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Sandy Spring Bancorp Reports First Quarter Profit of $7.3 Million

/ Source: GlobeNewswire

OLNEY, Md., April 21, 2011 (GLOBE NEWSWIRE) -- Sandy Spring Bancorp, Inc., (Nasdaq:SASR) the parent company of Sandy Spring Bank, today announced net income for the first quarter of 2011 of $7.3 million ($.30 per diluted share) compared to net income of $0.5 million ($0.03 per diluted share) for the first quarter of 2010 and net income of $8.3 million ($0.34 per diluted share) for the fourth quarter of 2010. The first quarter of 2011 included a provision for loan and lease losses of $1.5 million compared to $15.0 million for the first quarter of 2010 and $2.3 million for the fourth quarter of 2010.

"The repurchase of the TARP warrant from the Treasury concludes our participation in that program and has allowed us to concentrate more resources on funding and organically growing the fundamental core elements of our business," said Daniel J. Schrider, President and Chief Executive Officer.  "We are beginning to see increasing commercial loan balances, combined with solid growth in core deposits. These are indicators that we have, in fact, turned the corner. We are confident that the inherent strength of our community banking franchise and the ability of our client service team to develop customer relationships provides us with the necessary vehicle to drive us towards consistent ongoing profitability and sustainable growth as the economy recovers.

"We continue to be committed to meeting our clients' banking needs and expectations as we navigate this challenging economic environment. Our ultimate goal is and remains to provide our clients with a quality banking experience. Our team is looking forward to meeting the challenges that lie ahead of us and continuing to build on our solid foundation of customer relationships."

First Quarter Highlights:

  • The Company redeemed the warrant issued to the Treasury in connection with the Company's participation in the TARP Capital Purchase Program for $4.5 million. This redemption completed the last remaining facet of the Company's involvement in this program.
  • Commercial loans reversed a prior downward trend and increased 1% for the quarter over the prior year end due to new organic production in commercial real estate loans.
  • Deposits increased 2% compared to the year-end 2010 due to significant growth of noninterest-bearing demand deposits, which grew 9% during this period.
  • The net interest margin increased to 3.65% in the first quarter of 2011 from 3.56% for the first quarter of 2010 and 3.61% for the fourth quarter of 2010.
  • The provision for loan and lease losses totaled $1.5 million for the quarter compared to $15.0 million for the first quarter of 2010 and $2.3 million for the fourth quarter of 2010 as credit quality continues to improve.
  • Non-performing loans declined to $88.3 million compared to $136.5 million at March 31, 2010. This decrease also resulted in a coverage ratio of the allowance for loan and lease losses to non-performing loans of 67% at March 31, 2011 compared to a ratio of 51% at March 31, 2010.
  • Assets under management in our trust and wealth management services grew to over $2 billion during the current quarter.

Review of Balance Sheet and Credit Quality

Comparing March 31, 2011 balances to March 31, 2010, total assets decreased 3% to $3.5 billion from $3.7 billion. Total loans and leases decreased 5% to $2.2 billion compared to the prior year. The decrease in loans was attributable to declines in all major categories of the loan portfolio due to a general lack of loan demand as a combined result of the soft economy in addition to charge-offs and pay-downs on non-performing loans over the past twelve months. During the current quarter the commercial loan portfolio experienced growth of $12 million as compared to end of year 2010 balances. Total loans at quarter end remained relatively level as compared to total loans at December 31, 2010.

Customer funding sources, which include deposits and other short-term borrowings from core customers, decreased 2% compared to the first quarter of 2010. This decrease was due largely to a $144 million or 19% decline in certificates of deposit as a result of a reduction in rates as the Company implemented its net interest margin strategy. Non-interest-bearing and interest-bearing checking accounts increased $102 million or 12%, significantly offsetting the decline in certificates of deposit. The growth in checking accounts was the main driver in the growth in core deposits due to our client's emphasis on safety and liquidity. During the quarter, money market accounts experienced a 3% decline due mainly to clients' redeployment of funds in the face of low rates and rising equity markets. 

Stockholders' equity totaled $409.1 million at March 31, 2011, and represented 12% of total assets, compared to $471.9 million or 13% at March 31, 2010. The decline in equity was the direct result of the repayment of $84.0 million of preferred stock and the related warrant previously issued in 2008 as part of the Company's participation in the TARP Capital Purchase Program. At March 31, 2011, the Company had a total risk-based capital ratio of 15.48%, a tier 1 risk-based capital ratio of 14.21% and a tier 1 leverage ratio of 10.63%.

Non-performing assets totaled $96.3 million at March 31, 2011 compared to $143.3 million at March 31, 2010 and $97.7 million at December 31, 2010. The decrease compared to the prior year was due primarily to a decrease in non-accrual loans, particularly in the commercial real estate mortgage and construction portfolios as a result of charge-offs and pay-downs on existing problem credits and a significant reduction in the migration of new credits to non-performing status.

The provision for loan and lease losses totaled $1.5 million for the first quarter of 2011 compared to $15.0 million for the first quarter of 2010 and $2.3 million for the fourth quarter of 2010. The decrease from the prior year quarter was the result of a lower level of non-performing loans at March 31, 2011 compared to March 31, 2010. The decrease in non-performing loans was the direct result of early identification of problem credits, and the aggressive work out strategies or charge-offs for these problem credits.

Loan charge-offs, net of recoveries, totaled $4.7 million for the first quarter of 2011 compared to net charge-offs of $10.0 million for the first quarter of 2010 and net charge-offs of $7.5 million for the fourth quarter of 2010. The allowance for loan and lease losses represented 2.74% of outstanding loans and leases and 67% of non-performing loans at March 31, 2011 compared to 3.08% of outstanding loans and leases and 51% of non-performing loans at March 31, 2010 and 2.88% of outstanding loans and leases and 78% of non-performing loans at December 31, 2010. Non-performing loans includes accruing loans 90 days or more past due and restructured loans.

Income Statement Review

Net interest income for the first quarter of 2011 decreased by $0.1 million from the same quarter of the prior year as a result of the decline in interest income due to lower loan balances during this period. The impact of the $2.6 million decline in interest income was substantially mitigated by the $2.5 million decline in interest expense as average rates paid on deposit products decreased. The combined result of the reduction in average interest-bearing liabilities, due to planned run-off, exceeded the decline in average earning assets and resulted in a higher net interest margin for the first quarter of 2011 of 3.65% compared to 3.56% for first quarter of 2010.

Non-interest income decreased $0.9 million or 8% to $10.0 million for the first quarter of 2011 compared to $10.8 million for the first quarter of 2010. This decline was primarily the result of an $0.8 million decrease in insurance agency commission revenue due to the timing of the recognition of renewal premiums that was implemented in the first quarter of 2010. Deposit service charges declined $0.4 million as a result of the impact of recently enacted legislation on overdraft fees. Trust and investment management fees increased $0.3 million or 14% primarily due to an increase in assets under management. Fees on sales of investment products increased $0.1 million or 16% due to an increase in managed assets and increased sales of financial products. The increases in asset management fee income mitigated the erosion experienced in deposit service fee income. Visa check fees increased $0.1 million or 13% due to increased volume of electronic transactions. Net security gains declined $0.2 million in the first quarter of 2011 as compared to 2010. The gains realized in 2010 were the result of sales of securities whose proceeds were applied to reduce wholesale borrowings. Income from mortgage banking activities and other non-interest income remained relatively flat compared to the prior year.

Non-interest expenses were $26.1 million in the first quarter of 2011 compared to $24.8 million in the first quarter of 2010, an increase of $1.3 million or 5%. Salaries and benefits expense increased $1.3 million or 9% due primarily to higher salary expenses, increased incentive and commission compensation, health care benefits and taxes.  Other non-interest expenses increased $0.3 million or 8% due largely to losses on sales of other real estate owned and loan work out expenses. These increases were partially offset by a reduction in outside data services expense and lower FDIC insurance premiums.

Conference Call

The Company's management will host a conference call to discuss its first quarter results today at 2:00 P.M. (ET). A live Web cast of the conference call is available through the Investor Relations' section of the Sandy Spring Web site at .  Participants may call 877-380-5664. 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) May 21, 2011. A telephone voice replay will also be available during that same time period at 800-642-1687. Please use pass code #59024691 to access.

About Sandy Spring Bancorp/Sandy Spring Bank

With $3.5 billion in assets, Sandy Spring Bancorp is the holding company for Sandy Spring Bank and its principal subsidiaries, Sandy Spring Insurance Corporation 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 43 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.

The Sandy Spring Bancorp, Inc. logo is available at

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, 2010, 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 .

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