-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S654Bq4jcKyghycG+umcqwf4wVtQ53dE0VTGJuNqxhR2/QBu0ViIcE5Am0Vx+Dig xQjone8zS2WL4hKzl+1leQ== 0000928385-97-001265.txt : 19970812 0000928385-97-001265.hdr.sgml : 19970812 ACCESSION NUMBER: 0000928385-97-001265 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDY SPRING BANCORP INC CENTRAL INDEX KEY: 0000824410 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 520312970 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19065 FILM NUMBER: 97655233 BUSINESS ADDRESS: STREET 1: 17801 GEORGIA AVE CITY: OLNEY STATE: MD ZIP: 20832 BUSINESS PHONE: 3017746400 MAIL ADDRESS: STREET 1: 17801 GEORGIA AVENUE CITY: OLNEY STATE: MD ZIP: 20832 10-Q 1 FORM 10-Q 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 June 30, 1997 ------------- 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: O-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 301-774-6400 ------------------------------------- ---------- ------------------ (Address of principal office) (Zip Code) (Telephone Number) 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 ------- ------- The number of shares of common stock outstanding as of July 25, 1997 is 4,903,697 shares. SANDY SPRING BANCORP INDEX PAGE - -------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets at June 30, 1997 and December 31, 1996.................... 1 Consolidated Statements of Income for the the Three and Six Month Periods Ended June 30, 1997 and 1996................................. 2 Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 1997 and 1996..... 3 Notes to Consolidated Financial Statements............. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......... 6 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS... 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................... 11 SIGNATURES.................................................... 12
PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Sandy Spring Bancorp and Subsidiaries CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data)
June 30, December 31, 1997 1996 ---------- ------------ ASSETS Cash and due from banks $ 38,934 $ 32,899 Federal funds sold 17,980 23,278 Interest-bearing deposits with banks 1,410 861 Residential mortgage loans held for sale 4,880 7,985 Investments available-for-sale (at fair value) 289,595 234,423 Investments held-to-maturity -- fair value of $119,428 (1997) and $123,067 (1996) 118,343 122,272 Other equity securities 8,475 5,111 Total Loans (net of unearned income) 546,039 523,166 Less: Allowance for credit losses (6,431) (6,391) ---------- ------------ Net loans 539,608 516,775 Premises and equipment 23,782 20,211 Accrued interest receivable 8,845 7,917 Other real estate owned 500 0 Other assets 10,500 6,863 ---------- ------------ TOTAL ASSETS $1,062,852 $978,595 ========== ============ LIABILITIES Noninterest-bearing deposits $ 138,222 $117,052 Interest-bearing deposits 703,552 689,289 ---------- ------------ Total deposits 841,774 806,341 Short-term borrowings 112,127 68,127 Long-term borrowings 4,704 4,820 Accrued interest and other liabilities 2,598 2,726 ---------- ------------ TOTAL LIABILITIES 961,203 882,014 STOCKHOLDERS' EQUITY Common stock -- par value $1.00; shares authorized 15,000,000; shares issued and outstanding 4,910,490 (1997) and 4,902,113 (1996) 4,910 4,902 Surplus 33,713 33,474 Retained earnings 61,832 57,669 Net unrealized gain on investments available-for-sale 1,194 536 ---------- ------------ TOTAL STOCKHOLDERS' EQUITY 101,649 96,581 ---------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,062,852 $978,595 ========== ============
See Notes to Consolidated Financial Statements. 1 Sandy Spring Bancorp and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 1997 1996 1997 1996 -------- -------- ------- ------- Interest income: Interest and fees on loans $12,458 $11,530 $24,393 $22,881 Interest on loans held for sale 62 48 116 81 Interest on deposits with banks 15 76 42 99 Interest and dividends on securities: Taxable 5,005 3,550 9,465 7,057 Nontaxable 832 849 1,622 1,694 Interest on federal funds sold 321 326 647 730 -------- -------- ------- ------- TOTAL INTEREST INCOME 18,693 16,379 36,285 32,542 Interest expense: Interest on deposits 7,226 6,933 14,212 13,905 Interest on short-term borrowings 1,143 451 1,950 849 Interest on long-term borrowings 80 66 160 155 -------- -------- ------- ------- TOTAL INTEREST EXPENSE 8,449 7,450 16,322 14,909 -------- -------- ------- ------- NET INTEREST INCOME 10,244 8,929 19,963 17,633 Provision for Credit Losses 125 25 225 208 -------- -------- ------- ------- NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 10,119 8,904 19,738 17,425 Noninterest Income: Securities gains (losses) 112 4 132 (50) Service charges on deposit accounts 789 740 1,578 1,388 Gains on mortgage sales 255 246 524 443 Other income 858 721 1,609 1,431 -------- -------- ------- ------- TOTAL NONINTEREST INCOME 2,014 1,711 3,843 3,212 Noninterest Expenses: Salaries and employee benefits 4,147 3,634 7,887 7,028 Occupancy expense of premises 568 497 1,085 1,034 Equipment expenses 532 526 1,051 1,051 Other expenses 2,071 1,626 3,926 2,918 -------- -------- ------- ------- TOTAL NONINTEREST EXPENSES 7,318 6,283 13,949 12,031 -------- -------- ------- ------- Income Before Income Taxes 4,815 4,332 9,632 8,606 Income Tax Expense 1,695 1,429 3,309 2,827 -------- -------- ------- ------- NET INCOME $ 3,120 $ 2,903 $ 6,323 $ 5,779 ======== ======== ======= ======= PER SHARE DATA: Net Income $0.64 $0.60 $1.29 $1.20 Dividends Declared 0.23 0.19 0.44 0.37
See Notes to Consolidated Financial Statements. 2 Sandy Spring Bancorp and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended June 30, ---------------------- 1997 1996 ----------- --------- Cash Flows from Operating Activities: Net Income $ 6,323 $ 5,779 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,037 888 Provision for credit losses 225 208 Deferred income taxes (2) 130 Origination of loans held for sale (29,500) (28,065) Proceeds from sales of loans held for sale 33,129 29,964 Gains on sales of loans held for sale (524) (444) Securities (gains) losses (132) 50 Net change in: Accrued interest receivable (928) (633) Accrued income taxes (55) (333) Other accrued expenses (74) (875) Other -- net (4,008) 1,782 --------- -------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 5,491 8,451 Cash Flows from Investing Activities: Net increase in interest-bearing deposits with banks (549) (5,194) Purchases of investments held-to-maturity (6,155) (19,967) Purchases of other equity securities (3,364) 0 Purchases of investments available-for-sale (145,714) (61,984) Proceeds from sales of investments available-for-sale 46,245 8,802 Proceeds from maturities, calls and principal payments of investments held-to-maturity 10,201 16,581 Proceeds from maturities, calls and principal payments of investments available-for-sale 45,258 32,481 Proceeds from sales of loans 0 291 Proceeds from sales of other real estate owned 0 250 Net increase in loans receivable (23,438) (19,946) Expenditures for premises and equipment (4,642) (944) --------- -------- NET CASH USED BY INVESTING ACTIVITIES (82,158) (49,630) Cash Flows from Financing Activities: Net increase (decrease) in demand and savings accounts 17,763 14,901 Net increase in time and other deposits 17,670 15,177 Net increase in short-term borrowings 43,900 6,962 Proceeds from long-term borrowings 0 2,000 Retirement of long-term borrowings (16) (15) Net decrease in balance due to banks 0 (1,378) Common stock purchased and retired (723) 0 Proceeds from issuance of common stock 970 1,037 Dividends paid (2,160) (1,716) --------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES 77,404 36,968 --------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 737 (4,211) Cash and Cash Equivalents at Beginning of Quarter 56,177 60,435 --------- -------- CASH AND CASH EQUIVALENTS AT END OF QUARTER* $ 56,914 $ 56,224 ========= ========
3 Cont'd CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------- 1997 1996 ----------- --------- Supplemental Disclosures: $15,272 $14,454 Interest payments Income tax payments 4,140 2,850 Noncash Investing Activities: Transfers from loans to other real estate owned 565 93 Reclassification of borrowings from long-term to short-term 100 2,000 Unrealized gain on investments available-for-sale net of deferred tax effect of $414 in 1997 and $(929) in 1996 658 (1,477)
*Cash and cash equivalents include amounts of "Cash and due from banks" and "Federal funds sold" on the Consolidated Balance Sheets. See Notes to Consolidated Financial Statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - GENERAL The foregoing financial statements are unaudited; however, 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. These statements should be read in conjunction with the financial statements and accompanying notes included in Sandy Spring Bancorp's 1996 Annual Report to Shareholders. The results shown in this interim report are not necessarily indicative of results to be expected for the full year 1997. The accounting and reporting policies of Sandy Spring Bancorp (the "Company") conform to generally accepted accounting principles and to general practice within the banking industry. Certain reclassifications have been made to amounts previously reported to conform with current classifications. Consolidation has resulted in the elimination of all significant intercompany accounts and transactions. Financial data for 1996 has been restated under pooling of interests accounting for the Annapolis Bancshares, Inc. merger consummated August 29, 1996. NOTE 2 - STOCKHOLDERS' EQUITY On April 16, 1997, the Company announced that its Board of Directors had authorized the repurchase of up to 5%, or 246,042 shares, of Bancorp's outstanding common stock, par value $1.00 per share, in connection with shares expected to be issued pursuant to Bancorp's dividend reinvestment, stock option, and employee benefit plans and for other corporate purposes. The share repurchases would be made on the open market and in privately negotiated transactions, from time to time until March 31, 1999, or earlier termination of the program by the Board. At June 30, 1997, 20,830 shares had been purchased under this program. NOTE 3 - PER SHARE DATA Net income per common share is based on the weighted average number of shares outstanding which was, for the second quarter, 4,915,739 in 1997 and 4,875,667 in 1996 and, for the first six months, 4,911,088 in 1997 and 4,854,625 in 1996. 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Consolidated basis, dollars in thousands except per share data) This Management's Discussion and Analysis contains forward-looking statements, including statements of goals, intentions and expectations, regarding or based upon general economic conditions, interest rates, developments in national and local markets, and other matters, and which, by their nature, are subject to significant uncertainties. Because of these uncertainties and the assumptions on which statements in this report are based, the actual future results may differ materially from those indicated in this report. In the following discussion, all financial information pertaining to the first two quarters of 1996 except dividends per share have been retroactively restated for the Annapolis Bancshares, Inc. merger completed in the third quarter of 1996. THE COMPANY The Company is the registered bank holding company for Sandy Spring National Bank of Maryland (the "Bank"), headquartered in Olney, Maryland. The Bank operates nineteen banking offices in Montgomery, Howard, and Anne Arundel Counties in Maryland. On April 16, 1997, the Company announced that its Board of Directors had authorized the repurchase of up to 5%, or 246,042 shares, of its outstanding common stock, par value $1.00 per share, in connection with shares expected to be issued under the Company's dividend reinvestment, stock option, and employee benefit plans and for other corporate purposes. The share repurchases are expected to be made primarily on the open market from time to time until March 31, 1999, or earlier termination of the repurchase program by the Board. Repurchases under the program will be made at the discretion of management based upon market, business, legal, accounting and other factors. The Company has established a strategy of independence, and intends to establish or acquire additional offices or banking organizations as appropriate opportunities may arise. A. FINANCIAL CONDITION The Company's total assets were $1,062,852 at June 30, 1997, compared to $978,595 at December 31, 1996, increasing $84,257 or 8.6% during the first half of 1997. Earning assets increased $69,626 or 7.6% to $986,722 at June 30, 1997 from $917,096 at December 31, 1996. Total loans rose 4.4% or $22,873 during the first half of 1997 to $546,039. Commercial loans showed significant growth, rising $6,859 or 10.0%, as did construction loans, which increased $5,165 or 10.8% due to growth in residential construction loans. Real estate mortgages increased $11,203 or 3.0% during the first half of 1997, while consumer loans decreased $348 or 1.1%. The investment portfolio, consisting of available-for-sale, held-to-maturity and other equity securities, is the other significant category of earning assets. Total investments increased $54,607 or 15.1% from December 31, 1996 to June 30, 1997. Total deposits were $841,774 at June 30, 1997, increasing $35,433 or 4.4% from $806,341 at December 31, 1996. Interest-bearing deposits increased by $14,263 or 2.1% while noninterest-bearing demand deposits rose $21,170 or 18.1%. Growth in commercial and small business checking accounts was the primary cause of the increase in noninterest-bearing demand deposits. Federal Home Loan Bank of Atlanta advances were largely responsible for the $44,000 or 64.6% increase in short-term borrowings. 6 LIQUIDITY AND INTEREST RATIO SENSITIVITY The Company's liquidity position, considering both internal and external sources available, exceeded anticipated short and long term funding needs at June 30, 1997. In assessing liquidity, management considers operating requirements, the seasonality of loan and deposit flows, investment, loan, borrowing and deposit maturities, expected fundings of loans, deposit withdrawals, and the market values of available-for-sale investments. The Company employs simulation analysis in order to assess the degree of interest rate risk inherent in its asset and liability portfolios. Such risk is monitored in accordance with board of directors' policy limits by the Bank's asset-liability committee. The limit established for the estimated twelve month period impact of a 200 basis point change in interest rates on net interest income is 15%, while the limit for the estimated change in the fair value of the Company's net assets is 25%. Simulation modeling measured from June 30, 1997 indicated impacts of 11% on net interest income and 21% on the fair value of capital, both within the policy limits. The simulation model captures optionality factors such as call features and interest rate caps and floors imbedded in investment and loan portfolio contracts. CAPITAL MANAGEMENT The Company recorded a total risk-based capital ratio of 17.61% at June 30, 1997, compared to 17.56% at December 31, 1996; a tier 1 risk-based capital ratio of 16.54%, compared to 16.44%; and a capital leverage ratio of 9.80%, compared to 10.38%. Capital adequacy, as measured by these ratios, was well above regulatory requirements. Stockholders' equity totaled $101,649 (including a net unrealized gain of $1,194 on investments available-for-sale) at June 30, 1997, an increase of 5.3% from $96,581 (including a net unrealized gain of $536) at December 31, 1996. Internal capital generation (net income less dividends) provided $4,163 in additional equity during the first six months of 1997, representing an annualized rate (when considered as a percentage of average total stockholders' equity) of 8.6% versus 8.7% for the year ended December 31, 1996. External capital formation amounted to $970 for the six months ended June 30, 1997, resulting from issuance of 19,865 shares under the Company's dividend reinvestment plan and 9,358 shares from employee purchases through 401K benefit plans. Share repurchases began in the second quarter of 1997 and resulted in the retirement of 20,830 shares at an aggregate purchase price of $723. First half dividends were $2,160 or $0.44 per share in 1997, compared to $1,617 or $0.37 per share in 1996, for dividend payout ratios of 34.11% and 30.83%, respectively. B. RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1997 AND 1996 Net income for the first six months of the year rose $544 or 9.4% in 1997, to $6,323 ($1.29 per share) from the $5,779 ($1.20 per share) earned in the first half of 1996. The first half return on average assets was 1.28% in 1997 compared to 1.31% in 1996, first half returns on average equity were 13.03% and 13.18% in 1997 and 1996, respectively. NET INTEREST INCOME First half net interest income was $19,963 in 1997, an increase of 13.2% over $17,633 in 1996, reflecting a higher volume of average earning assets, along with a 6 basis point increase in net interest margin to 4.48% from 4.42%. First half tax-equivalent interest income increased $3,796 or 11.3% in 1997, compared to 1996. Average earning assets rose 11.1% over the prior year period while the average yield earned on those assets remained essentially constant. Comparing the first half of 1997 versus 1996, average loans grew 7.0% to $533,315 (57.4% of average earning assets) while the average yield on loans remained essentially constant. Commercial mortgage, residential construction and commercial loans were responsible for most of the rise in total loans. Average total securities 7 increased 20.6% to $366,737 (39.5% of average earning assets) and recorded an 18 basis point increase in average yield. First half interest expense increased $1,413 or 9.5%, as a net result of 11.2% higher average interest-bearing liabilities and a 5 basis point decrease in average rate paid. CREDIT RISK MANAGEMENT The first half provision for credit losses was $225 in 1997 compared to $208 in 1996. Net charge-offs of $185 were recorded for the six month period ended June 30, 1997 while there were net charge-offs of $27 for the same period a year earlier. Nonperforming loans decreased by $27 while total nonperforming assets increased by $473, from December 31, 1996 to June 30, 1997. Expressed as a percentage of total assets, nonperforming assets were 0.48% at June 30, 1997 and at December 31, 1996. Because the loan portfolio includes a significant number of loans with large individual balances, the unexpected deterioration of one or a few such loans may cause a significant increase in nonperforming loans and assets or in potential problem loans. The total balance of impaired loans was $1,317 at June 30, 1997 and the reserve on those loans was $338 compared to $1,280 with a reserve of $127 at December 31, 1996. The Company regularly analyzes the sufficiency of its allowance for credit losses based upon a number of factors, including lending risks associated with growth and entry into new markets, loss allocations for specific problem credits, the level of the allowance to nonperforming loans, historical loss experience, economic conditions, portfolio trends and credit concentrations, and changes in the size and character of the loan portfolio. Management establishes the allowance for credit losses in an amount that it determines, based upon these factors, is sufficient to provide for losses inherent in the loan portfolio. At June 30, 1997, the allowance for credit losses was 1.18% of total loans versus 1.22% at December 31, 1996. Coverage of risk in the loan portfolio may be evaluated using a ratio of the allowance for credit losses to nonperforming loans. Significant variation in this coverage ratio may occur from period to period because the amount of nonperforming loans depends largely upon the condition of a small number of individual loans and borrowers relative to the total loan portfolio. At June 30, 1997, the allowance for credit losses represented 139% of nonperforming loans compared to 137% at December 31, 1996. Management believes the allowance for credit losses at June 30, 1997 was adequate. NONINTEREST INCOME AND EXPENSES First half noninterest income, excluding nonrecurring securities gains and losses, profits on the sale of real estate owned and losses on the disposition of capital assets, rose $566 or 18.0% in 1997, compared to 1996. The primary causes for the change were increases in gains on mortgage sales as well as higher return check charges, trust department fees, Visa check fees and ATM surcharge fees. First half noninterest expenses increased $1,918 or 15.9% to $13,949 in 1997 from $12,031 in 1996. Income statement categories that increased most significantly were salaries and employee benefits, which rose $859 or 12.2%, and other expenses, which rose $1,008 or 34.5%. The increase in compensation expenses reflected a larger staff and an expanded branch network. The rise in other expenses included higher marketing and outside service costs and increased amortization of intangibles relating to a purchase of deposits in 1996. The ratio of net income to average full-time-equivalent (FTE) employees was $17 for the six month periods ended June 30, 1997 and 1996, although the number of average FTE employees rose to 378 from 343. INCOME TAXES The first half effective tax rate was 34.4% in 1997, compared to 32.8% in 1996 due primarily to increased amortization of intangibles. 8 ANALYSIS OF CREDIT RISK (Dollars in thousands) Activity in the allowance for credit losses is shown below:
6 Months Ended 12 Months Ended June 30, 1997 December 31, 1996 -------------- ----------------- Balance, January 1 $6,391 $6,597 Provision for credit losses 225 308 Loan charge-offs: Real estate-mortgage (60) (3) Real estate-construction (79) 0 Consumer (54) (143) Commercial (40) (469) -------- -------- Total charge-offs (233) (615) Loan recoveries: Real estate-mortgage 0 0 Real estate-construction 0 0 Consumer 25 37 Commercial 23 64 -------- -------- Total recoveries 48 101 -------- -------- Net charge-offs (185) (514) -------- -------- BALANCE, PERIOD END $6,431 $6,391 ======== ======== Net charge-offs to average loans (annual basis) 0.07% 0.10% Allowance to total loans 1.18% 1.22%
Balance sheet risk inherent in the lending function is presented as follows at the dates indicated:
June 30, December 31, 1997 1996 -------- -------- Non-accrual loans $1,672 $1,291 Loans 90 days past due 2,933 3,337 Restructured loans 23 27 Total Nonperforming Loans* 4,628 4,655 Other real estate owned 500 0 ======== ======== TOTAL NONPERFORMING ASSETS $5,128 $4,655 Nonperforming assets to total assets 0.48% 0.48% -------- --------
* Those performing loans considered potential problem loans, as defined and identified by management, amounted to approximately $5,890 at June 30, 1997, compared to $3,440 at December 31, 1996. Although these are loans where known information about the borrowers' possible credit problems causes management to have doubts as to their ability to comply with the present loan repayment terms, most are well collateralized and are not believed to present significant risk of loss. 9 C. RESULTS OF OPERATIONS - SECOND QUARTER 1997 AND 1996 Second quarter earnings of $3,120 ($0.64 per share) in 1997 were above the second quarter of 1996's $2,903 ($0.60 per share) by $217 or 7.5%. Tax-equivalent net interest income rose 14.2% during the second quarter of 1997 compared to the same three month period of 1996, showing the effect of an 11.9% increase in the earning asset base and a 9 basis point rise in net interest spread. The provision for credit losses was $125 and $25 for the second quarters of 1997 and 1996, respectively, reflecting favorable asset quality. There were net charge-offs of $81 and $27 in the two quarterly periods. Noninterest income for the second quarter increased 17.7% in 1997, compared to 1996, with the largest contributors being higher return check charges, trust department fees, Visa check fees and ATM surcharge fees. Noninterest expenses rose 16.5%, reflecting a larger staff, higher marketing and outside service costs and increased amortization of intangibles. The second quarter effective tax rate was 35.2% in 1997 versus 33.0% shown in 1996. 10 PART II - OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's annual shareholders' meeting held on April 16, 1997, the shareholders of the Company elected Susan D. Goff, Robert L. Mitchell, Robert L. Orndorff, Jr., and David E. Rippeon as directors for three year terms. There were no solicitations in opposition to management's nominees and all such nominees were elected. All of these nominees were incumbent directors except for David E. Rippeon. Other directors continuing in office are Solomon Graham, Charles F. Mess, Lewis R. Schumann, W. Drew Stabler, John Chirtea, Joyce Riggs Hawkins, Hunter R. Hollar, and Thomas O. Keech. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q: No. Exhibit --- ------- 10 Trust Agreement between the Company and CG Trust Company for Company's Cash and Deferred Profit Sharing Plan. 27 Financial Data Schedule (b) Reports on Form 8-K. On April 16, 1997, the Company filed a Current Report of Form 8-K reporting, under Item 5 of such form, a stock repurchase program authorized by the Board of Directors. The program is discussed above in Note 2 to the Consolidated Financial Statements on page 5 and in Management's Discussion and Analysis in the Section entitled "The Company" on page 6. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized. SANDY SPRING BANCORP, INC. (Registrant) By: /s/ Hunter R. Hollar ------------------------------------- Hunter R. Hollar President and Chief Executive Officer Date: August 8, 1997 By: /s/ James H. Langmead ------------------------------------- James H. Langmead Vice President and Treasurer Date: August 8, 1997 12 EX-10 2 EXHIBIT 10 Exhibit 10 THIS TRUST AGREEMENT, by and between Sandy Spring Bancorp, (hereinafter called the "Employer"), and CG Trust Company, a trust company organized under the laws of the State of Illinois with its principal office and place of business in the City of Chicago, Illinois (hereinafter called the "Trustee"). WITNESSETH: WHEREAS, the Employer has established or adopted for its eligible employees the Sandy Spring Bancorp Cash and Deferred Profit Sharing Plan (hereinafter called the "Plan") and serves as the Plan administrator and named fiduciary; and WHEREAS, the Employer desires the Trustee to hold Plan funds and the Trustee is willing to hold such funds pursuant to the terms of this Trust Agreement; NOW THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto do hereby mutually declare and agree as follows: Section 1: Establishment of Trust. ---------------------- (a) In order to carry out the purposes of the Plan, the Employer hereby creates and establishes a trust to be known as the Sandy Spring Bancorp Cash and Deferred Profit Sharing Plan Trust (hereinafter called the "Trust" or "Trust Fund"). The Trustee accepts this Trust and agrees to act as trustee hereunder, but only on the terms and conditions set forth in this Trust Agreement. Subject to the terms and conditions of this Trust Agreement, all right, title and interest in and to the estate of the Trust Fund shall be vested exclusively in the Trustee. This trust shall be effective on July 1, 1997 or, if later, the date executed on behalf of the Trustee. (b) The Trust Fund shall include only those assets which the Trustee accepts and which are identified on Exhibit A. Only assets actually received by the Trustee will become part of the Trust Fund. The Employer acknowledges and agrees that it is responsible for effectuating the transfer of any assets held by a prior trustee or custodian to the Trustee. All assets so received, together with the income therefrom and any other increment thereon, shall be held by the Trustee pursuant to the terms of this Trust Agreement without distinction between principal and income and without liability for the payment of interest thereon. Section 2: General Duties of the Employer; Indemnification. ----------------------------------------------- (a) The Employer shall control and manage the operation of the Plan. The Employer shall be responsible for determining benefit rights under the Plan, instructing the Trustee in the disbursement of benefits, investment management, 1 soliciting stock voting instructions from participants, directing the Trustee in voting proxies and performing those plan administration functions specified in the Plan. (b) The Employer shall act as custodian with respect to promissory notes, mortgages and related documents given in connection with Plan loans, if any, and the Employer shall hold in safekeeping all such promissory notes, mortgages and related documents. (c) The Trustee shall be fully protected and shall incur no liability in acting in reliance upon the instructions or directions of the Employer, or any delegate of the Employer. In addition, the Trustee shall be entitled to rely on directions given by a Plan participant, where the Plan provisions permit such direction. The participant shall be regarded as the delegate of the Employer for purposes of this Agreement and any reference herein to directions or to instructions from the Employer shall include directions or instructions from any delegate of the Employer including Plan participants. (d) The Employer shall indemnify and hold harmless the Trustee from and against any and all claims, losses, damages, expenses (including reasonable counsel fees) and liability to which the Trustee may be subject by reason of any act done or omitted to be done, except where the same is finally adjudicated to be due to the gross negligence or willful misconduct of the Trustee. (e) In addition to and in no way in limitation of the indemnification of paragraph (d), the Employer hereby agrees to indemnify and hold harmless the Trustee from and against any claims, losses, damages, expenses (including reasonable counsel fees) and liability to which the Trustee may be subject by reason of any act or omission of any prior, subsequent or existing trustee of the Plan. Section 3: General Duties of Trustee. ------------------------- (a) The Trustee shall receive, hold, manage, invest and reinvest the Trust Fund pursuant to the provisions of this Section and Section 4 in accordance with the directions of the Employer. The Trustee shall take no action except pursuant to directions received by it from the Employer, and shall have no duty to determine any facts or the propriety of any action taken or omitted by it in good faith pursuant to instructions from such persons. (b) The Trustee shall be responsible only for such assets as are actually received by it as Trustee hereunder. The Trustee shall have no duty or authority to ascertain whether any contributions should be made to it pursuant to the Plan or to bring any action to enforce any obligation to make any such contribution, nor shall it have any responsibility concerning the amount of any contribution or the application of the Plan's contribution formula. (c) The duties and obligations of the Trustee hereunder shall be limited to those expressly imposed upon it by this Trust Agreement notwithstanding any reference herein to the Plan, and no further duties or obligations of the Trustee, such as a duty to value Plan investments, determine the prudence of any Plan investment, or diversify Plan investments, shall be implied. The Trustee shall not 2 be liable in discharging its duties hereunder if it acts in good faith and in accordance with the terms of this Trust Agreement and in accordance with applicable Federal or state laws, rules and regulations. Section 4: Power and Duties of Trustee with Respect to Trust Fund. The ------------------------------------------------------ Trustee shall have the following powers and duties regarding the Trust Fund: (a) To hold title to the assets of the Trust Fund, which may include entering into depository arrangements for the safekeeping of records relevant to the ownership of such assets with any bank or banks as the Trustee may choose. Without limiting the generality of the foregoing, the Employer specifically directs the Trustee to appoint, and the Trustee hereby appoints the Employer to act as custodian with respect to promissory notes, mortgages and related documents given in connection with Plan loans, if any. (b) To invest the assets of the Trust Fund in such investment vehicles as directed by the Employer, including Plan loans made to participants, and annuity or insurance contracts issued by affiliates of the Trustee, in accordance with directions received from the Employer, and to agree to amendments to such annuity or insurance contracts, as directed by the Employer. The Trustee shall have no duty or responsibility to determine the appropriateness of any Plan investment, or to cause such investments to be changed. Notwithstanding any other provision of this Agreement, all notices, proposed contract amendments, rate or fee changes or other communications regarding all group annuity contracts that are assets of the Plan, including any group annuity contract issued by Connecticut General Life Insurance Company, will be sent directly by the issuer of the contract to the Employer or forwarded by the Trustee to the Employer, and the Trustee shall act on behalf of the Plan with respect to any such notice, proposed amendment, change or other communication only in accordance with the written direction of the Employer. Any rights of a contractholder under any such group annuity contract to discontinue, amend or otherwise modify the contract shall be exercised only upon the specific written direction of the Employer to the issuer of the contract or by the Trustee at the Employer's specific written direction. (c) To make transfers among investment vehicles or disbursements from the Trust Fund as directed by the Employer or, if applicable, Plan participants. The Trustee shall be entitled to rely on such direction, and shall have no responsibility to ascertain whether the Plan permits such a transfer or disbursement. (d) To delegate to third parties, including affiliates of the Trustee, any or all of its duties hereunder, including recordkeeping and reporting. Also, the Trustee may utilize the services of outside custodians to hold on the Plan's behalf any Plan assets invested in securities. (e) To vote securities proxies as directed by the Employer, or by another named fiduciary or investment manager designated by the Employer. Section 5: Payment of Taxes. The trustee shall pay out of the Trust Fund ---------------- income taxes and other taxes of any and all kinds levied or assessed under existing 3 or future laws against the Trust Fund, or against any person with an interest in the Trust Fund. Section 6: Disbursement of Trust Funds. --------------------------- (a) Upon receipt of written direction of the Employer, the Trustee shall make payments from the Trust Fund to such persons or direct Connecticut General Life Insurance Company to make such payments from an annuity contract listed on Exhibit A, in such manner and in such amounts as the Employer shall direct in writing, and amounts paid pursuant to such direction shall no longer constitute a part of the Trust Fund. Notwithstanding the foregoing, the Employer expressly reserves the right to provide direction directly to Connecticut General Life Insurance Company regarding payments of Plan benefits or other disbursements. (b) At no time prior to the satisfaction of all liabilities with respect to participants and beneficiaries under this Trust shall any part of the corpus or income of the Trust Fund be used for, or diverted to, purposes other than for the exclusive benefit of plan participants or beneficiaries. Except as provided in the Plan, the assets of the Trust Fund shall never inure to the benefit or the Employer and shall be held for the exclusive purpose of providing benefits to participants in the Plan and their beneficiaries, and defraying reasonable expenses of administering the Plan. Section 7: Expenses and Compensation of Trustee. The Trustee shall be ------------------------------------ compensated in accordance with the fee schedule provided to the Employer. In addition the Trustee shall be paid its reasonable expenses, including reasonable expenses of counsel and other agents employed by the Trustee, incurred in conjunction with the administration of the Trust Fund. If the Trustee proposes an amended fee schedule and the Employer fails to object thereto within ninety (90) days of its receipt, the amended fee schedule shall be deemed accepted by the Employer. Section 8: Expenses of the Plan and Trust Fund. The Employer shall pay, ----------------------------------- or, if not paid by the Employer and the Plan so permits, the Employer shall direct the Trustee to pay from the Trust Fund, the reasonable expenses relating to the Plan and Trust Fund. Such expenses shall include, without limitation, actuarial, investment management, accounting, legal and Trust expenses. Section 9: Accounts of the Trustee. The Trustee has accepted this Trust ----------------------- on the condition that the Employer has entered or is entering into a service agreement with Connecticut General Life Insurance Company whereby Connecticut General Life Insurance Company will provide recordkeeping services for all Plan assets held pursuant to this Trust Agreement. The Trustee shall be required to forward to the Employer, or require Connecticut General Life Insurance Company to forward to the Employer, the recordkeeping reports and related financial information provided by Connecticut General Life Insurance Company, but the 4 Trustees shall not otherwise be required to provide Trust accounts. Section 10: Resignation, Removal and Substitution of Trustee. ------------------------------------------------ (a) The Trustee may resign at any time by giving at least 30 days' written notice to the Employer (unless the Employer deems notice of a shorter duration to be adequate). The Employer may remove the Trustee at any time by giving at least 30 days' written notice to the Trustee (unless the Trustee deems notice of a shorter duration to be adequate). (b) The Trustee's service pursuant to this Agreement is conditioned upon the existence of one or more contracts between the Employer or the Plan (or the Trustee on behalf of the Employer or the Plan) and Connecticut General Life Insurance Company providing a funding medium for the Plan and providing for full Plan recordkeeping services. In the event the contract providing a funding medium or providing for recordkeeping services is discontinued or terminated, this Agreement shall be terminated as well with no further notice from either party to the other as of the date of discontinuance or termination of the contract providing a funding medium or providing for recordkeeping services. (c) Any successor trustee hereunder may be either a corporation authorized and empowered to exercise trust powers or may be one or more individuals. (d) Upon the appointment of a successor trustee, the resigning or removed Trustee shall execute, acknowledge and deliver all documents and written instruments necessary to transfer and deliver the Trust Fund and all rights and privileges therein to the successor trustee. Upon the appointment of a successor trustee, the resigning and removed Trustee shall be discharged from further accountability for the Trust Fund, and shall be under no further duty, obligation or responsibility for the disposition by such successor trustee of the Trust Fund or any part thereof. Section 11: Amendment and Termination of Trust. ---------------------------------- (a) The Employer and the Trustee may mutually agree at any time to amend this Trust Agreement and the Trust created hereby to any extent deemed advisable. No amendment to this Trust Agreement shall be effective unless mutually agreed to in writing by the Employer and the Trustee; provided, however, that Trustee's fee schedule may be amended as provided in Section 7. (b) The Employer may at any time revoke this Trust Agreement and terminate the Trust hereby created. Such revocation and termination shall become effective upon receipt by the Trustee or its delegate of a written instrument of such revocation and termination executed by the Employer. Upon such termination, disposition of the assets of the Trust Fund shall be governed by the terms of the Plan; provided, however, that the Trustee shall not distribute any portion of the Trust Fund after such termination unless the Employer first obtains a determination from the Internal Revenue Service that such termination will not affect adversely the qualified status of the Plan and, if required, approval of the Pension Benefit 5 Guaranty Corporation of such termination and distribution of assets. In lieu of an Internal Revenue Service determination, assets of the Trust Fund may be distributed if the Employer agrees in writing with the Trustee to indemnify the Trust Fund for any taxes or other penalties which may be assessed against it as a result of such termination or agrees to provide a bond to secure payment of any such taxes or penalties. Section 12: Miscellaneous Provisions. ------------------------ (a) Trust Agreement and the Trust hereby created shall be governed, construed, administered and regulated in all respects under the law of the United States and the State of Illinois. (b) The titles of the Sections in this Trust Agreement are for convenience of reference only and in case of any conflict, the text of this instrument, rather than such titles, shall control. (c) In case any provisions of this Trust Agreement shall be held illegal or invalid for any reason, their illegality or invalidity shall not affect the remaining parts of this Trust Agreement, and this Trust Agreement shall be construed and enforced as if the illegal and invalid provisions had never been a part of the Trust Agreement. (d) This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed an original. The counterparts shall constitute one and the same instrument and may be sufficiently evidenced by any one counterpart. (e) This Trust Agreement shall be binding upon the respective successors and assigns of the Employer and the Trustee. (f) Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. (g) In the event of any conflict between provisions of the Plan and those of this Trust Agreement, this Trust Agreement shall prevail. Provisions in other documents, including but not limited to plan documents, group annuity contracts, and/or service agreements, that might otherwise reflect the powers, duties, and responsibilities of the Trustee, shall in no way supersede or replace any of the provisions contained in this Trust Agreement. This Trust Agreement shall constitute the entire agreement between the Employer/Plan Administrator and the Trustee. (h) Communications to the Trustee shall be sent to the Trustee's principal offices or such address as the Trustee may specify in writing. No communication shall be binding upon the Trustee until it is received by the Trustee or its delegate. Communications to the Employer shall be sent to the Employer's principal offices or such address as the Employer may specify in writing. IN WITNESS WHEREOF, this Trust Agreement has been executed on the dates indicated below. The persons executing this Trust Agreement represent that 6 they are duly authorized to do so. ATTEST: EMPLOYER: /s/ Rita J. Woodward By: /s/ James R. Farmer - --------------------- ----------------------------------- Its Senior Vice President Date: 6/16/97 --------------------------------- ATTEST: CG TRUST COMPANY: /s/ Sharon Gregis By: /s/ Jeananne G. Digan - -------------------- ----------------------------------- Its Trust Officer Date: 6/23/97 --------------------------------- 7 EX-27 3 EXHIBIT 27
9 This schedule contains summary financial information extracted from the Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 0000824410 Sandy Spring Bancorp, Inc. 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 38,934 1,410 17,980 0 289,595 118,343 119,428 544,488 6,431 1,062,852 841,774 112,127 2,598 4,704 4,910 0 0 96,739 1,062,852 24,393 11,087 805 36,285 14,212 16,322 19,963 225 132 13,949 9,632 9,632 0 0 6,323 1.29 1.29 4.48 1,672 2,933 23 5,890 6,391 233 48 6,431 2,669 0 3,762
-----END PRIVACY-ENHANCED MESSAGE-----