SASR - Earnings call transcript Q3 2018 | Sandy Spring Bancorp, Inc.

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Operator

Good day and welcome to the Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the Second Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. like the now Dan over would CEO. Schrider, I to conference turn to And ahead. go Please

Daniel Schrider

for and by Kuykendall, you Sandy us to Bancorp's and and XXXX. conference joining everyone. Ron Schrider Dan our for call quarter Bancorp. speaking performance Spring Chief This Spring Officer is Sandy joined Thank for discuss afternoon Mantua, our General good here Counsel Thank I'm second of Phil the you for Financial

and is Ron today's our open call media, statement. to questions. as As the usual, of before analysts, a of news today website. get there investors, webcast Safe a Harbor give our highlights your key call But we the be will on will call customary covering available later the and the we'll all quarter, to well started, After replay live of as move

Ronald Kuykendall

future those may their Sandy and from conditions; subject afternoon other indicated. future of economic benefits; loan achieve future Bancorp's significant Thank statements Because earnings, uncertainties and uncertainties, statements probable make upon market this statements and and uncertainties. because in which will estimates to you, and significant gentlemen. and of by assessments the materially to These Dan. costs These Bancorp are risks variety Good lease Spring goals. other of management's Sandy projections forward-looking goals, estimates or interest expectations; a Spring to intentions, of forward-looking are statements results future they to of matters of regulations; uncertainties. other losses; that statements are affected assessments based market behavior, ladies and very rates, webcast and and subject of nature laws subject include by of financial and ability risk; are other actual these and and differ risks forward-looking

results future its company's results. of not do the addition, past In operations necessarily indicate

Daniel Schrider

solid of Bank. show second as were quarter core of integration for realizing we to of benefits Thank the XXXX WashingtonFirst continue The the results and many operating you, Ron. performance acquisition the

We from types D.C. relationships are base individuals depth throughout success in are our region. sizes of of With highly the of Washington Greater loan our all both retail demonstrating our and of the and ongoing capital well-positioned deposit quarter, serve growth with and competitive achieved market. momentum in talent, the and pleased and to we businesses the business needs

of Now cover quarter of XXXX. the the me let highlights some from second

exclusive X.XX% by a of for or compared of $X.XX; been the compared acquisition in average performance. from XXXX the million net or basis, the today's good results to and of would year's XX.XX%. a X.XX%. of XXXX the of to of in the of of As quarter attributable XXXX, merger-related $XXX,XXX $X.XX; impact per adjustments of and was on item for This value of for positively per of of basis common impact margin X.XX% like fair I due was merger-related core equity first a view for of linked was non-GAAP did and attempt On five EPS main second the comparative to last release. XX the non-core year recovery first which the was recent $X.XX Net just lending diluted X%. linked share XXXX. this assets loans margin XXXX, X.XX% the EPS taking and $XX.X by a were quarter for yields after what had for basis interest second All The $X.XX. of or expenses quarter million growth this: average second the EPS have quarter a return quarter all our purposes, quarter. into consideration point linked the core looked On to net first of rate $X.XX quarter. approximate income which X.XX% for very most quarter quarter it The to second tax quarter had share an on and positive share XXXX, second prior non-GAAP point income a total highlights $XX.X second the quick of XXXX interest items impacted the return a quarter on The rundown the accurate net of million a will for our I reduction income And very core momentum effective $X.XX pull quarter offset apart provide quarter tax basis, investments. strong. here's grew of the quarter, to diluted for of$XX.X second per Amortization and businesses advantaged by diluted net the in

teams the of build to new in the opportunities Our market. across Greater continue solid competitive lending highly market Washington pipelines

power second selling discipline loan that necessary banking objectives pricing The Our the of full relationships rates. reach credit year. lease non-performing the to was with of all quarter continues in the market million the teams of linked lag compared million and expense impact maturity the provision a reflects last and compared charge quarter financial organic strong to of a quarter. assets to $X.X continue second both The during loans the quarter. move loans to refinanced $X.X given will reductions losses hit metrics our the for for for impact and being the remain Overall, provision drive returns charge non-performing as acquired first production second the of in of they

growing from X.X% reserve growth quarter non-performing On non-interest in total a X% Our average deposits loans relationships. linked and we retail led by deposits. deposits With exceptional demand banking at commercial of basis, this our increased in is coverage both momentum continue activity, XXX%. lending core

to ongoing fund key deposits core ability expansion in strength Our growth asset new company. a through of our is

and modified incentive value gathering. for all opportunity we quarter, last placing plans mentioned deposit As more reward

our We to given continue Greater deposit of our coverage of are core well-positioned the market Washington legacy growth.

an continue X.XX% of third products linked new the hit area, their In as strong the the season long-term compared we driven due the gain effects second activity. the more sale be on the typical materialize top it the management spring in first did of accounts in ARM not second on quarter XX.X% growth expected interest The regional focus did normally was market Wealth win inventories. transaction to quarter see deposits and revenue housing driving non-interest the core to of teams quarter than production comparison market, expected portfolio price linked as relationships. second the to in our overall to by and quarter. in with of bearing than and quarter weaker deposit sales rates does, key softer XXXX. continue resulted lower We mortgage to We income and continues in

Financial agency rebound Services the a wealth seasonal professionals while Sandy dip our for commissions great quarter third also Trust typical expectation consistent in and is Spring Our Revenue with and client penetrating and advantage prior of taking years. the our experienced geography. do second base insurance West job our quarter management broader a

costs totaled to first and to the April. efficiency revenue consolidation XX.XX% $X.X with existing the the second see quarter community including of Merger-related the expenses growth for compared continue second XXXX. of for XX.XX% generated non-GAAP referrals bank quarter by associated million for of We quarter and the quarter for XX.XX% the ratio six offices clients. was The in

seasonal non-compensation-related the either merger-related quarter. in in nature an increase that experienced also were unique to second expenses or other We

to growth to strong equity of X remains a with of ratio common position risk one and tangible a capital ratio X.XX%. risk total XX.XX%, based ratio Tier of ratio Our the X of a X.XX% tangible capital support based capital Tier XX.XX%, leverage asset

and systems, As forward, the us that we prepare we future. look invest continue people, the technology in for will to

quarter, future Officer to of management further of continued During us for we Chief develop a announced enterprise growth. to our the risk prepare the hiring program Risk

greater We best their our provide to clients channel through will access any continue innovate to fits needs. for that

we from by quarter, one our With the and matching improved continued Tax The in for enriching and programs and the That move now you merit Operator, the to shareholders second will concludes in corporate-wide questions. XXXX employee one and realized your the in Act, bottom-line our benefit today take kind enhancing of realized comments opportunities and the are general markets incentive to my of Cuts advantage in for as a XXXK being a the opportunities. people performance such financial the is benefit best are growth increases that bank satisfy we success. and for of us and returns with achieve country position us? Jobs

Operator

the begin question-and-answer ahead. Stuart [Operator now will comes We Lotz question The Please first KBW. from session. go Instructions]

Daniel Schrider

Good afternoon Stuart.

Stuart Lotz

me? hear Can guys. you Hey

Daniel Schrider

can hear you. we Yes,

Stuart Lotz

how in questions. happy margin. quarters outlook there? hold-up the just I Awesome. to modeling much I'm yield on to And for is but for see accretable We at the My what the my this the X.XX%, what taking Well was just for question purposes, remaining accretable quarter? on first yield the Catherine. thanks want were in see was year? for this is

Philip Mantua

Phil. is this Stuart, Yes

earlier had overall stated average the think I to that probably was basis around points. we nine going year, for it

to I terms We're portion we're this year. from probably of in of in the mentioned that away continuing point of kind think basis XX that in X.XX%. beginning the accretable the amortize range eight to earlier at quarter of Dan seven the

Stuart Lotz

clarifying. for Thank you

Philip Mantua

your by year it five to get -- end points -- I'm to will of finish probably the will basis by the rest sorry, your the it and we the about way time Yes, be of -- the question.

Stuart Lotz

further outlook and betas is funding, pricing deposit margin, walk-in remainder we do this did just to a of that see Okay. what XXXX? but betas did no the bit up what this the hikes outlook for if Thank in quarter, just the see deposits, hold proactive And I as And pretty the see year? you. of outlook deposit your was for NIM jump your on more wanted just we well. little rate

Philip Mantua

Sure.

again. Phil So, Stuart, this is

the similar I the of think are moment, basis see the general couple of more direction compression margin between of levels now where end at a and probably could year. we points to

the will year, think that have to our X.XX% our X.XX% springboard generally that that another we Last quarter on will we included impact at Fed that to say included forecast forecast, obviously one not which included continue September. this time, and so this We But hike in December, changed I in and overall in now we've be net but the position our margin the in not certainly in is had in XXXX. range.

of quarter deposit from compression. at little standpoint in a again, So, points bit. last betas a looking do could settled have this down couple of think that versus more be they of the basis I

are the highest think but first beginning quarter the at of hottest I I the end or running quarter, towards it, come second they've into the back down. of the think of end their they probably now

give premier this with starting money funding been relationship tiers lead that in market just terms the from than higher of be both XX% has that So, to the a in product are on. earlier those have. core betas able you and price XX% deposit kind perspective, account XX% from to We're standpoint higher a our to range range some of to we XX% to more even or of

So, to betas are little ratepayers intend slow category position still we mentioned, as we in bit the of do some the some think the in and to of time upper that but the market, third ourselves, deposit in that area in well. Dan a even starting just as

Stuart Lotz

Then do just much. of and yields on this hike? we hike hold up see very sheet. over saw were remainder -- average of Do the you betas? loan were one sorry, -- assets you trend I balance Thank will year think asset the quarter bps bps opposite this another on side I nine June Fed Any well more this think, We that as had the quarter. earning outlook nine Great. if up

Philip Mantua

it position, terms general as I holding, just completely all I saw first in to of betas the that I to In in question mean your the the get quarter asset first. than think better that certainly regard we a second about think of betas

in think the the XX% think first last the I in the probably I we -- saw XX% they quarter -- more betas average were to our talked quarter where there over quarter, think are second that think XX% I more range, excuse I portfolio, quarter like me, range. over in that we first now commercial

just rest progress not we how might year. or to a year Whether So, of don't question. by are the that able in portfolio, the of to know the I seeing good going terms in some of I commercial the that be we a see hold what there. throughout much of end is can think we exactly that's yield

not just tough, the So, that what a landscape one's competitive little be. completely knowing might

Stuart Lotz

for taking my Well, Awesome. Great guys. questions thanks quarter.

Philip Mantua

welcome. You're you. Thank

Operator

next with from The question ahead. Whitman Sandler Go comes Casey O'Neill.

Casey Whitman

Good afternoon.

Philip Mantua

Good afternoon.

Daniel Schrider

Casey. Hi

Casey Whitman

Hi.

non-core opening mentioned You in seasonal expenses. your just comments the more

to back the is more well deal from of the do half good there? think expenses you for cost do rate coming a what as you run So, the in savings get year? see in And

Philip Mantua

Phil. Casey, Yes, is this

couple expense almost -- $X.X of non-comp other stood pretty other here at I linked And that -- of a categories there's professional quarter. categories and a looked just I overall out fees there kind think million was that and significant -- there really quarter expenses. of were delta of

are I around to the cetera. second business didn't Group, preparation of think but significant of terms cleanups that quarter. Dan like that that costs merger-related of the fees was in Things for example, classified commenting was that and to about our as line things or that get et things conversion was merger were expenses. seasonal in tax technology either XX% what Trust There are on

that just would as the run sustainable of think kind give I part not looking that really far into of it, of as rate. direction of you I that much in So, terms will be how and kind at of

Beyond pretty reviews to now personnel have go with. is at in that, and second increases. area traditionally all our mean we where and quarter of is level our the I beyond traditional benefits quarter good second -- we do think selling what I look a our

to is allow the again for this or from salary introducing bumps, starting One year comments overall in benefit Tax would in average we with corporate-wide Dan's that we one starting to -- We've traditionally plan Act, did all over -- the Reform also the average and whole of as increase related would -- some terms also increases to started what we've incentive introduced this the a employees the of of of we accrue about of with our we things do. point percentage quarter. this by absorb the

those as hold they think I So, are. things

is I X% bottom-line, the again, growth, rest terms think probably growth at throughout year reasonable. in of the X%, of expense

Casey Whitman

Okay.

you savings million growth, on that the top X%, but mentioned, also just So, so? X% of the or that

Philip Mantua

correct. that's That's Yes, correct.

Casey Whitman

Net out.

has folks? Okay. And far for thus remind WFBI gone the [Indiscernible] us how

Daniel Schrider

Yes, Casey, this is Dan.

our We to new pleased Sandy are with are Springers. that very now our of converts make ability bankers

relationship I beginning probably think the one year. in we've that We to couple closed commercial we at and leave managers of one space a the had the immediately of had leave time conversion. the the from transaction after

we time, the additional of same successful been to the in at While have organization. area from company attracting other talent

pleased WashingtonFirst really would that we and So, to all in all, even quality we're we're with at the retention bankers the I really say, pleased we're experienced of with our seasoned, talent part have more glad retained, of good, and have them team.

So, it's gone really well.

Casey Whitman

ask Got more it. one question, And back I'll just deposit. to

had non-interest-bearing the a looked you it the of in So, really nice end towards like jump quarter.

So, so potentially? And the there to also environment? in contribute deposit in how have beta you this lower a that just successful curious quarter been third could

Daniel Schrider

is Dan. this Casey, Hey

their inter of Phil I well. think of DDA balances, is I'll let title-related build -- got used couple business, up that that base nature a a back monthly within in quarterly. flows as to One there's there comments to then lot of is there make and of quarter, the particularly and is the that with we've that in and periods acquisition end and and comment volatility tends within the the WashingtonFirst ebbs more toward terms of

as products one some So, the key in it CD in deposit of deposit our bring while is Those in really a relationship. end the of had And typically market money that's top our second then we pressing the frontline before. tied the base. market we're over has our are focus of -- aspect and that to the commented

willingness balances accounts while or winning the having for those So, of a to interest-bearing pay the also some transaction DDA relationships. we're

you the base the existing of winning new think hard business. that if within you ones, at just so see on beta I'll -- it's comment out, good work of within street, to just you terms a the that how let understand of combination in expanding the relationships, the volatility So, side? I Phil, playing all, title-related kind on

Philip Mantua

if is to from to where lost power that than look I being the other nine basis in the to as a but Casey, base. so the the that we actually think grow at of as that what quarter margin at two well or Yes, this way able standpoint, look the spread I of -- it I only non-interest-bearing funding that more happened points piece to you think lends and continue parts

itself would me So, of of purposes. going do I think might some that's other have mitigate that lend that funding to kind thought same process to what help we to for

and with with predominantly on movements down end and work public much as curve, deposit more dramatically more going especially that place of where trying as it's other more as borrowed really the I here and other ratio late expensive to of loan-to-deposit to unnecessary might gotten has work forward even we loan which base, funding we're funds being think where the broker-type the a kind the short well. and as bank, the hard between think base the balance into the our home CDs I shift alternative the Fed's to of try even absorbed as be going attractive

So, as conjunction as mitigate deposit demand the of work we means in in us much the to for in continue that cost funds. I enjoy a overall trying see our probably increases direction to think with growth on we might what

Casey Whitman

taking questions. for my Thanks Understood.

Operator

Austin Go with next comes ahead. Nicholas from The question Stephens.

Austin Nicholas

guys. Hey Good morning.

Daniel Schrider

How are you doing Austin?

Austin Nicholas

answered, were just questions but fee income. my of most Yes, Good. maybe on

weaker volume attrition some may seasonally was tightening? maybe You mortgage a Is in or MLOs on was just Or there? of than expected. there touched that the any little have headcount this, bit spreads but lower

Daniel Schrider

on gain sale Dan. minor what of would the into that consider more really side, I really Austin, category. volume We a had contraction the margin this in went is issue

at some portfolio. mortgage sheet, growth So, the you we balance the we look saw in saw some -- if

the more out of well. and terms business side expectation than things, down had in of go as the some but then refinances sale of ARMs in lower on gain we move construction being and So,

less margin, about production. off-loan So, more about

Philip Mantua

continue mean into I mortgage of Phil. up loan a is this up. that that what the it gain volume it would in be looking not level points, ended now I contributor went to the where margin, sale refinancing especially quarter, viewing standpoint on production agree. and suggested, to larger tighten. but a there. basis fee in a significant supposed any was what suggest to been but we just bigger Dan the year. of It's in by and of linked and Austin, got gain by forward, rebounding forward way baseline XX% majority that is Yes, of the going way, to XX% that's was their sale that about was that's kind off as And going are portfolio off conservative as don't the overall and for just kind on for being -- We would that's about from produced I right rest make see gain nine And of sold. as income the it just about if on production to nearly, really of being sale

Austin Nicholas

maybe maybe payoffs? strong expectation? CRE then kind a pretty the growth, has in as in slightly guess, a seeing of up the terms you growth rate we Or portfolio it, was I are pay quarter. in high that downs what book or the just a is loan in picked good level And of Understood. then on -- and out single-digit slower look

Daniel Schrider

of would continue the kind What from The hit system. as in WashingtonFirst, forward little we to running. they Dan. things. the found natural Sandy momentum bit assuming -- be of our that assuming that a production get could is We Spring there I Yes, organic -- we integration then that just pullback the they the Austin, we've year a ground of into terms carried of went couple of from and would this know

So, space our commercial collective, really particularly group, our doing is in well.

in think that XX% year where much -- I in really goes the the and at appetite as into -- X%, expect our that as range and X% terms So, I is what the want the use wildcard just from that's we for That into was managing this the in thinking as production went probably I mortgage XX% business of be loan we're portfolio, we'll portfolio would a X% will we going in X% the think but how point for of outlook. to is reasonable. nature And to that be to end growth that think mortgage up liquidity. probably -- spigot well we that

we're or of book. runoff seeing pay of there's anything of turn out kind don't downs, terms that that In I think from there

On seems in win moving term, lenders are competitive things the properties. not we competitive out non-bank side, estate that as new real producing certainly been years. more portfolio, be active XXXX the the bit That's for but of a But try income the market longer in than business. of the there to prior more had it's little in it active issue to

Austin Nicholas

Understood. maybe And last just then one.

As M&A of you about with first out kind the in coming Washington, think saves cost fourth quarter.

you potential XXXX, deposit If partner to the M&A? of message on Would what the any on color on more like? it would a maybe be of and kind just transaction play? message or another then that out look And look what's

Daniel Schrider

Sure.

perspective, I opportunities. from non-bank a to be opportunistic, insurance. Non-bank that both we wealth bank continue in or and be to seek would think broad

think, in And transaction the play -- banking believe which think it is one, to front, grow. building is that it's always to the on well. we've is has on are we little out answering I appropriate I terms timing more before relationships directly, always bit continuing So, work, guess important a are I seeing the XXXX gone your and we we note there. WashingtonFirst certainly integration -- question the that your focused of

there's growths necessary the be overall, so, the very time, a But to grow not are going as to to inside sake. hesitancy. forward in not at we're investments going same Sandy company grow our It's Spring and good for we not way hesitant just the a grow cross to talent going continue any or to So, adding thresholds. and

going we from our a product have. aspect deposit geography that aren't edges a to the are of be a will or be to have we we And franchise enhance and or is of either on or in you deposit So, front many -- akin we where M&A bring that to opportunities we access banking are more to standpoint for what that line that for folks currently look not complement some do the look base that us. And attractive have. know, franchises would those smaller the non-interest-bearing that demand those the of market would we're as tend something on the in that probably there very market, base would now be to would

Austin Nicholas

Understood. have. Well, Thanks lot guys. that's a I all

Daniel Schrider

Thank you, Austin.

Operator

[Operator Instructions] The with Company. next ahead. Comery Steven & Gabelli question comes from Go

Steven Comery

Hey guys. Thanks question. for taking my

Daniel Schrider

Steve. Hi

Steven Comery

to wanted just clear really explanation the you expense guys non-interest I on be kind of gave.

$X.X sort $X.X the quarter, merger-related, million. or was so you if of take of million, or the XX% So, it's million XX% seasonal so so the $X.X increase of in

the about out X% increase that growth, to $X.X it? order Is way print X% think to in X% right that think X% per should this take that to quarter's the million to So, from quarter. by we number about and then

Philip Mantua

this Steve, is Phil.

if would way I to probably the think to mitigates and back was probably higher expense had of annual historically, do we we the on we back to overall second kind I we it. of do increase then I basis most forward. quarter moves think and each conservative an look look that that's And it and thinking in have X% historically this, X%. can expense levels -- year be the more

at we're what getting So, that's kind that here. of I think

on true things second number in a quarter didn't quarter merger-related than in little some it the that it been timings people get that would in quarter may just first the that because done got being that of maybe be. systems have this category, think some is that integration merger first and bit also look ultimately and taken -- that I normally probably lower focused of made of conversion that expenses in

that the elements how would think of much So, those of is that two give to one those in you I why of estimate as I categories. are other really

Steven Comery

that's Okay, okay, very definitely helpful.

for maybe year have ratio do another expectation QX XXXX? the in way both you guys same think of sort an is, and of the at to efficiency question where for the kind whole then like I goes, look

Philip Mantua

people and Yes, of low-XX%, this the that's landed side to the also commented any that question, I the about certainly the a to had which efficiency on, piece too year point answer at is fair anything I the level. that the would I course quarter -- amount taken a And lot couple of fees of exactly of also thought impact we the a of just efficiency related itself, where I'm because your other believe think be movement settle that fee where But what ratio into ratio on consideration, should rest in to kind XX.X% happy time, think lack the that. was for that a the into not ratio significant the of we lines. efficiency that there. of think we XX% The of this

a XX% we in little there well. that at same in low a pretty outside, is first quarter the was quarter on as I that time popped it but think probably

of at So, everything quarters. see kind XX%, we that it couple this to down would having through like we do, where XX% is, I think, of a point, settle gone knowing

Steven Comery

XX% XX%, quarterly That basis, right? on a numbers

Philip Mantua

It is here Yes, quarter-to-quarter we year, like going the looking and to blend probably that's forward be. whole in but out target what will right. at for kind where terms of would it we that it of range would

Steven Comery

had. the Thanks. That's Okay. I Very good. questions all

Philip Mantua

you. Thank

Daniel Schrider

Steve. Thanks right. All

Operator

concludes the question-and-answer like to I Dan back closing conference over session. would This our remarks. Schrider any for to turn

Daniel Schrider

for and afternoon. the this call you everyone thanks Thank and participating joining

call, any have of And the feedback. Thank us effectiveness afternoon. evaluate help you your a appreciate to we always, e-mail can to comments ir@sandyspringbank.com. great you, you As the again have and

Operator

attending you concluded. presentation. today's now Thank The conference for has

may disconnect. You now

Sandy Spring Bancorp (SASR) 19 Jul 182018 Q3 Earnings call transcript