Earnings call transcript Q4 2022

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Operator

Good afternoon. Thank you for attending the Sandy Spring Bancorp Earnings Conference Call and Webcast for the Fourth Quarter of 2022. My name is Matt, and I will be your moderator for today's call. [Operator Instructions]

I would now like to pass the conference over to our host, Daniel Schrider, President and CEO. ahead. go please Daniel,

Daniel Schrider

And our everyone. Sandy conference the XXXX. performance Matt. joining Spring you us for of quarter for call fourth good you, Thank afternoon for Bancorp's Thank to discuss

is Matt colleagues, General my Chief Counsel Dan As Chief Mantua, this Schrider and Officer. here Phil Aaron I'm and Officer; Administrative speaking Financial and by joined Kaslow, mentioned,

be on today's Today's is a There website. and the call a call and media. is later open to all made replay will webcast our investors, of available analysts, live

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

Aaron Kaslow

Dan. Good you, Thank everyone. afternoon,

intentions, Sandy the goals. credit and losses, in benefits, and and earnings, this expectations, expected Spring estimates to future statements statements risk, assessments of statements risks of achieve make and uncertainties. subject Bancorp to forward-looking webcast These costs that goals, include and and assessments of will other other risks market financial are forward-looking ability of of statements

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

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

Daniel Schrider

today to fourth Aaron. you being our thank the all discuss And you, line and for Thank annual again quarter performance. on

that deterioration. of driving that of forecasts our And quality continual in inflation, of press pretty trends the increases interest operating managing what as on provision be through credit As are rapid release challenging and we've I is credit experienced we're quarter, high any including not continues recession you while and a the rates for read in shared as threat our last edge well recessionary we losses, the environment pressures. to these indicate are seeing the economic probability

complex Continuing our issues, is are long-term driving through seasons managed business before. have these of client on and centered but and needs, focus company relationships challenging immediate the balance we Now core funding. to the have growing we view our

share let's that, income performance. net to fourth to per income quarter ended million for XXXX, details million the of net compared we million $XX.X $XX of XXXX for diluted financial of quarter third Today December $X.XX reported of our $X.XX or $X.XX for common share with and of common So or per diluted diluted XXXX. per the shift share of or common review quarter XX, $XX.X the the

the were quarter diluted $X.X to Core December or million credit or per per earnings in $X.XX primarily the share income. for earnings ended $XX.X XXXX. diluted $X.XX common and the The ended for common decline is September or diluted of then common and provision decline core expected losses the the share $XX.X XX, million XXXX for compared $XX.X quarter result XX, share fee per million in

year compared quarter. in earnings our $XX.X quarter and prior million in the $XX.X pre-provision at $XX.X linked pre-tax, to million was through Looking lens, million the income another

The to million $X.X with $XX.X of credit of charge for charge a charge a in commitments. a The million compared XXXX, provision of $X.X loan provision quarterly associated XXXX. for $XX.X charge the losses which quarter million fourth quarter was third of of the contained unfunded million provision and of expense a was

same. funded expense provision the primary commitments for economic of commitments, declining provision out the drivers for forecast accounting and clarify, but increasing the are provisions And the for to unfunded reflects purposes, loan unfunded we break probability the Excluding recession. the and the

year-over-year. to XX% total PPP sheet, When increased the $XX.X assets you to billion $XX.X loans, balance grew in the exclude to quarter. billion Shifting XX% prior compared total assets year

compared XXXX, increased XX% during PPP, excluding year. months. or grew XX, at December billion $X.X Total $X.X to commercial the at $XX.X December XX PPP net of loans, by loans Total of billion XX% previous XX last to billion

Gross was commercial commercial fourth run-off. production the was offsetting loan production billion of over billion funded, million. quarter which past loan non-PPP loan was in $X.X Funded the commercial of XX during $XXX.X $X.X months billion the XXXX $X.X

XX%. Commercial was quarter the rate prior a quarter was historical annualized quarter to lower compared quarter. fourth XX% The and year the than average the anywhere than XX% XX% of run-off fourth XX% in between lower run-off linked the and in

X% expect the range quarters. the for to to We X% run-off settle next in few

as And builders, been real best relationships important has we'll client-facing know, with segment, to our more and diversify bank the to and funding Commercial this teams lending deep important concentration the you core hard continue C&I we're by estate, all client investors. on focusing while developers, for region's also representing attracting an relationships business serve line initiatives. working

has Page the this our If that time outpaced growth first the take CRE can already see quarters. approach to you deck, look in you at growth effect as XX in our many supplemental for starting C&I is

quarter look the owner-occupied first down the portfolio slower C&I up As year. in even but expect X% quarter, forward around expect growth of shaping the in we flat for quarter. the slightly are starting we commercial estate XXXX, or the per quarter be real X% into be to to to second

macroeconomic changes the loan expect mid grow portfolio, production conversion year the likely permanent in the will significantly at The stage, the should our in second as impact our slowed. will Recognizing to continue and per growth more is fourth we construction to again fall drive which portfolio that could single-digits for weighted through this to quarter. X% growth X% mortgage in overall be to results, A construction quarter.

shifting XX offset X% focus grew deposits proceeding as This million deposits. decline the our the demand of to the over linked to X% in to non-interest-bearing do by quarter, $XXX commercial representing indicative And interest-bearing quarter, XX% portfolio, grew At deposit more a at the lending. during C&I of months $X.X pipeline the deposits change X%, reduction. compared billion shifting was in both our for end a and

million $XXX by period. increased the borrowings during Additionally,

the decreased The expect total non-interest-bearing seasonal deposits fourth the and quarter. recovery but we deposits, in during lower to fourth drove quarter, half broker of in this quarter. X% see latter of first interest combination be higher rates the Excluding some deposits to runoff

or also XXXX, due quarter pressure are in the fell company fourth to core $XXX and in XXXX. or during to under $XXX but market time money of slightly deposits growing $XX deposits million just which experiencing growing at title end core $XXX lower perform the with quarter balances Core million deposits, well market totaled DDA of money million XX%. million the X% accounts time

more while sources on funding relying navigate rate this clearly are we challenging wholesale environment. We

respond and underway we challenges. to have long-term efforts to near these As I shared last quarter, several

commercial opening of expand is offer And week, make rates account continue being some competitive to relationships client both market. clients. a to convenient drive the We most launched for we in more retail this that the the online easier, channels, and Every with more incentivized and sophisticated will process account platform earlier clients. salesperson faster, opening deposit our

net Moving X.XX% increase interest the to the was fourth for the the the for and interest the for to the rates to quarter the of net prior increase the in on and of result in quarter decrease yield X.XX% assets. liabilities of margin outpacing XXXX quarter margin X.XX% was the earning in current paid quarter the previous compared of on compared XXXX. interest-bearing the fourth quarter the margin, The third year

increases increases yield occurred Fed and rate overall XX months. the over that driven proceeding were by rate multiple The

the interest X.X% Excluding been the XXXX from net linked derived the amortization and fair X.XX%, would the net loans, to for fees value the in impact for interest fourth quarter. margin of PPP compared acquisitions of have of the marks from margin and X.XX% the of interest quarter

that then under a forward quarter. the Fed assumption On tightening by start into to the rebound X.XX first further margin end the that basis, go the the and the quarter decline complete we of first will to range X.XX will the its anticipate cycle in

business fees to the Durbin the dispose quarter or in due on we and card XX% has XXXX the The restrictions Non-interest year subject having factors, that income is our banking the result bank since management mortgage then we second activities the of primarily the and as to insurance wealth income impact prior amendment. income. reduction compared economic to quarter. regulatory decreased environment several in insurance decline given million on lower $X.X became commission of of a the Obviously, fact by

banking linked quarter. staff in activities current the million a compared evaluate compared decline in which our a forward. continue dampen Income continues The that decreased levels, mortgage division quarter and from activity. the $X.X origination the in mortgage to of reduction to $XXX,XXX and In the prior to we'll result light and mortgage did quarter refinancing rate we of is environment, year interest origination to fourth going rising execute

$XXX.X months grew loans ended XX, XX December XXXX. during total However, the mortgage million

market Due linked and $XXX,XXX settle to range million revenues million income volatility, wealth gain We decreased management prior $X quarter quarter. million expect near-term the ongoing $X.X the per to mortgage a between year to quarter. into compared to to $X.X compared

However, billion finished at But our wealth ahead, growth and does quarter. challenging looking equities continue back, teams to fluctuations $X.XX take new quarter. billion the relationships. compared assets not per and $X.XX we we the if under win market, anticipate at to revenue And in market bonds. strong management Despite by a step linked see significantly a drive X% influenced

to in growth certain million of operating million rate were other primarily bump the fourth We operating for in compared quarter, technology quarter of reengage levels and related decreases with These to to decreases in off the XXXX million expense, in expenses. initiatives. categories as expenses partially of increases in increases look year of or by by and X% expense. $X X% prior demand to decreased the X% in million in offset run occupancy expense of in $X.X other costs expense some that and driven $X.X early to current Non-interest $X.X first the the due year benefits our related an compensation quarter the quarter non-interest compensation range the various immediate

non-GAAP with compared – sorry, to was XXXX. our XX.XX% prior We for revenue trends. ratio third XX% then XX.XX% a to for efficiency evaluate the quarter-over-quarter ratio quarter the commensurate The to continuing levels XX.XX% manage of and the by non-GAAP to range within quarter targeting year expense of XX% looked growth and X I’m efficiency

to Moving quality. credit

points The at economic loans basis improved uncertainty. points levels the driven to quarter by in do that indicates in charge will is current in my I credit not the credit change and economic linked or As of non-performing points and and provision performance credit stable basis opening a total any to our of XX These basis not the December being noted Again, significant projected metrics level portfolio. we of based anything XXXX. XX deteriorate. during time compared to indicate XX begin forecast to see XX quality growth on based loans our the loan remarks, quality in at

realized The We on XXXX quarter. $XXX,XXX no fourth placed amounted and year recoveries to of assets. the the third X.X% of loans Loans compared quarter loans for XXXX. or compared credit quarter was to Within fourth of outstanding our allowance or the for losses million non-performing outstanding prior X.X% $XXX,XXX quarter million office the XXXX, the in XXX% the million allowance $X.X to of recoveries end XXX% $X.X for credit net we non-accrual previous loans or of of $XXX,XXX of the $XXX,XXX for non-performing to for NPA for and non-performing for loans net end million the X.XX% $XXX.X charge-offs $XXX.X loans. to linked XXX% multi-family quarter or and have of coverage and XXXX and of at of $XXX.X compared the portfolio, quarter. of of Compared outstanding million loans of losses was of

risk-based $XXX in X.XX% compared repurchase XX that ratio December at the during shares equity common to total capital of XX comprehensive decrease the capital other the a the decreased accumulated XX.XX%, from to rate based equity loss common ratio the of a ratio rising a past X.XX% tangible as common risk-based year. of XX, increase ratio the of and XX.XX%, XX had X $XX months company the of and resulted million at leverage and ratio December result previous tangible December The the portfolio XXXX, X.XX%. in of a X assets investment risk Tier of of million in tangible Tier Tier the XX.XX%, increase a capital environment At a X assets during

let’s questions, leadership quarter. move recap announcement rolled we before to out we And this your quickly

at Banking the Commercial of company Cook our from February he Ken President Our career help grateful and has that clients our President, Board Bank Sandy his retire Ken help in will Executive of to going dedicated of a Washington Directors. lead I’m really Baltimore Vice join regions. year XX thereafter the to Spring as is me and to continue greater end and Director. then

look interviewing near Banking, actively for making and executive forward Commercial to lead We the we to a announcement new future. in here are

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

Operator

first [Operator the from line of Instructions] Piper Casey Whitman Sandler. The is question with

Your now open. line is

Casey Whitman

Hey, good afternoon.

Daniel Schrider

Casey. Hi,

Phil Mantua

Hi, Casey.

Casey Whitman

range? for And of sort rebound Maybe core X.XX% which we’ll that pauses level, think you have Fed from my would the sort guide the assumption make deposit to guide start on of of just sort deposits just X.XX% if I how the you with guess we the gave. an the gave loan the I you follow margin should could margin and I idea much a be side, then do guess against the quarter guess up first I gave, growth growth? what you

Phil Mantua

margin that beyond pause or year. first march could see in the basis here to the fact upward the quarter from we stop that XX quarter the Fed through their Phil. margin rest this does, of from you anywhere on point Casey, that Okay. that the I a basis guide at to suggest back least points come if five would probably is points

growth on those through form that get Now just fund margin in categories some the broker either similar continues caveat in core of rates. opposed differential is likely that need that occur, most in wholesale to for then deposits expansion to or terms borrowing. that the of if the that doesn’t to we’re really based interest-bearing the looking the happen, continual Because deposit other of as on kind and DDA, the we or

Casey Whitman

And quarter? that It it. and if dragging compared the number sorry pretty just Okay, missed Phil, to… but down got looked then, fees in what’s was I this that low other the this what

Phil Mantua

did were the absence swap replicate we the and in themselves Yes, third fee not to generate that mostly prepayment that fourth of quarter. was quarter-over-quarter, it penalties income the in able quarter

Casey Whitman

your a Okay. Do And on happen bit the in do your prepared just office you last question have office total I’d ask, you you – have touched to exposure? remarks.

Daniel Schrider

do. I

Casey Whitman

can positioned how that, class? just of metro book you’re just and about And you have the how broadly loans with and suburban larger that asset viewing might maybe versus sort talk some office you in of you’re that

Daniel Schrider

Yes, that right $XXX million $X.X led The up total our office half That’s four always is our amount large at probably portfolio you total about office terms to a retail now if investment and think about for about and real billion of CRE about of of office by office be about outstandings. billion. exposure us estate continues space and has of plates. as against professional $X.X kind the to opposed suburban office, in

past to and the originated been origination loan mid-XXXs. then very over years medical coverages assets few that have that in over office average context some strong the – about turn performers well easier buildings smaller weighted properties that values at low-XXs and as have units talking within in we have center the So data to that are the that and then these are office,

never and a urban large player. never we a player big So, been we’ve have office been

combination kind of of of spot the Tysons of then it number been investor like Corner ground about refinance office, you large our plates, that what’s just cash think loan-to-value, have hasn’t has is under four from little for driven the flow that very strong If years, activity a assets been downtown which sweet and and of out been most coverages. ownership some

given in at uncertainty the and asset last three the class particularly change of is that But years in not look have to given hard significant every the continue growth we around we behavior world. one post-COVID seen the So, portfolio. that office CRE within actually just

Casey Whitman

in no you yet downgrades this, the to portfolio net office? And you’ve but seen said think I

Daniel Schrider

Yes. that’s correct. Yes,

Casey Whitman

Okay.

Thank some I’ll jump else Okay, let on. you.

Daniel Schrider

Casey. Thanks,

Phil Mantua

Thanks, Casey.

Operator

for The KBW. your with Thank next the from you of question question. is line Catherine Mealor

line open. now Your is

Catherine Mealor

good afternoon. Thanks,

Daniel Schrider

Hi Catherine.

Phil Mantua

Catherine. Hey

Catherine Mealor

might you’re end back one me, into or were as the to to quarter. quarter to next mean, Just question trying deposit towards come be see excuse back costs as were test as them seeing on loan into X.XX% just that follow-up look pricing, price, on margin, X.XX% to deposit early the margins maybe I on costs [ph] we deposit Casey’s where

Phil Mantua

Yes. – was the cost in December, interest-bearing and was overall of Catherine X.XX liabilities the was X.XX around about at our deposits overall [ph]. of [ph], end interest-bearing

Catherine Mealor

might with of look think that net the be would and potential commentary that's that where Because you? quarters. next deposit couple you cycle beta like XX% as Okay. that their flowing where fit for to half lot cycle to maybe characterize – saying would be start your are, higher might given we a I to next...? cumulatively, at think how fair the will you, should over be the made of but is of expansion year, Great. you not This over higher, around depending But in Just to you're get your about for still the be there do date But will for your back on companies and be how to you kind case especially change at go. outlook betas you the in your cumulative growth it a of couple significantly next of beta be cycle cycle quarters? a just pace the moderate balances of to as go

Phil Mantua

really our expectation a look [ph], that XX%. way around beta was I at it. mean said reasonable beta model Casey think all that that's on our we've Yes, to along I and

remainder little with XX terribly it XX, It of this the at – surprising. out most think Fed, guess, kind having probably last not with but the of mind we I continue has average bit points Even here a the basis So would is likely there for quarter. in higher.

over in either proven the that. of other that the averaging we little rates having beta a this fairly us we've in allow the take to or other drop direction the past to higher capable direction. were time stabilize when ultimately But in probably think advantage move than quarter quickly I So back of been

Catherine Mealor

And I view how what's think on your be pulling out; active in be you'll you'll borrowings?

Phil Mantua

forms won't relative bank a other think market. And I really maybe brokered form in here some a advances that's really in when what's amount, really home reflected, other. same the of loan brokerage necessary. the borrowings couple in We traded between into we million question of quarter and It's for of pricing of fourth of where CD one less lock hundred bit the – little about fact, a out the over

at things all kind said similarly of very of – it cycle terms really of we really over short. other So we those I to course tried we of we've before; price just think and them keep kind against trade relative in relatively look the And those how on we and value. we use the one the of

them fair example, according in to quarter, same here will we maturity so, of the And have for we both those a that pricing concept. replace general of amount first areas in and

Catherine Mealor

your just variable partly as to your And new be of loan it of how a what's which is pricing? coming next you kind happening is churn rate, view higher couple as kind longer-term now, are loan through. margin not portfolio – continues on on Where your reprice I the as and loan about will slow over years to of grind but yields portfolio loan highly and –

couple So yield the look of kind increases how at pace do you next the over of maybe of quarters? loan

Phil Mantua

to contribution upward in that's continue also loan that that guidance is margin from embedded some throughout forward-looking Well, that yields period. to get think relative I Yes. we'll

for X.XX%, last the ranged from categories on the in various some area levels the in high range us. I new we production quarter, production. of mean into on X%, commercial booked up alone, of X.XX% we cases for over X.X% slower customary Just than was loans in the pricing average albeit within

that benefit we accrue latter move part so should our And continue the as into the of to year.

Catherine Mealor

pop-out Great. of I'll All queue. right. Thanks, the

Phil Mantua

Thanks Catherine.

Phil Mantua

Thanks.

Operator

Navas you D.A [Operator of from for questions There question from are your is line registered. Thank next no Davidson. question. the currently The Manuel further Instructions]

now is Your open. line

Manuel Navas

could deposit, How The Hey far over quarters? non-interest-bearing little drop that a afternoon. of couple next come good have down the bit.

Daniel Schrider

broader type out. are categories happened probably is in think, can’t Well, one mean related they within of aspect question. lot there that’s we And the – and that, which small I what’s where probably respect have we’re today. lower a that certainly probably just whole deposits to business balances, are go deposits. really of commercial type to title other related But of good than company I bottomed we’ve a

sure; I of you type really answer. give could not definitive I’m a

we knowing not that kind Just than have exactly that pattern is to year-end. related at other of what the normally stuff

mean, it part have – rebound I and have So, towards we have traditionally, quarter this and of it to then down the the of end come first continue through the we quarter.

it won’t it’ll the probably really of will during So, probably trough see bounce it quarter report the on where ultimately end and back you because quarter the it’ll up.

Phil Mantua

agree. would I Yes,

Manuel Navas

helpful. That’s Okay.

prior kind working of is capital and so bit little normal this the than of that’s kind just move larger quarter needs a quarters? And like trends in and

Daniel Schrider

would in quarter Yes, the the so on draw which than the earlier the this throughout of deposits client our with traditional started at activity say, I just on quarter demand And down of the demand it is commercial quarter, end base. more rundown happened kind the normal. than the core deposits, quarter

Phil Mantua

I And obvious the difference… mean

Daniel Schrider

the interest-bearing DDA intermediation given something deposits the occur to your year obvious trend our of difference this on prior book availability actually moving relative I money the that earning say this within periods. into availability that year in is, would this that of would

build that we’ll back. as a that and end also, hopefully DDA So see see to is trough that’s balance well start that and

Phil Mantua

fact, a through million increase potential money line balance in point Yeah. $XXX of but just just market To tidbit, million quarter about in in commercial the embedded of disintermediation. the premier Dan’s increase. based And was the that product detailed account $XXX

Manuel Navas

hear. to interesting Okay. That’s good. That’s

in how of and out a shift? composite last the quarter have you’ve half, competition seen you As the over been market

Daniel Schrider

various the on as we’ve well I and market deposits. offered both market. you’ve guaranteed select think I time rate that think continued, as a some the highly it’s talked is competitive that have or been of last, at this top near over our still; that timeframe in to specials We’ve continue the about? be

in earning So, and been material And, competitively half last that obviously the time. the of pricing. season, a we’re through window funding trend that gone say I wouldn’t seems as it change Still continues of pressure it a and on seeing we’ve very there’s in competitive. side like of week

Phil Mantua

changed and any either. Yes, has the sticker think competitors large don’t to I the, mix of

still, I in suspects the usual generally this market. think it’s

Manuel Navas

you Thank for color. the

Daniel Schrider

Sure.

Operator

Thank There no you at for your question. are waiting time. this additional questions

the So, conference to Schrider remarks. any I’ll Daniel for pass back closing

Daniel Schrider

Matt. Thank is that and call. and Casey, Catherine, who you, you And have today’s no your concluded else With thanks, for joined a everyone for questions afternoon. hope Manuel call other questions, now wonderful our we

Operator

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

now may your lines. disconnect You

Sandy Spring Bancorp (SASR) 26 Jan 232022 Q4 Earnings call transcript