SASR - Earnings call transcript Q2 2019 | Sandy Spring Bancorp, Inc.

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Operator

Good afternoon and welcome to the Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for Second Quarter 2019. All participants will be in a 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.

to Schrider. conference like and to now Dan CEO, would turn over the President I proceed. please Dan,

Daniel Schrider

the Thank you, to Phil good of and Ron us Bankcorp. all Bankcorp's Ian I'm a and and for on XXXX. for for thank performance by Daniel Officer; today's our Kuykendall, joining And and Today's investors, today. is Financial for And you of Spring website joined General this our be Chief Sandy conference Schrider replay will second here Mantua, to call call the discuss is open analysts, Spring afternoon Sandy webcast quarter available a everyone. media. there Counsel speaking later will And live be and colleagues my call,

from started quarter Ron Harbor get your questions, customary highlights give statement. we taking covering will and the Safe the Before

Ron Kuykendall

other Dan. Thank statements earnings, make this statements in future Good and benefits, Bancorp and Spring loan achieve and probable and to of These ladies assessments the are risks will costs lease goals. of estimates you, expectations, goals, gentlemen. intentions, forward-looking other losses, statements statements assessments market to and of of of uncertainties. financial and ability that afternoon webcast Sandy subject include risks, and and forward-looking risk

differ those laws very significant future are These future conditions, Because interest of projections these because Bancorp's of regulations, results actual Spring forward-looking behavior and or they other other are management's uncertainties. materially significant indicated. a subject subject economic uncertainties, estimates to by from of and which uncertainties may nature variety matters, affected Sandy rates, statements to their future are by based upon and and market

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

Daniel Schrider

demonstrate performance Overall our success in quality to to sustained in was Ron. continue earnings. you, generate the balanced and ability quarter we solid second Thank

we to delivered, exceptional especially as the with level grown. able been and we've maintain, client service We we've are the pleased results of

But we've growth service We've that, through has achieved, your personal with start of could impact type high integrity, held us of or that the companies, can us. culture values, not M&A, uniquely makes case to identity. the level Sandy strong and confidence both some for For I organically say your Spring and the Bank. dilute been that to

interest shared decisions Greater as a banking region the one is the challenge. and this with remains to Our remains commitment many and another the and has Not growth. organization business acquisition that what environment hurdles us Washington work the and fiercely rate logistical made through we successful and come surprising, industry competitive,

to we remained in continued financial this successfully Competition of new us us. and The it This for landscape care services, nothing our have delivering is entrants We've us keeps laser-focused it and consolidation competitive sharp. we than more client where on XXX drives years for the taking is is outstanding where operated and market, employees. thrive. and new service

per of we $X.XX XXXX. XXXX areas quarter There the of a are million quarter net or or or and compared diluted diluted XXXX per was $XX.X million second like release for few $XX.X of income first of share diluted $X.XX income $XX.X second highlight the from this press issued morning. the of share to Net I'd income per net to the for $X.XX for share million quarter

were around. the first acquired this quarter. credit from proceeds a million interest such as quarter It includes XXXX. year's and prior a quarter loans, the million loan mortality worth life a of in items XXXX of insurance for expenses expense in That the $X.X in impaired provision were earnings no is that the versus quarter noting and second items one-off time $X.X first few $XXX,XXX there merger-related well in second for There losses, recovery as the in in

So, by comparison, strong. remained very the core earnings reported today

increased assets total XXXX, grew of quarter second increased X%, X%, loans X%. deposits and the to Compared

are to XXXX. quarter second at end loan-to-deposit at in pleased deposits, growing of in the We reducing ratio with our XXX% the compared made XXX% year-end to the we've the especially progress second quarter

growth a a deposits XX% XX% deposit non-interest-bearing wholesale increase deposits. in and Our in reduction included year-to-date

commented on the initiatives I place initiatives strategically to today into and report pleased and put to I'm deposit deposits January, to that work In many hard we deepen those been effective have to relationships. continue grow we

income X.XX% for interest with adjusting in and X.XX% compared second on interest allowed together quarter net million the of first FHLB $X.X of XXXX our recovered in the coming to after to strong, credit acquired deposit for some for margin success remain gathering, has X.XX% of advances Our XXXX, repositioning loans. at quarter impaired

things, of the reported compared side year lending the quarter. growth prior to On we second

quarter. flat more remained linked first in few this loans moments. more detail I'll in compared to just -- the comment a on However,

Our remained in strong X.X% decrease credit last an quarter. loans compared quality to with non-performing

the We and at list loans in coverage also saw non-performing watch credits reduction a strong remained meaningful our of XXX%. allowance

from prior revenue this banking driven quarter. primarily mortgage our great sale last quarter, XX% by To in end, income from the to that division activities. to compared continues $X.X million increasing million mortgage Non-interest income $X.X on year's gain increased area deliver also results to

We mortgage loan the across production overall with our thrilled are footprint.

growth, also $X.X production revenue in As a we it of that mortgage and made sheet to quarter versus of team decision off-balance XXXX. results. strategic portfolio we per last more is remainder out the million the for expectation important drive sales for quarter, to I revenue at our note that gain-on-sale hold mentioned will is the form approximately strong built It's delivering that

Both quarter and to X% X.X% year, wealth this division by management divisions wealth to insurance our revenue increased under increased also first billion. by the assets saw increases $X.X nice our and quarter. Compared of the

compared quarter to a also increased commissions quarter XXXX. strong the X.X% Our by agency and insurance had second of

quarter. quarter quarter XX.XX% slight XX.XX% of compared manage current ratio The first the We the continue effectively the previous of to to non-GAAP expenses quarter with and efficiency XXXX XX.XX% XXXX. a for was second to for compared the for decrease

share details with to more comments my back going you growth, want earlier to was what few quarter. about second I in the some So, of happening a loan regarding

level a a run-off. in mortgage As shift quarter strategy, remained previously, production, noted unanticipated of which I higher loans the of of our and flat, funded levels this result was

lower instead we for to the made and of retaining our production decision of of gains market, a mortgage conscious loan the sell Given them spreads mortgage portfolio majority in portfolio.

initial was production consistent lower a to basis of higher-yielding ADC composition with funded loans more funding. of on prepayment portfolio less secondary fees commercial and construction with loans fully The prefer selling shifted Additionally, fixed-rate year-to-date remains the our estate are as and financing. include investment strong we projects more are in real clients XXXX. of increasing to XXXX The term and a production level market

several good in Our leaving year-to-date production quarter prior the a to note the bank. as compared XX% saw It's days between representing of the construction utilization timing, million dropped projects, final payoffs year. important percentage we And of of self-liquidity $XX and million. that successful to in in to bit matter totaling the we have $XX clients of a XX% not

top We portfolios. achieving balanced, talent focused commercial on and remained across production profitable recruiting

our a XXXX, XXXX the of will Given growth experience the growth in average loan first two produce for rate. average we mid-single-digit quarters year believe

risk-based grow an to of capital support dividend capital X.XX%. XX.XX%, ratio we're to continues strong And since Tier and total growth. of trend remains during again leverage ratio position a tangible which ratio risk-based With continued to base XXXX. X the continues quarter, pleased a our X of Tier ratio and capital a of XX.XX%, raise to the annual X.X% common asset of increases once tangible Our

We local Sandy and fueling like Spring. jobs, going to special our some making shift know our this a and and played creating in has economy, grow initiatives update to on critical news pivotal I'd in now communities, at you investments small business region. on helping our role

conduct independent and mind, survey decision-makers. Business of Journal the to we With an owners local that with in Washington partner business

local and Our to about of business to economy. was interviews hear goal leaders these what opportunities say challenges, their our had

their contrast is What also for in to overall responses great place Greater in specific D.C. and businesses see Maryland, interest tremendous Washington, the that optimism some businesses priorities we've and women-owned have is heard There about Washington future. region's leaders here businesses and minority-owned were and light that opportunity Business the and came business. Virginia, from along a

many things the that some businesses participated small gave businesses us and The insights who in heard from validated directly new serve. we we survey this

clients, actionable bank. and in we what research, heard the Given partners through responding seen to we've will grow ways we've and the our what in are that learned and from practical continue succeed what performance, small we help own business our our help

state the local This Business as small results accessible as talent that on C&I well our we small on Journal survey the recruiting truly simply the by Washington. the via The second they're serve in quarter understands business strategic website business in were published in Greater of communities unique sandyspringbank.com. includes searching that a Washington and focus lending of

a we're Beltsville office focus this of new this it excited with community. in month, office later and in dedicated on businesses Coming small open retail a businesses And George's will will the mind, the serving however, business serve in clients, community small have County. to this Prince

we technology a shared experience. us that in and quarter, you deliver will with As people last I invest to continue help more our fine streamlined

System online are as out in a later to we look account nCino great Loan Origination We well this of portal, as forward new year. which our making opening strides rolling both

personal the a in We number security bolster further also introduced of of security seamlessly online proactively clients. our enhanced features banking to and order and safety

the XXXX delivering client experience Washington Best Forbes employees. Post, We an be especially continue quarter That's XXXX focused and named remain State on workplace to and our personalized we're for this pleased Bank to by keenly Workplace. exceptional in Top why in

our entire is Bank in ranked that One Maryland, what made company-wide us however, our possible. Number Forbes efforts the across region

employees special great our be. what Washington one and the Bank that to As relationships clients, we makes our tremendous culture top acknowledged a and Sandy truly prioritizes with recognition, that embrace workplace for Post employees as is be our is people knowing another. built think community, and the Spring a affirmation that is so To that us together, place value culture the authentic

what to to achieve optimistic and we and look the do future, growth. As continued success to we have we know we're

value We Bank. Sandy and and focus true remain do shareholders to will make we best doing on makes by adjustments and Spring as us delivering all clients needed what that to

know company on, we This the question questions. Ian and concludes the appreciated to you with us affiliation whom you come as we'll my know could let are general comments for first and and so speaking. can now today we're you if have we move if who we'd your

Operator

now begin Instructions] question-and-answer the [Operator will We session.

Nicholas from Our first of question please Stephens. proceed. Nicholas Austin Mr. comes

Austin Nicholas

Hey good guys afternoon.

Daniel Schrider

Austin. afternoon Good

Phil Mantua

doing you How are Austin?

Austin Nicholas

Pretty questions. think was good. taking just -- within of can it you that I guess that Thanks number? for X margin, the accretion I my confirm points basis on

Phil Mantua

around Phil. in that prior. to other Yes. relative That's this noise of kind this that is periods from any correct. Right to without at Austin -- period comparison

Austin Nicholas

Okay.

X.XX? to So, it's closer fair to was the core margin say maybe

Phil Mantua

about it's X comes that's being think I And X right. adjustments And -- anticipate points basis from next couple to fair from value down I to from of left that what's the the Yes. standpoint basis of in per X quarter. points would knowing probably adjustments quarters

Austin Nicholas

maybe maybe you're what that's on thoughts Okay, of then the And couple expecting for the cuts outlook, just core just over helpful. next give some margin quarters? rate could on you Fed

then your could down brought And to level? now trend, the any more have much especially margin think that on XXX% where that level kind a comments loan-to-deposit today you of at ratio manageable you guys

Phil Mantua

Sure.

to the are So, indicate current this I end time cut month a there's by would end that -- get of we and certainly be that all, think the now to people quarter. we of like -- of at this most probably going the first I

And pretty where occur. of much could the a basis it given margin is, maybe couple we're looking down that that so, being at points

that think rate to of having in does we'll our that Fed also that without I'd kind some part offerings layered base, liability done movements that the that in bit the of -- the actually latter the of in time the consumer deposit look it really think rate we've have at doesn't done until of but restart the side. on reprice specials I way see is -- something. I quarter I market the We've there, to and little say that here down opportunity a

rates then once So, and basis we I that, down, bit a think will that those back. maybe allow of will that up psyche think to occurs, the little points the retail probably get us the of of can moderate I customer change some

Austin Nicholas

that kind of number. on just maybe what you are then of versus deposits, commercial then disclose maybe And to deposits those kind that be to those -- would Or of percentage And point, of as you sense. want would retail? -- classify commercial commercial that anyway of Makes kind of tied short-term of index? your monthly percentage a what

Phil Mantua

mean, regard. to I mix that at and base, that just rule in for I deposit retail of our that I in so Yes. think us think been commercial, kind the of core general thumb has look the of that we XX/XX

tied that’s got balance directly, true to anything, product got really commercial, only As that one tied legacy the retail far -- as market index. it's product market to to money index a or actually directly an it relatively small money an we've

And more to we're changes, the doing but premier-offered in we our legally adjust rate course things market environment tied the of so. as not money

So, that's would the move to thing suggest product one that -- that could that only you actually say. automatically, I let's the

Austin Nicholas

it. Got

is have funds large Fed like or anything directly to a that speakers] municipal there -- maybe don't not is you So, [multiple book tied

Phil Mantua

the growth down that Dan the public well. the CDs position our No. had, brokered And quarter, growth we we did, in even actually deposit quarter with the -- funds we ran as even during with ran the as we with as mentioned, loan in fact, down

think life. significant keep I parcel constant funds and of -- were significant So, during loan growth. we able things We fairly cost deposit while the are part of those still the had the quarter to

Austin Nicholas

it. Got

maybe on to kind of a maybe run -- through Is kind we just expense build of should of that your expense off of picture. good this that? of be commentary just the Okay, And side the rest change rate any kind And could natural that's helpful. growth see rate of any of the year? then might the the in you hiring doing then on

Phil Mantua

Sure.

XXXX we expense on if over were But you this in finish think, we'll where now expenses at look the would I that before. commented we're suggest XXXX general, core going the given to probably think is and growth we've I are I year, how year-over-year, around of So, expecting X%.

is that compensation-related will overall for example, of as in if there fourth us, in the the couple look back to create in quarter-to-quarter, current bit this on couple a a pattern in a past. in drop it'll quarter. the from the for little higher fee bump of the areas some seasonality of quarter. of There of business again, you does, expenses And then are Now, some level categories, next up cost usually income down, at quarter it insurance

think expenses at the rest surprisingly I use the year idea So, from last you looking kind year, that's excluding X% of guideline looks. pretty as course, a if the merger-related year-over-year, the how good for of of

Austin Nicholas

it. Got

one. helpful. And maybe then That's one last Okay. just

WashingtonFirst up that us the the seek you any of then thoughts you'd and is capital? on and of transaction of on kind With of M&A. of the And part maybe message And you capital of could that where kind behind I on hovering strategy? XX.X% around kind the incrementing grow, kind your remind guess, to of uses CETX,

Daniel Schrider

to growth, focused thoughtful we be as is Dan. view this drive probably it building continue to relationships. sound support Austin, us our relates -- repetitive and active dividend. organic those capital, Yes. toward in predominantly I to M&A And continue are strong allowing on our to about

decent in of which anticipation share. a the do there. in some that weakness activity have we capital the but doesn't been a quarter not in place, believe have at point we of consider past not having there's And level it the we in continuing would active, then repurchase we share that so mean as that And authorization

things about those as levels. combined all capital of So, think it's really I four we think

Austin Nicholas

tax should be? full range got is where Okay, And we then of kind the -- XX% just for rate, it. on XXXX, the year the still be we should

Phil Mantua

use that's think good the Yes. Austin. for a year, to Yes, overall I basis

Austin Nicholas

it. Got

questions. I'll great. off. Okay, my Thanks hop taking for

Phil Mantua

Austin. Thanks

Operator

KBW. Catherine Our next question of proceed. Catherine please from Mealor comes

Catherine Mealor

Good afternoon. Thanks.

Daniel Schrider

Good afternoon.

Phil Mantua

Catherine. Hi

Catherine Mealor

any if of as there are on One lower borrowings to kind plans about other you FHLB just the other outlook? Remind think NIM margin. your us one

Phil Mantua

depending home Phil. Catherine, one going CD a Not we this which borrowing on us to better was market what se broker acquisitions between against the is loan wholesale that will necessarily we the give we bank our adjust do just can per but, form the in as of result. again, of those economic -- think

for -- know position. bank books there to there I other mature some to relates loan are -- things don't that, to place going but that to what plan if in specific there is but out may now So, advances, just if right start a home directly the reduce on it be than the

Catherine Mealor

it. Got

the some Okay. kind you're you the security bottom just bring like the room on further? you side, securities is balance there? And that still then Do this thinking of there feel balances. as to sheet a and Do more like at about balance down feel

Phil Mantua

we portfolio Yes. that today. XX% our what rise mean further at And targeted that part short-term XX% shrinking quarter. bit below I the It's normally thing, seeing portfolio of it a anticipate and be part but from wasn't -- I And of have of where to That the that I overall between was assets. securities a of think it. position is. wouldn't to kind of gave that's cash bigger the end little only that for

get portfolio we'll rest fully a out year. think investment the as start the through little bit of in move more to the I invested we here

Catherine Mealor

NPL Okay, on then a earlier a on and talked quarter. credit, pulling in great. conference this was I market this credit credit construction kind had couple local of There in really back mean, And about single-family your quarter. call of strong a competitor your that was moved

little that you're And just even kind part within where a of attention are bit as anything seeing softness it cycle? others the more wanted paying locally pockets that you're take to just -- where D.C. get just a and your to of closer on there's

Daniel Schrider

-- level, high to if the as the I is the is every solid. at you from quality, including look look credit when everything business, this CRE, Catherine, you really particularly relates mean every builder-related at category, the onion really Dan. it back peeling

you're and imagine to earlier, -- what well. referencing client-specific, the within continue in extremely but things not I knowing I from that So, look would market, of maybe terms perform would to trends

to -- quarter completion one I intended in some builders prior from from to comments of of projects communicate coming our of successful that -- and out selling is this them. what maturity, to out Some is past of successfully increased run-off my from meaning building projects anticipated

well think balanced We're well diversified So, type of product region. I pretty or in we're pretty we're heavy around submarket. one not -- and any one type our

around multifamily Our properties. be to redevelopment and metro stuff tends stops

But really not weakness. we're is what's we, continue to answer short to attention seeing cooking. signs of So, pay obviously,

Catherine Mealor

very much. Great quarter. Thank you

Daniel Schrider

you, Thank Catherine.

Phil Mantua

you. Thank

Operator

from proceed. Our question Research. comes G. Steven Comery Instructions] next [Operator of Steven please

Steven Comery

Hey guys. Good afternoon.

Daniel Schrider

Hi Steve.

Steven Comery

if there of just kind of on the was here? wondering versus quarter I last same the there dynamics contrast was you something unique going could growth level or loan relatively the coming low quarter. this Were

Daniel Schrider

Yes. is Steve, Dan. this

and putting prepayment in there. quarter I the as some things given couple production our allude we loan much a we in drive of as more what commercial the clearly At -- moving, think not with -- to to to in speeds mortgage active increased tried activity in I've happened the and did rates actual -- selling second the same of have my that's comments, made in time, quarter portfolio. we're second

On more lower in and what real than less the loans bit the that commercial originations which first a but historically. side -- in being of it the book, construction-related higher quite the the meant that quarter it far our were was the fully estate had significantly was than funding different funded actually and our term with first, originations been quarter production in was the from in on were second they nature and investor those owner-occupied

of of quarter, on portfolio top refinanced end the had that, quarter of material of to end the And the on we therefore, kind have growth. effect couple a balances large and, average at credits a a right out which then happen just of

year about obviously, production on impact I our net just and really formal first feel good few things growth to of a quarter, those ramp-up we So, of for growth had mentioned rate. from quarter, for outlook a second commercial the the direct the entire the reshapes

Steven Comery

sense. makes Yes, Okay. that

quarter do the of context, mean next So, term this expect is in or I a adjustment? longer that of pick-up funding to you sort over kind

Daniel Schrider

a lower of the shorter that funding typically credits drove are term nature credits. level The

draw construction So, XX periods. to XX-month

So, production next ramp-up of you of in over see just the that type course funding of quarters. couple the

some moderate What self-liquidating around continued real have utilization that that is of will some that picking driving at and but estate opportunities, offset in funding efforts payoffs, may hopefully, those or up hopefully more investor additional owner-occupied business success funding C&I rate. our and other will projects

Steven Comery

front, attractive mortgage Okay. just find far And to the as out I'm thoughts in the guys then on forward. expected the that mean banking happen or of banking more I put out mortgage have putting you sheet going for less attractive. just more your as would balance kind guidance wondering for Good. what to did you revenue are for fee

Daniel Schrider

that. yes, originate mortgages that different play things want are risk. selling been pulling Yes. hear because interest fixed-rate The good together and we sheet those CRE-related have long-term and volume we couple -- decision a rate that We don't there of for the -- originating a of into that then off-balance

doing hitting basis so we're never portfolio. on Now, that they're a flow and really

that more even as aspect, the and flows have other on some ARM us, product. a that will to typically mortgage, is and will which in construction as perm then business for the far typically we cases, XX.XX% on permanent category XX.X right a probably and into go The construction meaningful

of The fixed on spreads competitive that local have bit been incredibly XX-year unattractive. has good just XXXX into writing XXXX competitors for are environment a that been hedge that well

going we it originate want that's just a in to so originate, profitable a taken that have And level. to pause we we're not why at that business,

will So, point. mean itself or competitors I think up bucket be not our realize tolerance as it's that a and as a today. at that to fill advantageous maybe will probably reverse going some they that there's

Steven Comery

for sort me, you that? forward? at finally And on look of how just the general going guys any commentary Okay. pipeline And then

Daniel Schrider

lending about talking You're pipeline?

Steven Comery

Yes. Yes.

Daniel Schrider

pipeline year. we good feel Yes. course our of built Yes. the the commercial throughout about as really We

-- be speaking the heading we side expect things. rectify door strong the directly, that So, continue quarter production to we've pay got But on got strong parts our and the second into pipeline in that a will a back in through fourth space. moving the third off. expectation of will and our quarter is commercial It's here efforts few will the

Steven Comery

Okay, very thanks. good.

Daniel Schrider

Thank you.

Operator

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

Daniel Schrider

I for taking Ian. Thanks participate want to just the Yes. time afternoon. everyone thank to this

would let feedback how call to was effective and ir@sandyspringbank.com. can our comments your us appreciate we know today e-mail you your always, As to

have So, everyone. afternoon great a

Operator

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

You may now disconnect.

Sandy Spring Bancorp (SASR) 18 Jul 192019 Q2 Earnings call transcript