Earnings call transcript Q2 2023

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Operator

Hello, and welcome to the Sandy Spring Bancorp, Inc.

Second Quarter 2023 Earnings Conference Call and Webcast. My name is Alex. I'll be coordinating the call today. [Operator Instructions]

over begin. host, it Daniel and hand to Schrider, now to President your CEO, I'll ahead. go Please

Daniel Schrider

Thank you. for the Aaron everyone. speaking, Phil discuss Administrative of Good Mantua, afternoon, Chief This General and Sandy call joining XXXX. Financial by Officer. Spring Counsel to I'm our our joined and Bancorp's my Dan Chief Kaslow, performance is the here quarter Thank second Schrider you colleagues for and Officer;

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

we questions, highlights I'll Before customary from your to Aaron and give the taking covering started ask statement. safe the get harbor quarter

Aaron Kaslow

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

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

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

Daniel Schrider

you, Thank Aaron.

these on predominantly categories onboard achieved momentum we've these to capitalizing bank. continue the After quarter, certain stabilized to products. become in to relationships some primary savings and to core focused remain earlier and we're we in expanding the and and release, growing deposits press our deepen clients their in runoff look noted to growth our base. client deposit we deposit forward funding beginning see experiencing We As time on deposit

channel value the through in give to for past the our And we our Washington and new expand as XXX to of We remain ways to continue introduced doing approach, community. our have business in personalized Greater we region the the we'll confident pursue aggressively and ease years. digital our recently reach clients

the Today, of million diluted last we $X.XX $X.XX of reported share, year. income compared income per ended for of $X.XX of the $XX.X for XXXX $XX.X share per June million $XX.X net quarter per quarter common share and or or first diluted second diluted to quarter or the million common for XX, common

$X.XX for earnings earnings quarter were share previous million income per core compared provision credit per Current the in quarter diluted diluted $X.XX to $XX.X the XXXX. million lower the common driven decline or core income, quarter losses compared for The ended million net $XX.X expense. and was share non-interest or $X.XX and per XX, $XX.X to common with share by higher quarter for and diluted interest linked common or net June coupled

credit a credit XXXX. provision $X.X a to first of and the for quarter losses for $X XXXX quarter for of current million $XX.X for of end, was that the compared quarter second million million the To the provision

converted The estate multifamily of commercial on the is construction with phase. large provision is result non-accrual lease-up primarily relationship of reserve one to an to individual consumer loans. loan quarter's reserve charge-off This its that individual was real several established along related

is the been borrower occupancy, to who flow units And in fully challenges for creating the targeted this therefore, this. case, bank as some work with cooperating the cash we slower through have achieve

indicate reserve broader to with at assessment to while any an relationships. But the our does review in that individual is similar and establish prudent Given trends lease-up our work borrower. not we phase of the our slow time competitive this other market, was multifamily continue portfolio

look XX. March the mortgage level $XX at compared remained at loans and business loans due billion a quarter-over-quarter, loans to compared commercial Total stable the loans while also sheet. were $XX.X XX. March Taking to moving The estate billion XX stable at grew construction residential balance Total to June real remained assets portfolio. at Total at permanent X% $XX.X billion residential into

the loan yielding Commercial commercial of year. $XXX the $XXX first funded production $XXX million, production compares $XXX second million of in This to quarter in in million production the yielding totaled loan million funded production. for quarter

couple the loan focus activities. runoff funded acquisition we production to next expected million, on retention to matching around continue both we deposit expect of not Over as and essentially do exceed quarters, $XXX

As will we we loan our funded see core up, deposit increase growth activity. pick

of recently the Baltimore. XX deck the and on portfolio, composition supplemental an portfolios, urban estate quality accuracy of to our portfolio commercial markets specific our provide We completed analysis estate the our commercial granularity continues Pages through which our composition risk real and loan XX performance overall on of and and detail in be underlying ratings D.C. more and real strength and re-underwriting affirmed the strong. of office of

assess performed under segments severe routinely A underwriting our outside scenarios, in strong. were performance and and clients loan We several close external stress confirmed all of reused capital of moderate very stress on stress and rating lost risk portfolios. expectations to portfolio evaluation our also that an segments reasonable recent and test systems. We the tests to and obtain remained continually remain

to deposits. to June $XX $XX.X XX. million X% decreased March deposits billion XX to Shifting Total compared or at at billion $XXX.X

declined period, deposits this X%, while million accounts; in non-interest-bearing of During steady. interest-bearing total $XXX.X commercial level checking or deposits primarily remained the

at base. on deposits, of basis. a of previous and the XX.X% deposits deposit money deposit deposits mostly to declined total while represented core observed expect quarter, the current reflecting by respectively, during Quarterly continue time May XX% the of in outflow this level Core at quarter, grew the quarter and months early stabilized and XX% represented June. X%. accounts was stability end going-forward market savings of current deposits the the of X%, and and During accounts Broker the deposits total we

deposits uninsured total deposits. June approximately were XX% Total XX at of

exceed We also FDIC offer reciprocal accounts which for $XXX,XXX. that insurance arrangements, clients deposit provide deposit

current increase the experienced deposit of we net quarter, million in accounts. a reciprocal $XXX During

more combination which concentration is XX Slide no represents portfolio, the core base, well or the industry supplemental of a of which years, of diversified our single the average a deposit relationship in deck client. provides non-interest-bearing and XX% of our With color on majority market single length of commercial of X is in portfolio the an deposit with money accounts.

of remained With which of an composition XX DDAs, among length on retail the time well see supplemental can retail concentration. at breakdown with our our markets in deck, accounts and average more deposits. the diversified Slide also decline Likewise, is book, deposit in was that base. XX no portfolio you non-interest-bearing category deposit years, deposit total deposit significant of has significant still the diversified Despite the of XX% strong year-to-date, money the

of unpledged contingent funds of as At cash, consists available borrowings, which and securities the totaled the discount June term FHLB Bank's funding $X.X from well liquidity, Federal program Reserve deposits. uninsured XX, billion and XXX% excess as available bank window or

compared by which Company and of available increased the $XX.X X% prior coverage income Fed million funds, deposits. or XX% of provides uninsured year also quarter total $X.X addition, declined a by to the had Non-interest compared million billion or XXX% $X quarter. in linked to the In

decrease and higher from segment $XX.X charges and of associated service quarter was gain. primarily noninterest year-over-year of driven million insurance result by mortgage the sale of Company's The income quarter-over-quarter activities, accounts. BOLI increase the the the income second banking The on deposit income in a mainly during XXXX was

a income by non-interest restrictions second that gain, of income lower XXXX. as million declined onetime lower bank this Excluding to or and in half X% year-over-year went effect income card to of fee result sale due insurance into due commission $X.X the regulatory

be $X.X banking to and compared the mortgage increased million quarters. increase representing in of X.X% $XX revenue XXXX. quarter, and Wealth totaled stayed is to gain third $X.X Income million. activities income since at relatively March and billion, expected management quarter Future a unchanged $X mortgage $XXX,XXX million under both end XX, the $X million at assets in from linked mortgage loans grew levels the total to

preceding For the our by XXXX. into portion interest-bearing funds There's increases rate has occurred quarter margin quarter that the interest months, the our to have was construct a XXXX, accounts the of first the compared margin quarter our the second impacted of moving in for XXXX of series question the no of for fierce significant balance X.XX% over X.XX% XX been second and of rate net X.XX% with deposit that and assets. clients the competition market, in sheet fixed

the Fed XX rose rate to paid on points, margin rate increase compression linked basis by Fed the on our the basis basis assets while XX end XX With quarter, Compared increased margin the the see point resulting quarterly based competitive. we of in the interest-bearing remain basis that yield the XXX the expectation continue order and points. increments for current in on do two next the interest-bearing liabilities funds low will in XXXs of to to to quarters, the will year, now offer believe we what to we rates deposit need our into markets between compress our points

by quarter Non-interest cost expense driven of management with our and that is or the $X.X for the current that year were quarter. $X.X associated mainly or part of control million was staffing adjustments X% broader X% increase to severance-related $X.X million expenses to by the compared implemented year. The XXXX compared prior million quarter's the current first quarter of increased during a initiative

are market last pressures, As ensure staffing halted we we and add we conducted plans demands. aligned assessment all we to profitability to over business with volumes a shared and quarter, offset to staff,

the and $XX quarter operating continued quarter actions these a the expenses look discretionary managing of at by focus per fourth range year. the in With we on managed million spending

the action. of there termination plan expense is once efficiency The for to ratio XX.XX% associated benefit be previously amount I quarter, occur was it disclose the will is The frozen termination do slated with mid-third non-GAAP We and mentioned previously this this determined. the second expense defined a been compared revenue to quarter. and XX.XX% our plan. nonrecurring decline the and future. net GAAP quarter by as in quarter year have first of and XXXX non-GAAP XX.XX% invest in for we the prior noninterest impacted in the continue Both XXXX for growth of to negatively to

indicate prior $XX.X nonperforming XX remained credit period XXXX, credit points compared million stable loans XX of as totaled year nonperforming Shifting quarter and XX credit level non-performing quality to basis for March June points. was at loans million and These $XX.X At compared XX million basis Overall, quality. XXXX. June uncertainty. at loans to to of XX, quality this the XX, to to during of the stable total loans levels continue points compared basis to economic $XX.X

was of quarter second of net for the XXXX year. several of in outstanding the $XXX,XXX at quarter prior The of and consumer X.XX% charge-offs or the to quarter's the within of the million elimination compared charge-offs net and The prior non-performers outstanding recoveries non-accrual loan occurred compared or loans Total end $X.X of to of amounted the non-performing to of net net XXX% due credit to current first for charge-offs The the insignificant loans. current quarter $XXX.X $XXX.X X.XX% coverage the and for losses for million loans loans million at quarter. XXX% allowance the portfolio

the ratio Tier risk-based had risk-based and also XXXX, Tier XX, ratio ratio X.XX. a of of capital X capital risk-based Tier June equity XX.XX At a leverage of XX.XX XX.XX, total and a a ratio capital at common X Company X

remain mandated All excess of of well minimum in these the requirements. regulatory ratios

this to going current As I today, wrap comments reiterate environment. in our up focus my

First these drive new then of channels clients relationships. all and and core business full digital converting banking to through our funding lines

successful technology important We'll loan completing generation. to investments active to As future. more manage continue while the growing area core be capacity create are in necessary our for we in in funding costs

over evolve to and take well make expand advantage And lastly, channels our to our built relationships we excellent the continue assets with. management reputation to under delivery of client it grow easy on the to decades business do businesses

This can operator, comments. concludes take to we And move my now questions.

Operator

KBW. Mealor now [Operator go open. your line Instructions] ahead. today for Our is Please question comes of Catherine, from Catherine first

Catherine Mealor

the understand Fed Good hikes just wanted mentioned, with low to I more Dan. Thank start that to the you. down get the XXXs to pressure you if we afternoon, I margin.

deposit Just you're kind some the side, could the thinking just color give on about us of around of just that? or you're if some And component's background curious you how where the maybe costs deposit product by also helpful about type how the guidance, kind year? think be non-interest-bearing end and then today incremental the that seeing you by within mix-shift of of would new maybe starting

Philip Mantua

Catherine, this is Good Phil. afternoon,

forward. I out So, I looking about of various elements talk the yes pricing these can various about the how -- we're can -- elements talk

line. product want if through down walk So, kind you to the of

last biggest a of today, One break X.X% savings things account. Dan recent we've over we a would in continue deposit and introduced generated the we'll piece carry that with see the alluded we've it, already high-yield growth of million, time, that that about grow. base But of category the which $XXX to and quarter, throughout of to in done here that continue was to

where now on tiers, the rates market terms X.XX%, of the quarter business new quarter of for aggressive this retail X.X% the the gotten early premier and In space, varying greatest the part We've is challenges been some I the majority had of of rate think introductory money in the across balances. at the rates that intra as and has and rate last now well. of and retained more our all even we've into

the amount which overall in to growth reported the as a X% in there of the in the special now time And variety was or range. of brokered all other at in deposit special XX-month growth X.X% and fact, a of area. fair a CDs, that because, was then no on X-month growth success this in with a deposits out we've are period, also in We're X% of at had terms was the maturities traditional X.X%, time area, core

So areas. in upped our particular of all we've clearly those game

account to of between which to of ICS core the averaging relates we we much and see portion checking the average element account things, the portfolio. continue into ICS has of the run out the money X.X%. is the offering it on of As believe DDA element about market of The that DDA runoff component,

is fairly on now, that stable albeit basis would points funds for a then right our rely there And might to to in from Fed terms Fed advances stability some rate migration some similar of further couple incremental of necessity far reposition look to things in things as in any worth We've area, going So are to be subject XXX loan able we to cost. of the area. whatever as home cost concerned, impact are here, related bank been and and that borrowings increases. come

Catherine Mealor

Great. That's all helpful. really

slower then we might over forward certain on of kind from a is to there hard -- asset know your balance the slow, end -- know the the things? churn next side Any betas the put so component loan just given just of more see couple of so just side of yields, portfolio. But group the about an as that lift, or is look think sheet of stabilize I of other been And you of it's down in through growth to fixed quarters, -- as the your loan portfolio. have helps there loans bleed you repricing the I rate and the a see quarter just margin where either is that kind you

Philip Mantua

going loan to way groups have the just Yes. associated topping or from is kind on I that to of X.X% today X% X% probably of as that's the any portfolio, has kind X.X% the type out which well. range change I the mean that is commercial portfolio anything anything don't with rate real recent it probably in produced of based categories growing high the standpoint mortgage is been a in to portfolio timing been and into pricing a would know there's that repricing.

has I kind any it But quarters. more as it in beta contribution think help. the being more certainly of additional same, on here Catherine, of really would much side, regard that to recent been the in anything So it's loan towards really than relates

Catherine Mealor

it. different I Makes going me, Hopefully, understand a you're sense. Okay. but for have story to

And that's margin. the so

pulled that term the noticed maybe one question just bank a It's program. And funding borrowings. you just on of little bit -- so I

it swapped FHLB and like the -- you into Just to looks that.

will how curious back of kind year? about you think strategy Just continue the that, and you're side into if your thinking the half the borrowing of that

Philip Mantua

those product required that us that of down of the XX-month the Reserve to gave over purely really way the had that implications, The benefits on rate and the in an on offered not opportunity use given just down lock borrowings pull the particular Yes. than was that Federal way on economics particular are funds in to the period, minimize the program home fledging loan rates the in were then in that Fed we were what program that the it Fed and of excess that. to much able some capacity and that run for else it's

actually that did We quarter. in the early

to could than what of amount at it. see in more think to in on position end time. So have a XXX aspect a more of of got Fed borrowing -- on the could based lot might see to change today it If lot. planning section. expensive we've But going balance don't runway down funds But you that on know that it's a at a we're a the don't change available a down the clearly we XXX we it the At we still whole in whole range. collateral, fair I would otherwise, quarter, brought in of pull sheet I be that point

Operator

of comes question Sandler. next from Our Piper Whitman Casey

Your now open. go line is ahead. Please

Casey Whitman

good Hey, the starting afternoon. just Maybe expenses. with

the are second pretty the So mostly And imply for from we other in quarter those should they're areas gave coming salaries fourth there line? quarter. all the down Is sort from? guys Are you the nicely coming of that where would consider? guide

Philip Mantua

given quarter middle half Yes, severance part were the Casey, a of that this back the Phil. much made pretty quarter. to that moves in this we is the the is the Salaries equation during certainly of

year the and that. related lot will that that well but the end through of certainly as part completely quarter, yet, to So the we of were as realization be of costs third not in the a move other

third this to it. the some costs go technology also fees professional some There's fourth slow in that hand-in-hand quarter towards with the consulting and our that into that's related So and of some of quarter first investments should the element quarter.

those that's there into in range guide the and land referencing quarter fourth significant that both things to as degree to come the the million through last a it as parts So get $XX were it well. relates quarter of are quarter third that -- trying to really to to we

Casey Whitman

think more Great. I you will that down, in said just next guess you need Okay. the we But hopefully margin for think pause? through margin. do in bigger you down to a to go rates the do bottom out of we I X that? the lift some just dumb Just quarters XXX could like maybe see back XXXX And Or Fed range. from picture. couple can

Philip Mantua

think we yes. I -- yes, actually

to I I half need of level think some now, to lift. until viewing we kind of us that's there year. things the basis need some second point a get cut cuts addition some in margin, at we're us sooner, to at the rate increases really down piece rate rates the but point next little comes mean two of rate some in be time our to right two We for the being? the to current go about for and it potentially this Hopefully, I at the it to cuts for here a that we're a could wrong that see don't into a way when legitimate in point. any forecast. we're get think or order prediction going going lift one we're point true out. need rate But or And

Casey Whitman

about thing here. table on balance is another sheet buybacks thinking is understood. expected? capital question growth Are that me, given consideration? for the your Last really stock where Or Okay, without just

Daniel Schrider

next I table, be but That There in the that's plans Casey. something to at point always this expect are It's quarter. active. wouldn't it the no change, could on

Operator

Gunther go line Our next is your now Russell, of open. Stephens. Please Russell ahead. comes question from

Russell Gunther

target growth? are you demonstrating Just growth to outlook. non-IB mix stabilizing hear kind how of Is loan about XXX to against? you a when there. see kind wanted What's follow or growth I us up loan-to-deposit it ratio we that when you're match, certain guys when about in I to a on could bogey the a of -- for positive net thinking on range? comfortable we think as breakeven so good

Daniel Schrider

Dan. this Russell, Yes. is

I side mentioned, of of been the the think through we've the focused And funding I the the active. we stable, I've the went and momentum stable we been as hit point. half and activity seeing saw feel we think pressure we really -- which, to growth. as we've on that of comfortable the as first some like kind on getting more all that And be if -- achieved continue back getting some can become quarter we would in achieve quarter

about our active important to we is, where ratio. would relationship it are be long in obviously think keep don't activity C&I get lending, An can ideal the be looking for it. be the in short direction. I going funding can soon between at run, the There's along moving that but stay as with to loan-to-deposit space acCompanying situation, I funding the the certain moderating us as as might a goes more right the in that think it's case we that we in lending as and

get want we in as we can. we business to soon make that sure So as back

Russell Gunther

the seeing target to Okay, competitors your funding hold then the just retain from typical. want? a to you guys kind pressure. more And commercial ability folks guys perspective the Are you of to lending able given you is on talent the than Are Dan. on

you update could share? any Just

Daniel Schrider

the did be we the targeting lending front would that of than the last right to was to certain our some Yes. going the really was portfolio. Probably that well reputation what as good size with appetite some a nature be book not to to what Part our of more we got in line typically quarter in business staffing as talent. aspects want line would. seeing adjustments great We've I around any we -- referred of and what trying of

loan-oriented shifting have a think care a at point, at we their clients around taking this that the efforts to lot a great reasonable preserve gathering type a deposit to opportunities of managing to think level incentive teams of I of and job done So incentive earn and we opportunity been reasonable funding also our had try is adapted production our program. with what and emphasis predominantly comparison to in to our

pretty So good in we're the of I in talent. of retention shape think terms

Russell Gunther

Dan, I then gears the color. just shifting a bit. And appreciate lastly,

say could a of the at the you again I of on color that think extra it's details or took portfolio kind provide just you sat, you look in observed incremental I we that. intra-quarter, value heard details? any underwrote office whether declines Any

Daniel Schrider

Yes. concern. valuation. office under test, Company flow It's say, portfolio, indicators have a would all on It held both a scenarios. of things create office in really all, up standpoint, held of well a which seeing in focus was from cash also different stress our up a most which We're that recent leading variety the not stress

And historically, to opposed floor plates of or two of tenants tends as as smaller amount kind the I've unit were that leave exposure large professional indicated, a significant to be our properties one stress.

average So value well. service weighted portfolio loan the portfolio ratio low on to is the current on far, is XXX it's Right in coverage XXs. performed debt now, average the

in good we're think continue We'll it asset every accrual in I -- it's we pretty shape. will as book. So class the to watch

Operator

question D.A. Manuel from from Our Navas Instructions] [Operator next comes Davidson.

Manuel Navas

point where quarter we of we've is still pace had to cuts. the in improvement? guess, XX an Can where If rebuilding, get a per a points X basis be couple environment NIM we're I

Philip Mantua

this that five conversations the I Phil. are the is prior XX any I than is, that to we've know I don't this know along used in we Manuel, point. thinking that differently know that about numbers we before. have I don't believe And Yes,

that So, don't any past. yes; than I it don't said we've what I differently see I see today the know in it --

we so anything I think different to starting recently point, come here for more else. land just what's our than is have where obviously,

Manuel Navas

the charge-offs size on it. provision the the roughly that loan, large Got And or the -- what's for loan? CRE net that CRE on large of

Daniel Schrider

in million It's range. the $XX low

Manuel Navas

just higher with deposit it's it deposit And loan off? what's seems stabilization longer did change? in some some loan of kind in and if you're of like might that turned seeing a little else rate -- Or growth be just hard for a happy is keep bit of environment it trends. some Or it. the we kind get you you're there? interested more anything to You changed realized really growth here, growth you're seems Got

Daniel Schrider

Yes.

industry I failures think deposit the we stabilization last time mean, the end funding back the and be. the would front. the think it's on situation to as related talking, obviously, I to what I -- concern were bank it of on was some across

so paying in growth we're be as you in to And market. we the direction levers tell we don't to And the deposit we're the move for the see we ton we would helpful while today, heavily of getting, Fed us. want active until from have -- a conversation still can a that be

so. lending of would those levers allows funding to the be be one So do active when to in us business

Manuel Navas

And to rate I point, that's closer sense you makes more grow mean at that as get XX, to right? almost the marginal of new assets

Daniel Schrider

with that. you repeat Manuel. tracking sure not that? I'm Can I'm

Manuel Navas

it are -- new most yields loan X.X%, of seems around your If your... yields X%, like

Daniel Schrider

agree I with your Yes, would statement.

the I first. think, sentence I didn't whole pick at up

Operator

questions. [Operator currently no have Instructions] this Okay. At further we time,

remarks. back to Mr. I'll hand further So any Schrider for

Daniel Schrider

call Okay. for Thank you for all questions. your and joining today's

address please or today, afternoon. reach And myself. Phil have, we for to a able you obviously, questions thank out either to your If that Have weren't you great additional time.

Operator

joining for call. you Thank today's

You may disconnect now your lines.

Sandy Spring Bancorp (SASR) 25 Jul 232023 Q2 Earnings call transcript