Sandy Spring Bancorp Reports Record Quarterly Earnings

Company Demonstrates Strong Performance and Momentum Across the Organization

OLNEY, Md., Oct. 18, 2018 (GLOBE NEWSWIRE) -- Today, Sandy Spring Bancorp, Inc., (Nasdaq-SASR), the parent company of Sandy Spring Bank, reported net income for the third quarter of 2018 of $29.2 million ($0.82 per diluted share) compared to net income of $15.1 million ($0.62 per diluted share) for the third quarter of 2017 and net income of $24.4 million ($0.68 per diluted share) for the second quarter of 2018.  The current quarter’s results included $2.0 million of recovered interest income from a previously acquired credit impaired loan and $0.6 million in merger expenses.  Excluding the after-tax impact of these items, the net income for the third quarter would have been $28.2 million or $0.79 per diluted share.

The results of operations from the January 1, 2018, acquisition of WashingtonFirst Bankshares (“WashingtonFirst”) are included in the Company’s consolidated results of operations for the first nine months of 2018.  The current period results reflect increased levels of average and period end balances, income and expense, versus comparable periods in 2017.  At the acquisition date, WashingtonFirst had assets of $2.1 billion, loans of $1.7 billion and deposits of $1.6 billion.  The growth in interest income and expense from the prior year is the result of the growth in the balance sheet.  The cost savings initiatives as a result of the synergies from the combination of the two institutions will continue to be realized into the first half of 2019.

“As the largest locally-headquartered community bank, our success is evident in our record quarterly earnings and growth momentum,” said Daniel J. Schrider, President and Chief Executive Officer. “We are thriving in a highly competitive market and among our peer group. To continue to be a high-performing company, we will remain grounded in our core strengths: effectively funding the bank by deepening our client relationships and enhancing our funding strategies, driving robust loan growth, and managing expenses. All of these performance drivers have been key to this quarter’s strong results.”

Third Quarter Highlights: 

• Total loans increased 52% compared to the third quarter of 2017, primarily as a result of the WashingtonFirst acquisition. Post-acquisition loan growth momentum remained strong during the quarter.  Compared to the post-acquisition combined portfolio at the beginning of 2018, the loan portfolio has experienced 6% growth.
   
• Total deposits have experienced post-acquisition growth of 6%, primarily in noninterest-bearing demand deposit accounts, which have grown 13% subsequent to the acquisition. 
   
• The net interest margin for the third quarter of 2018 was 3.71% compared to 3.54% for the third quarter of 2017 and 3.56% for the second quarter of 2018.  The current quarter’s margin was positively impacted by an interest income recovery of $2.0 million.  The net interest margin for the current quarter was 3.60% after excluding the interest income recovery.
   
• Third quarter results reflected an annualized return on average assets of 1.45% and annualized return on average equity of 11.26% as compared to 1.13% and 10.74% respectively for the third quarter of 2017.  Exclusive of merger costs and the interest income recovery on an after-tax basis, the return on average assets and return on average equity for the current quarter would have been 1.40% and 10.85%, respectively.
  
  
• Pre-tax merger expenses recognized in the current quarter declined to $0.6 million compared to $2.2 million in the prior quarter.
   
• The Non-GAAP efficiency ratio was 49.27% for the current quarter compared to 53.76% for the third quarter of 2017 and 52.98% for the second quarter of 2018.  Excluding the previously mentioned interest recovery, the Non-GAAP efficiency ratio for the current quarter was 50.48%.

Review of Balance Sheet and Credit Quality

At September 30, 2018, total assets amounted to $8.0 billion compared to $5.3 billion at September 30, 2017. This increase was primarily the result of the acquisition of WashingtonFirst’s $2.1 billion of assets. Total loans at September 30, 2018, were $6.4 billion compared to $4.2 billion at September 30, 2017.  Post-acquisition asset growth has been primarily the result of net loan growth in the first nine months of 2018.

Tangible common equity totaled $711 million at September 30, 2018, compared to $482 million at September 30, 2017. At September 30, 2018, the ratio of tangible common equity to tangible assets has increased to 9.26% compared to 9.18% at September 30, 2017.  The initial impact on tangible common equity of the growth in intangible assets associated with the WashingtonFirst acquisition has been substantially offset during 2018 by increased net earnings.   The Company had a total risk-based capital ratio of 12.38%, a common equity tier 1 risk-based capital ratio of 11.02%, a tier 1 risk-based capital ratio of 11.18% and a tier 1 leverage ratio of 9.46% at September 30, 2018.

The ratio of non-performing loans to total loans decreased to 0.52% at September 30, 2018, compared to 0.72% at September 30, 2017, as a result of the growth in the loan portfolio.  Non-performing loans totaled $33.3 million at September 30, 2018, compared to $30.2 million at September 30, 2017, and $28.8 million at June 30, 2018. Non-performing loans include accruing loans 90 days or more past due and restructured loans, but exclude non-performing loans acquired in the WashingtonFirst acquisition.

Net loan charge-offs/recoveries were not significant for the third quarter of 2018 compared to $1.1 million for the third quarter of 2017.  The allowance for loan losses represented 0.79% of outstanding loans and 151% of non-performing loans at September 30, 2018, compared to 1.07% of outstanding loans and 149% of non-performing loans at September 30, 2017. The decline in the ratio of the allowance for loan losses to outstanding loans ratio is the result of the accounting for credit losses on the loans acquired in the WashingtonFirst acquisition as any incurred credit losses have been embedded in the determination of the fair values of those loans.

Income Statement Review

For the third quarter of 2018 net interest income increased 58% to $67.6 million compared to $42.7 million for the third quarter of 2017 as average loans from quarter to quarter increased 51% primarily as a result of the WashingtonFirst acquisition and, to a lesser extent, the Company’s organic loan growth. The net interest margin for the current quarter was 3.71% compared to the net interest margin for the third quarter of 2017 of 3.54%.  The current quarter’s margin included $2.0 million in recovered interest income from a previously acquired credit impaired loan compared to $0.7 million in recovered interest for the prior year’s quarter.  Excluding these amounts, the net interest margin for the current quarter was 3.60% compared to the prior year’s 3.54%.  Amortization of the fair value adjustments to both interest-earning assets and interest-bearing liabilities directly attributable to the acquisition had an 18 basis point positive effect on net interest margin for the current period. This favorable margin impact was offset by approximately 5 basis points as a result of the impact that the recent reduction in the tax rate had on tax-advantaged investments.

The provision for loan losses was $1.9 million for the third quarter of 2018, compared to $0.9 million for the third quarter of 2017 and $1.7 million for the second quarter of 2018. The increase in the provision reflects the impact of organic loan production and the impact of acquired loans being refinanced as they matured under the original lending arrangements during the third quarter of 2018.  

Non-interest income increased to $15.0 million or 18% for the third quarter of 2018, compared to $12.7 million for the third quarter of 2017.  The increase in non-interest income was due primarily to the impact of increased mortgage banking activities and, to a lesser extent, income from wealth management activities and bank card fees.

Non-interest expenses increased 36% to $42.4 million for the third quarter of 2018, compared to $31.2 million in the third quarter of 2017. The current quarter included $0.6 million in merger expenses compared to $0.3 million for the third quarter of 2017.  Excluding these expenses, non-interest expenses increased 36% compared to the third quarter of 2017 due to increased compensation and benefit costs and facility and other operational expenses as a result of the acquisition.  The non-GAAP efficiency ratio improved to 49.27% for the third quarter of 2018, compared to 53.76% for the third quarter of 2017, as a result of the growth in net interest income.  The Non-GAAP efficiency ratio for the current quarter was 50.48% after excluding the interest income recovery.

Net interest income for the first nine months of 2018 increased 55%, compared to the first nine months of 2017, due to the combination of the acquisition and organic loan growth. During the first nine months of 2018, the net interest margin was 3.62% compared to 3.55% for the prior year period. Net interest income for the first nine months of 2018 includes the previously mentioned $2.0 million of recovered interest income.  This compares to the interest recovery of $0.7 million for the same period of 2017.   Excluding these recoveries, the net interest margin would have been 3.59% compared to 3.54% for the nine months ended 2018 and 2017, respectively.  The amortization of the fair value adjustments is estimated to be 14 basis points on an annual basis.  This favorable margin effect was partially offset by the impact that the recently enacted tax rate reduction had on the tax-advantaged securities in the investment portfolio which adversely affected the margin by 5 basis points.  

The provision for loan losses was $5.6 million for the first nine months of 2018, compared to $2.5 million for the first nine months of 2017.   The increase in the provision reflects the organic growth in the loan portfolio year over year in addition to the impact of acquired loans being refinanced as they reach maturity under the original lending arrangements and cease to be accounted for as acquired loans. 

Non-interest income was $47.0 million for the first nine months of 2018, compared to $38.9 million for the first nine months of 2017.  The first nine months of 2018 included gains of $0.1 million on sales of investment securities compared to $1.3 million in 2017.  Excluding these gains, non-interest income increased 24% compared to the prior year period primarily due to increases in mortgage banking activities, wealth management income and BOLI insurance mortality proceeds. Mortgage lending operations acquired as part of the WashingtonFirst transaction has resulted in significant growth in mortgage banking income for the first nine months of 2018. 

Non-interest expenses increased 46% to $137.1 million for the first nine months of 2018, compared to $94.0 million for the prior year period.  Excluding merger expense from both years in addition to the prior year’s loss on the FHLB redemption, the year-over-year increase in non-interest expense was 37%.  The majority of the increase was in compensation, facility costs and other operational expenses as a result of the acquisition of WashingtonFirst.  The non-GAAP efficiency ratio improved to 50.57% for the first nine months of 2018 compared to 54.21% for the first nine months of 2017 as a direct result of the growth in net interest income.  The Non-GAAP efficiency ratio for the current year-to-date was 50.99% excluding the interest income recovery.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company’s management uses supplemental non-GAAP financial measures in its analysis of the Company’s performance. These non-GAAP financial measures include: reported net income excluding intangible asset amortization, merger related expenses and the loss on the FHLB redemption from non-interest expense; non-interest income excluding securities gains (losses); and tax-equivalent net interest income, which adjusts the interest earned on tax-advantaged loans and tax-exempt investment securities to an amount comparable to interest subject to normal income taxes. Because the adjustments made to derive non-GAAP financial measures can vary from period to period, the Company’s management believes that the non-GAAP financial measures are useful in comparing 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. 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 Non-GAAP Reconciliation table included with this release.

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 Webcast of the conference call is available through the Investor Relations section of the Sandy Spring Website at www.sandyspringbank.com.  Participants may call 1-866-235-9910. A password is not necessary.  Visitors to the Website are advised to log on 10 minutes ahead of the scheduled start of the call.  An internet-based replay will be available on the website until 9:00 am (ET) November 1, 2018.  A replay of the teleconference will be available through the same time period by calling 1-877-344-7529 under conference call number 10124406.

About Sandy Spring Bancorp, Inc.

Sandy Spring Bancorp, Inc., headquartered in Olney, Maryland, is the holding company for Sandy Spring 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. Through its subsidiaries, Sandy Spring Insurance Corporation and West Financial Services, Inc., Sandy Spring Bank also offers a comprehensive menu of insurance and wealth management services. Visit www.sandyspringbank.com for more information.

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 

Media Contact:
Jen Schell
301-570-8331
jschell@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 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; the possibility that any of the anticipated benefits of acquisitions will not be realized or will not be realized within the expected time period; and a variety of other matters which, by their nature, are subject to significant uncertainties.  Sandy Spring Bancorp provides greater detail regarding some of these factors in its Form 10-K for the year ended December 31, 2017, including in the Risk Factors section of that report, and in its other SEC reports.  Sandy Spring Bancorp’s forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC’s Web site at www.sec.gov.

Sandy Spring Bancorp, Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS - UNAUDITED
		Three Months Ended									Nine Months Ended
		September 30,						%			September 30,						%
(Dollars in thousands, except per share data)			2018			2017		Change				2018			2017		Change
Results of Operations:
Net interest income		$	67,591		$	42,697		58	%		$	194,300		$	125,276		55	%
Provision for loan losses			1,890			934		102				5,620			2,450		129
Non-interest income			15,033			12,746		18				47,019			38,949		21
Non-interest expenses			42,393			31,191		36				137,116			94,040		46
Income before income taxes			38,341			23,318		64				98,583			67,735		46
Net income			29,234			15,089		94				75,298			44,942		68
Pre-tax pre-provision income		$	40,811		$	24,597		66			$	115,969		$	71,517		62
Return on average assets			1.45	%		1.13	%					1.27	%		1.15	%
Return on average common equity			11.26	%		10.74	%					9.89	%		10.99	%
Net interest margin			3.71	%		3.54	%					3.62	%		3.55	%
Efficiency ratio - GAAP basis  (1)			51.31	%		56.26	%					56.82	%		57.26	%
Efficiency ratio - Non-GAAP basis  (1)			49.27	%		53.76	%					50.57	%		54.21	%
Per share data:
Basic net income		$	0.82		$	0.62		32	%		$	2.11		$	1.86		13	%
Diluted net income		$	0.82		$	0.62		32			$	2.11		$	1.86		13
Average fully diluted shares			35,744,085			24,223,004		48				35,721,702			24,201,448		48
Dividends declared per share		$	0.28		$	0.26		8			$	0.82		$	0.78		5
Book value per share			29.35			23.53		25				29.35			23.53		25
Tangible book value per share			20.03			20.07		-				20.03			20.07		-
Outstanding shares			35,521,541			23,990,370		48				35,521,541			23,990,370		48
Financial Condition at period-end:
Investment securities		$	992,797		$	795,922		25	%		$	992,797		$	795,922		25	%
Loans			6,388,959			4,194,118		52				6,388,959			4,194,118		52
Interest-earning assets			7,428,534			5,049,229		47				7,428,534			5,049,229		47
Assets			8,034,565			5,334,788		51				8,034,565			5,334,788		51
Deposits			5,898,394			3,955,792		49				5,898,394			3,955,792		49
Interest-bearing liabilities			5,042,431			3,422,568		47				5,042,431			3,422,568		47
Stockholders' equity			1,042,716			564,480		85				1,042,716			564,480		85
Capital ratios:
Tier 1 leverage  (4)			9.46	%		9.28	%					9.46	%		9.28	%
Tier 1 capital to risk-weighted assets  (4)			11.18	%		10.99	%					11.18	%		10.99	%
Total regulatory capital to risk-weighted assets  (4)			12.38	%		12.01	%					12.38	%		12.01	%
Common equity tier 1 capital to risk-weighted assets  (4)			11.02	%		10.99	%					11.02	%		10.99	%
Tangible common equity to tangible assets  (2)			9.26	%		9.18	%					9.26	%		9.18	%
Average equity to average assets			12.90	%		10.52	%					12.85	%		10.50	%
Credit quality ratios:
Allowance for loan losses to loans			0.79	%		1.07	%					0.79	%		1.07	%
Non-performing loans to total loans			0.52	%		0.72	%					0.52	%		0.72	%
Non-performing assets to total assets			0.44	%		0.59	%					0.44	%		0.59	%
Allowance for loan losses to non-performing loans			151.35	%		148.73	%					151.35	%		148.73	%
Annualized net charge-offs to average loans  (3)			0.00	%		0.10	%					0.01	%		0.05	%
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income.
The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization, merger expenses and loss on FHLB redemption from non-interest expense;
securities gains (losses) from non-interest income and adds the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.
(2) The tangible common equity to tangible assets ratio is a non-GAAP ratio that divides assets excluding intangible assets into stockholders' equity after deducting intangible assets
and other comprehensive gains (losses).  See the Reconciliation Table included with these Financial Highlights.
(3) Calculation utilizes average loans, excluding residential mortgage loans held-for-sale.
(4) Estimated ratio at September 30, 2018

 

Sandy Spring Bancorp, Inc. and Subsidiaries
RECONCILIATION TABLE - UNAUDITED
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(Dollars in thousands)			2018				2017				2018				2017
Pre-tax pre-provision income:
Net income		$	29,234			$	15,089			$	75,298			$	44,942
Plus non-GAAP adjustment:
Merger expenses			580				345				11,766				1,332
Income taxes			9,107				8,229				23,285				22,793
Provision for loan losses			1,890				934				5,620				2,450
Pre-tax pre-provision income		$	40,811			$	24,597			$	115,969			$	71,517
Efficiency ratio - GAAP basis:
Non-interest expenses		$	42,393			$	31,191			$	137,116			$	94,040
Net interest income plus non-interest income		$	82,624			$	55,443			$	241,319			$	164,225
Efficiency ratio - GAAP basis			51.31	%			56.26	%			56.82	%			57.26	%
Efficiency ratio - Non-GAAP basis:
Non-interest expenses		$	42,393			$	31,191			$	137,116			$	94,040
Less non-GAAP adjustment:
Amortization of intangible assets			540				25				1,622				76
Loss on FHLB Redemption			-				-				-				1,275
Merger expenses			580				345				11,766				1,332
Non-interest expenses -  as adjusted		$	41,273			$	30,821			$	123,728			$	91,357
Net interest income plus non-interest income		$	82,624			$	55,443			$	241,319			$	164,225
Plus non-GAAP adjustment:
Tax-equivalent income			1,221				1,888				3,483				5,585
Less non-GAAP adjustments:
Securities gains			82				-				145				1,275
Net interest income plus non-interest income - as adjusted		$	83,763			$	57,331			$	244,657			$	168,535
Efficiency ratio - Non-GAAP basis			49.27	%			53.76	%			50.57	%			54.21	%
Supplemental Non-GAAP Performance Measurements:
Net income - GAAP		$	29,234			$	15,089			$	75,298			$	44,942
Merger expenses - net of tax			428				207				8,692				801
Acquisition fair value marks - net of tax			2,499				17				5,777				65
Net income - Non-GAAP		$	27,163			$	15,279			$	78,213			$	45,678
Diluted net income per share - Non-GAAP		$	0.76			$	0.63			$	2.19			$	1.89
Return on average assets - Non-GAAP			1.35	%			1.14	%			1.32	%			1.17	%
Return on average common equity - Non-GAAP			10.46	%			10.88	%			10.27	%			11.17	%
Tangible common equity ratio:
Total stockholders' equity		$	1,042,716			$	564,480			$	1,042,716			$	564,480
Accumulated other comprehensive income			24,420				3,477				24,420				3,477
Goodwill			(345,422	)			(85,768	)			(345,422	)			(85,768	)
Other intangible assets, net			(10,327	)			(604	)			(10,327	)			(604	)
Tangible common equity		$	711,387			$	481,585			$	711,387			$	481,585
Total assets		$	8,034,565			$	5,334,788			$	8,034,565			$	5,334,788
Goodwill			(345,422	)			(85,768	)			(345,422	)			(85,768	)
Other intangible assets, net			(10,327	)			(604	)			(10,327	)			(604	)
Tangible assets		$	7,678,816			$	5,248,416			$	7,678,816			$	5,248,416
Tangible common equity ratio			9.26	%			9.18	%			9.26	%			9.18	%
Outstanding common shares			35,521,541				23,990,370				35,521,541				23,990,370
Tangible book value per common share		$	20.03			$	20.07			$	20.03			$	20.07

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION  - UNAUDITED
		September 30,				December 31,				September 30,
(Dollars in thousands)		2018				2017				2017
Assets
Cash and due from banks		$	63,380			$	55,693			$	50,076
Federal funds sold			2,055				2,845				2,838
Interest-bearing deposits with banks			13,142				53,962				49,267
Cash and cash equivalents			78,577				112,500				102,181
Residential mortgage loans held for sale (at fair value)			31,581				9,848				7,084
Investments available-for-sale (at fair value)			926,723				729,507				756,069
Other equity securities			66,074				45,518				39,853
Total loans			6,388,959				4,314,248				4,194,118
Less: allowance for loan losses			(50,409	)			(45,257	)			(44,924	)
Net loans			6,338,550				4,268,991				4,149,194
Premises and equipment, net			62,098				54,761				54,108
Other real estate owned			2,118				2,253				1,448
Accrued interest receivable			24,058				15,480				16,045
Goodwill			345,422				85,768				85,768
Other intangible assets, net			10,327				580				604
Other assets			149,037				121,469				122,434
Total assets		$	8,034,565			$	5,446,675			$	5,334,788
Liabilities
Noninterest-bearing deposits		$	1,902,537			$	1,264,392			$	1,312,710
Interest-bearing deposits			3,995,857				2,699,270				2,643,082
Total deposits			5,898,394				3,963,662				3,955,792
Securities sold under retail repurchase agreements and federal funds purchased			142,669				119,359				146,569
Advances from FHLB			866,445				765,833				632,917
Subordinated debentures			37,460				-				-
Accrued interest payable and other liabilities			46,881				34,005				35,030
Total liabilities			6,991,849				4,882,859				4,770,308
Stockholders' Equity
Common stock -- par value $1.00; shares authorized 50,000,000; shares issued and outstanding 35,521,541,
23,996,293 and 23,990,370 at September 30, 2018, December 31, 2017 and September 30, 2017, respectively			35,522				23,996				23,990
Additional paid in capital			605,623				168,188				167,455
Retained earnings			425,991				378,489				376,512
Accumulated other comprehensive loss			(24,420	)			(6,857	)			(3,477	)
Total stockholders' equity			1,042,716				563,816				564,480
Total liabilities and stockholders' equity		$	8,034,565			$	5,446,675			$	5,334,788

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
(Dollars in thousands, except per share data)		2018			2017			2018			2017
Interest Income:
Interest and fees on loans		$	76,786		$	43,891		$	215,050		$	126,861
Interest on loans held for sale			336			119			983			273
Interest on deposits with banks			211			108			1,082			289
Interest and dividends on investment securities:
Taxable			5,112			3,410			15,297			10,572
Exempt from federal income taxes			1,921			2,053			6,035			6,110
Interest on federal funds sold			8			8			28			18
Total interest income			84,374			49,589			238,475			144,123
Interest Expense:
Interest on deposits			10,773			3,701			26,583			9,212
Interest on retail repurchase agreements and federal funds purchased			383			83			599			238
Interest on advances from FHLB			5,141			3,108			15,557			9,385
Interest on subordinated debt			486			-			1,436			12
Total interest expense			16,783			6,892			44,175			18,847
Net interest income			67,591			42,697			194,300			125,276
Provision for loan losses			1,890			934			5,620			2,450
Net interest income after provision for loan losses			65,701			41,763			188,680			122,826
Non-interest Income:
Investment securities gains			82			-			145			1,275
Service charges on deposit accounts			2,316			2,140			6,865			6,121
Mortgage banking activities			1,672			632			5,943			2,080
Wealth management income			5,344			4,864			15,792			14,092
Insurance agency commissions			2,016			1,950			5,020			4,924
Income from bank owned life insurance			663			609			3,664			1,808
Bank card fees			1,436			1,211			4,199			3,609
Other income			1,504			1,340			5,391			5,040
Total non-interest income			15,033			12,746			47,019			38,949
Non-interest Expenses:
Salaries and employee benefits			24,488			18,442			73,064			54,525
Occupancy expense of premises			4,355			3,294			13,939			9,907
Equipment expenses			2,441			1,722			6,909			5,213
Marketing			770			784			2,863			2,223
Outside data services			1,736			1,286			4,840			4,045
FDIC insurance			1,257			850			3,840			2,478
Amortization of intangible assets			540			25			1,622			76
Merger expenses			580			345			11,766			1,332
Other expenses			6,226			4,443			18,273			14,241
Total non-interest expenses			42,393			31,191			137,116			94,040
Income before income taxes			38,341			23,318			98,583			67,735
Income tax expense			9,107			8,229			23,285			22,793
Net income		$	29,234		$	15,089		$	75,298		$	44,942
Net Income Per Share Amounts:
Basic net income per share		$	0.82		$	0.62		$	2.11		$	1.86
Diluted net income per share		$	0.82		$	0.62		$	2.11		$	1.86
Dividends declared per share		$	0.28		$	0.26		$	0.82		$	0.78

 

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
			2018												2017
(Dollars in thousands, except per share data)		Q3				Q2				Q1				Q4				Q3				Q2				Q1
Profitability for the Quarter:
Tax-equivalent interest income		$	85,595			$	79,774			$	76,589			$	52,550			$	51,477			$	50,477			$	47,754
Interest expense			16,783				14,779				12,613				7,184				6,892				6,250				5,705
Tax-equivalent net interest income			68,812				64,995				63,976				45,366				44,585				44,227				42,049
Tax-equivalent adjustment			1,221				1,177				1,085				1,874				1,888				1,901				1,796
Provision for loan losses			1,890				1,733				1,997				527				934				1,322				194
Non-interest income			15,033				14,868				17,118				12,294				12,746				13,571				12,632
Non-interest expenses			42,393				45,082				49,641				35,059				31,191				32,868				29,981
Income before income taxes			38,341				31,871				28,371				20,200				23,318				21,707				22,710
Income tax expense			9,107				7,472				6,706				11,933				8,229				6,966				7,598
Net income		$	29,234			$	24,399			$	21,665			$	8,267			$	15,089			$	14,741			$	15,112
Financial Performance:
Pre-tax pre-provision income		$	40,811			$	35,832			$	39,326			$	23,647			$	24,597			$	24,016			$	22,904
Return on average assets			1.45	%			1.23	%			1.12	%			0.61	%			1.13	%			1.14	%			1.20	%
Return on average common equity			11.26	%			9.66	%			8.70	%			5.82	%			10.74	%			10.80	%			11.45	%
Net interest margin			3.71	%			3.56	%			3.58	%			3.57	%			3.54	%			3.60	%			3.51	%
Efficiency ratio - GAAP basis (1)			51.31	%			57.29	%			62.04	%			62.85	%			56.26	%			58.80	%			56.69	%
Efficiency ratio - Non-GAAP basis (1)			49.27	%			52.98	%			49.54	%			55.69	%			53.76	%			54.10	%			54.78	%
Per Share Data:
Basic net income per share		$	0.82			$	0.68			$	0.61			$	0.34			$	0.62			$	0.61			$	0.63
Diluted net income per share		$	0.82			$	0.68			$	0.61			$	0.34			$	0.62			$	0.61			$	0.63
Average fully diluted shares			35,744,085				35,743,927				35,683,542				24,228,471				24,223,004				24,262,745				24,158,566
Dividends declared per common share		$	0.28			$	0.28			$	0.26			$	0.26			$	0.26			$	0.26			$	0.26
Non-interest Income:
Securities gains (losses)		$	82			$	-			$	63			$	(2	)		$	-			$	1,273			$	2
Service charges on deposit accounts			2,316				2,290				2,259				2,177				2,140				2,017				1,964
Mortgage banking activities			1,672				2,064				2,207				654				632				840				608
Wealth management income			5,344				5,387				5,061				5,054				4,864				4,744				4,484
Insurance agency commissions			2,016				1,180				1,824				1,307				1,950				1,222				1,752
Income from bank owned life insurance			663				670				2,331				595				609				605				594
Bank card fees			1,436				1,393				1,370				1,218				1,211				1,253				1,145
Other income			1,504				1,884				2,003				1,291				1,340				1,617				2,083
Total Non-interest Income		$	15,033			$	14,868			$	17,118			$	12,294			$	12,746			$	13,571			$	12,632
Non-interest Expense:
Salaries and employee benefits		$	24,488			$	24,664			$	23,912			$	18,607			$	18,442			$	18,282			$	17,801
Occupancy expense of premises			4,355				4,642				4,942				3,146				3,294				3,211				3,402
Equipment expenses			2,441				2,243				2,225				1,802				1,722				1,767				1,724
Marketing			770				945				1,148				896				784				776				663
Outside data services			1,736				1,707				1,397				1,441				1,286				1,367				1,392
FDIC insurance			1,257				1,390				1,193				827				850				823				805
Amortization of intangible assets			540				541				541				25				25				25				26
Merger expenses			580				2,228				8,958				2,920				345				987				-
Professional fees			1,351				1,699				1,040				1,439				1,053				1,045				955
Other real estate owned expenses			36				41				38				14				4				(6	)			5
Other expenses			4,839				4,982				4,247				3,942				3,386				4,591				3,208
Total Non-interest Expense		$	42,393			$	45,082			$	49,641			$	35,059			$	31,191			$	32,868			$	29,981
(1) The efficiency ratio - GAAP basis is non-interest expenses divided by net interest income plus non-interest income from the Condensed Consolidated Statements of Income.
The traditional efficiency ratio - Non-GAAP basis excludes intangible asset amortization, merger expenses and loss on FHLB redemption from non-interest expense;
securities gains (losses) from non-interest income and adds the tax-equivalent adjustment to net interest income.  See the Reconciliation Table included with these Financial Highlights.

 

Sandy Spring Bancorp, Inc. and Subsidiaries
HISTORICAL TRENDS - QUARTERLY FINANCIAL DATA - UNAUDITED
			2018												2017
(Dollars in thousands)		Q3				Q2				Q1				Q4				Q3				Q2				Q1
Balance Sheets at Quarter End:
Residential mortgage loans		$	1,181,427			$	1,106,674			$	992,287			$	921,435			$	882,890			$	871,766			$	848,814
Residential construction loans			188,779				197,372				215,445				176,687				171,814				169,901				170,285
Commercial AD&C loans			631,589				609,266				564,871				292,443				295,222				314,259				309,350
Commercial investor real estate loans			1,924,397				1,923,827				1,928,439				1,112,710				1,104,669				1,069,988				979,410
Commercial owner occupied real estate loans			1,201,673				1,184,421				1,174,739				857,196				831,461				797,629				772,443
Commercial business loans			738,083				702,939				652,797				497,948				451,667				451,570				457,216
Consumer loans			523,011				525,574				532,973				455,829				456,395				458,058				455,478
Total loans			6,388,959				6,250,073				6,061,551				4,314,248				4,194,118				4,133,171				3,992,996
Allowance for loan losses			(50,409	)			(48,493	)			(46,931	)			(45,257	)			(44,924	)			(45,079	)			(43,861	)
Loans held for sale			31,581				40,000				28,486				9,848				7,084				5,743				17,717
Investment securities			992,797				1,017,274				1,040,339				775,025				795,922				821,491				855,707
Interest-earning assets			7,428,534				7,532,664				7,285,731				5,155,928				5,049,229				4,988,704				4,919,927
Total assets			8,034,565				8,152,600				7,894,918				5,446,675				5,334,788				5,270,521				5,201,164
Noninterest-bearing demand deposits			1,902,537				1,910,690				1,767,523				1,264,392				1,312,710				1,302,536				1,234,505
Total deposits			5,898,394				5,837,826				5,627,206				3,963,662				3,955,792				3,885,445				3,799,198
Customer repurchase agreements			142,669				139,647				149,323				119,359				146,569				127,312				141,244
Total interest-bearing liabilities			5,042,431				5,168,055				5,057,645				3,584,462				3,422,568				3,380,221				3,380,937
Total stockholders' equity			1,042,716				1,026,349				1,014,608				563,816				564,480				554,683				544,261
Quarterly Average Balance Sheets:
Residential mortgage loans		$	1,122,946			$	1,034,062			$	1,117,478			$	903,660			$	880,782			$	860,081			$	847,896
Residential construction loans			215,578				223,171				193,327				171,239				172,921				169,130				157,152
Commercial AD&C loans			632,354				576,076				582,876				289,737				291,569				302,924				310,325
Commercial investor real estate loans			1,905,427				1,924,759				1,988,340				1,114,960				1,090,641				1,010,389				945,080
Commercial owner occupied real estate loans			1,190,865				1,184,409				940,065				842,642				808,802				776,279				774,964
Commercial business loans			700,791				666,280				657,372				454,330				459,779				454,724				462,444
Consumer loans			524,605				531,965				538,198				458,378				457,526				461,672				458,162
Total loans			6,292,566				6,140,722				6,017,656				4,234,946				4,162,020				4,035,199				3,956,023
Loans held for sale			29,939				25,403				35,768				5,862				7,093				7,077				7,402
Investment securities			996,365				1,028,306				1,062,325				780,522				813,179				842,837				818,287
Interest-earning assets			7,372,536				7,311,272				7,212,878				5,061,075				5,019,133				4,922,389				4,829,208
Total assets			7,986,525				7,926,735				7,841,611				5,346,625				5,297,368				5,202,398				5,111,698
Noninterest-bearing demand deposits			1,822,931				1,796,644				1,651,258				1,322,157				1,293,470				1,251,396				1,159,715
Total deposits			5,783,992				5,657,420				5,489,715				3,991,936				3,916,657				3,810,180				3,673,731
Customer repurchase agreements			139,809				148,539				136,694				139,125				133,145				132,552				128,485
Total interest-bearing liabilities			5,076,717				5,058,016				5,116,904				3,419,669				3,407,279				3,360,128				3,375,002
Total stockholders' equity			1,030,167				1,013,081				1,010,106				563,506				557,282				547,229				535,308
Financial Measures:
Average equity to average assets			12.90	%			12.78	%			12.88	%			10.54	%			10.52	%			10.52	%			10.47	%
Investment securities to earning assets			13.36	%			13.50	%			14.28	%			15.03	%			15.76	%			16.47	%			17.39	%
Loans to earning assets			86.01	%			82.97	%			83.20	%			83.68	%			83.06	%			82.85	%			81.16	%
Loans to assets			79.52	%			76.66	%			76.78	%			79.21	%			78.62	%			78.42	%			76.77	%
Loans to deposits			108.32	%			107.06	%			107.72	%			108.85	%			106.02	%			106.38	%			105.10	%
Capital Measures:
Tier 1 leverage  (1)			9.46	%			9.27	%			9.21	%			9.24	%			9.28	%			9.26	%			9.26	%
Tier 1 capital to risk-weighted assets  (1)			11.18	%			11.01	%			11.08	%			10.84	%			10.99	%			10.96	%			11.02	%
Total regulatory capital to risk-weighted assets  (1)			12.38	%			12.19	%			12.27	%			11.85	%			12.01	%			12.00	%			12.06	%
Common equity tier 1 capital to risk-weighted assets  (1)			11.02	%			10.85	%			10.92	%			10.84	%			10.99	%			10.96	%			11.02	%
Book value per share		$	29.35			$	28.90			$	28.61			$	23.50			$	23.53			$	23.13			$	22.74
Outstanding shares			35,521,541				35,511,943				35,463,269				23,996,293				23,990,370				23,983,997				23,930,165
(1) Estimated ratio at September 30, 2018

 

Sandy Spring Bancorp, Inc. and Subsidiaries
LOAN PORTFOLIO QUALITY DETAIL - UNAUDITED
			2018												2017
(Dollars in thousands)		September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
Non-Performing Assets:
Loans 90 days past due:
Commercial business		$	150			$	6			$	-			$	-			$	-			$	-			$	-
Commercial real estate:
Commercial AD&C			1,261				-				-				-				-				-				-
Commercial investor real estate			-				-				-				-				-				-				-
Commercial owner occupied real estate			13				112				-				-				-				424				-
Consumer			563				-				126				-				1				4				-
Residential real estate:
Residential mortgage			-				-				-				225				225				-				232
Residential construction			-				-				-				-				-				-				-
Total loans 90 days past due			1,987				118				126				225				226				428				232
Non-accrual loans:
Commercial business			6,352				6,883				6,634				6,703				6,091				6,807				4,849
Commercial real estate:
Commercial AD&C			136				136				136				136				137				137				137
Commercial investor real estate			5,861				5,878				5,813				5,575				5,589				6,934				7,970
Commercial owner occupied real estate			3,352				3,440				3,524				3,582				5,012				4,926				5,106
Consumer			4,098				4,298				3,244				2,967				3,152				3,111				3,058
Residential real estate:
Residential mortgage			9,134				6,251				7,063				7,196				7,345				7,101				6,908
Residential construction			163				168				174				177				182				187				189
Total non-accrual loans			29,096				27,054				26,588				26,336				27,508				29,203				28,217
Total restructured loans - accruing			2,224				1,663				2,678				2,788				2,471				2,569				2,409
Total non-performing loans			33,307				28,835				29,392				29,349				30,205				32,200				30,858
Other assets and real estate owned (OREO)			2,118				2,361				2,761				2,253				1,448				1,460				1,294
Total non-performing assets		$	35,425			$	31,196			$	32,153			$	31,602			$	31,653			$	33,660			$	32,152
		For the Quarter Ended,
		September 30,				June 30,				March 31,				December 31,				September 30,				June 30,				March 31,
(Dollars in thousands)		2018				2018				2018				2017				2017				2017				2017
Analysis of Non-accrual Loan Activity:
Balance at beginning of period		$	27,054			$	26,588			$	26,336			$	27,508			$	29,203			$	28,217			$	29,211
Non-accrual balances transferred to OREO			-				-				(289	)			(888	)			(411	)			(175	)			(113	)
Non-accrual balances charged-off			(91	)			(144	)			(411	)			(446	)			(1,127	)			(179	)			(391	)
Net payments or draws			(1,777	)			(1,635	)			(357	)			(1,707	)			(1,869	)			(1,804	)			(1,382	)
Loans placed on non-accrual			4,193				2,245				1,309				2,504				1,712				3,144				1,461
Non-accrual loans brought current			(283	)			-				-				(635	)			-				-				(569	)
Balance at end of period		$	29,096			$	27,054			$	26,588			$	26,336			$	27,508			$	29,203			$	28,217
Analysis of Allowance for Loan Losses:
Balance at beginning of period		$	48,493			$	46,931			$	45,257			$	44,924			$	45,079			$	43,861			$	44,067
Provision for loan losses			1,890				1,733				1,997				527				934				1,322				194
Less loans charged-off, net of recoveries:
Commercial business			(49	)			(73	)			322				48				1,029				107				260
Commercial real estate:
Commercial AD&C			-				-				(62	)			-				-				(103	)			-
Commercial investor real estate			(49	)			(8	)			(8	)			(8	)			(10	)			(78	)			(5	)
Commercial owner occupied real estate			-				-				-				243				5				-				-
Consumer			85				244				99				(71	)			103				189				167
Residential real estate:
Residential mortgage			(11	)			13				(22	)			(12	)			(32	)			(3	)			(16	)
Residential construction			(2	)			(5	)			(6	)			(6	)			(6	)			(8	)			(6	)
Net charge-offs			(26	)			171				323				194				1,089				104				400
Balance at end of period		$	50,409			$	48,493			$	46,931			$	45,257			$	44,924			$	45,079			$	43,861
Asset Quality Ratios:
Non-performing loans to total loans			0.52	%			0.46	%			0.48	%			0.68	%			0.72	%			0.78	%			0.77	%
Non-performing assets to total assets			0.44	%			0.38	%			0.41	%			0.58	%			0.59	%			0.64	%			0.62	%
Allowance for loan losses to loans			0.79	%			0.78	%			0.77	%			1.05	%			1.07	%			1.09	%			1.10	%
Allowance for loan losses to non-performing loans			151.35	%			168.17	%			159.67	%			154.20	%			148.73	%			140.00	%			142.14	%
Annualized net charge-offs to average loans			0.00	%			0.01	%			0.02	%			0.02	%			0.10	%			0.01	%			0.04	%

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
		Three Months Ended September 30,
		2018											2017
										Annualized											Annualized
		Average				(1)				Average			Average				(1)				Average
(Dollars in thousands and tax-equivalent)		Balances				Interest				Yield/Rate			Balances				Interest				Yield/Rate
Assets
Residential mortgage loans		$	1,122,946			$	10,485			3.73	%		$	880,782			$	7,772			3.53	%
Residential construction loans			215,578				2,160			3.98				172,921				1,641			3.77
Total mortgage loans			1,338,524				12,645			3.77				1,053,703				9,413			3.57
Commercial AD&C loans			632,354				9,185			5.76				291,569				3,705			5.04
Commercial investor real estate loans			1,905,427				25,735			5.36				1,090,641				12,279			4.47
Commercial owner occupied real estate loans			1,190,865				14,484			4.83				808,802				9,492			4.66
Commercial business loans			700,791				9,196			5.21				459,779				5,252			4.53
Total commercial loans			4,429,437				58,600			5.25				2,650,791				30,728			4.60
Consumer loans			524,605				6,011			4.59				457,526				4,395			3.84
Total loans (2)			6,292,566				77,256			4.88				4,162,020				44,536			4.25
Loans held for sale			29,939				336			4.49				7,093				119			6.69
Taxable securities			720,317				5,342			2.97				512,420				3,531			2.76
Tax-exempt securities (3)			276,048				2,442			3.54				300,759				3,175			4.22
Total investment securities			996,365				7,784			3.12				813,179				6,706			3.30
Interest-bearing deposits with banks			51,683				211			1.62				34,007				108			1.26
Federal funds sold			1,983				8			1.58				2,834				8			1.16
Total interest-earning assets			7,372,536				85,595			4.61				5,019,133				51,477			4.08
Less:  allowance for loan losses			(49,194	)										(45,546	)
Cash and due from banks			64,653											48,221
Premises and equipment, net			62,452											53,938
Other assets			536,078											221,622
Total assets		$	7,986,525										$	5,297,368
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	703,905				231			0.13	%		$	615,250				135			0.09	%
Regular savings deposits			347,299				93			0.11				326,827				57			0.07
Money market savings deposits			1,625,481				5,330			1.30				1,002,779				1,479			0.59
Time deposits			1,284,376				5,119			1.58				678,331				2,030			1.19
Total interest-bearing deposits			3,961,061				10,773			1.08				2,623,187				3,701			0.56
Other borrowings			188,133				383			0.81				133,145				83			0.25
Advances from FHLB			890,040				5,141			2.29				650,947				3,108			1.89
Subordinated debentures			37,483				486			5.19				-				-			-
Total interest-bearing liabilities			5,076,717				16,783			1.31				3,407,279				6,892			0.80
Noninterest-bearing demand deposits			1,822,931											1,293,470
Other liabilities			56,710											39,337
Stockholders' equity			1,030,167											557,282
Total liabilities and stockholders' equity		$	7,986,525										$	5,297,368
Net interest income and spread						$	68,812			3.30	%						$	44,585			3.28	%
Less: tax-equivalent adjustment							1,221											1,888
Net interest income						$	67,591										$	42,697
Interest income/earning assets										4.61	%										4.08	%
Interest expense/earning assets										0.90											0.54
Net interest margin										3.71	%										3.54	%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017 respectively. The annualized taxable-equivalent adjustments utilized in the above table to compute yields aggregated to $1.2 million and $1.9 million in 2018 and 2017, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.

 

Sandy Spring Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES - UNAUDITED
		Nine Months Ended September 30,
		2018										2017
									Annualized										Annualized
		Average				(1)			Average			Average				(1)			Average
(Dollars in thousands and tax-equivalent)		Balances				Interest			Yield/Rate			Balances				Interest			Yield/Rate
Assets
Residential mortgage loans		$	1,091,515			$	30,280		3.70	%		$	863,040			$	22,651		3.50	%
Residential construction loans			210,774				6,203		3.93				166,459				4,656		3.74
Total mortgage loans			1,302,289				36,483		3.74				1,029,499				27,307		3.54
Commercial AD&C loans			597,283				25,592		5.73				301,537				11,126		4.93
Commercial investor real estate loans			1,939,205				71,824		4.95				1,015,903				33,978		4.47
Commercial owner occupied real estate loans			1,106,032				39,051		4.72				786,805				28,501		4.84
Commercial business loans			674,973				26,052		5.16				458,973				15,321		4.46
Total commercial loans			4,317,493				162,519		5.03				2,563,218				88,926		4.64
Consumer loans			531,539				17,310		4.41				459,118				12,496		3.67
Total loans (2)			6,151,321				216,312		4.70				4,051,835				128,729		4.25
Loans held for sale			30,349				983		4.32				7,189				273		5.06
Taxable securities			738,580				15,891		2.87				526,931				10,944		2.77
Tax-exempt securities (3)			290,177				7,662		3.52				297,818				9,455		4.23
Total investment securities			1,028,757				23,553		3.05				824,749				20,399		3.30
Interest-bearing deposits with banks			86,446				1,082		1.67				38,006				289		1.02
Federal funds sold			2,607				28		1.41				2,493				18		0.97
Total interest-earning assets			7,299,480				241,958		4.43				4,924,272				149,708		4.06
Less:  allowance for loan losses			(47,533	)									(44,324	)
Cash and due from banks			69,301										48,184
Premises and equipment, net			61,507										53,680
Other assets			535,778										222,682
Total assets		$	7,918,533									$	5,204,494
Liabilities and Stockholders' Equity
Interest-bearing demand deposits		$	730,520				657		0.12	%		$	613,498				372		0.08	%
Regular savings deposits			390,231				488		0.17				322,683				163		0.07
Money market savings deposits			1,520,953				13,028		1.15				992,069				3,333		0.45
Time deposits			1,245,510				12,410		1.33				637,478				5,344		1.12
Total interest-bearing deposits			3,887,214				26,583		0.91				2,565,728				9,212		0.48
Other borrowings			158,939				599		0.50				131,412				238		0.24
Advances from FHLB			1,000,060				15,557		2.08				683,231				9,385		1.84
Subordinated debentures			37,518				1,436		5.11				549				12		2.93
Total interest-bearing liabilities			5,083,731				44,175		1.16				3,380,920				18,847		0.75
Noninterest-bearing demand deposits			1,757,573										1,235,350
Other liabilities			59,371										41,537
Stockholders' equity			1,017,858										546,687
Total liabilities and stockholders' equity		$	7,918,533									$	5,204,494
Net interest income and spread						$	197,783		3.27	%						$	130,861		3.31	%
Less: tax-equivalent adjustment							3,483										5,585
Net interest income						$	194,300									$	125,276
Interest income/earning assets									4.43	%									4.06	%
Interest expense/earning assets									0.81										0.51
Net interest margin									3.62	%									3.55	%
(1) Tax-equivalent income has been adjusted using the combined marginal federal and state rate of 26.13% and 39.88% for 2018 and 2017 respectively. The annualized taxable-equivalent adjustments utilized in
the above table to compute yields aggregated to $3.5 million and $5.6 million in 2018 and 2017, respectively.
(2) Non-accrual loans are included in the average balances.
(3) Includes only investments that are exempt from federal taxes.