SASR - Earnings call transcript Q1 2024 | Sandy Spring Bancorp, Inc.

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Operator

Good afternoon, ladies and gentlemen. Thank you for joining today's Sandy Spring Bancorp Earnings Conference Call. My name is Tia, and I will be your moderator for today's call. [Operator Instructions]

I will now pass the call over to Daniel J. President. and CEO Schrider, proceed. Please

Daniel Schrider

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

customary from quarter covering we your safe started Before the and harbor the get statement. questions, highlights taking cover Aaron will

Aaron Kaslow

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

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

Daniel Schrider

Aaron. Thanks,

funding, with At world. this you including a quality. deposits, read manage position remain improving real expenses diversifying core income, shore quarter, categories unrest XXX economy, And other reported more release use to have strong our in we'll business and operating up much factors, for a local the in and despite exposure interest well in strong our results asset same while in external navigating history. and That focused experience a we in on years rate continuing includes as our the core growth environment parts economic time, industry. many show are region estate our our liquidity commercial we these As fee today, several as of a shifting challenging we and advantage navigate press cycles operate solid, as profitability and to of which fundamentals reduce the to as uncertain categories. We loan our November well in national continue our that our throughout forecasts we picture as election

quarter. Today, million of common the Current per results ended or per XXXX. XX, the quarter net the $XX.X share for to XXXX. were December or core of for good of $X.XX quarter $X.XX quarter's let's quarter XXXX first $XX.X and ended first we the for share XX, share $XX.X per income compared with per XX million common for income share per for million $X.XX ended share or common review the net or million So $XX.X or diluted diluted common share per diluted $X.XX million $XX.X the common diluted diluted million the diluted March earnings $X.XX $XX.X compared of $X.XX March to or quarter common fourth and that, quarter reported for

of interest noninterest and to for core earnings rates income quarter current expense. higher income is quarter. prior because previous for the losses, to of quarter quarter driven a million higher an was the The This $X.X $XX.X compared a a specific million attributable provision funded $XXX,XXX the in industries for loan in the segment for of in caused credit losses real quarter's on CECL Total and the by linked the adjusted credit million also credit for current current was of provision credit. Within $X.X estate million. increase portfolio compared directly methodology, our risk increase unfunded quarter, of lines net credit to to $X.X net quarter decline to we the included utilization an commercial lower on provision in factors and year commitments Provision the to the provision. this which credit quarter

remained in quarter. consumer was reserves $XXX.X the grew the to at Total sheet. or compared consistent million reduced at to quarter-over-quarter, assets and unchanged. loan-portfolio it And X% balance the portfolio were commercial to by decreased recession. Shifting billion loans while Commercial $XX.X loans previous probability the the quarter. mix decreased overall, real portfolios billion an partially compared Investment relatively XX. stable previous However, $XX.X mortgage and and individual Total to loan to this X% $XX offset of or XX% million business billion $XXX.X lower economic during compared the estate total AD&C remain period. loans December

was $XXX curtailment yielding X% million Commercial in And due totaled over funded quarter. production expect -- $XXX loan production production CRE and to quarter million, in the yielding of compares to linked range per the in fall to production commercial $XXX loan funded loan second pipelines, couple in loan $XXX growth softer of next funded $XXX on seasonality production commercial quarter. based expect this This between million growth. commercial second quarter expected, the production. and we $XXX normal million of do As We the million in million, loan our the in continued quarters.

activity we we our Given base, achieves profitability building targets. in pipelines lending are that core achieved deposit of stability more the

margin exercising conscious and discipline with we are being produce. we However, whatever pricing

X portfolios. on provide composition we to real commercial at look loan on provide of detailed hotel and you our estate released XX, Pages property flex/warehouse the in composition And real commercial through markets Slide through Baltimore. and urban overview multi-family, our this estate of related office, more If our in the a we D.C. specific XX real portfolios. detail commercial estate X retail, portfolio the types supplemental of Data information specific morning, and

As you slides, these our lending market primary well. in that notice reviewing may we we when know are

three earlier among subject credits delinquent that have and all been appropriately reserved. only identification to loans handful portfolios referenced nonperforming a and have of We

We closely continue continue and to feel to good our about other credit to that clients, close credits the portfolios. repricing quality stay throughout subject overall assessing to and year our monitoring are

deposit total growth deposits accounts, But noninterest-bearing $XX.X which continue represented billion deposits, positive. first the lower accounts. We the We start total million XX% business and respectively, million million. during see linked the in and time to which On categories the at by quarter, deposits the or reduced in deposits quarter compared quarter, growth the stability at $XX.X a X% our Strong total $XX.X The deposits. linked was XXX% billion decline Deposits noninterest-bearing small quarter and driven to increased continued the XXX% DDA deposit the grow funding. ratio deposit to did while balances seasonal of decline in initiatives core core million uninsured to interest-bearing deposits quarter, quarter we Many $XX decreased within from compared at of XX% we XX increased a categories grew excluding market loan-to-deposit key as half declined mainly core $XXX.X resulted momentum our base. XX% were the linked ability in to later core during by checking within is deposit XX, in growth deposit Interest gain December in are generation. brokered to savings March $XXX.X tied $XXX.X and $XX.X compared reflecting million, deposits total brokered deposits to deposit $XX noninterest-bearing strength to quarter. increased while runoff. checking deposits of million. The million to and million of the the to attribute interest-bearing by accounts $XX.X money side, in of declining deposits commercial approximately was

the focused effort low-cost driving of All the with in to to activities core strategy deepening are on relationships an shift focus we continue across deposits. So bring on laser deposits. in lines business company,

the we aimed as a new as this into well. at specifically businesses over we well to To recently relationships, these wealth deposit course high-yield full savings X,XXX with product. segment generated our Over DDA outreach clients to product new continue introduced our of as client XXXX, turn accounts accounts these

and to lending business declined growth a we that March deposit as through correlation are enhanced cut final previous the the driving to by the of process Reserve's income home of but I'm as know of make first of is by recently that during we well and accompanied over payoff quarter. the linked relationships SBA With leveraging compared relationships. the the our lending for we the core repeat other To XX home high application full small Those $XX.X the A small just to that reduction clients there's to through quarter. in Due continued products automation deposit a example we Borrowings XX% and pleased to easier on outstanding in business between million XX%. to focused end, million delivery PPP. few at Bank the our loan of by the Additionally, report did we $XX equity to of Funding our to products Term quarter on accounts. the Federal core liabilities. advances. compared activity. Shifting delivering automation team equity recently that focus bank, want business in examples closed administration. a $XXX Not diversification $XXX.X borrowings to that, [indiscernible] noninterest officers event, learn our of the FHLB Program and million increased brought the effectiveness million XXXX success to of

XX%. market by is and management year-over-year the basis, income of the the during primarily noninterest wealth Over performance income the improvement to grew quarter. This due

continue especially X.X% Assets and end the of XX, pleased two quarter wealth million. the optimistic subsidiaries, the a and balance December credit-related our Compared retention clients activities under all Sandy to Trust to relates about increase income Spring mortgage with billion, representing linked from success of management to since totaled business increased as of XXXX. segments banking at our our be of it $X.X management fees and quarter we're wealth the $X.X

Our $X.X quarter. per mortgage $X fall million should expectations million range the revenue to for in banking

demand to which During on mortgage the mortgage was quarter, a Housing be the continues of portfolio challenge, lowers part the first consumers. supply relatively loan unchanged.

was first for and margin interest ] quarter. the net [ the of quarter X.XX% (sic) (sic) first to linked X.XX% ] compared [ Our fourth XXXX X.XX% for

we're margin and the yield to on rates quarter and the is during interest-earning our X month interest-bearing less the in March. competition aggressive. rose shifted generally disciplined rate has our encouraging improvement to of basis interest encouraged margin in the market assets fourth over while increased Since somewhat Compared on landscape reflects are net margin paid -- rate competitive via This time. we We deposits the XXXX, the experienced the approach of improve XXXX, that for the contraction points, points. liabilities to XX basis pricing order of slowed,

$XX with the We believe future regarding just Looking the which outlook current linked margin next rate the increased X that margin Fed the year the ahead, compared year-end will low X quarter that bottomed for expense cut we XXXX, throughout Fed-driven rate to a our rates anticipate margin of should see quarter $XXX,XXX margin to out basis the cuts the and the we believe points or late XXXX to once expanding change X% in this X year remainder quarter X% the we by quarter. expansion and in has toward XXXX. Noninterest during even cuts, by million. during further per accelerate

increased linked credit XX.XX% a in and the total range decline fourth is million first forward the million for quality. going where only XXXX in compared improved This revenue, nonperforming quarter ratio, see look to quarter of forward. for first expenses was XX.XX% X%. Shifting quarter XXXX. result the quarter representative of of to the while of to non-GAAP level we primarily first $XX efficiency of compared the XX% to and to per for we manage reflecting decline expenses efficiency, The the XX.XX% in points The loans quarter of quarter the non-GAAP non-GAAP XXXX ratio the $XX to XXXX. in was first increase in from XX quarter efficiency XXXX XX the of basis basis to loans to going of the The non-GAAP quarter points

$XX.X And transfer million loans nonaccrual the to reduction from quarter's first quarter payoffs conclude on investment to excess real estate update due This million capital first estate real commercial we nonaccrual amounted minimum XX, other was portfolio XXXX. quarter. several Tier and The to call, more $XX.X leverage the XX.XX%, $XXX,XXX new million capital to full on of previous of of the tier the assumptions, during items. to owned. to ratio total is the on $XX.X improvement ratio based XXXX. Total a common concentration the equity $XX.X mainly our couple ratio $XXX,XXX ratio and quarter in of ratios estate in XXXX loans risk-based quarter and quarter's compared recoveries during X.XX%. well of change the is for first other XX.XX% These loans quarter to Total in $X.X investor forecast current a loan X a portfolios. At quarter overall million administration charge-offs credit one X nonperforming of placed current you net fourth and less first the XX.XX%, qualitative XXXX the of for linked requirements. And of quarter compared want all had in risk-based $X.X recoveries quarter to for regulatory amounted the million and real of of a in net million of favorable were of economic tier before compared in and X March across I the company risk-based remain of for allowance

today. of with Mantua's As retirement well. toward The going I call, year Cullum Phil us during top the is the is mentioned at Charlie extremely this transition

Community. and to we third Here communities the also this our our pleased responsibility encourage upcoming website to So community. to for And during you I issue as current our in call partners -- meetings, Charlie annual to and our about with we'll our report entitled Future of are investment efforts to the to more continue visit recent our our corporate learn investor workforce. introduce clients, support and

now Operator, move So we'll questions. can your move questions. we comments, and this concludes my to to

Operator

comes the line question First with of Mealor from Instructions] [Operator KBW. Catherine

Catherine Mealor

of out wanted you you we took increase environment, we were if loans of quarter rate just cuts or about bps think and loan In just over that to rate that pace repricing cuts maybe rate fixed about the And the kind I stable you've start got loan the percentage I expect talk appreciate kind on we guide, of can to tap maybe to that environment of a cuts amount thinking expect you than per the to less see? X this see on the Maybe is this loans, reprice pace of so don't margin. increased back rate an a dollar getting that I we your is year. year. what quarter, where this were first should half of year? model yields to

Charlie Cullum

million quarter, XXXX. remain Charlie. head but we've the then should Catherine, up rate little The to repricing little That XXXX. half and pick year, of for loan of this the $XXX excess fixed we rest the higher of bit we for relatively points. $XXX the year. Per and be is XXXX million even rest bit going in as basis approach consistent all falls of between a got repricing pace are will to loans a XXX it million the maturities into as up to $XXX of a this little $XXX throughout those of of curve But second million

movement the curve. in to what without So the that's expansion yields loan contributes the in really yield

Catherine Mealor

like even quarter? little then and started you cost would -- Great. mentioned, side, bit. half the to Dan, have stabilized on March Okay. back the Can of the down started it deposit it And a deposit in you be seems that mean actually quarter in could there a not into or about -- decline I see XQ quite costs where yet? move you are as we costs where ended talk is bit deposit scenario deposit And there we the a little

Charlie Cullum

this again. Charlie Catherine, is

March overall by deposit did basis costs So decline to February from points. X

deposit decline. some know of February cost ] don't I deposit around we in But increases deposits back [ would would continued million in expectations don't bit. March. our ] deposit timed I $XXX recent as moderation I million So anticipate [ Fed significant interest-bearing costs of was up have The and I $XXX a forward. in rates to if go costs. cuts a expect expect spike caused

has point. at stabilized this think I that

Catherine Mealor

follow-up one average kind rate right of your maybe now? savings on Where And account Great. that. is high-yield

Charlie Cullum

the X.X% high-yield the So savings of of the rate we pulled retail down end as quarter. to

Catherine Mealor

And coming then your new CD are costs where on today? around

Charlie Cullum

a a have blend X% of X there at We CD out healthy two. months for X.XX%, a and pretty currently the XX-month

Operator

Casey line Whitman Sandler. from comes the question Piper next of with The

Casey Whitman

just So with for you quickly how questions cuts drop guess be first rate rates you? along you can remind us going then? helpful -- on helpful deposit would how the Catherine's just the I Can margin.

Charlie Cullum

is expectation our begin that reduce once deposit to base does be we the Our able move rates. Fed quickly would interest relatively to

basis guiding without to per X here, quarter in somewhere So X cuts. the the improvement we're points

than it's points improvement. basis cuts, related With twice long the it's drop a more anticipating isn't short the but XX moving, just of the And to end that of little to doesn't expectation end part per that, quarter margin significantly. closer

So we of shape yield coming curve as get in the as out of short well down. value the some some normalization the end

Casey Whitman

And with points you quarter XX-basis mean? a every XX that's point-cut, basis

Charlie Cullum

XX% Exactly. we cut. get about the Yes, of

Casey Whitman

repricing the asset just question Okay. Like book. loan on but And year the side, you or X, then the yields, maturing? securities think asked over do what same or the about have I naturally next Catherine on

Charlie Cullum

million per to Xs securities portfolio million to month. reprices The low mid-Xs. are low, yields Those $XX $XX about pretty

a they're curve bit. So the quite repricing up

seasoned right of the MBS barbell a of two, Our kind blend and strategy. to a buy now strategy is rate floating

So the yields on to blended a or average close greater X% we're two. getting between basis

as the securities the in improvement progress overall should throughout portfolio year. on we some yield nice So we see that

Casey Whitman

provided the do we to say want appreciate today. guys slide you Okay. switch But outlook I'll I gears.

stock where at to can Or your shares on that you today, just something capital, you? rather the is might view given Is Okay, hold just buying back capital? sense on would you buybacks? make remind for us here looking

Daniel Schrider

would some I to but of -- think preserving to change looking standpoint, the position is we're ]. (sic) could future. that It at repurchasing in active the I clarity that Casey be to answer with [ immediate profitability regret way we're uncertainty environment around it just think to But we not the #X. a I shares. way, this But us so be the moment. and our back makes probably a from entire in Catherine But us, sense in not more as work item with be active I that

Operator

The next Gunther question Stephens. comes from of with Russell the line

Russell Elliott Gunther

drivers Just on around just Dan, upon where the CRE, quarter. between today expand the X% expectations mix for growth second discussion, to that bit stands of loan if from you you commercial. maybe what linked in a mentioned your the pipeline And then perspective, may a able Can you're be? versus the C&I, kind share quarter target

Daniel Schrider

Yes.

perspective, without terms on in care So -- portfolio. of materially growing take we ourselves things allowing of mix we're that the some side to basically CRE of are clients existing

a as capital. just So pretty not the That's by a portfolio -- it at not necessarily whole see level. over a we time, concentration of shrinking like to but keeping shrink lot, just

consumer commercial emphasis to in as business of we And as But as activities the market. accompanying C&I. to C&I the consisting -- small lending pipeline well our uptick our upmarket ramp So our and home equity. bread-and-butter up kind I we in kind be middle as the owner-occupied look blends is of as that going activities would say from as more lending some well move community, more into of at what is

all. of blend a it's think I So

accompanying estate. quarter-over-quarter production of in I is C&I to So owner-occupied commercial funded real be to commented going you're that in see the most on what and going in that

Russell Elliott Gunther

the kind background bring recruiting, Any team of your like? some lenders C&I Great. appetite the SBA on the around looks teams intra-quarter. And over a the you to mentioned do brought opportunity likely how set of then do characterize to environment for you thoughts and additional ability what with and

Daniel Schrider

just the what -- so very less we with which early. on outside did recently things probably it's SBA that out side Yes, team of building of is

in and getting regional management we one-off it in Products attract We've do just we're that of that in now terms than on that middle in and most them But we commercial of those teams. producers in and as what successful the unnamed can goes players Is with up. banks, folks, deliver are more market the larger for way. largest folks capacity. have far a and comparable of it's to find well. And are other we and bankers treasury bringing geared higher-touch activity, opportunities? thus new that can the bringing the services super is there are commercial We it but been kind

so of in terms And that's competitive comps. we talent. We're where terms can in attracting win of

So that's commercial -- to and obviously our grow to where want them. we going business, and we're get

Russell Elliott Gunther

with the regard -- to discussion deposits you And of pretty guys rate then with other you cuts, funds get share can think if move just a would have Fed -- get cut the immediately? margin as [indiscernible] follow-up just you rate to we we that or percent would indexed

Charlie Cullum

to $XXX tied as Yes. of day. tied that to say, in Today, directly But by client $XXX outside is balances number are the the million range fluid that funds, we Fed funds. around of relationships, that move deposits to those are million Fed brokered have,

Russell Elliott Gunther

into there can for then the NPL disclose terms for transfer in Great. credit. Okay. Is one any CRE And there? of color the you me last additional

Daniel Schrider

into the of you're -- The out owned? other real about estate move talking NPL

Russell Elliott Gunther

I'm sorry. Yes. Yes,

Daniel Schrider

current that that we're believe It most was took that. into we based office actually we small appraisal that a on on collateral back property still OREO, good and

don't we it. it So small we But sitting in it long. that the a for books was on property out move again, see think successfully we'll -- of market was

Russell Elliott Gunther

appraisal updated able Okay. in from then And the you what share value decline was? the are to

Daniel Schrider

know that, costs. our have exceeds far but carrying don't it I I

Operator

question from D.A. Manuel Davidson. Navas line with next the of comes The

Manuel Navas

it. are a X It's higher net you range added range have charge-off of The bit low your year? might recent any watching net in for than drives of What thoughts just outperform What most? on -- experience? shooting kind that you But at you the this the kind charge-offs? year, range for increase is But XX points. what that still to kind that in of basis

Daniel Schrider

is quarter, we nothing smaller -- of then really a kind to at ran just Dan. south. There's easier few move or points That's We that into year, a charge-offs X about of what things this to a is annualized this smaller take process credit get credits any predict the material while to cycle. go we we to a -- Manuel, And the it X. speak if with we predict. look through we net Yes, because further year X typically X saw in tough obviously, through a things about plainly, the we typically basis normally or in the And given year. come one

if I've but is we'll I likelihood, and what seeing we're dings think nothing side significant. that in maybe on things along some dents of all described the kind way, credit the of --

to wouldn't So We point don't XX reasonable. up projection the year. would the to basis of have will that be outlook I'm a number I appear if where X unreasonable. they it an in saying but that, just points don't be annualized ended end But NCOs have to that up for

Manuel Navas

as portfolio I this is year noticed the loans you're confident seems -- of there else, it of bit as or Or -- a everywhere extra a percentage reserving there for? hotel as total. extra and that as through have that it you're kind pricing disclosures more multifamily like. Anything little

Daniel Schrider

Yes.

that settings. in properties are I urban think diverse. We've portfolio the multifamily pretty got is

don't in the yet ones concerns going trend couple The up the rents on time. stabilize that out and any that we're We watching of a last of the ones or about, closely, we significant properties that and that of were have have in suburban. over underwritten ground clearly was to have years have come

ultimately to underwriting. breakeven closer those maybe coverages that cash the than so during And flow projected be might are assets

a And of than the closer coverage a so again, all of takes it's rate but never concerns. interest expected, short-term fact both was then the to rent occupancy, environment going pain, settings, breakeven initial us to aim those some while are to in the nothing underwritten cash maybe paid bit them flow that to little rid and big cash giving that's flow tenants change get urban in and of that probably it

Manuel Navas

I disclosures appreciate here. appreciate that. the I Okay.

shifting of topics. kind Just

little You part management the Wealth the bit fee big of for a that. talked guide is a about year. income for better

the AUM within there market increase. to Was driving You fees there is any it's that? wealth to on talked going are doing about well. Are the if do management well, result wealth side? quarter's just like is Or it of other in the this part that as also seasonality kind mainly management first

Daniel Schrider

ability and not driven The what to division time, under onetime to No. relative market assets quarter, new a and the would -- might trust by saw only management. and performance fees. that you that and be to only not affect But the within hit thing expect the trust time the our from did may this have attract some of a is what significant it's have it you for remainder we disposition to of our overall year both going is if

Manuel Navas

high-yield success. and a savings that testing And or to are seeing strength account? little on Can the it able kind speaks early it's that cross-sell. branding you're to about of cross-sell really just so these of your of more and you've success far? bit bit probably high-yield think talk you're brought that interesting Can that savings kind more seeing I with you some that early a about you little talk

Daniel Schrider

from commercial I good wealth as early. of both our our deposit mentioned, base. is in And retail core bit are management the We offices is and stabilizing out. a our our it just XXXX, reaching bankers, focus the spent outreach, on focusing that Yes, pros

the to DDA think savings. be very account, will the high-yield attractive we created mentioned, has we attributes are also that As -- that's I profile client a in that the of

And so I those portfolios. driving in more our next have into quarter, data on success think we'll

full history you and where think, believe, probability bit banking going, relationship were do point. those approach higher gives a clients. that the into is So and us of the a Manuel, think of take, I and early I deepening turning the I little would But we relationships at them support, this reputation bank,

Operator

The next of Daniel with question Montgomery Janney the Scott. from comes line Cardenas

Daniel Cardenas

Dan, market so? its of if update decide on potentially could and out there there to space a an as do maybe the of to office substantially coming give government D.C. health is does could there reduce of the kind years potentially, the you be proposal what impact us in the couple an

Daniel Schrider

I a have, office on areas. D.C. surrounding it think could material in impact obviously,

the that it's roll. that leases within of and short Now, hasn't the the a think the difficult of whether time. the are buildings re-tenant are And properties going return to dispose work of a in really agencies floor to I plate window large property office happened. It's function very they those to government affect let

I individual units in will it that could where to but it an do type re-tenant -- how think small is those Tough of it large that material at stayed us, much, of believe plate our have properties. don't investors have we space, professional being and certainly standpoint, I smaller but property. an have We it floor impact those occupancy impact businesses a would could would don't with an to closely So present service are exposure impact. impact easier Dan, for important book, have. an types it predict office relationships. on have in look from investors to We've on

Operator

time. Instructions] I are additional management this at remarks. There team no hand it back the left closing questions [Operator for to will

Daniel Schrider

this thank afternoon. again, for you and you, joining our everyone, Thank call

be to and have hope to you answers, you glad other any reach feel appreciate and time we'll to myself but spending your If a get please free afternoon. you you we have questions, great the out

Operator

conference today's concludes Thank call. That you.

You your now may lines. disconnect

Sandy Spring Bancorp (SASR) 23 Apr 242024 Q1 Earnings call transcript