million or 3%, both of which were due primarily to a decline in assets under management. These decreases were somewhat offset by an increase in gains on sales of mortgage loans of $1.0 million or 59% due largely to higher mortgage refinancing volumes reflecting market conditions. Other noninterest income also increased $0.1 million or 2% compared to 2008.
Noninterest expenses were $77.7 million for the first nine months of 2009 compared to $74.9 million in 2008, an increase of $2.8 million or 4%. This increase was due primarily to an increase of $3.7 million in FDIC insurance expense which includes a one time special assessment in the second quarter by the FDIC of $1.7 million. Excluding the 2009 FDIC special assessment, a $2.3 million goodwill impairment charge and a $1.5 million pre-tax pension credit in 2008, noninterest expenses increased $1.9 million or 3% over 2008.Salaries and benefits expenses increased $1.7 million or 4%, while marketing expenses decreased $0.1 million or 8% and expenses for outside data services decreased $0.6 million or 17% compared to the first nine months of 2008.
Conference Call
The Company’s management will host a conference call to discuss its third quarter results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations’ section of the Sandy Spring Web site at www.sandyspringbank.com. Participants may call 800-765-0709. 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 12:00 midnight (ET) November 21, 2009. A telephone voice replay will also be available during that same time period at 888-203-1112. Please use pass code #7548411 to access.
About Sandy Spring Bancorp/Sandy Spring Bank
With $3.6 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation, The Equipment Leasing Company and West Financial Services, Inc. Sandy Spring Bancorp is the largest publicly traded banking company headquartered and operating in Maryland. 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 Bank was founded in 1868 and offers a broad range of commercial banking, retail banking and trust services through 42 community offices in Anne Arundel, Carroll, Frederick, Howard, Montgomery, and Prince George’s counties in Maryland, and Fairfax and Loudoun counties in Virginia. Through its subsidiaries, Sandy Spring Bank also offers a comprehensive menu of leasing, insurance and investment management services. Visit www.sandyspringbank.com to locate an ATM near you or for more information about Sandy Spring Bank.
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
Web site: www.sandyspringbank.com
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, 2008, 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
Sandy Spring Bancorp, Inc. and Subsidiaries
Sandy Spring Bancorp, Inc. and Subsidiaries
Sandy Spring Bancorp, Inc. and Subsidiaries
Sandy Spring Bancorp, Inc. and Subsidiaries
