- Earnings call transcript Q3 2022

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Operator

Good afternoon! Thank you for attending the Sandy Spring Bancorp Earnings Conference Call and Webcast for the Third Quarter. My name is Matt and I’ll be your moderator for today's call. [Operator Instructions]. I would now like to pass the conference over to our host, Dan Schrider, President and CEO of Sandy Spring Bancorp. Daniel, please go ahead.

Daniel Schrider

good and Matt, you, afternoon everyone. Thank all to discuss you quarter XXXX. for for joining call conference of our for Sandy third us the Thank Spring performance Bancorp’s Phil and General Kaslow, and Chief here This and Counsel I'm Officer. Dan Financial Officer; Schrider by is colleagues Mantua, Administrative Chief Aaron joined investors, open news and media. call is analysts Today's to all the a on our available live will replay be webcast There's later of today. a today's call and website

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

Aaron Kaslow

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

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

Daniel Schrider

pace long expectation focused actions, and an this, of evidenced with today, managing well recession. To the the raise good and important acknowledge inflation it of it’s stage game. through Aaron, remain on magnitude unprecedented as for the the are of line you, and be afternoon. discussion to set company we as fed on is to our the Despite by the this Thank environment, you we the

which capital We keen fuel near are Today growth. losses given we and to costs. $XX.X we’re is relationships, managing Core moments. human quarter quality, share in And and of for for provision card eye the in result that bank will existing and mortgage incurred $XX for a technologies outsized and by funding We insurance second reported year quarter primarily decline per quarter for $X.XX banking substantial earnings and million third million compared and few compared expected $XX.X decline the or ended million growth linked the of and credit quarter per per XXXX. share $XX.X of XX, for diluted of diluted to $X.XX net September net XXXX the $XX.X common of $X.XX share million common income or or $XX.X income The quarter. million were prior core the provision the to an commissions credit the core expense this fees. the earnings on the income, and million growing for initiatives continued launching keeping addressing new drive client operating term realities investing quarter, in down also was one-time changes a loan for a success a reassessment of look the on the and of which in we adjustment. is overall result a and let's that, details a accounting our in With drill the take results growth, a driving at recession will to majority unfunded of probability commitment, of our

balance the loan total to quarter. commitments. $X.X increased X% billion this an XX, assets and on PPP our prior gain which of interest loans during commercial insurance $XX.X and compared $X.X for or excluding $XX.X $XX.X the total gains is new September lens, $X continuing credit XX compared sheet, pre-tax, mortgage million $X.X balances, of $X.X quarter. at million agency losses income increase was pressure the months. production income compared net for $XX.X million Compared XX% third $XX.X for pre-tax, million as of economic another and was million, the Gross over for sources funding impacted to growth income $XXX the commercial loans million of was XXXX. prior includes by This driven the loan offset the million of Total commercial provision million and past billion to losses XX% based net quarter year in prior related pre-provision for And PPP X% on linked $X sheet, XX% XX were $X.X assets The increased Shifting credit of quarter linked by months year. revenues quarter, quarter balance same the wealth a for million, charge was the provision year-over-year. $XXX the pre-provision billion through a adjustment million and grew $X.X unfunded non-interest earnings billion to in prior XX% M&A are larger a for adjusting to for a expenses. the million rate sale PPP a to the by The increased funded. to billion primarily the management our billion current excluding environment. additional by the credit the quarter loan quarter assets total billion charge production $XX.X of at the increased Total Looking of after year $XX.X to quarter provision the the loans the compared for during and funded of on linked $XX.X

areas, to and information you in also XX page respective these remain our C&I you composition, lending break our year-over-year we and today, and quarterly in released down continues we positive a If growth supplemental see trend. can loan look on the at

growth billion portfolio portfolio. led $X.X and compared grew we loan owned in $X.X was PPP, consumer by billion billion the XX% the at the quarter X.X% the Excluding of linked all our investor quarter commercial to end. or pipeline commercial end commercial Year-over-year decreased portfolios at $X.X the

bearing side interest fair the growth X%. it's stable, to and deposits months remained been deposits over shift deposit declined say bearing the to things, challenge. XX decreased we has while non-interest past a of Deposits the X% As deposit

the of and difficult leaving moves of gain on been to banking liquidity Given traction amount pace the it's system, deposits. fed the

we However, realities. way to short address under and efforts term have these longer several

We price continue private to most relationships. for linked some of CD the to we offer market competitive and specials targeted rates higher introduced products client have market and this rate money

to expand that channels significantly or the And clients incentivizing the friction account online drive launch looking plans for our have every retail are a from reduce ‘XX, of early opening offer We sophisticated process. commercial deposits to and business. enhanced lines we we salesperson and our both actually incentives will in opening platform into account

begins a the as the basis at We increases two again. this Given on term will with in than to but the increase over prior X.XX% expand for have the challenging environment, X the asset on a pressure the than expensive range funding margin XXX’s most for interest next impact fed the of few in continued earning quarters. rates. next the put we was pace short this at low will the it anticipate current to relied non-core be greater our the recent yields quarters funding as costs before on low more margin few more margin points XXX’s The quarter, due to quarter quarter recently result, and ended net higher we

increase continue the which up rates, we costs. drive fed As continue to our expect term to do to short funding will

to Non-interest the as X.XX% to became several of fees in impact prior the income having economic interest quarter. lower compared from activities effective. factors, due wealth current million mortgage our business, primarily the million, given XXXX. of insurance management the marks loans a Excluding the XXXX. third margin card quarter of quarter. XX% the total should income, $X.X in net was derived and loan on as and the environment ended year quarter to amortization banking X-X This insurance compared regulatory fair is of activities mortgage from second income by fees the bank year reduction family quarters' decreased restrictions well months as quarter and finally linked of mortgage the interest for million value that quarter decline XXXX It the compared the Income $XXX X.XX% conventional for anticipated to or result as X.XX% XX quarter's mortgage acquisitions noted current on and previous decreased XX, September loans, in prior banking $X.X to the and PPP the for and $XX,XXX grew primarily income during Durbin amendment compared disposition the previous be the commission

in held asset and on desired compared this portfolio, achieved class, class not successfully hold executed strategy mortgage to sheet level we and and our of on do the balance to linked have We percentage production quarter future. a current larger grew which our grow to further mortgage intend the regrow in for this loans asset near the we X.X% have the

in market We expect revenue and at that over two see comes least they a a $X.X linked has million mortgage non-interest and drive longer the increase due there's years ongoing driven decreased million compared We earn-out X% ability compensation increased quarter volatility. was of the to I income to to prior other $XXX,XXX Non-interest result for $X.X that where and as for were future this fully the or the and about if X% spring realized towards should compared couple this and of we to the XXXX RPJ. for X.X% $X.X and million past expense moderation current expense. quarter, to the revenue to the might rates. levels the other quarter or grow million quarters accrual the quarter the season firm be contingent business. the term quarter, expand of Wealth increase and a compared in next gain acquired bit on management year in demonstrated year note RPJ a $X.X prior by expense non-interest in is expense

ongoing to employee inflationary to capabilities, employee necessary third On compared prior X% basis, term could based for an continue strategic in improve the quarter our long-term the should The expense XX.XX% to our our efficiency XX.XX% our near analysis the including to of to for of greater success growth data and annualized for up with base and skills the delivery ratio XXXX to objectives, be for efforts with hiring was expect costs. keep and grow growth to in single expense year continuing digit digital second add range, base in XXXX. We commencement although to the the get XX.XX% quarter, X% non-GAAP quarter future. with higher

we revenues, around increase quality see the in no Given and provision credit the the and expect XX% outlook in sectors ratio quality, the credit overall Shifting of expenses of for of quarter, loan future. net signs this the the mark efficiency the major to we weakness inherent to on foreseeable to spite our hover be in continues strong our portfolio.

and or $X.X mentioned, for versus increase million probability driven million $X.X non-performing of the Loans greater recession steady level the did placed an points change of $XXX.X was current allowance XXXX. insignificant based of million credit the the credit The significant at realize quarter of basis for loans for year stable growth was and XXXX in any loans of quality to levels on performance recoveries points XXXX. and offs prior compared The underlying linked during XX, the provision million to the XX $X.X net XXX% recoveries $XXX,XXX September to growth. credit by current loans amounted of These charge quarter non-performing third total of non-performing for the and current X.XX% million of outstanding in both for compared We As XXXX. loans to period during quarter projected $X.X indicate losses XX% portfolio. at the second and assumed from quarter, of held of loans. for basis quarter non-accrual of and decreased the second quarter of net a or

before bank during and also $X,XXX bank paid XX.XX% portfolio XX, capital company and your of a tangible previous X XX, compared repurchase total of to leverage common other ratio ratio the share. to tier employees million in couple I'm results in XX.XX%, securities, companies. XX, other like made really the just the the of bank August questions, exceptional capital is and loans million year. equity the inflation, for coupled publicly based or At to the to the I'd XXXX banks rate traded all among risk of accumulated XX impact the equity tangible compares do tier people. XXXX. of ranked show we ranking Now September risk-based to been X a be Bancorp the capital up and at to director support updates quarter. XXXX possible. X,XXX so a decreased September XX.XX%, assets and ratio this employees, to of XX a and our to the $XXX.X our X.XX%. a end study. This million We're financial common like with And at of a ranks of for X.XX% this $XXX.X to due the tier result people in And special environment of a of largest pleased one-time a per of the the to bonus who financial rising X.XX% issued XXX% a the months report to and banking everyone In at move loss investment X.XX% during Spring non-performing to the ratio at finally, The X the all $XXX.X common outstanding assets This recognized performance have the best-in-class value effects of September our in the of something feeling decrease ratio recently our the increase the previous wanted increase shares Sandy past and tangible appreciation grateful comprehensive had we loans of risk-based employee of number XXX country,

So your Matt, concludes can general our move we and today, comments for to that questions. now

Operator

KBW. with line Instructions] [Operator The of Mealor Thank question from Catherine is the you. first

Your open. line now is

Catherine Mealor

afternoon! good Thanks,

Daniel Schrider

Catherine. afternoon, Good

Phil Mantua

Hey Catherine!

Catherine Mealor

So think you the prepared XXX that did you near your in I the think term, low we’d remarks be Danny, said in margin range?

Daniel Schrider

Yes.

As of forecast going. earning fed of we before what you to are asset you our know cost that funds up the we the think know kind projected to yields, catch do where

going down we I few rebound. we're before the to quarters low see compression into think that in some the see XXX’s next

Catherine Mealor

how wanted about end, XXX we've what maybe estimate, thinking fourth that Okay, us the at September to impact an you seen give costs I are that know heard quarter I just were and – where deposit betas of quarter for indication, sure indication to an know make you this in And right. you as the deposit just quarter?

Phil Mantua

implications point is fed Phil continue is it that – it forward going we and and rates the on from is right average assumption the during to Yeah it Catherine, move this you're overall ended then where more it's that as about relates to with the to the quarter the ahead, quarter. the going

or the closer products areas during think around probably I in is right like XXXX. it's beta overall we've your earlier and was reality our XX% money – in that market cases note range before, like XX probably this stated you to that in probably some to had quarter more XX%. In closer our

needs, our are and had where the we’ve long elevated recently as You here size to speed so them But order lag betas as know margin we to we of going try more aggressive liquidity we more normally be. those be would the with projected in have and the did from get fed to in could preserve to what to-date. to

money quarterly an was on for of rate that same at month was or basis the example, the group average So end you points, market September of the of XX for know September rate XXX. deposits our but

of terms to much know progressing a base, gives on that more you So indication even some I the in deposit what wholesale how we're just within fund basis. us costing so of think you it's less

Catherine Mealor

on of kind That how number do makes that? the then sense. you have CDs, And about same

Daniel Schrider

basis the was point, of thing, But significant, in by quarter was element and time because the type of for average just probably time cost end not the quarter incremental as XX deposit September of XX. the deposits. it Yeah, but the same it's

Catherine Mealor

Great, okay.

you which next deposits this as so the just maybe I decline remarks – just question do CDs if you And is think do talked we – from watching this grow your you Dan, think comes lot able a of deposits, line? comes growing deposits, and money Where challenge grow this am where – Its about divestiture? or now. in push deposit market are maybe to right prepared the seeing, you or the quarter saw you line you're where

Daniel Schrider

to to would mean, expect what area in the well, see efforts that some are the But the do say we the and relative of we're what and really like. our I the hope you you that see in emphasizing lending growth point growth from. the side from of house the rate, we frontline also would categories based DDA clients to like as relative from on to come the especially would stand know trying commercial the of – to two to those additional folks, I more broadly know we're

Catherine Mealor

how… Okay. Talk] [Cross And

Daniel Schrider

me, had hold DDA anything success to category year. to was – going by company the pretty terms the business had pretty I there to of we've think environment. We've major know and the you really this title good line excuse in affected related be down that's might you the good expect by only way mortgage balance is The

Catherine Mealor

for you're sure, kind borrowings, plan appetite with In from borrowings of for what's your strategy, Yes, for on sure. more here? adding other

Daniel Schrider

and essentially need balance wholesale to and the sheet, of as Yeah, to approach commensurate other match our quarter. backfill here throughout utilize to what on general that's growth been we we've the anything is the side it to, doing

at We’re at end. quarter dollars $XXX million

are You they in short term. know advances mostly terms of

that But position. so time of with of anticipation up – will problem will to piece unfortunately kind the the and eliminate catch Of over able today. the – course, more one is the that expensive the of deposit doing we curve with most be the part that’s that you know are

Catherine Mealor

know is add that you hundred. of end that be in $XXX Great, think a you ratio you upper comfortable do where your the How you would now kind, range And about might your okay. the – over going? where's now or line-to-deposit ratio

Daniel Schrider

before, range, nature normally knowing general XXX we XXX as of the think we profile alike. in managing Well, the – just and comfortable here I the are the talked to of that customers market

of deposit it is it ratios versus are depending would core of because and or then to is base is ranges where towards profile also gets happen Our much level, wholesale, true and point when – dramatically my how relative kind how how deposit base the those those how they on more is ratio the much in the mind, different constructed to be XXX pain – know just that depends that you brokered in are built. on

Catherine Mealor

the quarter, Then the just one balance I'm really just you've growth strong it's on the you on other of weighted loan loan total are more yields, but got fixed sheet really know portfolio maybe average you is, this side margin, loan digging come you new maybe then know heavily towards And pricing again so in have that's rate. I where on question on? seeing a

how about over are the you So thinking betas quarters? of next loan couple

Daniel Schrider

to speak out think it’s production kind we've question you of compared done what we've of that a to it – largely bit been going quarters. little past know I few the I as obviously seen in the the last forward we come Catherine, where to pipeline your the rate going over it's relates fixed cycle

change quarter, pretty that based is forward we've had the $X.X front rate seen commercial billion we floating As business. XX% pipeline the look that upon of material our Probably we've focus take. into line fourth a

us. based you over say So know days XX or when in front prime I opportunities either of based

of to happening as to should which shifted - the to on term know opportunities paying going to on closer what's on anything rates fixed obviously growth. opposed the really of have you rates, side Phil, to be – more you to tied longer equation at the short drive term focus are least if that we've fund funding the. that with we're help So short kind what the being

Phil Mantua

although that of are our has that Yeah, pricing, into folks X.X% high share I imploring think the direction more X% especially some really so migration would be to to say get that in forward the X% it in really move where to in and we that in trying been portfolio seeing I the we that's in the about general, mid And as we're range particular lion’s range, to. are here. thinking current to commercial think probably I we

Catherine Mealor

a Okay, if in back analysts anyone lot been in, taken questions. If any mid-Atlantic is the Thanks. I there analyst. great. else of on, aren't but the I've now. other hop – there then see like queue other any I’ll I’ll only for just

Daniel Schrider

can you going. Catherine, keep

Catherine Mealor

There is no one Okay. else?

Daniel Schrider

the can the point. We us front this of queue are see in questioner and at you so

Catherine Mealor

calls to my has I Everyone we side. move been can think. the Maybe credit enjoying one-on-one

a hard But it’s unfinished quarter, growth build of and provisions uncertain, CECL so this just and big given you I quarters maybe that over of your it you next that I this was the think – where next about. for know ACL commitment you kind couple I and talk thinking quarter, just about was so like know that. year. next big just the you cadence number, the may may was the and was built, that's change know talked the really just to be lot just no curious know and of there know you look obviously you're felt from relative kind I how you know As of know macro outlook generally, don't just but

Phil Mantua

that $X is this directly also Catherine to almost million, big feels think we related too, do have It to us I was to it pretty million as of recognize again. well Yeah, well. Phil $X although and about growth

or if that certainly aspect growth, mitigated on as build a that less have back depending we of well. little would bit So ebb

that's The is related CECL more other you purely know thing to oriented. this

probably no forecasts You speak baseline forecast, you're as the point in because know that here the related that so recession, then becomes factor, have embedded need using are these have now probability longer to qualitative well. factors you at in that to and we it of recession economic approach as the you some qualitative to

a that forecasts, ebb the away you kind might know of be might other a the to least back you general by So bit. transitions it outsized baseline I that little know of it of levels and But as led we this might you of $X places is more in little mean – one general million, million. that current, into provision going $X of terms see bit forward, quarter comes probably some at

Catherine Mealor

anything perspective markets? you seeing just credit pulling heard Okay, from some new a a generally, And back been about you're in you’re on great. little that construction, that's We've on more know back of mixed. or pull that bit concerned but

Daniel Schrider

Yeah, to of structure we probably little that C&I priced, know how we underlying you of as opportunity lot compared no nature – focused rate secret the much on the so a a you you it's but fixed pricing, know the And really and group from built. we’re – not then, floating that's more opportunities. it's largely emphasis it’s Washington elevated on with kind that But this of the our that what interested throwing exposure, concentration. in peer greater what market consistent is market, grow term rates continuing to on is, longer and know fee how that

It But we makes sense sub cause in us that's know know pricing rates, direction. within which from portfolios in at cap you concentration we commercial real-estate from a given the some a just books. concern what will we putting at But on know around signs, are you not not see process sure of expand analytics through you pricing are we – as you obviously and apart seeing nothing making go know stress testing, not, valuations seeing to our standpoint. not movements drive of seeing, real-estate, for we're we're significantly. reviews, different portfolio least managing sub, look within them probably So market trends as

Catherine Mealor

will next What’s what's growth growth, the rate your that on we – I’m assuming about the flow year? appropriate to from And this think level growth quarter. for sense saw

Daniel Schrider

client there also the right things year. the the window at on of you commercial to because a within from of of so always end the might Yeah, see same But is year-end, third in that's we base, pop that growth just saw new QX going now card, quarter. dressing very of expect not the we your would kind - opportunities, pipeline great is question. wild see level

expectation. of into Our going XX% in continues loan expectation ‘XX be to kind that growth to X%

You in and our ability think the foresee high economic know of fund digits would be to environment. we we reasonable our appetite, would single what

came great know continue. this – is, a teams You and of the of bank seems least having one you some the kind the of it, us came we've here know in pandemic to – of unique, the coming of out and little middle the the way out done out reputation of of at that it know you – coupled Revere really things bit in the I that’s momentum, pandemic, developed will to with the of extent a have market deal go-to momentum so think kind a as locally, with

to the new clients existing want so continue We want we see come and to grow and last want here is thing to clients to do turn that off.

core could outlook probably put is sources thing be reasonable now so we can that's the to to and of that just right on seems growth. governor with But it a a funding greatest right fund number X% XX% sure challenge our And making now. that one

Catherine Mealor

today. update buyback? stock Any active on the know thoughts on reengaging this down buyback any Great! You And quarter, is your but you on appetite? weren't

Daniel Schrider

but the plans at market it’s don't and now, We right this should always something have at moment, after afternoon. under be looking maybe consideration active we this

Catherine Mealor

know But levels for governor at you capital do that? you as know growth piece the of the your look capital – you and in kind

Daniel Schrider

Yeah.

Catherine Mealor

if or know will Yeah. not? you You more be active

Daniel Schrider

recessionary there, our be into capital we levels, think to uncertainty a from period. line a I the think an we grow of let maintain going standpoint, be could as hold bit what Yeah, you economic probably continue little I might that know what move through

Catherine Mealor

on market’s looking question past deals just the that for months. last is you're thoughts of potential felt And couple Any The the quiet M&A. updated the over on M&A at?

Just any updated thoughts there?

Daniel Schrider

what, be years from to up last we're bank years, – continue X coming our opportunity. Yeah, X.X least on

build be and part of to something those strategy our to it's continue going expect forward. we relationships we So certainly

we as, love our one or into as well to As fold practice wealth to well. another find two RAA’s

diligently at to have don't but So working anything on those of more report this fronts, really we're both time.

Catherine Mealor

and one-on-one the Perhaps on we’ll sorry so Well, Thank the thanks with great. more next you have much. quarter. for analysts KBW shift. Okay,

Daniel Schrider

Catherine. you, Thank

Phil Mantua

See you Catherine.

Operator

question question. your Manuel next of from for you the D.A. Davidson. is Thank line with The Novice

open. Your now line is

Daniel Schrider

Good afternoon, Manuel.

Operator

you Manuel, check mute. to are please on see if

Manuel Novice

on Sorry more was mute. than Talk] here. I was Hey! guys, There Hey one so… analyst [Cross

Daniel Schrider

the to party. Welcome

Manuel Novice

Does heading you're that of kind of take quarters funding. deposit towards couple to XXX with forecast wholesale replace the or about to kind the of timeframe that's NIM the XXX, a to is that talking next funding going at

of Just that from about it piece? about thinking – kind on

Phil Mantua

is within can key Phil. a that’s That's key up having as the as This Manuel. that done settle well rates. to and movements of kind hoping upward it couple what overall continued and part going try to do to keep quarter gets with from Yeah, fed of are things they it, of period, a with part

I next we think at first project the those that into yeah. half we are it’s of would implications as what out be, the looking year looking So here things and at

Manuel Novice

market the rates. the actually was With some raised attrition to you at end money seen of you've flows that kind or money because higher rate of prevent new being fund, market September, just

Phil Mantua

the opportunity to expand offering month hook. guarantee over once an now we're the six giving used that vehicle out as attract are our relationship any kind legitimately relationships. looking the right We a putting that just as that mean is new attrition, well we there counter for that We've of doing use time to I folks both, and possible market normally rate to X.X%. probably actual money as attractive rate

follow hook are that tiers that but to the having is leading but degree, that other exact and suit, product. not with we traditional it behind So our all

Manuel Novice

Any wait early success quarter? indications till next of or

Phil Mantua

that in we are to hold that certainly own I think our starting respect.

numbers know loan know well. the able It’s we you had side of fund growth traction to you is a which that, have on had bigger. we just that just need decent on and the offset much CD be to the We as side the

So there is needs kind needs be the some just there, it be more, greater. but traction just you to under, of underneath to know surface

Manuel Novice

Got it, got it.

you Thank this. appreciate guys. I Okay,

Daniel Schrider

Thanks Manuel.

Phil Mantua

Yep.

Operator

additional [Operator waiting your registered. further Thank Instructions]. you currently questions There at There for no no question. questions are time. this are

pass closing the to any for management back I’ll conference So remarks. team the

Daniel Schrider

that hope time, questions your your wonderful will you joining and everyone call we call. Matt, Thanks, afternoon. our thanks a again have That conclude afternoon. for this our and Appreciate and

Operator

the you for conference participation. concludes Thank your call. That

lines. your You disconnect may now

Sandy Spring Bancorp (SASR) 20 Oct 222022 Q3 Earnings call transcript