OLNEY, MARYLAND, April 23, 2024 — Sandy Spring Bancorp, Inc. (Nasdaq-SASR), the parent company of Sandy Spring Bank, reported net income of $20.4 million ($0.45 per diluted common share) for the quarter ended March 31, 2024, compared to net income of $26.1 million ($0.58 per diluted common share) for the fourth quarter of 2023 and $51.3 million ($1.14 per diluted common share) for the first quarter of 2023.
Current quarter's core earnings were $21.9 million ($0.49 per diluted common share), compared to $27.1 million ($0.60 per diluted common share) for the quarter ended December 31, 2023 and $52.3 million ($1.16 per diluted common share) for the quarter ended March 31, 2023. Core earnings exclude the after-tax impact of amortization of intangibles, investment securities gains or losses and other non-recurring or extraordinary items. The current quarter's decline of net income and core earnings as compared to the linked quarter was driven by an increase to the provision for credit losses coupled with lower net interest income and higher non-interest expense, partially offset by higher non-interest income. The total provision for credit losses was $2.4 million for the first quarter of 2024 compared to a credit of $3.4 million for the previous quarter and a credit of $21.5 million for the first quarter of 2023.
“We continued to gain momentum this quarter in several critical areas, including growing core funding and maintaining a strong liquidity position. We also continued to uphold our credit quality through prudent risk management and our hands-on approach to working with our clients,” said Daniel J. Schrider, Chair, President & CEO of Sandy Spring Bank.
“As we move through the year, we remain focused on expanding client relationships through enhanced products, services and digital solutions and by delivering local and remarkable client service,” Schrider added.
First Quarter Highlights
- Total assets at March 31, 2024 decreased by 1% to $13.9 billion compared to $14.0 billion at December 31, 2023.
- Total loans remained level at $11.4 billion as of March 31, 2024 compared to December 31, 2023. During the current quarter, we reduced our concentration in the investor commercial real estate segment by $106.5 million, while the AD&C portfolio increased $101.3 million. Total commercial business loans and lines and mortgage and consumer loan portfolios remained relatively unchanged during this period.
- Deposits increased $230.7 million or 2% to $11.2 billion at March 31, 2024 compared to $11.0 billion at December 31, 2023, as interest-bearing deposits increased $326.9 million, while noninterest-bearing deposits declined $96.2 million. Strong growth in the interest-bearing deposit categories was mainly experienced within savings accounts, which grew by $303.9 million compared to the linked quarter. Interest checking and money market accounts increased $64.5 million and $51.6 million, respectively, while time deposits decreased $93.0 million. The decline within noninterest-bearing deposit categories was driven by lower balances in commercial and small business checking accounts.
- The ratio of non-performing loans to total loans was 0.74% at March 31, 2024 compared to 0.81% at December 31, 2023 and 0.41% at March 31, 2023. The current quarter's reduction in non-performing loans was related to full payoffs of several non-accrual loans in combination with the movement of one investment commercial real estate loan from a non-accrual category to the other real estate owned. Net charge-offs for the current quarter totaled $1.1 million.
- Total borrowings declined $353.4 million at March 31, 2024 compared to the previous quarter, due to the full payoff of $300.0 million in outstanding borrowings through the Federal Reserve Bank's Bank Term Funding Program and a $50.0 million reduction in FHLB advances.
- Net interest income for the first quarter of 2024 declined $2.4 million or 3% compared to the previous quarter and $18.0 million or 18% compared to the first quarter of 2023. Compared to the previous quarter, the $0.4 million growth in interest income for the current quarter was more than offset by the $2.7 million increase in interest expense.
- The net interest margin was 2.41% for the first quarter of 2024 compared to 2.45% for the fourth quarter of 2023 and 2.99% for the first quarter of 2023. Overall, the rate of net interest margin contraction slowed down during the current quarter and we experienced a margin increase during the last month of the current quarter. Compared to the linked quarter, the rate paid on interest-bearing liabilities rose 10 basis points, while the yield on interest-earning assets increased 9 basis points.
- Provision for credit losses directly attributable to the funded loan portfolio was $3.3 million for the current quarter compared to a credit of $2.6 million in the previous quarter and a credit of $18.9 million in the prior year quarter. The increase in the provision during the current quarter was attributable to the adjustments of risk factors applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves, the result of several payoffs of non-accrual loans, and the reduced probability of an economic recession. In addition, during the current quarter, the reserve for unfunded commitments decreased by $0.9 million, a result of higher utilization rates on lines of credit.
- Non-interest income for the first quarter of 2024 increased by 11% or $1.8 million compared to the linked quarter and grew by 15% or $2.4 million compared to the prior year quarter. The quarter-over-quarter increase was mainly driven by higher wealth management income, due to a 3% increase in assets under management and the overall favorable market performance, along with higher income from mortgage banking activities and other income, generated by increased credit-related fees.
- Non-interest expense for the first quarter of 2024 increased $0.9 million or 1% compared to the fourth quarter of 2023 and $1.7 million or 3% compared to the prior year quarter. The quarterly increase in non-interest expense was primarily due to higher salaries and benefits as more employees were subject to employer-related payroll taxes during the current quarter as compared to the linked quarter, partially offset by lower professional fees and lower marketing expense.
- Return on average assets (“ROA”) for the quarter ended March 31, 2024 was 0.58% and return on average tangible common equity (“ROTCE”) was 7.39% compared to 0.73% and 9.26%, respectively, for the fourth quarter of 2023 and 1.49% and 19.10%, respectively, for the first quarter of 2023. On a non-GAAP basis, the current quarter's core ROA was 0.63% and core ROTCE was 7.39% compared to 0.76% and 9.26%, respectively, for the previous quarter and 1.52% and 19.11%, respectively, for the first quarter of 2023.
- The GAAP efficiency ratio was 69.60% for the first quarter of 2024, compared to 68.33% for the fourth quarter of 2023 and 58.55% for the first quarter of 2023. The non-GAAP efficiency ratio was 66.73% for the first quarter of 2024 compared to 66.16% for the fourth quarter of 2023 and 56.87% for the prior year quarter. The increase in non-GAAP efficiency ratio (reflecting a decrease in efficiency) in the current quarter compared to the previous quarter and the first quarter of the prior year was the result of declines in net revenue from the prior periods coupled with the growth in non-interest expense.
Balance Sheet and Credit Quality
Total assets were $13.9 billion at March 31, 2024, as compared to $14.0 billion at December 31, 2023. At March 31, 2024 total loans were stable at $11.4 billion compared to the previous quarter. Investment commercial real estate loans decreased $106.5 million or 2% quarter-over-quarter, while the AD&C portfolio grew $101.3 million or 10% during this period. Commercial business loans and total mortgage and consumer loan portfolios remained relatively unchanged. Overall, the loan portfolio mix remained consistent compared to the previous quarter.
Deposits increased $230.7 million or 2% to $11.2 billion at March 31, 2024 compared to $11.0 billion at December 31, 2023. During this period interest-bearing deposits increased $326.9 million or 4%, while noninterest-bearing deposits declined by $96.2 million or 3%. Growth within interest-bearing deposit categories was driven by savings accounts, which increased by $303.9 million or 24%. Interest checking accounts and money market accounts grew by $64.5 million or 4% and $51.6 million or 2% during the current quarter, respectively. These increases were partially offset by the $93.0 million or 3% reduction in time deposits, of which $49.8 million was related to a reduction in brokered time deposits. The decline in noninterest-bearing deposit category was primarily driven by decreases of $110.6 million or 9% and $35.9 million or 3% in commercial and small business checking accounts, respectively. Total deposits, excluding brokered deposits, increased by $286.6 million or 3% quarter-over-quarter and represented 93% of the total deposits as of March 31, 2024 compared to 92% at December 31, 2023, reflecting continued strength and stability of the core deposit base. The deposit growth experienced during the current quarter resulted in the loan to deposit ratio declining to 101% at March 31, 2024 from 103% at December 31, 2023. Total uninsured deposits at March 31, 2024 were approximately 33% of the total deposits.
Total borrowings declined by $353.4 million or 27% at March 31, 2024 as compared to the previous quarter, driven by a full payoff of $300.0 million of outstanding borrowings through the Federal Reserve Bank's Bank Term Funding Program facility. In addition, FHLB advances were reduced by $50.0 million during the current quarter. At March 31, 2024, contingent liquidity, which consists of available FHLB borrowings, fed funds, funds through the Federal Reserve Bank's discount window, as well as excess cash and unpledged investment securities, totaled $6.3 billion or 170% of uninsured deposits.
The tangible common equity ratio increased to 8.86% of tangible assets at March 31, 2024, compared to 8.77% at December 31, 2023. This increase reflected the impact of a $141.6 million reduction in tangible assets, while tangible common equity remained level during the current quarter.
At March 31, 2024, the Company had a total risk-based capital ratio of 15.05%, a common equity tier 1 risk-based capital ratio of 10.96%, a tier 1 risk-based capital ratio of 10.96%, and a tier 1 leverage ratio of 9.56%. All of these ratios remain well in excess of the mandated minimum regulatory requirements.
Non-performing loans include non-accrual loans and accruing loans 90 days or more past due. At March 31, 2024, non-performing loans totaled $84.4 million, compared to $91.8 million at December 31, 2023 and $47.2 million at March 31, 2023. Non-performing loans to total loans ratio was 0.74% compared to 0.81% on a linked quarter basis. These levels of non-performing loans compare to 0.41% at March 31, 2023. The current quarter's decrease in non-performing loans was mainly related to several full payoffs, charge-offs and the transfer of one commercial real estate loan into other real estate owned. The majority of the non-accrual loans fully paid off during the current quarter were previously adequately reserved for, which provided a benefit to the current quarter's provision expense as the respective individual reserves were released upon the full payoff. Additionally, during the current quarter, we foreclosed on and transferred one investment commercial real estate property out of non-accrual loan category into the other real estate owned. Total net charge-offs for the current quarter amounted to $1.1 million compared to net recoveries of $0.1 million for the fourth quarter of 2023 and $0.3 million of net recoveries for the first quarter of 2023.
At March 31, 2024, the allowance for credit losses was $123.1 million or 1.08% of outstanding loans and 146% of non-performing loans, compared to $120.9 million or 1.06% of outstanding loans and 132% of non-performing loans at the end of the previous quarter and $117.6 million or 1.03% of outstanding loans and 249% of non-performing loans at the end of the first quarter of 2023. The increase in the allowance for the current quarter compared to the previous quarter mainly reflects updates to risk adjustments applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves due to non-accrual loan payoffs and the reduced probability of an economic recession.
Income Statement Review
Quarterly Results
Net income was $20.4 million ($0.45 per diluted common share) for the three months ended March 31, 2024 compared to $26.1 million ($0.58 per diluted common share) for the three months ended December 31, 2023 and $51.3 million ($1.14 per diluted common share) for the prior year quarter. The current quarter's core earnings were $21.9 million ($0.49 per diluted common share), compared to $27.1 million ($0.60 per diluted common share) for the previous quarter and $52.3 million ($1.16 per diluted common share) for the quarter ended March 31, 2023. The declines in the current quarter's net income and core earnings compared to the previous quarter were driven primarily by a higher provision for credit losses coupled with the decline in net interest income.
Net interest income for the first quarter of 2024 decreased $2.4 million or 3% compared to the previous quarter and $18.0 million or 18% compared to the first quarter of 2023. Both linked quarter and year-over-year decreases in net interest income were driven by higher interest expense, a result of higher funding costs, which outpaced growth in interest income. The rising interest rate environment was primarily responsible for a $14.7 million year-over-year increase in interest income. This growth in interest income was more than offset by the $32.6 million year-over-year growth in interest expense as funding costs have also risen in response to the rising rate environment and significant competition for deposits. Interest income growth occurred in all categories of commercial loans and, to a lesser degree, in residential mortgage loans, and consumer loans.
The net interest margin was 2.41% for the first quarter of 2024 compared to 2.45% for the fourth quarter of 2023 and 2.99% for the first quarter of 2023. The contraction of the net interest margin slowed down during the current quarter as the rate paid on interest-bearing liabilities rose 10 basis points, while the yield on interest-earning assets increased 9 basis points. The rate and yield increases year-over-year were driven by the several federal funds rate increases that occurred over the preceding twelve months, competition for deposits in the market, and customer movement of excess funds out of noninterest-bearing accounts into higher yielding products. As compared to the prior year quarter, the yield on interest-earning assets increased 38 basis points while the rate paid on interest-bearing liabilities rose 115 basis points, resulting in net interest margin compression of 58 basis points. With respect to the current quarter, margin compression began to reverse itself as the net interest income and net interest margin increased during the last month of the current quarter.
The total provision for credit losses was $2.4 million for the first quarter of 2024 compared to a credit of $3.4 million for the previous quarter and a credit of $21.5 million for the first quarter of 2023. The provision for credit losses directly attributable to the funded loan portfolio was $3.3 million for the current quarter compared to a credit of $2.6 million for the fourth quarter of 2023 and the prior year quarter’s credit of $18.9 million. The current quarter's provision is mainly a reflection of adjustments applied to specific industries within the commercial real estate segment, partially offset by lower individual reserves due to full payoffs of several non-accrual loans along with the lower probability of an economic recession.
Non-interest income for the first quarter of 2024 increased by 11% or $1.8 million compared to the linked quarter and grew by 15% or $2.4 million compared to the prior year quarter. The current quarter's increase in non-interest income as compared to the previous quarter was mainly driven by the $0.7 million increase in wealth management income due to the $166.0 million or 3% growth in assets under management and the overall favorable market performance. Additionally, income from mortgage banking activities and other income, a result of increased credit-related fees, increased by $0.6 million and $0.5 million, respectively.
Non-interest expense for the first quarter of 2024 increased $0.9 million or 1% compared to the fourth quarter of 2023 and $1.7 million or 3% compared to the first quarter of 2023. Quarter-over-quarter increase is predominantly attributable to the $1.2 million increase in salaries and benefits, as more employees were subject to employer-related payroll taxes during the current quarter as compared to the previous quarter. This increase was partially offset by lower professional fees and lower marketing expense, which declined by $0.7 million and $0.5 million, respectively.
For the first quarter of 2024, the GAAP efficiency ratio was 69.60% compared to 68.33% for the fourth quarter of 2023 and 58.55% for the first quarter of 2023. The GAAP efficiency ratio rose from the prior year quarter primarily as a result of the 14% decrease in GAAP revenue in combination with the 3% increase in GAAP non-interest expense. The non-GAAP efficiency ratio was 66.73% for the current quarter as compared to 66.16% for the fourth quarter of 2023 and 56.87% for the first quarter of 2023. The increase in the non-GAAP efficiency ratio (reflecting a decrease in efficiency) from the first quarter of the prior year to the current year quarter was primarily the result of the 13% decline in non-GAAP revenue, while non-GAAP expenses increased 1%.
ROA for the quarter ended March 31, 2024 was 0.58% and ROTCE was 7.39% compared to 0.73% and 9.26%, respectively, for the fourth quarter of 2023 and 1.49% and 19.10%, respectively, for the first quarter of 2023. On a non-GAAP basis, the current quarter's core ROA was 0.63% and core ROTCE was 7.39% compared to 0.76% and 9.26% for the fourth quarter of 2023 and 1.52% and 19.11%, respectively, for the first quarter of 2023.
Explanation of Non-GAAP Financial Measures
This news release contains financial information and performance measures determined by methods other than in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, such information is useful to investors. Non-GAAP measures used in this release consist of the following:
- Tangible common equity and related measures are non-GAAP measures that exclude the impact of goodwill and other intangible assets.
- The non-GAAP efficiency ratio excludes amortization of intangible assets, investment securities gains/(losses), contingent payment expense, and includes tax-equivalent income.
- Core earnings and the related measures of core earnings per diluted common share, core return on average assets and core return on average tangible common equity reflect net income exclusive of amortization of intangible assets, investment securities gains/(losses) and other non-recurring or extraordinary items, on a net of tax basis.
- Pre-tax pre-provision net income excludes income tax expense and the provision (credit) for credit losses.
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 that may be presented by other companies. Please refer to the non-GAAP Reconciliation tables included with this release for a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
Conference Call
The Company’s management will host a conference call to discuss its first quarter results today at 2:00 p.m. (ET). A live Webcast of the conference call is available through the Investor Relations section of the Sandy Spring Website. Participants may call 833.470.1428. Please use the following access code: 186461. Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call. An internet-based replay will be available on the website until May 7, 2024. A replay of the teleconference will be available through the same time period by calling 866.813.9403 under conference call number 131243.
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 50 locations, the bank offers a broad range of commercial and retail banking, mortgage, private banking, and trust services throughout Maryland, Virginia, and Washington, D.C. Through its subsidiaries, Rembert Pendleton Jackson and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of wealth management services.
Category: Webcast
Source: Sandy Spring Bancorp, Inc.
Code: SASR-E
For additional information or questions, please contact:
Daniel J. Schrider, Chair, President & Chief Executive Officer, or
Philip J. Mantua, E.V.P. & Chief Financial Officer
Sandy Spring Bancorp
17801 Georgia Avenue
Olney, Maryland 20832
800.399.5919
Email:
DSchrider@sandyspringbank.com
PMantua@sandyspringbank.com
Media Contact:
Jen Schell, Senior Vice President
301.570.8331
jschell@sandyspringbank.com
Forward-Looking Statements
Sandy Spring Bancorp’s 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 our quarterly and annual reports and the following: changes in general business and economic conditions nationally or in the markets that we serve; changes in consumer and business confidence, investor sentiment, or consumer spending or savings behavior; changes in the level of inflation; changes in the demand for loans, deposits and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; the impact of the interest rate environment on our business, financial condition and results of operations; the impact of compliance with changes in laws, regulations and regulatory interpretations, including changes in income taxes; changes in credit ratings assigned to us or our subsidiaries; the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations; competitive pressures among financial services companies; the ability to attract, develop and retain qualified employees; our ability to maintain the security of our data processing and information technology systems; the impact of changes in accounting policies, including the introduction of new accounting standards; the impact of judicial or regulatory proceedings; the impact of fiscal and governmental policies of the United States federal government; the impact of health emergencies, epidemics or pandemics; the effects of climate change; and the impact of natural disasters, extreme weather events, military conflict, terrorism or other geopolitical events. Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2023, 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.