SASR - Earnings call transcript Q3 2021 | Sandy Spring Bancorp, Inc.

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Operator

Welcome to the Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the Third Quarter of 2021. My name is Harry and I'll be your coordinator today. [Operator Instructions] I will now hand over to your host, Dan Schrider, President and CEO of Sandy Spring Bancorp, Inc. to begin. Mr. ahead. go please Schrider,

Dan Schrider

And your and for Counsel General everyone. open Kaslow, discuss today's our for Aaron Sandy on analysts of Bancorp's covering Harry, give the Spring questions, you replay our Sandy colleagues, available also impact our the to is and will Financial Phil really is joining Schrider started performance XXXX. quarter later Officer; customary a will Mantua, third of safe from us call Today's for live conference date we the we'll good joined you, highlights harbor to I and I'm This and today. speaking, pandemic. Bancorp. afternoon, be Chief appreciate quarter response Spring call, today, But statement. Thank and call the webcast and bring get taking investors, COVID-XX all be here Aaron to before you Dan from up on media. will the website then by There my a to and

Aaron Kaslow

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

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

Dan Schrider

Thanks, Aaron, our joining and third thanks again everyone to us discuss quarter for financials. to

performance earnings by strong, lines production, a existing grow our another of new and deposit level record we Fueled solid exceptional client loan growth relationships quarter. commercial continue remained and delivered of Our to we and business. across

good We with In addition, position, and in are into and quarter ratios you great margin share continue momentum fourth of going make quality, efficiency to forgiveness. to and great today. our do credit the we news progress on all have lot a PPP

jump period Shifting credit this or $X.X unemployment for common grew and of XXXX year quarter the $X.X we $XXX the earnings cash months. to So metrics PPP per by September included of and and of forgiveness quarter the primarily forecast to this and per XX remained compared into of at deposit determining quarter. that declined for for loans. And ended growth provision for for the from September of $XX diluted let's PPP by last and The prior equivalents credit the right or further common for this the $XX.X highlights Core for provision press to $XX $X.XX at the quarter the compared or sheet. $XX income increase diluted $X.XX stable XX, Total the also quarter balance or funded the was share reflect million million million $XX.X Today, of end, cash the million third XX.X% net per To same The for a a quarter the the for operating XXXX. $XX.X credit year. allowance share quarter million for the compares quarter from X% common over losses. and supplemental XX, compared third second improved XXXX. loans diluted release assets million updated current reported information. of net billion for as the credit year second $X.XX income losses share a rate, the million, million were to billion $XXX to consistent quarter's $XX.X primarily XXXX, credits million the at the during linked

the the $X.X loan at third year. of portfolio the remained quarter prior Excluding billion to compared PPP,

offset On production commercial X%. and commercial increased was and While increased gross $XXX funded residential totaled million and million. loan basis, totaled $XXX funded million, of loan or $XX the million, for mortgage consumer increased million. year-over-year Year-over-year gross growth $XXX million $XXX X% and X% runoff $XXX $XX production linked-quarter by or or it the XXX% or or XXX% a million quarter, production commercial production increased

growth great know because we the results when We're that to. all accustomed space. commercial and the production So that the normalize, with sustained of expanded in pleased it will we're to commercial translate kind times

loan clients opportunities season the in to line in higher line of commercial larger our This our runoff balance in While on credits, new quarter. market. excess new actions taking talent we the accelerate adding lower operate approaching and fourth to at of continue commercial growth and we're commercial pursuing our liquidity utilization, proactively and across new business, sheet, prospective looking includes

income banking or continued decline relationships. anticipated slow. as the XX% we from client refinances the in of is growth year-over-year $X income by a in indication The which XX% to the was by X% year deposits and deepen deposits to good This deposit million and deposits. of our significant compared prior quarter. increased growth decreased activities, XX% ability to was decline things, and XX%. mortgage of a Noninterest grow deposit driven interest-bearing in On side noninterest-bearing This growth result

future as expect ahead, income our to in consistent that of million the rate the mortgage anticipate in stabilize by on and compared retaining wealth our runoff roughly we prior a We to the XX% management be production we to Looking to on year. we balance gain environment quarterly sheet. growth range $X achieved sale $X million portfolio more from the more moved

XXXX performance compared interest of contractual of markets Jackson in XXX% incentives. prior the the primarily continues to as improved Our year the by compared to grew the financial base. wealth well X.XX% expansion and X.XX% the Rembert margin of acquisition months the net as year client The Other quarter, the vendor X management impact a positive fees driven the in also results Pendleton to for credit-related by make income noninterest for to our and prior year. first

was the success X.XX costly cost in the basis and in interest-bearing X.XX year-over-year the Excluding our the aspect acquisitions, down value from would borrowings net margin A marks significant margin the the of current the amortization subordinated for been the year of derived debt. have our ability deposit fair interest of in more points liabilities disciplined manage to and and reduction wholesale-based improvement through pricing of XX by XXXX.

contributed grow deposits improvement. million year the of over the XXXX. third the compared also to average noninterest-bearing expenses to XX% Noninterest increased $X.X quarter prior by ability Our margin or X% to

than previously of outstanding of to and an linked nonperforming a did contained have losses. as are totaled of of result in million from primarily change factors for the fees a being The of nonaccrual loans FDIC result insurance. various subsequently Salary to is not was loans banking due associated mortgage the to in loans trend in quality. in provision did XXX% Again, loans and for reserves, points million ratio and credit The million of of a longer the While charge-offs balance benefits to quarter. company or of as quarter was prior aggregate in these compared outstanding more for $XX.X quarters. professional commented on third It's XXXX, Nonaccrual Charge-off quarter income in XX quarter X quarter the $X.X quarter. linked days positive in the $X.X for the process XX and reflects investments. losses individual XX.XX% quarter. loans linked primarily of fees fees increase non-GAAP XXXX current in basis quarter increased result outstanding and the non-GAAP and technology past million experienced partial after $XX.X -- credit loans XXX% that XXXX. to consulting And on with or efficiency no million the mentioned charge-offs $XXX,XXX note of Loans ratio the in staffing charge-offs the quarter for were portfolio $XXX,XXX million increased $X.X on our and to hotel of few with increase second credit a $X.X due X.XX% Loans $X.X in professional the rising a linked loans level increases. maturities in longer additional a the to for and to the by nonperforming The from to hospitality costs of we activities loans during to million associated relationships extended. XXX declined insurance and due. X.XX% to and eventual so compared the compared portfolio greater company. increase quarter's quarter result million. third quarter at the it quarter. $XX.X compared XXX% prior important by prior million professional expense large amounts noninterest amounting basis the efficiency reduced not for the compared settled of exceed the the $XXX.X credits allowance and primarily linked The the was personnel within was compared XX.XX% of quarter. risk $XX.X during that are $X.X payoffs nonperforming at in recorded of of points in are their the compensation no September that This M&A the third current reduction I XX fees, prior and costs The primarily borrowings loans. existing net loans lack quarter the from continued million these million that assessment sector during million decline FDIC it to or year the charge-offs $XXX XX, were the was quarter. this in borrowings the this expenses of significant any net the in of driven at regulatory increase quarter decrease agency's for of impact of XXXX reflects to the nonaccrual placed Loans of partially of the offset for amounted Nonperforming Shifting

credit billion $X loans in payments. XX, losses our or Excluding X.XX% you'll PPP our supplemental be to positive. X.X% increased for compared the assets Overall, $X.X common Tangible accumulated quarter. returned X.XX% as to see months. And of to over September making compared credit at have tangible percentage linked equity to loans, or continue of result all of total quality a nearly allowance trends accommodations earnings to September at as the as at a the was materials, X.XX% XX loan XXXX, XX billion preceding outstanding

the a X the risk-based company common the the X.X%. XX, would Excluding at ratio program impact equity the tangible XX, of same be ratio capital of risk-based XX.X% Tier a September X.XX%. XXXX, ratio risk-based from a assets and common ratio leverage At of ratio X equity at of XX.X%, PPP XX.X%, September tangible Tier had X capital Tier total a

per the Given repurchase an our stock share. shares average million and $XX.XX strong program company and year, price of X.X past growth the common stock over approved at activated position its its of repurchased capital during

the So with issued now we supplemental turn morning. to this information that, we'll also

as the with where X. of Outstanding the less local quarter remaining stand detailed If accommodations the and expected of the out loan great for we earned indication is our $XX accommodations for September loan you'll balances only in of form and of million, moving industry and you Again, not the economy. for to what within XX. This portfolio On payment X, X information, forgiveness X, in of XX but resulting on segment you We've specific we move going this loans September then is news X% the that the recovery and payment X Slide accommodation. the so see of X be on, well can see totaled the each and breaking Slides an that's than are also fees of to to balance portfolio, rounds in program. have remaining program. some Slide included as And that

forgiveness submitted for on applied the of round submitted XX% of of all forgiveness, received X, SBA have and As XX% full October round applications XX.X% applicants for have have loans forgiveness. those of of Slide And loans X, applied forgiveness. XXX% X received X as and have to detailed full

the progress, be rounds we're really forgiveness complete of by we both year. to on So of and the making good end expect substantially

Phil he'll I'll slides and walk over So through Mantua, to it turn capital CECL with that, our and position.

Phil Mantua

afternoon, and going over XXXX X, primarily everyone. the by reflect representation was driven main level part inputs, On periodic unemployment current change drivers is Slide and more recent broken the you, reduction our is Good model of waterfall economic quarter of projected pick change quarter variables. in a to the of X comparison rate; our process. movement X Thank The individual forecast the the a the I'm key of which the allowance factors: have we near-term in of of our update change our the to Dan. in reserves; the of review into third course quarter. current the Slide up a that components on for during where the

continues quarter of was effect to baseline the forecast an XXXX. ultimately that version by level and a of in use essentially XX. market that Our COVID-XX our third recovers on CECL the baseline Moody's third released rate has September methodology X% already for quarter for of local and integrates the peaked portrays a Moody's to forecast This the unemployment

Additionally, change the to levels the and of the business credit the contributed provision quarter. growth year-over-year for in as index the price home projected bankruptcies presented in

macroeconomic additional our factors reserve can where categories to major the further of granularity that you these third next commercial key a some exception the the related reserve the #X. Our variables continuing trend quarter, loans, from in quarters. all prior variables manner all those outlined provides with to in have view, applied same consistent on used And reflect Slide been portfolio X Slide the a AD&C, as of the of see of as in for are be of business here commercial bottom X.XX%. And would illustrated know the our no note loans there outstanding, at our exclude as for footnote reserve the be we to includes We when loans on PPP the PPP the loans. X.XX% would X.XX% total although commercial that balance segment on reserve of adjusting the the reserve in And slide, release. should loans. reserve business reflected total required is those loans balance, of

of Slide and explanations of tangible capital the is forecast the resultant updated reflect impact that's loans for the the on base certain the We've CECL equity those Finally, their impact PPP XX brief our severe the economy a measure. to and constructed COVID Moody's the our same First the the of current to and outstanding transaction the acquired feel Having which capital case. in of continue we in therefore, that, we amount Dan, confident the during million said the And our $XX activated complete earlier total million mentioned comments, Washington was back $XX $XX in program during obtained expect our of share buyback quarter, the other repurchase million we acquisition. subordinated the earlier you. And about shares capital ratios to incorporated Included the with to asset of on ratios. baseline scenario, and is tangible as position. items recently regarding trend redeemed comments his to also in of some our debt, severe stress tests. in of baseline some quarter, ratio Revere the year-end. treatment before Dan into authorized to utilizing We calculation, forecast adjusted we

Dan Schrider

Phil. Thank you,

do prepandemic to to expand Before office continue we let X. will across move move our I forward, effective time, our return clients we colleagues, that all healthy so offices everybody that that fully and communities can your to plans all safety X, November to operations serve. we questions, In-person for and want levels. vaccinated part our to know We've November be workplace to the ensure that our employees also required by

and with general we'll to will conclude today, move our your I So questions. that, comments now for

So away. Harry, it can you take

Operator

from Our from comes Piper first question Casey Whitman Sandler.

Casey Whitman

potentially mentioned you adding Dan, new talent.

investments other and the talked about You've some technology initiatives. of previously

think expense efficiency of sort in Or going easier XXXX is us expectation just what update help reasonable target. to your a perhaps us be. maybe So ratio to about on growth for

Phil Mantua

Phil. Yes, Casey, is this

will we terms increase we consideration talked takes that, looking year. expense about during talked just occurred year last year-over-year into would of we that that Loan also things core roughly things about the a this Bank don't the of asking anticipating of things X% that reoccur next and think you're advanced time in over fees we this 'XX to prepayment base, terms Home in probably of some believe course that overall -- again, And 'XX. in be and again I about of related

Casey Whitman

kind I'm to maybe thinking you, quarters? core us core liquidity for how do your you more of margin here quarter, that margin question But Phil, update anticipating. the but there's outlook? maybe core are next about that want the you were this on several over you margin impacted sure Another than

Phil Mantua

Yes. that Casey. I'd be too glad about to talk as well,

of quarter strip will into would when margin for I next we're redeploy quarter as low think got in course add that kind of trying that some keep next the mid-X.XX% throughout that value range anticipating third and of margin all, liquidity, probably anticipate as towards And to we reported that stay of and fourth here, commentary next probably PPP expectations in the be the of to because well. move on impact did for excess PPP the in we to would be the in work quarter, though, our year year trying And range. quarter not as then fair program. plan or part that the think forgiveness finishing you back comparable core we of I the first that mid-X.XX% although marks that, of that, the to the in I margin then way as core forgiveness, here was So the would the away we this what

Casey Whitman

your Okay. think timing we'll kind Understood. And Do for forgiveness? be what of the of Or of you mid-XXXX? do latest that earlier? is will expectation round think the through that you go PPP through

Dan Schrider

Yes.

Our some control we're substantially be first go into a substantially over complete expectation margin of the our might that it from have virtue do. we just can't we hard us this so 'XX behind have quarter to clean exactly year, fall into is working to clients But we but perspective. by what can

Operator

Our Zwick from Boenning next Scattergood. and Erik question from comes

Erik Zwick

talent of and loan of so, about or growth First, the on the I year Would wanted credits, past a mix gotten kind in the maybe has portfolio? much so the larger, you not Casey's follow has terms expect of current larger gotten mix up rate, commercial the with but bit of the in Or little to looking the new adding runoff, are at of question over the and loans. Absent that mix remixing to continue? commercial happy the smaller. you residential PPP mortgage terms

Dan Schrider

mortgage We've Erik, with just the to estate is production. comments bit business, market gov future lending and we're intent I runoff connected of terms the we've particularly that C&I middle commercial mean, my con of putting Dan. being look the by of space. in might When perhaps more virtue our and related for are Yes. owner-occupied Part growth to more on. in and real talent see and of to it. the growing we're process stabilize new portfolio enhance even doing the looking begun that putting a to terms mortgage of that that seeing able we space, of already to portfolio try production, in in earlier, portfolio the little going been eliminate on

grow where in the are are those efforts to so trying And that. specific really

of do, CRE, good we're significant we is part Now very it. what and at obviously, a

that's bigger take time take mix focused. C&I a overall standpoint, a we're to going it's but where to for from role So some on

Phil Mantua

up the to in up here together Truist, I might like out. mean of putting to we're to is kind Dan's talent that trying to of handful portfolio. And been on recent we very organizations, Dan's in recent continue being excess pretty to we've liquidity to related for building times, one directly et And the Yes. the by portfolio, some this that build I other means more the about looking Erik, here large pulling comments also from individuals produce the mortgage in point side. of cetera, as that some want follow sopping of times of a successful and area -- it

Erik Zwick

color. That's great

the Turning the to in charge-offs quarter.

record now? size bank the Just you the then, prompted are took? still how with you marks determine point? the And those charge-offs curious, X the what to the decision of And relationships this did at

Dan Schrider

-- we've we've working a The of to resolve credits No. obviously number as mentioned. quarters, for been these

go those cost like. specific establish were on we those -- or during process cases, Our methodology through reserve in And and the our to were resolved initial -- liquidation through value based were, in a reserves aside and the we set assessing sales. of and the both they cases

Erik Zwick

do Got happen have it. -- dollar the And go ahead. amount Phil, you to

Dan Schrider

further I'm sorry. longer no They're to answer your question. clients,

Erik Zwick

Understood. of Phil, do you amount accounting accretion that purchase have the dollar XQ? in was recorded

Phil Mantua

it move I relates core, much necessarily to left probably nature. not only insignificant I think will be ahead to reported we to we're the year as amount exhausting think accretive I pretty is, margin Because that per it as well and what's pretty And it have it's well. se, but as next be will to be as guidance, more getting here. don't -- my be but dollar more getting

Erik Zwick

consistent a every of -- flow in provide the release, is, And How mentioned you just guess then with in noninterest Okay. in higher year-over-year I've my activity-based that's does color kind sounds contractual does what quarter? through? income That And model. that more little vendor last in like whether the incentives. Is just the on got I there an Can related comparison, press what annual? you one exactly hit to? of terms that

Phil Mantua

a of thresholds probably programs different with types incentive to relates as Erik, targets. for hitting or we have basis, more it certain vendors That's one-off on various

Erik Zwick

you. Got

like... year. next would in XQ again time see Or it we might next are targets there So here? likely, the There be multiple

Phil Mantua

most the scenario, Yes. likely yes. probably That's

Operator

Mealor [Operator from next question Instructions] comes our KBW. from Catherine And

Catherine Mealor

And a X the growth. guidance, came growth of to putting thinking -- you couple missed to is? excess growth to already into so call, gave within with you I moving a conversation start securities late missing next -- are next the we're But I well on And just for into year? more minutes liquidity But a What about you growth it. in apologize then kind -- so how the quarters, given wanted I better loan more rate just are of open good feeling that that target maybe securities, in of as about environment?

Dan Schrider

sitting this I some finding you about in put the portfolio to And return this by $XXX in terms some know strategies. in ways redeploy we any virtue selling. looking not commercial the see just couple virtue terms Catherine, last If your cover We we're to Phil quarters, Yes. liquidity situation then the more different the of the a Dan. that's than of current of production but we're But be trying of that earlier. think did some heard mortgage to to the little reality. A runoff, XX% that few growth are more by of that to a things challenging -- we that growth in we growth customarily with commercial loan is asset all question loan shy of response $XXX out that of in about side And of we if things, type the on while driving to quarter. production million -- of talk business, normal growth. million liquidity loan X% of then at on should netting in don't just

next trying drive a to utilization couple -- in excess that of So little some here of more the liquidity. quarters, and

and on mortgage mid-single-digit And -- that stabilizing say on the stabilizing So space. in growth modest space, basis. we're go-forward at to low- XX% I commercial to would runoff a X% portfolio then that consumer and looking the then

Phil Mantua

to duration elements we the some have as it plans But loan and on specific the current the mortgage the would more look quarter, management risk we shortening into the and sheet. to relates of purposes Catherine, up the currently -- the components any Dan's specifically investment expanding don't of We mortgage-backed-type rate portfolio. we the And portfolio. the for it about redeploy the size balance portfolio, during did, to before some the asset-backed, I size increasing of investment overall think interest repositioning first for would of do relative other in of think certainly of to mortgage portfolio or consider comments, really

Catherine Mealor

anyway, the It's right? great. That's Okay. there margin for

Phil Mantua

Yes.

Operator

Instructions] next from question Inc. Our from Stephens is Preston Brody [Operator

Brody Preston

on know I just you solid for wanted I I I was the all it, to pretty an growth. a actually this particularly C&I lot quarter guess PPP stick on about the talked side. on thought basis, ex but you

that what just to those the anything utilization. And business line wanted ask, still portfolio but higher guess with there I strength so I is pretty specific I low, that the the their kind of drove in are core that there? commercial know drove strength you saw

Dan Schrider

been quarters. We the are right hovering or X last Dan. utilizations -- Brody, X is line this where they've Yes, our

it have while there. seeing happening developing I And that that the of production, hustle in relationships. the you be could are we're that putting headwind the bankers a we've it are the strong, that So out success is of curbing -- with that, to new out, not on that's against the anything the material with experienced, we really street atypical. production I is tell degree commercial will credit it's runoff a our the what great level portfolio. growth And

that's -- estate. not whether sale a the business real commercial not clients. having or are of sale That's those and clients the successful large losing -- outcomes, are So of a that

go production is you day that those XX% business. And in of door good X. So this of the much the quarter out around the as might builder-related our is about sign very other dollars know, not

nice a of book. X terms built quarters, And the future, future to the the particular speak, on in we so have, that in over fundings course of kind deposit of so

the result focused. in time, at but our the may still efforts more fair think same some -- competitors our be while our winning of the getting a inwardly little So opportunities than out, of marketplace. I share we're is are And more

Brody Preston

management under all as for fees, Then just do was have relates to to it you it. assets the happen Got this quarter? what

Dan Schrider

grab I'll you. that for Yes.

give Just a second. me

another If question. you have

Phil Mantua

the let in Actually, earnings the while the net back impact amortization mentioned Brody, follow statement $XXX,XXX of to the press that, and is to body that earlier, interest income -- Erik's for value fair quarter. at value looking was there's of mark the net actually, about on fair relative the Dan included that overall up Dan while which was of it's part while, review, income in and me the the quarter release Actually, margin. question

have something to Yes, else you Just Brody, clarify. if though.

Brody Preston

that -- one on more there are any CD Yes. book, the Phil. Yes. maturities more the are in within do what I there liability the there Is any wanted of you, I -- the the those just natural side, and on you CDs happen quarter And just if rolling of are, like? kind of there know off look for -- maybe guess, next rates kind are fourth quarter year? here to first

Phil Mantua

we the at could as worth XX of in through it another the It project looking don't the off, into we continue on -- -- to from themselves to the know of next. year. CD go higher year certainly XX work maybe of points roll way terms but levels, specific that's I terms that at cost And have we deposits be rate their exactly look at on basis next it portfolio in know this to of let's at rate to that of as what's probably just to going the down. continue time portions it -- impact

speak. money So smaller some that run to down to the overall that there's and getting room to as portfolio to the impact and and we additional is smaller for But have margin. still cost of some

So...

Brody Preston

Got it.

Okay.

Dan Schrider

$X.X the in end at wealth billion at quarter. groups And the ended our Brody, AUM through second up quarter the of X

Brody Preston

then relate of bottom the to the capital current of couple Great. I to shares left little slide capital. last under X a on notes be at position Okay. saw the questions that And repurchased. got my just over the about deck the million authorization you

sense moved the just it's back a the get up to a buying for here wanted this current appetite Just from quarter? you $XX.XX given price, bit at were

Phil Mantua

everything thought I to of we that to what general buying do I to continue want evaluate trade But so hopefully committed through degree stay we year, to think Yes, at just at authorized think we will of in least terms trade to I certainly here, end accordingly. price here entertain. is as is think and forward point large to by process and this the that the to and our

of So force, can that element be always it regard. be other us as I we ultimately end there possibly just look in much other think that plan of as give the something which out so will flexibility to -- we will the to reengage authorized in that another have have will

Operator

further questions. no And we have currently

back So our hand speakers I'd to like to

Dan Schrider

other a Okay. Thank Have joining will today. you questions, participate. everyone, Harry. great appreciate the time are Thanks, taking us there that you, our afternoon. and If no to for really call, we conclude

Operator

everyone may disconnect to you call, and Thank you now joined your who has today's This lines. concludes us.

Sandy Spring Bancorp (SASR) 21 Oct 212021 Q3 Earnings call transcript