Company Quick10K Filing
Quick10K
Sandy Spring Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$34.71 36 $1,240
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-18 Earnings, Exhibits
8-K 2019-04-24 Shareholder Vote
8-K 2019-04-18 Earnings, Exhibits
8-K 2019-01-17 Earnings, Exhibits
8-K 2018-12-13 Other Events, Exhibits
8-K 2018-11-26
8-K 2018-10-18 Regulation FD, Exhibits
8-K 2018-10-18 Earnings, Exhibits
8-K 2018-07-19 Earnings, Exhibits
8-K 2018-04-27 Amend Bylaw, Exhibits
8-K 2018-04-25 Shareholder Vote
8-K 2018-04-19 Earnings, Exhibits
8-K 2018-01-18 Earnings, Exhibits
8-K 2018-01-01 M&A, Officers, Other Events, Exhibits
NTRS Northern Trust 21,110
LOB Live Oak Bancshares 676
IIIV I3 Verticals 636
HTBK Heritage Commerce 530
IDSY ID Systems 100
SGRP Spar Group 14
DPDW Deep Down 0
SQFT Presidio Property Trust 0
BYIN Baying Ecological Holding Group 0
EXENT Exent 0
SASR 2019-03-31
Note 1 - Significant Accounting Policies
Note 2 - Investments
Note 3 - Loans
Note 4 - Credit Quality Assessment
Note 5 - Goodwill and Other Intangible Assets
Note 6 - Deposits
Note 7 - Subordinated Debentures
Note 8 - Share Based Compensation
Note 9 - Pension, Profit Sharing, and Other Employee Benefit Plans
Note 10 - Net Income per Common Share
Note 11 - Accumulated Other Comprehensive Income (Loss)
Note 12 - Leases
Note 13 - Financial Instruments with Off-Balance Sheet Risk and Derivatives
Note 14 - Litigation
Note 15 - Fair Value
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities - None
Item 4. Mine Safety Disclosures - Not Applicable
Item 5. Other Information - None
Item 6. Exhibits
EX-31 exhibit31a.htm
EX-31 exhibit31b.htm
EX-32 exhibit32a.htm
EX-32 exhibit32b.htm

Sandy Spring Bancorp Earnings 2019-03-31

SASR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 maindocument001.htm Form 10-K 2007 (00310308.DOC;1)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-Q

 

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended March 31, 2019

 

OR

 

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to ____________

 

Commission File Number: 0-19065 

 

 

 

 

 

SANDY SPRING BANCORP, INC.

 

(Exact name of registrant as specified in its charter)

 

Maryland                                   52-1532952 

(State of incorporation)           (I.R.S. Employer Identification Number)

 

                                          17801 Georgia Avenue, Olney, Maryland          20832

                                                     (Address of principal executive office)             (Zip Code)

 

301-774-6400

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

SASR

The NASDAQ Stock Market, LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.

Yes  X        No                                                                                          

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  X        No                                                                                             

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer X  Accelerated filer       Non-accelerated filer       Smaller reporting company  Emerging growth company                                  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes            No   X                                                                 

The number of outstanding shares of common stock outstanding as of April 30, 2019

 

Common stock, $1.00 par value – 35,602,868 shares

 

 

 


 

SANDY SPRING BANCORP, INC.

TABLE OF CONTENTS

 

 

 

                                                                                                                            

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

 

  Item1. FINANCIAL STATEMENTS

 

 

 

 

Condensed Consolidated Statements of Condition - Unaudited at

 

 

March 31, 2019 and December 31, 2018

4

 

 

 

 

Condensed Consolidated Statements of Income - Unaudited for the Three  Months

 

 

Ended March 31, 2019 and 2018

5

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income – Unaudited for

 

 

the Three Months Ended March 31, 2019 and 2018

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Unaudited for the Three

 

 

Months Ended March 31, 2019 and 2018

7

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Unaudited for the

 

 

Three Months Ended March 31, 2019 and 2018

8

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

  Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

 

 

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

34

 

 

 

  Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

 

 

ABOUT MARKET RISK

54

 

 

 

  Item 4. CONTROLS AND PROCEDURES

54

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

  Item 1.    LEGAL PROCEEDINGS

54

 

 

 

  Item 1A. RISK FACTORS

54

 

 

 

  Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

54

 

 

 

  Item 3.    DEFAULTS UPON SENIOR SECURITIES

54

 

 

 

  Item 4.    MINE SAFETY DISCLOSURES

54

 

 

 

  Item 5.    OTHER INFORMATION

54

 

 

 

  Item 6.    EXHIBITS

54

 

 

 

  SIGNATURES

56

2


 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q, as well as other periodic reports filed with the Securities and Exchange Commission, and written or oral communications made from time to time by or on behalf of Sandy Spring Bancorp and its subsidiaries (the “Company”), may contain statements relating to future events or future results of the Company that are considered “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by the use of words such as “believe,” “expect,” “anticipate,”  “plan,” “estimate,” “intend” and “potential,” or words of similar meaning, or future or conditional verbs such as “should,” “could,” or “may.”  Forward-looking statements include statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.

 

Forward-looking statements reflect our expectation or prediction of future conditions, events or results based on information currently available. These forward-looking statements are subject to significant risks and uncertainties that may cause actual results to differ materially from those in such statements.  These risks and uncertainties include, but are not limited to, the risks identified in Item 1A of the Company’s 2018 Annual Report on Form 10-K, Item 1A of Part II of this report and the following:

 

·       general business and economic conditions nationally or in the markets that the Company serves could adversely affect, among other things, real estate prices, unemployment levels, and consumer and business confidence, which could lead to decreases in the demand for loans, deposits and other financial services that we provide and increases in loan delinquencies and defaults;

·       changes or volatility in the capital markets and interest rates may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet as well as our liquidity;

·       our liquidity requirements could be adversely affected by changes in our assets and liabilities;

·       our investment securities portfolio is subject to credit risk, market risk, and liquidity risk as well as changes in the estimates we use to value certain of the securities in our portfolio;

·       the effect of legislative or regulatory developments including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry;

·       acquisition integration risks, including potential deposit attrition, higher than expected costs, customer loss, business disruption and the inability to realize benefits and costs savings from, and limit any unexpected liabilities associated with, any business combinations;

·       competitive factors among financial services companies, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals;

·       the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission, the Public Company Accounting Oversight Board and other regulatory agencies; and

·       the effect of fiscal and governmental policies of the United States federal government.

 

Forward-looking statements speak only as of the date of this report.  The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date of this report or to reflect the occurrence of unanticipated events except as required by federal securities laws.

  

3


 

Part I

Item 1. FINANCIAL STATEMENTS

Sandy Spring Bancorp, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(Dollars in thousands)

 

2019

 

2018

Assets

 

 

 

 

 

 

 

Cash and due from banks

 

$

67,282

 

$

67,014

 

Federal funds sold

 

 

481

 

 

609

 

Interest-bearing deposits with banks

 

 

65,886

 

 

33,858

 

 

Cash and cash equivalents

 

 

133,649

 

 

101,481

 

Residential mortgage loans held for sale (at fair value)

 

 

24,998

 

 

22,773

 

Investments available-for-sale (at fair value)

 

 

926,530

 

 

937,335

 

Other equity securities

 

 

60,769

 

 

73,389

 

Total loans

 

 

6,569,990

 

 

6,571,634

 

 

Less: allowance for loan losses

 

 

(53,089)

 

 

(53,486)

 

Net loans

 

 

6,516,901

 

 

6,518,148

 

Premises and equipment, net

 

 

61,003

 

 

61,942

 

Other real estate owned

 

 

1,410

 

 

1,584

 

Accrued interest receivable

 

 

26,182

 

 

24,609

 

Goodwill

 

 

347,149

 

 

347,149

 

Other intangible assets, net    

 

 

9,297

 

 

9,788

 

Other assets

 

 

220,012

 

 

145,074

Total assets

 

$

8,327,900

 

$

8,243,272

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

$

1,813,708

 

$

1,750,319

 

Interest-bearing deposits

 

 

4,410,815

 

 

4,164,561

 

 

Total deposits

 

 

6,224,523

 

 

5,914,880

 

Securities sold under retail repurchase agreements and federal funds purchased

 

 

122,626

 

 

327,429

 

Advances from FHLB

 

 

726,278

 

 

848,611

 

Subordinated debentures

 

 

37,389

 

 

37,425

 

Accrued interest payable and other liabilities

 

 

121,236

 

 

47,024

 

 

Total liabilities

 

 

7,232,052

 

 

7,175,369

 

 

 

 

 

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

 

Common stock -- par value $1.00; shares authorized 100,000,000; shares issued and outstanding 35,557,110

 

 

 

 

 

 

 

 and 35,530,734 at March 31, 2019 and December 31, 2018, respectively

 

 

35,557

 

 

35,531

 

Additional paid in capital

 

 

607,479

 

 

606,573

 

Retained earnings

 

 

461,862

 

 

441,553

 

Accumulated other comprehensive loss

 

 

(9,050)

 

 

(15,754)

 

 

Total stockholders' equity

 

 

1,095,848

 

 

1,067,903

Total liabilities and stockholders' equity

 

$

8,327,900

 

$

8,243,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements

 

4


 

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(Dollars in thousands, except per share data)

 

2019

 

2018

Interest Income:

 

 

 

 

 

 

 

Interest and fees on loans

 

$

80,397

 

$

67,592

 

Interest on loans held for sale

 

 

192

 

 

368

 

Interest on deposits with banks

 

 

194

 

 

357

 

Interest and dividends on investment securities:

 

 

 

 

 

 

 

 

Taxable

 

 

5,685

 

 

5,102

 

 

Exempt from federal income taxes

 

 

1,710

 

 

2,072

 

Interest on federal funds sold

 

 

5

 

 

13

 

 

 

Total interest income

 

 

88,183

 

 

75,504

Interest Expense:

 

 

 

 

 

 

 

Interest on deposits

 

 

14,480

 

 

6,959

 

Interest on retail repurchase agreements and federal funds purchased

 

 

398

 

 

108

 

Interest on advances from FHLB

 

 

6,064

 

 

5,078

 

Interest on subordinated debt

 

 

491

 

 

468

 

 

 

Total interest expense

 

 

21,433

 

 

12,613

Net interest income

 

 

66,750

 

 

62,891

Provision (credit) for loan losses

 

 

(128)

 

 

1,997

 

 

 

Net interest income after provision for loan losses

 

 

66,878

 

 

60,894

Non-interest Income:

 

 

 

 

 

 

 

Investment securities gains

 

 

-

 

 

63

 

Service charges on deposit accounts

 

 

2,307

 

 

2,259

 

Mortgage banking activities

 

 

2,863

 

 

2,207

 

Wealth management income

 

 

5,236

 

 

5,061

 

Insurance agency commissions

 

 

1,900

 

 

1,824

 

Income from bank owned life insurance

 

 

1,189

 

 

2,331

 

Bank card fees

 

 

1,252

 

 

1,370

 

Other income

 

 

2,222

 

 

2,003

 

 

 

Total non-interest income

 

 

16,969

 

 

17,118

Non-interest Expenses:

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

25,976

 

 

23,912

 

Occupancy expense of premises

 

 

5,231

 

 

4,942

 

Equipment expenses

 

 

2,576

 

 

2,225

 

Marketing

 

 

943

 

 

1,148

 

Outside data services

 

 

1,778

 

 

1,397

 

FDIC insurance

 

 

1,136

 

 

1,193

 

Amortization of intangible assets

 

 

491

 

 

541

 

Merger expenses

 

 

-

 

 

8,958

 

Professional fees and services

 

 

1,245

 

 

1,040

 

Other expenses

 

 

4,816

 

 

4,285

 

 

 

Total non-interest expenses

 

 

44,192

 

 

49,641

Income before income taxes

 

 

39,655

 

 

28,371

Income tax expense

 

 

9,338

 

 

6,706

 

Net income

 

$

30,317

 

$

21,665

 

 

 

 

 

 

 

 

 

 

Net Income Per Share Amounts:

 

 

 

 

 

 

Basic net income per share

 

$

0.85

 

$

0.61

Diluted net income per share

 

$

0.85

 

$

0.61

Dividends declared per common share

 

$

0.28

 

$

0.26

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements

5


 

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Net income

 

$

30,317

 

$

21,665

 

Other comprehensive income:

 

 

 

 

 

 

 

Investments available-for-sale:

 

 

 

 

 

 

 

 

Net change in unrealized gains (losses) on investments available-for-sale

 

 

8,814

 

 

(12,689)

 

 

 

Related income tax expense

 

 

(2,306)

 

 

3,321

 

 

Net investment gains reclassified into earnings

 

 

-

 

 

(63)

 

 

 

Related income tax expense

 

 

-

 

 

16

 

 

 

Net effect on other comprehensive income for the period

 

 

6,508

 

 

(9,415)

 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension plan:

 

 

 

 

 

 

 

 

Recognition of unrealized loss

 

 

265

 

 

250

 

 

 

Related income tax expense

 

 

(69)

 

 

(119)

 

 

 

Net effect on other comprehensive income for the period

 

 

196

 

 

131

 

Total other comprehensive income (loss)

 

 

6,704

 

 

(9,284)

Comprehensive income

 

$

37,021

 

$

12,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements

6


 

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(Dollars in thousands)

2019

 

2018

Operating activities:

 

 

 

 

 

Net income

$

30,317

 

$

21,665

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

3,326

 

 

2,990

 

Provision (credit) for loan losses

 

(128)

 

 

1,997

 

Stock based compensation expense

 

690

 

 

582

 

Tax benefits associated with share based compensation

 

41

 

 

34

 

Deferred income tax expense

 

1,069

 

 

(1,673)

 

Origination of loans held for sale

 

(97,286)

 

 

(47,975)

 

Proceeds from sales of loans held for sale

 

97,456

 

 

58,121

 

Gains on sales of loans held for sale

 

(2,395)

 

 

(2,872)

 

Losses on sales of other real estate owned

 

-

 

 

90

 

Investment securities gains

 

-

 

 

(63)

 

Net increase in accrued interest receivable

 

(1,573)

 

 

(397)

 

Net decrease in other assets

 

5,191

 

 

11,407

 

Net decrease in accrued expenses and other liabilities

 

(10,381)

 

 

(403)

 

Other – net

 

992

 

 

754

 

 

 

Net cash provided by operating activities

 

27,319

 

 

44,257

Investing activities:

 

 

 

 

 

 

(Purchases of)/proceeds from other equity securities

 

12,620

 

 

(700)

 

Purchases of investments available-for-sale

 

(15,919)

 

 

(497)

 

Proceeds from sales of investment available-for-sale

 

-

 

 

994

 

Proceeds from maturities, calls and principal payments of investments available-for-sale

 

34,829

 

 

23,975

 

Net (increase)/ decrease in loans

 

1,644

 

 

(123,945)

 

Proceeds from the sales of other real estate owned

 

-

 

 

292

 

Proceeds from sales of loans previously held for investment

 

-

 

 

59,945

 

Acquisition of business activity, net of cash acquired

 

-

 

 

32,552

 

Expenditures for premises and equipment

 

(1,066)

 

 

(2,842)

 

 

 

Net cash provided by/ (used in) investing activities

 

32,108

 

 

(10,226)

Financing activities:

 

 

 

 

 

 

Net increase in deposits

 

309,643

 

 

52,702

 

Net increase/ (decrease) in retail repurchase agreements and federal funds purchased

 

(204,803)

 

 

23,078

 

Proceeds from advances from FHLB

 

1,079,000

 

 

1,990,000

 

Repayment of advances from FHLB

 

(1,201,333)

 

 

(1,984,081)

 

Proceeds from issuance of common stock

 

343

 

 

456

 

Stock tendered for payment of withholding taxes

 

(101)

 

 

-

 

Dividends paid

 

(10,008)

 

 

(9,267)

 

 

 

Net cash provided by/ (used in) financing activities

 

(27,259)

 

 

72,888

Net increase in cash and cash equivalents

 

32,168

 

 

106,919

Cash and cash equivalents at beginning of period

 

101,481

 

 

112,500

Cash and cash equivalents at end of period

$

133,649

 

$

219,419

 

 

 

 

 

 

 

 

 

Supplemental disclosures:

 

 

 

 

 

 

Interest payments

$

21,455

 

$

11,680

 

Income tax payments

 

-

 

 

15

 

Transfer from loans to residential mortgage loans held for sale

 

-

 

 

60,043

 

Transfer from loans to other real estate owned

 

-

 

 

289

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements

7


 

SANDY SPRING BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED

 

`

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

Total

 

 

 

Common

 

Paid-In

 

Retained

 

Comprehensive

 

Stockholders’

(Dollars in thousands, except per share data)

 

Stock

 

Capital

 

Earnings

 

Income (Loss)

 

Equity

Balances at January 1, 2019

 

$

35,531

 

$

606,573

 

$

441,553

 

$

(15,754)

 

$

1,067,903

 

Net income

 

 

-

 

 

-

 

 

30,317

 

 

-

 

 

30,317

 

Other comprehensive income, net of tax

 

 

-

 

 

-

 

 

-

 

 

6,704

 

 

6,704

Common stock dividends -  $0.28 per share

 

 

-

 

 

-

 

 

(10,008)

 

 

-

 

 

(10,008)

Stock compensation expense

 

 

-

 

 

690

 

 

-

 

 

-

 

 

690

Common stock issued pursuant to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option plan - 6,755 shares

 

 

7

 

 

122

 

 

-

 

 

-

 

 

129

 

Employee stock purchase plan - 7,662 shares

 

 

7

 

 

207

 

 

-

 

 

-

 

 

214

 

Restricted stock - 11,959 shares

 

 

12

 

 

(113)

 

 

-

 

 

-

 

 

(101)

Balances at March 31, 2019

 

$

35,557

 

$

607,479

 

$

461,862

 

$

(9,050)

 

$

1,095,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

$

23,996

 

$

168,188

 

$

378,489

 

$

(6,857)

 

$

563,816

 

Net income

 

 

-

 

 

-

 

 

21,665

 

 

-

 

 

21,665

 

Other comprehensive income, net of tax

 

 

-

 

 

-

 

 

-

 

 

(9,284)

 

 

(9,284)

Common stock dividends -  $0.26 per share

 

 

-

 

 

-

 

 

(9,267)

 

 

-

 

 

(9,267)

Stock compensation expense

 

 

-

 

 

582

 

 

-

 

 

-

 

 

582

Common stock issued pursuant to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of WashingtonFirst - 11,446,197 shares

 

 

11,446

 

 

435,194

 

 

-

 

 

-

 

 

446,640

 

Stock option plan - 12,353 shares

 

 

12

 

 

220

 

 

-

 

 

-

 

 

232

 

Employee stock purchase plan - 6,912 shares

 

 

7

 

 

217

 

 

-

 

 

-

 

 

224

 

Restricted stock - 1,514 shares

 

 

2

 

 

(2)

 

 

-

 

 

-

 

 

-

Reclassification of tax effects from other comprehensive income

 

 

-

 

 

-

 

 

1,477

 

 

(1,477)

 

 

-

Balances at March 31, 2018

 

$

35,463

 

$

604,399

 

$

392,364

 

$

(17,618)

 

$

1,014,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these statements

8


 

Sandy Spring Bancorp, Inc. and Subsidiaries

Notes to the CONDENSED Consolidated Financial Statements - UNAUDITED

 

Note 1 – Significant Accounting Policies  

Nature of Operations

Sandy Spring Bancorp (the “Company”), a Maryland corporation, is the bank holding company for Sandy Spring Bank (the “Bank”). Independent and community-oriented, Sandy Spring Bank offers a broad range of commercial banking, retail banking, mortgage and trust services throughout central Maryland, Northern Virginia, and the greater Washington, D.C. market. Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc.

 

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”) and prevailing practices within the financial services industry for interim financial information and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and notes required for complete financial statements and prevailing practices within the banking industry.  The following summary of significant accounting policies of the Company is presented to assist the reader in understanding the financial and other data presented in this report.  Operating results for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2019. In the opinion of management, all adjustments (comprising only normal recurring accruals) necessary for a fair presentation of the results of the interim periods have been included. Certain reclassifications have been made to prior period amounts, as necessary, to conform to the current period presentation.  The Company has evaluated subsequent events through the date of the issuance of its financial statements.

 

These statements should be read in conjunction with the financial statements and accompanying notes included in the Company’s 2018 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on February 22, 2019.  There have been no significant changes to the Company’s accounting policies as disclosed in the 2018 Annual Report on Form 10-K.

 

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Sandy Spring Bank and its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc. Consolidation has resulted in the elimination of all intercompany accounts and transactions. 

 

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, in addition to affecting the reported amounts of revenues earned and expenses incurred during the reporting period. Actual results could differ from those estimates. Estimates that could change significantly relate to the provision for loan losses and the related allowance, determination of impaired loans and the related measurement of impairment, potential impairment of goodwill or other intangible assets, valuation of investment securities and the determination of whether impaired securities are other-than-temporarily impaired, valuation of other real estate owned, valuation of share-based compensation, the assessment that a liability should be recognized with respect to any matters under litigation, the calculation of current and deferred income taxes and the actuarial projections related to pension expense and the related liability.

 

Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, federal funds sold and interest-bearing deposits with banks (items with stated original maturity of three months or less).

 

Revenue from Contracts with Customers

The Company’s revenue includes net interest income on financial instruments and non-interest income. Specific categories of revenue are presented in the Condensed Consolidated Statements of Income. Most of the Company’s revenue is not within the scope of Accounting Standard Update (ASU) No. 2014-09 – Revenue from Contracts with Customers. For revenue within the scope of ASU 2014-09, the Company provides services to customers and has related performance obligations. The revenue from such services is recognized upon satisfaction of all contractual performance obligations. The following discusses key revenue streams within the scope of revenue recognition guidance.

 

Wealth Management Income

9


 

West Financial Services, Inc., a subsidiary of the Bank, provides comprehensive investment management and financial planning services. Wealth management income is comprised of income for providing trust, estate and investment management services. Trust services include acting as a trustee for corporate or personal trusts. Investment management services include investment management, record-keeping and reporting of security portfolios. Fees for these services are recognized based on a contractually-agreed fixed percentage applied to net assets under management at the end of each reporting period. The Company does not charge/recognize any performance based fees.

 

Insurance Agency Commissions

Sandy Spring Insurance, a subsidiary of the Bank, performs the function of an insurance intermediary by introducing the policyholder and insurer and is compensated by a commission fee for placement of an insurance policy. Sandy Spring Insurance does not provide any captive management services or any claim handling services. Commission fees are set as a percentage of the premium for the insurance policy for which the Sandy Spring Insurance is a producer. The Company recognizes revenue when the insurance policy has been contractually agreed to by the insurer and policyholder (at transaction date).

 

Service Charges on Deposit Accounts

Service charges on deposit accounts are earned on depository accounts for consumer and commercial account holders and include fees for account and overdraft services. Account services include fees for event-driven services and periodic account maintenance activities. The obligation for event-driven services is satisfied at the time of the event when service is delivered and revenue recognized as earned. Obligation for maintenance activities is satisfied over the course of each month and revenue recognized at month end. Obligation for overdraft services is satisfied at the time of the overdraft and revenue recognized as earned.

 

Loans Acquired with Deteriorated Credit Quality

Acquired loans with evidence of credit deterioration since their origination as of the date of the acquisition are recorded at their initial fair value.  Credit deterioration is determined based on the probability of collection of all contractually required principal and interest payments.  The historical allowance for loan losses related to the acquired loans is not carried over to the Company’s financial statements.  The determination of credit quality deterioration as of the purchase date may include parameters such as past due and non-accrual status, commercial risk ratings, cash flow projections, type of loan and collateral, collateral value and recent loan-to-value ratios or appraised values.  For loans acquired with evidence of credit deterioration, the Company determines at the acquisition date the excess of the loan’s contractually required payments over all cash flows expected to be collected as an amount that should not be accreted into interest income (nonaccretable difference). The remaining amount, representing the difference in the expected cash flows of acquired loans and the initial investment in the acquired loans, is accreted into interest income over the remaining life of the loan or pool of loans (accretable yield). Subsequent to the purchase date, increases in expected cash flows over those expected at the purchase date are recognized prospectively as interest income over the remaining life of the loan as an adjustment to the accretable yield.  The present value of any decreases in expected cash flows after the purchase date is recognized as impairment through addition to the valuation allowance.

 

Leases

The Company determines if an arrangement is a lease at inception. All of the Company’s leases are currently classified as operating leases and are included in other assets and other liabilities on the Company’s Condensed Consolidated Statements of Condition.

 

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease arrangements. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of the expected future lease payments over the remaining lease term. In determining the present value of future lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating ROU assets are adjusted for any lease payments made at or before lease commencement date, initial direct costs and any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease expense is recognized on a straight line basis over the expected lease term.

Lease agreements that include lease and non-lease components, such as common area maintenance charges, are accounted for separately.

 

 

Adopted Accounting Pronouncements

10


 

The FASB issued Update No. 2016-02, Leases, in February 2016. From the lessee’s perspective, the new standard requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company adopted the standard on January 1, 2019 (“adoption date”) using modified retrospective approach. The Company elected the transition option to apply the provisions of the new standard only as of the beginning of the adoption period and did not restate comparative historical periods presented. The Company also elected a package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification of those leases in existence as of the adoption date.

 

The standard had a material impact on the Company’s Condensed Consolidated Statements of Condition, but did not have a material impact on Condensed Consolidated Statements of Income. The most significant impact at the adoption date was the recognition of ROU assets and lease liabilities for operating leases which totaled $77.7 million and $85.1 million, respectively. Refer to Note 12 – Leases for other required disclosures.

 

Pending Accounting Pronouncements

The FASB issued Update No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20):  Premium Amortization on Purchased Callable Debt Securities, in March 2017. This guidance is intended to eliminate the current diversity in practice with respect to the amortization period for certain purchased callable debt securities held at a premium. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life. As a result, upon the exercise of a call on a callable debt security held at a premium, the unamortized premium is recorded as a loss in earnings. The amendments in this update shorten the amortization period for such callable debt securities held at a premium requiring the premium to be amortized to the earliest call date. This guidance is effective for a public business entity that is a U.S. Securities and Exchange Commission (SEC) filer for its fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

 

The FASB issued Update No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. The objective of this guidance is to simplify an entity’s required test for impairment of goodwill by eliminating Step 2 from the goodwill impairment test. In Step 2 an entity measured a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. In computing the implied fair value of goodwill, an entity had to determine the fair value at the impairment date of its assets and liabilities, including any unrecognized assets and liabilities, following a procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under this Update, an entity should perform its annual or quarterly goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount and record an impairment charge for the excess of the carrying amount over the reporting unit’s fair value.  The loss recognized should not exceed the total amount of goodwill allocated to the reporting unit and the entity must consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance is effective for a public business entity that is an SEC filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

11


 

The FASB issued Update No. 2016-13, Current Expected Credit Losses (CECL), in June 2016. This guidance changes the impairment model for most financial assets measured at amortized cost and certain other instruments. Entities will be required to use an expected loss model, replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts.  This will result in earlier recognition of loss allowances in most instances. Credit losses related to available-for-sale debt securities (regardless of whether the impairment is considered to be other-than-temporary) will be measured in a manner similar to the present, except that such losses will be recorded as allowances rather than as reductions in the amortized cost of the related securities. With respect to trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures, the guidance requires that an entity estimate its lifetime expected credit loss and record an allowance resulting in the net amount expected to be collected to be reflected as the financial asset.  Entities will also be required to provide significantly more disclosures, including information used to track credit quality by year of origination for most financing receivables. This guidance is effective for public business entities for the first interim or annual period beginning after December 15, 2019. The standard’s provisions will be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Early adoption by public business entities is permitted for the first interim or annual period beginning after December 15, 2018. The Company assessed the guidance and has identified the available historical loan level information and completed a data gap analysis. The Company is in process of designing calculation methodologies under the new guidance and quantifying the approximate impact on the Company’s financial position and results of operations.

 

Note 2 – Investments

Investments available-for-sale

The amortized cost and estimated fair values of investments available-for-sale at the dates indicated are presented in the following table:

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

(In thousands)

 

Cost

 

Gains

 

Losses

 

Value

 

Cost

 

Gains

 

Losses

 

Value

U.S. treasuries and government agencies

 

$

314,928

 

$

546

 

$

(1,886)

 

$

313,588

 

$

300,338

 

$

370

 

$

(4,030)

 

$

296,678

State and municipal

 

 

261,126

 

 

3,491

 

 

(37)

 

 

264,580

 

 

280,725

 

 

2,080

 

 

(781)

 

 

282,024

Mortgage-backed and asset-backed

 

 

340,657

 

 

1,037

 

 

(3,597)

 

 

338,097

 

 

355,267

 

 

653

 

 

(7,405)

 

 

348,515

Corporate debt

 

 

9,100

 

 

287

 

 

-

 

 

9,387

 

 

9,100

 

 

140

 

 

-

 

 

9,240

Trust preferred

 

 

310

 

 

-

 

 

-

 

 

310

 

 

310

 

 

-

 

 

-

 

 

310

 

Total debt securities

 

 

926,121

 

 

5,361

 

 

(5,520)

 

 

925,962

 

 

945,740

 

 

3,243

 

 

(12,216)

 

 

936,767

Marketable equity securities

 

 

568

 

 

-

 

 

-

 

 

568

 

 

568

 

 

-

 

 

-

 

 

568

 

 

Total investments available-for-sale

 

$

926,689

 

$

5,361

 

$

(5,520)

 

$

926,530

 

$

946,308

 

$

3,243

 

$

(12,216)

 

$

937,335

 

Any unrealized losses in the U.S. treasuries and government agencies, state and municipal, mortgage-backed and asset-backed investment securities at March 31, 2019 are not the result of credit related events but due to changes in interest rates.   These declines in fair market value are considered temporary in nature and are expected to recover over time as these securities approach maturity.

 

The mortgage-backed securities portfolio at March 31, 2019 is composed entirely of either the most senior tranches of GNMA, FNMA or FHLMC collateralized mortgage obligations ($117.6 million), GNMA, FNMA or FHLMC mortgage-backed securities ($170.4 million) and SBA asset-backed securities ($50.1 million). The Company does not intend to sell these securities and has sufficient liquidity to hold these securities for an adequate period of time to allow for any anticipated recovery in fair value.

 

Gross unrealized losses and fair value by length of time that the individual available-for-sale securities have been in an unrealized loss position at the dates indicated are presented in the following table:

 

12


 

 

 

 

March 31, 2019

 

 

 

 

 

 

 

 

 

Continuous Unrealized

 

 

 

 

 

 

 

 

 

 

 

Losses Existing for:

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

of

 

 

 

 

Less than

 

More than

 

Unrealized

(Dollars in thousands)

 

Securities

 

Fair Value

 

12 months

 

12 months

 

Losses

U.S. treasuries and government agencies

 

 

27

 

$

186,675

 

$

204

 

$

1,682

 

$

1,886

State and municipal

 

 

9

 

 

8,724

 

 

-

 

 

37

 

 

37

Mortgage-backed and asset-backed

 

 

78

 

 

254,545

 

 

23

 

 

3,574

 

 

3,597

 

Total

 

 

114

 

$

449,944

 

$

227

 

$

5,293

 

$

5,520

 

 

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

Continuous Unrealized

 

 

 

 

 

 

 

 

 

 

 

Losses Existing for:

 

 

 

 

Number

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

of

 

 

 

 

Less than

 

More than

 

Unrealized

(Dollars in thousands)

 

Securities

 

Fair Value

 

12 months

 

12 months

 

Losses

U.S. treasuries and government agencies

 

 

33

 

$

194,135

 

$

452

 

$

3,578

 

$

4,030

State and municipal

 

 

80

 

 

78,232

 

 

569

 

 

212

 

 

781

Mortgage-backed and asset-backed

 

 

110

 

 

308,254

 

 

1,592

 

 

5,813

 

 

7,405

 

Total

 

 

223

 

$

580,621

 

$

2,613

 

$

9,603

 

$

12,216

 

The amortized cost and estimated fair values of debt securities available-for-sale by contractual maturity at the dates indicated are provided in the following table.  The Company has allocated mortgage-backed securities into the four maturity groupings reflected in the following table using the expected average life of the individual securities based on statistics provided by independent third party industry sources.  Expected maturities will differ from contractual maturities as borrowers may have the right to prepay obligations with or without prepayment penalties.

 

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

 

 

 

Estimated

 

 

 

 

Estimated

 

 

 

Amortized

 

Fair

 

Amortized

 

Fair

(In thousands)

 

Cost

 

Value

 

Cost

 

Value

Due in one year or less

 

$

57,794

 

$

58,089

 

$

63,482

 

$

63,747

Due after one year through five years

 

 

283,422

 

 

284,235

 

 

277,297

 

 

276,830

Due after five years through ten years

 

 

190,435

 

 

191,473

 

 

212,825

 

 

210,386

Due after ten years

 

 

394,470

 

 

392,165

 

 

392,136

 

 

385,804

 

Total debt securities available for sale

 

$

926,121

 

$

925,962

 

$

945,740

 

$

936,767

 

At March 31, 2019 and December 31, 2018, investments available-for-sale with a book value of $446.3 million and $477.3 million, respectively, were pledged as collateral for certain government deposits and for other purposes as required or permitted by law. The outstanding balance of no single issuer, except for U.S. Agencies securities, exceeded ten percent of stockholders' equity at March 31, 2019 and December 31, 2018.

 

Equity securities

Other equity securities at the dates indicated are presented in the following table:

(In thousands)

 

March 31, 2019

 

December 31, 2018

Federal Reserve Bank stock

 

$

22,496

 

$

22,456

Federal Home Loan Bank of Atlanta stock

 

 

38,273

 

 

50,933

 

Total equity securities

 

$

60,769

 

$

73,389

               

 

Note 3 – LOANS

Outstanding loan balances at March 31, 2019 and December 31, 2018 are net of unearned income including net deferred loan fees of $0.6 million and $0.9 million, respectively.  The loan portfolio segment balances at the dates indicated are presented in the following table:

 

13


 

(In thousands)

 

March 31, 2019

 

December 31, 2018

Residential real estate:

 

 

 

 

 

 

 

Residential mortgage

 

$

1,249,968

 

$

1,228,247

 

Residential construction