SASR - Earnings call transcript Q3 2024 | Sandy Spring Bancorp, Inc.

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Operator

Good day, and welcome to Atlantic Union Bankshares Third Quarter 2024 Earnings Call and Sandy Spring Bank acquisition announcement. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Bill Cimino, Senior President, Investor Relations. Please go ahead.

William Cimino

Thank you, Michelle, and good morning, everyone. I have Atlantic Union Bankshares' President and CEO, John Asbury; and Executive Vice President and CFO, Rob Gorman, with me today.

Spring call, President in who merger earlier Sandy Schrider, CEO, discussing have announced the on will today. also Bancorp's and Chairman, Dan our We join us for management and releases accompanying investor slide to will executive website, that available the our are on of period. Please note members be Other here download the presentations investors.atlanticunionbank.com. question-and-answer today's team our

to Important and During XXXX. comparable our measures, metrics and GAAP performance using today's both financial included is call, we measures, earnings quarter slide non-GAAP financial GAAP will for information measures. in comment including to of these on third the reconciliations in our financial appendix release about non-GAAP the our presentation

any We from will the questions that can statement. to subject turn that forward-looking from At and these to harbor will to take John. safe research including or are actual materially any important are performance update expressed the other further now during forward-looking differ to on the factors that other refer the are forward-looking in discussion the our information be which release All subject implied We or results and made cause of call, expressed are over any by publicly risks factors statements, regarding comments company's undertake we statements. not actual SEC call and could to historical call, not differ future our risks, today's uncertainties. and those risk analyst call end no I'll no obligation of fact make to for our filings to the subject from statements. community. And assurance or statement. forward-looking There or forward-looking implied not statements earnings today's which expectations will statements Please revise of results

John Asbury

has This Bank we're XXX-year among and a Maryland to Maryland. been bank Sandy it's and paths what $XX.X asset announce oldest from grown only highly respected an view, an Atlantic Thank exceptional our is quality in track Spring the Bank franchises America, glove franchise, done Bank excited you, neighboring cultures a merger Bancorp. and exactly historic Union customer attractive independent Atlantic a have focus. largest in with in history Virginia. We similar contiguous Spring bank with that Good a fit Union the Maryland billion and is two everyone. the asset This Community in has hand for a Maryland-based Bankshares record in of to Sandy Today, morning, community on with similar Bill. is in believe impeccable great similar it a markets.

good it results thoughts and value QX We prior serve our on a are Rob announcement the was each will comments makes why abbreviated proposition eager Atlantic provide for I Union. do customers to which and I shareholder so share quarter, we easier Atlantic less conversation and results. after for about quarter Union and believe ability shorter with improves this our communities. an It in noise our to on for and company's

So begin. let's

Federal were we're commercial down display. bond this their in serve the we closed third We begin treasury during relatively averaged and full earnings merger-related quarter's to X.X%. Loan million the combination utilization real quarter. X.X%, pickup we in the core a Linked-quarter clients X.X%. pleased averaged our over in grew had in were the cuts we lower X.X% reduced On Virginia well our growth impacting institutional balances though payoffs Overall, was there's a of flat our down for believe commercial impacted as quarter which to annualized experienced real also real portfolio, second commercial estate by rate was which Bank these relatively up acquisition indicates deposit flat, indirect power dip based sales. markets, and balances results wind following approximately items linked base during Also, recall, $XX by ending estate and up quarter the September, in slower loan pay third yields you'll something as As to quarter, on encouraging. during basis, our property during American some have post-merger and the expected of were second growth refinances a is loan down. systems clients weekend. seasonally annualized liquidity waiting telegraph the during Day National we the a completed not did the line estate the our we Danville, larger We Memorial conversion quarter despite and This quarter, in auto quarter our nonrecourse end commercial headwinds. Increased stay is quarter loan payoffs. reminder, and at continuing now

quarter. said X are point rest is otherwise of eighth have pipelines healthy, year growth say is even in to believe that company. might quarter, there see loan growth. that, banking X annualized us we that asset and we the be yet years, for basis benign. any of have quality what story mute net real of leading today. our mode sign quarter, the as commercial commercial was a said again XXXX. Having point And in a recorded Credit good estate Our that coming of we for each a a basis stronger And I which X down I'll points moderate backlog third will now may systemic remain to the inflection in payoffs metrics, second we anniversary believe of from This be charge-offs for again the my

a our to charge-offs, a minimal following we are quality run continue confident While pleased some asset long point in of net and expect asset normalization at we in quality. remain with

interest the on adjusted on show earnings see improvement remains envision strong top-tier expense continued and can net common asset on our core good ratio, points financial in of trends. delivering we and efficiency we generating the impressive As power always, franchise American assets the our this proof management, are margin leverage. believe tangible and as equity, modest focused performance, National. We We we quarter-over-quarter when on focused serves that improvements quality return positive you operating compression all return acquisition of and had announced

confirmation priority strategy We in performance with markets provide continue beneficial deep a traditional as makes XXX-year and run informs of straightforward Atlantic profitability order good being it for the our quarter sum, withstood difference it our it This people our how help services is to and and the over strong full-service was of help communities. and see model, long-term and businesses remain soundness, company. In brand It's mantra economically our a to diversified in we time business positive of our help client and relationships. We bank in that our of that history. why a works Union. financing test a a growth

for before Rob acquisition operating transaction. into quarter on call the are to results Financial and the results Gorman, in We National and new top Officer, cover about Central, have will presence to now our Western are American long-term adjusted basis. I'll we believe we Carolina financial quartile expansion National to Rob? achieve details deliver excited the reiterate from North get promising integration American that increased savings potential. the over planned the are and positioned our markets, Virginia turn completed in an of fourth the Chief growth quarter We we Southern and and well of the offer the which cost

Robert Gorman

$XX.X third common operating operating an the which double excludes common costs quarter Well, were available or on adjusted or income from recorded on XXXX for million per XX.X% adjusted in third million you, second XXXX. The the $XX.X the of quarter up tangible million, or the of of shareholders share my share return for XX.X% $X.XX on and in and XX.X% Please $X.X operating the million earnings was a XX.X%. operating $XX.X quarter, Adjusted an the from increase John, third was quarter. In focus efficiency financial everyone. The third of X.XX% which and thank quarter. with good common equity the the part, adjusted third that the in $X.XX. Union's in operating basis, reported third third basis, earnings commentary note And non-GAAP relatively quarter $XX.X quarter, quarter. on was at morning, quarter assets most second common was merger-related were will common the shareholders on million was the pretax adjusted flat return Atlantic net to per ratio results

in lower to down National the of XX was quarter's quarter. end and the credit in losses American was $XX.X net basis credit third loans third annualized points charge-off total commitments of year-to-date quarter million annualized net charge-offs of quarter. initial points points quarter's for third basis credit well third prior of in of the the total for ratio represented percentage or and allowance The the of quarter, in the from prior second point by for which decreased driven losses primarily quarter. Net and As $XXX.X million an unfunded credit the from a losses million, from the for on provision growth lower or $XXX,XXX charge-offs X basis. loans. The basis X X as by the million provision acquired $X.X losses, million annualized inclusion as $X.X the non-PCD basis $XX.X as loan was provision approximately

of quarter, less was costs deposits. primarily as of Now million million [ in components higher due investment interest to down average offset interest primarily than average and on XXX.X growth. net funding income accretion million. Borrowing Interest by balances increased during as growth held the a lower statement time result expense equivalent lower which income higher net for $X.X the a lower costs. borrowing held deposits to interest-bearing for million on balances interest loan of loans for was million, loan result pre-provision due from quarter. Tax wholesale $X.X turning increased increased partially ] during decreased and the of high to third Interest due higher to X% third the income or on loans in income investment in result deposit as customer on second offset increased quarter were the pretax partially quarter income yields, customer $XXX.X deposits, usage interest-bearing by a $XXX ] expense approximately of loan the [

of sale lower capitals amortization At by million from Construction in million for and by the -- a $XXX.X increased for in points September, quarter. XX $XX.X million in and investments increases loans portfolio and sale the loss by of operating quarter result in on $XXX credit pay and operating the million yield. Noninterest impact quarter on revolving by end the X the the variable development negative driven on yield period costs interest loans, a increase $XX.X third broker net basis balances partially portfolio deposits. third basis the or third result loan quarter, quarter The million, portfolio in as had impact primarily yields increased in $XX which commercial new was costs as of market third $X stood second annualized positively and cost shift accretion million charges investment growth and acquisition. These that's and interest as an down assessment loans of was cost previous was securities quarter's base a deposits during increased a $XXX short-term in a the a deposit a industrial earnings quarter, net due due noninterest-bearing for $X.X decrease Bankshares in $XX.X is the borrowing prior $XXX,XXX million in and third due The noninterest $XX.X loan equity increase million construction prior X of the had prior and a slightly income X available excludes partially third second accounted driven loan X quarter third method million funds. decline The well levels. demand for originated at loans products yield prior basis was loans for billion, expenses third a in X deposits deposits by by lower average in million point X and basis a due equivalent lower end, Bank's by and to unrealized point full-time $X.X -- technology third million decline the Adjusted and National deposits, negative Atlantic growth XXXX, mix decreased increase and third annualized $XX.X on the an in million the the increase $XXX in on quarter. approximately X.XX% impact borrowing net $XX.X held equipment quarter. At The due partially costs in service second $XX.X accretion which above in which result offset quarter. customer quarter acquired and salaries bank-owned of and point in an and the of lower of securities, the X.X% loan point income, million a our a a the the negative to the the which in noninterest an due funds funds well-capitalized on X.XX% quarter. million [ the to to decline American by earnings $X.X impact earning points AFS funding by on to a XX% merger-related impact there's million in from of X other ] in mix of on primarily total or which assets as than seasonal $X.X deposit on decrease primarily of yields. There basis increases intangible of lower of was decreased increase lower positive at increase expenses. asset from and impact cost excludes FDIC fair assessment quarter, totaled yields X $XXX.X quarter's to third projects from was portfolio from higher rates offset as the in end increase and $XXX.X increased core debt offset continue X.XX% to impact $XXX,XXX losses the impacted the loan to The XX% the third net of tax processing income the X current X.XX%, rates quarter, and in for the approximately an data prior of basis basis point basis the on result third the the declines the prior a million usage. At yield increase lower million $XXX,XXX a costs the from deposits, the compensation basis in increased wholesale XX were received primarily lower value benefits funds. of quarter which expenses points to on higher demand $X.X driven as quarter. equivalent of the cost employees is costs. Deposit income, increased $XXX,XXX during losses quarter million million well quarter the higher-yielding million $X.X assets for which decrease land acquired the deposits. Noninterest of primarily life of $XX.X partially the quarter securities operating securities value to asset of from regulatory end insurance basis to in and the point up, in loss impact expense and into of point decreased from core to the to was ongoing At interest-bearing increase benefits but Union third of income, the to due due a due increase on securities income, to increase $X fund quarter, net margin of usage. million of increases million to from of line impact were and by basis lower in to accretion offset point of incentive quarter from the driven loan Atlantic due and quarter pretax Adjusted sale Union primarily increase on which in a downs fair premiums, gains rates loans, total a

negative if remain the include capital of in of capitalized In forma AOCI unrealized addition, losses the the regulatory you well a held-to-maturity and calculation securities we pro basis, on impact ratios.

$XXX full end Slide we million fall the come our $XX and the net to loan interest to million we've XX, year between XXXX updated and noted billion, between As $XXX fully billion. full $XXX net Fully to income following: between expect for billion to deposits tax interest financial And fourth outlook to and million. in the million. fourth and taxable year and $XX $XX.X targeting while year-end projected on projected we balances quarter run are year equivalent equivalent be rate between balances income the $XX.X are quarter $XXX is billion

As for interest in in equivalent net X.X% we by Federal X.XX% will by and a points range year result, December. the Fed projecting the between full and fourth we and our the basis year, that margin baseline fully that assumption funds would rate tax Bank between the fall targeting XX quarter, are Reserve are X.XX% and X.XX% cut in November driven full the

noninterest margin the addition, to net interest income second American amount XX rates, tax basis impact National, renewed a which yields term In net the include rate The well reduction earnings targeting year in to the operating million, million. is significantly projected is aggressive which in income adjusted as in loan results basis million, rate guidance operating to $XXX the due quarter. On a to $XX change. $XX the a fully XX to equivalent provided fall third million while range we income we Union interest between of are noninterest lower quarter fourth the expected financial expected fixed fourth of to quarter Atlantic funds for our Adjusted delivered are fourth impacts $XXX reduction and and and $XXX full September, in full projection of are had year between in income million Fed noninterest rate summary, $XXX of the decline our assumed accretion are ranges be point quarter $XXX call as expenses and $XXX is new lower adjusted more adjusted of strong basis, the fall between of primarily level the estimated operating run million income from estimate the from to rate noninterest the and and targeting also points we target subject in and the and fall volatile million of accretion net million. In quarter margin previous interest operating XXXX. net during expense interest

details result, to profitable are We're value build a and Bancorp. sustainable, for we believe attention positioned we of to our our continue and in our As provide merger with to growth to the well Spring with Sandy XXXX beyond. turn you shareholders generate announcement excited now to long-term

John Asbury

you, Thank Rob.

both the points talk we and partnership about our exciting that's the that with hit Now for Sandy let's the today, big high Spring. news quarter,

on still call slide. beginning the the apply, and at risks of covered this As listed to forward-looking noted statements additional this Bill X, Slide we'd note on like

of the filed SEC, contain the forth participants and prospectus considered read available the is of important Union Atlantic Slides proposed it with becomes merger Union the can may, Union filed because you it in be and SEC. Atlantic the be urge the shareholders will it the you merger in regarding priority on when Information with solicitation proxy connection the will information. joint statement prospectus it be addressed in the Sandy statement under Spring a X rules Sandy of with of and see set We Atlantic be when to who in SEC. a to As X, persons Spring and

by me thrilled. saying let Now we begin are

people Community track to the transformed thrilled Dan This we've and to common in long neighbors, bank. We admire have Bank. we XXX-year XXX-year same we relevant here and which their operate own know share have Sandy We'll withstood and is many as that their in have of services We being time. the its a with market their Virginia's people-oriented Union's the and them culture, we Greater lower is Maryland's traditional admired and and highly done our We team legacy times are the help communities Together, and important highly respect asset they each more I've exactly not with provide their Maryland both communities bank models regional record Washington this Spring. this are intentional bank. that Virginia. We depository the means is businesses company history the We've test their partner of Bank broadly, his compatible We they focus, also and are role quality financing into so the now have and help over history, why strategy and long for beneficial in density and help make customer case They a banking with to as played our recognize well team a Bank strategy our watched people, before share have at Regions franchise, culture. view, impeccable Maryland economically said Bank, the #X Atlantic we opportunistic. Sandy Schrider markets. our Springs' in Mid-Atlantics Maryland's are combination. we

regional over our franchise in bank we replicated in should this Lower position the enormous connects Mid-Atlantic, top the From scarcity powerful Southeast, that, plan that assets in and my invest $XX this a would that anything where with grow the position in of Virginia the billion Carolinas linchpin combined franchise formidable compelling in resulting be cannot the argue holds banks. You of Mid-Atlantic regional in dense become region. franchise the to as and time. I firmly seen at bank our largest pure the our compact becomes will we've us ever the to quartile value. can franchise presence now preeminent returns eclipse Mid-Atlantic It's the will a in that see franchise financial opinion,

leading convenience we build our further increasing company has on presence have in Spring objective proposition, Sandy our every in value density, why and believe you'll this shareholder capabilities of our transaction partnership believe regional worked banking Union network through Sandy strength in our Bank. is scarcity This in one our financial potential will the brand an we It scale, invest enhance power Spring our just increased the points enhanced allowing a that done our by us like better profitability, Maryland. We and region. recall, Bank to you one delivers in investment of this is value will growth and in see Virginia, the company and If hard Mid-Atlantic we and Atlantic that communities serve. by to

Union to we Bank's Sandy capabilities banking will and the position We Spring. By growth markets substantial markets America. liquidity to most by balance be organic capabilities proactive industrial from of substantial significant take deploying the into we well while plan to positioned Sandy pro that have for chosen keeping poised adding actions so CRE Atlantic attractive Springs constraints. management opportunities for wealth levels, in better sheet capital in capital commercial and and no our some growth forma enhance with growth and derisk control are concentration future We liquidity

shareholder As in stacks dominate today share compete be the the too. We against while show we alternative banks, and maintaining the forma our the and are the the that institutions how in you responsiveness with market to in flexibility we to large up smaller believe to wanted company challenger proposition. Lower will value Bed-Atlantic pro the Virginia,

said retained grow. at generate levels and continue return see have more real efficiency peers. to expect short you have tangible And our we close the capital should earn-back have rate forma and equity, loans, we'll rate share the sell as the just book believe period we value top we've billion and up earnings we and as liquidity above sale announced mark poor M&A, to a pro to going equity ratio of in our tier forward, strong acquisition generate always the do be internal checks on we our raise forward will will assets with By earnings this merger short, we we intention this accretion. Rob acquired per on details, until return boxes an closes, from increase tangible commercial our and significant accretion of common estate our but capital rate. In can to ample done. With hurdle $X and for all return capital the in to morning we interest

their to of with now characteristics for us. we attractive could you are speak to Executive Sandy you like Schrider, them Dan make Dan, Chief those an to Officer, you unfamiliar Chairman, with wanted some partner which President and highlight I'd the For decided us? Spring, who key of why partner introduce to

Daniel Schrider

Thank you, part and I Spring, appreciate Sandy being really like bit would a and We've this mean this partnership. morning's about a do talk call, what John. our share will to about for and announced clients communities. this of our

we're I'll our in us a treasury same are our for families range capabilities values Bank greater and for will value combination for share add Sandy to is products Sandy our to us this banking, people Both I'm the Sandy with scale Q&A brings strong and greater of Virginia, the North once capacity opportunities trust I'm questions employees first wealth serving to robust services, turn larger Spring area a those who and doing a businesses D.C., management we'll commitment. And and our XX creating session. And and serve. This management Maryland, wide consumer Maryland, noted, business. And commercial really together, complete, we and communities today's organizations, of banking, For and together years approach the excited unfamiliar specific Virginia including any Metro during and we Bank, in Union we've clients served include with and happy over Spring share will locations Washington $XX.X deliver will John. XXX those that provide footprint provide what and two announcement Atlantic organization. for D.C. to enhanced Bank, business and to even Carolina. Bank within collective our and assets of answer grow are merger regarding billion If and and together. it Spring those back there very John and as about over

John Asbury

some my market and #X Slide create situated this counties bank highlights. [indiscernible] the #X the I you To and can powerful not regional the will before much, in done franchise. The Virginia, too. is shows forma an #X been bank Thank entity has pro the in share Dan. Maryland in the regional the country. We're in do of be region wealthiest Mid-Atlantic enormously and separately, knowledge, market it so bank excited again. never to X This in regional some combined be done

forma percentile household in be median the XXth pro by counties Our will income. franchise of

excited us positioning largest D.C. in are to to Washington, and In and customer fact, opportunities market with allow the of and by wealth Maryland. population growth the United share. loan on of should States. and the Coast enhanced and those wealth growth growth drive some East XX have capabilities. ability X top in of We're our the the our management and potential expanded gain future deposit for This centers

Before to I wanted we I this perspective why were it should that on Rob, surprise offer come turn it over a in no as to interested combination.

As earlier, been Bank at Union for years. mentioned I've now X Atlantic

while now of growth, a had the those today's merger organic-only that what strategies Investor that those periods what this ensure Day hard doing X would say operational we reputation one with midsized see scalable with will infrastructure Slide built XX achieved we we a our outlined since have all. like. can things. At this become. announcement And and we is management them technology build M&A scalable XXXX and bank look to you for have And we During at we different X We've done ago, ago, particularly worked time, I outlined of our support what talent risk that of future years times, we we to years do. presentation. we've partnership options on

We completing to to large to from We've that offerings better that well meaning to banks today, regional through super more serve. our announced arc Virginia. the consolidated on Crescent Virginia, deliver complete customers down runs become Richmond segments Virginia's Golden complete we've will match those customer serve and use also substantially the a and Baltimore through Coastal And combination Washington, we've strategy, bank. Greater and that and and for products services product our the choose up the we against periods improve national

have largest share against while regional and smaller into Mid-Atlantic market these compete compete banks agile that the evolved that a with enough primary a too. responsive bank in remaining head-to-head can the and banks, dominate areas We to challenger

ever DNA, more now community essence our our heritage. than are we of capable the humble We and are roots a They're of bank. Bank but mindful Community

Our at now will more predecessors National in our markets. for and Bank for American continue us organic carefully Union create Rob most the And strategy these as paying Trust, our banks organic combination capabilities in scarcity other of vision. The us with customers. communities provides growth enables to our turn a among been career with growth terrific shareholders Bank, and platform value we has builds result cultivated exciting new this who Sandy share now unmatched details. came a convenience It's partnerships it for before serve. for to forward to value Spring me, people. such and it more that Bank those opportunities for our others. I'll our also over invest & and to

Robert Gorman

John. Thanks,

impact gears very compelling. On we Slide John the to the expected of transaction. switch the merger which, as we just aspects believe, financial structure transaction, terms noted, the recap are XX, from me strategic outline Let transaction of the key the in of

share Sandy a company transaction on for ending the itself, the per ownership X.XX share XX. This combined of based it's fixed XXX% of with closing Sandy Atlantic That out full stock. terms of a a multiple the AUD the stock of Sandy today Sandy common common Friday, XX.Xx stock Sandy Spring's conditions the the equity represents transaction, Friday's XXXX Spring Union shareholders of Spring's exchange premium common In in implied deal to October This of both Spring of When announced value of from to join X.XX aggregate settlement raise X% of billion, shares. transaction works factored will quarter and companies. by price Board X.X%. per the market of of book stock Atlantic end subject to is receipt The Board The and CEO, represents price approval customary Dan of of a core X consensus ratio the shares Union's [indiscernible] closing translates premium physical shareholder closing each and a price. $XX.XX [ closing regulatory Upon ] expected Directors XXXX, the of with stock of to tangible per metrics share transaction shareholders. or approximately members share earnings deposit $X.X value share price to on to transaction XX% of close an third over required approximately Schrider. approvals pro Springs about into including forma by multiple of

be intangible The XXXX expect key savings out million. targeting $XXX gross or million wealth million set to to in we with and the systems and market a merger approximately to of is credit cost Slide rate a deposits non-PCD, loan On assuming time are to mark modeling annual we credit to mark after-tax write-up $X rate-related million, X.XX% million approximately of adjustment held of of loads portfolio, real XX% lay first on Sandy achieve expense. incur a Sandy we a $XXX perspective, maturity [ deposit and we of of X% also savings In the the $XX mark non-PCD operating million day core interest [ value deposits [indiscernible] And or balances securities debt is of approximately or are adjustment XX, ] expenses Spring's complete credit benefit assets. and assumptions. From the loan fair so-called approximately ] loan is expected $XXX estate core X million expect $XXX subordinate ] transaction and Spring's quarter Sandy can addition, $X expected core million, conversions. slip. [ the of market of net we Springs to reserve $XX at XX% double XX% $XXX the are cost Xx be be PCD non-PCD The intangible for million a the merger-related of [indiscernible] We CECL X.XX%

$XX.X today date. that a provides assumed of $XXX share utilizing $XX.XX deal at raised common million announced M&A be with equity which funded, price equity settlement closing the when to forward XX% of mechanism date that a also million or we settlement per greenshoe the would at be is a We flexibility the around

of the to ratio reduce commercial the merger sale $X the CRE close. used We also ratio the closes up or after combined below sheet to real loan-to-deposit Spring's to estate billion post Sandy delever intend balance will to reduce the and company's CRE to sell XXX%. company's from concentration Proceeds be portfolio pro forma's

Turning to [indiscernible]. page the

of As we of any been at summarized Immediate to if expect key John enter into book tangible when financial an we terms here rate a targets very have transaction, in XX%. merger as mentioned EPS, reminder. years least those around earn-back I've X public acquisitions and about dilution, our earnings earlier, accretion less that any, we internal of the churn of of mergers an and value disciplined or

can our all EPS you pro period XX% tangible deal a see, M&A metrics, accretion, X.X a earn-back book on basis, this XX% As of forma boxes a rate year checks the on internal return. value and

This CRE you on ratio. forma In merger across the equity should of on top assets, firmly ratio pro position the and the have on efficiency will side see ratio capital forma tangible quartile strong right on of capital addition, ratio. meaningful on peers profile, impact we us return slide the common that basis, and putting the our profitability return concentration a a the can pro into slide, that illustrates have our

put wanted levels. positioned strong the entity that liquidity pro CRE be capital levels, John forma capacity ensure of and As thought we into for this a lot to noted, and success concentration larger with transaction should

strengthen and sheet are upon forma transaction. to capacity positioning organically to the the pruning the We provide grow the closing pro balance of combined actions taking entity

the two by We to ratio. the forma sale, pro And ratio expect concentration the loan which raising loan-to-deposit additional capital capital second, at lower through to enhance estate ways: common closing. should these the first, reduce our CETX should risk-based in approximately which real total to provide accomplish liquidity objectives CRE company's to XX% commercial equity, ratio and

In footprint. should and and across the expense saves in organic that power of level its expect addition, factoring you can the earnings deal we combined which forma pro the the potential generated using the support entire XXXX transaction, the this expected capital consensus internally company Street to of see of create estimates franchise growth from

to marks as Additionally, be we generation the locked-in those forward. our earnings expect going accretion and of flow earnings from represent and capital rate-related capital fair enhanced through GAAP value back interest

confirm merger part confirming and ensure merger undertaken equity we of exclusivity and we any the as As of in preliminary we of comprehensive loans through Sandy feasibility transaction X-week reviewed due a as purchase the due sheet. Spring's Significant diligence due pro adjustments raise any as accounting ahead our you to was the the to derisk aspects very transaction. formed process all positivity balance CRE of preliminary exclusivity the went as we ability merger, could cross-functional period. to team to diligence the more sell due feasibility well expect, company impacts do Upon a a business that determine of forma to diligence formal over diligence estimate period

clean real credit diligence with to estate very rate matters in the legal low The has very see Spring of due was In review third internal Spring's thorough, a noted Sandy be third-party and loan Sandy and to here. from team, our bank the the portfolio transaction. Spring interest our of results credit well and case. tax connection review can parties you perspective historically credit a addition Sandy from as engaged magnitude as market been found that we expertise valuations the as of as review from to

integration plan diligence a due understanding Sandy of and of counterparts culture operations business to you addition of In on smooth will Union franchise. into for the see Atlantic areas their with us which strong came a listed the in slide Spring met with away allow teams and each the to this very

Now discuss John community benefits to forma over I'll turn plan to the back it for our company. pro

John Asbury

people. real Thank real Union for Sandy and you, are Spring Rob. banks Atlantic

go and our we them our to wouldn't We communities, XXX As years. mentioned, supported roots of the support back today the have back theirs here XXX while years years. be go through without

X $X.X developed even to lot we financing we we communities over a our $X billion of that have end, for will As markets We money see, time benefit in believe spend plan, you and to the us both in in community billion investments enable benefits serve. this years, approximately will that across and approximately benefits community a charitable greater our and we $X.X our commit ] provide billion of whereby And communities. the communities. next to can transaction to the [ investing benefit contributions deliver community

We to William Prince branch excited new Maryland; Prince will locations X City, open County, Virginia. Maryland; Baltimore we and that are moderate also low income County, to in George's announce areas in

make long because donations We additional the we we today announced and medium-sized serve. won teammates support and that residential additional And right plan the future. businesses our community lots well small and history to communities into continuing things do reflects illustrates community awards and for We've provide our for the will of mortgage assistance, organizations. support the

status and As us that it you the on can see, Mid-Atlantic our positions lower solidify the shareholder to levels this many transaction of will deliver Southeast. long-term preeminent franchise value, bridges so works into

integrations and dilution as that earnings quickly. will an conversion, the just has With significant lower result. mentioned, we believe transaction a tangible history execution recently risk these a acquisition exercised to this value muscles our Rob accretion book of and completed back As systems and successful we've earn having

to greater and be offer set. And be greater will as expanded mentioned, soon product benefit will the larger convenience teammates Our capabilities previously and will expanded opportunities from customers organization. gear development able an our have to and in

communities. plan cultures We shareholders, together respect to do two companies, and great great compatible our our and our teammates, our customers we for and things our between have

to are from We And it together. it stronger analysts. with up Bill back I'll questions for turn Cimino to that, open Bill? over our

William Cimino

Michelle, please. for you, our ready Thank first we're John. question,

Operator

Catherine from Our comes Mealor Instructions] first [Operator KBW. with question

Catherine Mealor

to loan this CRE on the with just wanted Congrats I maybe start acquisition. sale.

presentation, prepared I sale of logistics about takes then mentioned how curious if looks? the your also that in you And book for how you through series that, talk of can you've Just that us out value. the $X.XX saw

that discount kind assuming number? of within So you're just of what kind curious

John Asbury

the start with process. I'll Sure.

active to X, are who I the marks, real the We group, Stanley. did X due took interest and calculate of we and at to estate as for of portfolio, work. referred or things maintains time. rate transaction test. both on this we diligence marks say, I at tape had sense? which phase actual Morgan Does we phases. due we diligence period both to identify had and markets Phase the loan Stanley merger the had billion. Dan math and an represented as preliminary make the want estimated and importantly, should also several Morgan capital took we this the Does feasibility by sale portfolio diligence, $X Dan, to that We refer analyzed commercial assess Due the credit

calculated And marks, so frankly, time, it speculate, was important guess identified at to interest we the interest the rate loan portfolio and party. third the the actually And with rate the Stanley for-sale same or not estimate actually marks it assessed Mortgage using price notes our them.

known out, ratio will not loan-to-deposit I'll the for on targeted So billion. ratio. we $X a and necessarily the that up the handle very, solving $X of be. Catherine, commercial real to concentration very it's good billion. We're It's metrics estate point what have

the loan-to-deposit liquidity of ratio transaction modeling could that based feasible to potential so find in a to we've agreed But all going to to and sell we we're going going we're CRE ratio. up hold need it's was to to if company not confidence the are that us nevertheless, we we're concentration that do on we ample the to out each to growth, this, have conclude we and going position done, for with have back, $X we the were able that do And that. billion, not

will that's in that terms be it. how we By nature way, of the of service retained. So works the

will real be speak the to client. Rob, the the retained, for service do experience are sold it loans how marks. we will that the commercial want same estate So calculate to be meaning you

Robert Gorman

loans So billion book $X value, selling the Obviously, being noted, Catherine, as impact sale. in about on you for marked terms CRE of we're are favorable of those

related of We're X.X then the to the sale to able ] that interest we're top that, in included a sell market. we've [ additional rate total XXs on terms a And what low portfolio. of that to. discount assuming mark. So mark, credit We've a on mark X% got in got mark, in

proceeds a we're ] rates the and are the Loan Loan down XXX as range. brokered those on at the X.XX% those And we a among paying when point par. [ reinvesting things. Federal we reinvesting those advances proceeds that on see should actually, currently, down that deposits by high-cost paid we're are and about those $X from XXX, model. And Federal on in about basis I paying other then yield Bank Home we're -- Home And -- out is billion Bank talking the So discounted

point bit of a taking of a on earnings haircut we're that from So view. an

invested In that some those both securities -- loans and also will in addition, of of proceeds -- we be portfolio. some

by on So the aspect related And of loans, then we on accretion that. there's a selling those. the haircut aspect also that basis we're getting yield the lose of taking there's income to income these we're not the accretion ability a

how as that's calculated. been number of earnings do it's So really of we the forward, the the know headwind but We yield on XX% X. against it's go gross a it's portfolio. kind not full

John Asbury

a looks a It's headwind, despite great headwind. the but transaction

Catherine Mealor

allows as headwind grow move you to out The you of that...

John Asbury

of estate, point easily in commercial exactly we're that fix below of an mindset of which an real really loans running in ratio that as that we do ratio. are out targeted been you solving they level It's here. actually as How to simple and of estate That's equation. simply will fewer top the quite also to loan-to-deposit able are planned if concentration targeted we're going order real a lucrative real because we off that. elevation the have payoffs And hit doing see estate to option find much commercial I our marked. We'll the if we're sell math right. are, there's embedded sort to we to really then will want all we that. be is have will balances, Again, and as sell that commercial sort

Catherine Mealor

ratios, assume targeted the just XXX XXX you're those more [ is ]? I at? ] than Is below that it is capital [ -- of And looking it targeted like there

Robert Gorman

probably [ XXX sitting over now, [ in That's Yes, below if that company XXX a It's at what XXX holding at that will we're that can loan-to-deposit you the think ] ] the ]. little right sure. but But and on bring XX%. to modeling, about you the we're XXX we're level. [ [ we below good [ I XXX level actually see than Yes, bank reported ] a will bit down the XXX it great yes, look at key is be And in -- even that for trying still now, where right in the about shape. They'll that be lower shape ] be today. ratio slide lower

teams, who operate the to Positioned in and is particularly will open to which from business. key the grow. think they will we I markets be message the for Sandy to Spring join

Catherine Mealor

we NIM in Great. margin at of just there it fourth Union, then bit a more which for the like kind to looks how hikes. That's down helpful. little way impacts we really coming start stand-alone think basis a just on And the added any for XXXX? is as about that Atlantic Is should the quarter rate

Robert Gorman

of kind Yes, the quarter. really, Catherine, cut impacts renewing rates as you of fourth forecast. term impacted in we've the than that then of lower January. lower hadn't I is we income think there's up -- provide come funds part catch estimates we had some in getting can basis rates XX projected is lowered fixed see we're rates, have expansion in rate lower That then of earnings more expecting were in loans. And that Fed will terms market originally quarter. of other yields should an accretion will can And we fourth coming we fourth XXXX. temporary official until a some extra this the won't on you fixed impacted quarter -- the payments our in prepayments our rate call we and But coming out our guidance that margin or have that see new -- of as in to the we're originally points expect

deposit being together that on rates And a us allow margin bit we'll put deposit bringing that beta down, in call. that spend deposit our XXXX. more next to all the rate, aggressive talk on about we're should in down, and mid-XXs assuming So

Operator

with comes next Gunther from Inc. Our Stephens question Russell

Russell Elliott Gunther

potential would up does quickly follow us margin line the with to Could we on you for Catherine's million XX. on Just should sales the the Pro Slide about that $X number? Does of $XXX the for marks to sense question and expect you give think, I you of taken How shake $X deal close billion on referred where -- a not? NIM. the be billion out forma -- CRE thinking to include or that

Robert Gorman

from include it include -- And the accreting should well That marks the as both earnings in impact the as Yes. should much sale, perspective not as of CRE terms income? of...

Russell Elliott Gunther

$XXX billion $X million you of -- up contemplates loans sold. The to that

Robert Gorman

Yes, range be terms exactly. impact, the, margin think accretion we'd of coming projecting suggesting to it, XXX And see XXX probably we [ close call what then in I with the ] we're the and we're accretion in upon income. is through, the as

Russell Elliott Gunther

and to gears And then switching it. the growth loan Got loans outlook.

the is this at liked I Union. Spring -- way a much C&I bit very have core they a to competency think grow Atlantic Sandy struggled would

rate then playbook should for growth the And forma us on we about loan give overall Sandy pro you going overlaying could AUV So think forward. the how model the Spring.

John Asbury

is who's Ring, of our all Dave commercial businesses Head here.

Let me playbook. a say that we have

to refine time continue as spend We will the we begin to playbook with them. more

So show least your much, Dave, be but correct. too hand directionally at don't

David Ring

Yes.

lines. their advantage going the really transaction business is think into segmented I they've this already

C&I fee-based the now do really accre opportunity have [ ] already -- the businesses to we acquisition. they segment along an grow client we So new so like it's the segment like a do in

to to will acquisition. time, very XX% client remain probably Our comes seen over what XX% you've where of production new similar from playbook

John Asbury

the that would similar we I markets Yes. what see. And are say Maryland to

me definitely rephrase, we'll we to use we -- middle-market I positioned are are the we better call will So -- -- what playbook able companies. or should let better Virginia serve

is perhaps Sandy bit more there. So limited a

additional market. currently to that business, go they be but We lending, that to offer program, we'll hedging robust after asset-based into it finance, treasury table, way, rate can smaller management move a the exchange, treasury we bring offerings new have don't the some So intend we pure to we keep. capabilities interest foreign equipment continue certainly middle management By the services.

constrained in will we capacity So to time. I here. or of X, very any new to come real. be The is form the lend. in believe while -- revenue going that not be synergies they're tools all largest shape modeled are revenue do we But there synergy that have way, terms single to and table in I they'll think their bring

needed, what to more as it will about and excited they do also room that help I have think extent finds we to it we're So us the grow talent. talent add and together the that can attract team

Russell Elliott Gunther

then loans solvency the the you whether share of in deposit on math sold? could CRE you sold, profile All classes Just terms the of be the like geographies? the to potential ratio concentration. it's But there anything just of how asset one kind office the be of right. did or equation Great. ring loan last a characteristics in a me CRE for and for is loan of follow-up would Understand And in terms sale. to

John Asbury

down portfolio the to priced it the identified actually we've note. Russell, and Yes. individual

it's largest Just then up. And context, get to you the about ]. -- some think makes retail X,XXX to notes. you multifamily want categories and don't ] some and of will be give other, two I into XXX it's I [ [ which it miscellaneous kind

But ] Now things there's XXX identified sell clear thing talking right that for do didn't to clear, exceptionally we don't to have have to a I is to to do. [ performing we but so loans. good, be to very be liquid can about high-quality speak. very it market portfolio. those any, the wish we're notes We sell those some around, that, the is

selling. So exactly good of have sight we're what into very line we a

Operator

Moss Steve James. from comes Raymond question next Our with

Stephen Moss

real Just following to sell loans estate up plan you on here. the commercial

curious of to of of the type looking loans versus kind looking kind CRE life average life sell retain? to of you're you're Just the the of what's average loans the

Robert Gorman

It pretty on duration little I that of much there. pretty the line portfolio of in years would be much real estate line are duration. commercial life portfolio. the average X but loans And about shorter, the with a think is in these

Stephen Moss

just sorry. Rob, I'm total or the part the you're That's selling, portfolio,

Robert Gorman

and is duration X-year is The we're part a portfolio the that... total about in selling approximately

John Asbury

largely Yes. It's reflective.

Robert Gorman

of be for significantly. the sort from assets, a could shorter the it So -- market just but than these not it's little appetite X years

Stephen Moss

you then low the that I in ] is rate included? and in And talking Okay. included in terms guys the said, of just that [ -- think that that interest mark? XXs -- you are the mark Or about million guys not is $XXX

Robert Gorman

out in It X a a a negative -- you is mark. at part places, real in I the then have of Page the back, we of as it that deal, think, kind then and look if we have estate And total included we -- the XX. in And resettlement back positive.

Stephen Moss

quarter. came Okay. And you guys of during the Got sounds thinking here loan market today. in It just saw yields the in like then about you. terms

kind Just you curious I what here are guys you mean rate rate. the origination seeing of thinking kind how combined guys are new on of and about originations forma pro

Robert Gorman

Yes.

around are to ] of third new range quarter. coming XXX on Union the terms ] the In [ X in the loans [ Atlantic

third I about quarter. is the prior significant in Now the that X.XX a decline to Part and that from, that's in quarter. the [ second occurred term ] of due in rates think, down

XXX I think X-year points. basis fell almost the about

a back quarter. of the gone since that's the end Now little

new So that's loans. renewed we're and putting what on

Sandy's, we're if ], much pretty overall will, kind yield I of combine portfolio. of ballpark Sandy's the terms the with if you can mean you that you [ the two which loan or think portfolio, mark In in it talking about marks, about

So are really, through. loan those being mark, to play of terms at the market those expect would of you kind put rates see on in so

Stephen Moss

before Okay. And I meant to question. that ask

$X curious, closer last plan kind rate Or of reflective of And has the hedging Just portfolio? that the sell? loans [indiscernible] moved the to you price up weeks, X any looking the year couple on billion quite is a bit the since the guys to going sell, here loans you're just locking that also in doing are back to mark around -- of on loans you in a taking you're the is to

Robert Gorman

time, we and mark. good loan that. rates looked all quite We'll that that evaluate point reflective, go We of from the alternatives that. we haven't point of in call market locked on a talking hedging we've to if basis about Yes. in the into points, have hedging were think, still It's are were expensive. we at it's I hedging, But in from various in terms XXX think we're do the at anything But shape up room this here. rates definitively continue to view, of metrics it, reflected

Stephen Moss

here were you Okay. Fed the here curious on what deposit Got trends quarter. cut forward? you ahead you. guys like the basis sounds for just are what trends with expecting And deposit then of for guys cost bit Chris were a XX side. cost It point seeing little going

Robert Gorman

been down. seeing rates Yes, fairly money Fed from that in we're post BofAs. and with bringing the our We've market, some of the we're and been seeing down larger certainly truest our come and September CD market what actually They've rates, the both aggressive aggressive. in consistent wells players move

So well. being as we are aggressive

down we'll would As I be and modeling very mentioned, on cycle from aggressive we the deposit that probably here. be we are a through beta mid-XXs perspective, in the the downside

Operator

Our Bishop comes David from last Hovde with question Group.

David Bishop

strong Do upper close types obviously, get of Dan. are post of you transaction. of lot loan very guys here curious, nature materially the the following terms a to Obviously, that community you bank-oriented see upmarket bigger and that the move you in relationships changing I'm franchises, middle the both John, here you market.

you may curious change. business think model Just the

John Asbury

we would here doing on that's way The we'll standpoint on nothing think terms doing banking. commercial at is it about we're going not going Sandy keep of Spring from there's in everything that's today our

clients the what doing some middle as with we doing we're well deal keep we capacity the larger into will but market. have So to

some be of will have other capabilities interest. that We

competitive make will for actually us public have a more which example, We finance subsidiary, there. out

We the time there. In you Southeastern of industrial spent used up Baltimore asset-based to a lending terms run Baltimore I financing, of an office. of outstanding We for the had in area is a tax market. exempt America. know Bank example. And lot

region cetera, bring the got So the equipment have calling we of excellent just and finance a and equipment marine But of Maryland. Central of Baltimore but in sort commercial Greater and the things Baltimore area tugboats, finance just like industrial broadly, not an lot that is specifically Port asset-based as think see we and market. table to lending then out finance, et Washington barges, we and capabilities, opportunity, there,

to able the bit We move be will upmarket. a more and It's capital table to an they're or. be capabilities. additional to to not doing either some It's some bring and able everything tools

David Bishop

maybe And terms growth far retention in deposit Boston But thus national trends close? your just maybe it's maybe little and [indiscernible] of somewhat American a base, in bit. maybe Great. post there curious, obviously experience the some

Robert Gorman

side it. retention good really both really perspective. I has and deposit perspective a and -- client Yes, good. think about feel retail really the feel a been and We the good we commercial from

So there. like bullish, I we're material growing accounts. of report not feel to those actually we're some

John Asbury

have you comments what do on commercial. Dave the on any you're seeing

David Ring

Yes.

side, is only at the than commercial client lower National. client average the our higher On American for attrition slightly average than the rate historical rate legacy and actually attrition

of steady pretty seeing a business. -- book we're steady So

John Asbury

-- perceive guys great team enhanced some go down a improves bankers to ability capabilities a into the great demonstrate Western have we we've with because -- Carolina. in are right team team been market. going we've is Southern benefit the have our good we which and and middle who thing That only additional additional adding That's Virginia, we have a the seen clearly in of now able big that North will good in to been and mostly one ability a but because it as Central, commercial our head-to-head bankers the to scale to there be further Carolina to North recruit, to

David Bishop

color. paydowns one talk coming John, sounds I you some Got commercial it. that had up real seeing here, like that coming to maybe maybe where guess sight it of final estate about pressure appreciate some you're additional question, of line from? I

John Asbury

It's Yes. interesting.

it's just here our you recently a very So payoffs, as me. is through like a were a we've backlog. what and which, commercial time back, commercial Maria backup suppressed clear that is in Tedesco of look with estate been you a spending here team, of estate if real of normal going real below bit or it with or my mind, on have We period think

making sell nonrecourse in the been been they've insurance going course possibly institutional developers CMBS. And term are So will to like of that been these markets are kind companies they've waiting come rates that down properties. -- or departments Freddie their expectation programs, has Fannie the normal or refinance into because the or

term when rates rates And so cap go come down. down,

yields and that saw little last So a quarter, a to like to the it. treasury flood, they do tipping not decision I'm this make saying when point, but I'm were they there's in felt a saying we began dip of and ready bit just

capital And we want to more talking saw that as do It their viewed a feel in backlog sort to projects. thing they back, -- this to healthy go should because the ability additional we be their they the go is pickup. they of they from and This So know have them, want good thing. actually markets. as a their

to kind payoffs I'm bit -- of It's normal for there huge some I'm below be saying So do. beginning backup just This little normalized, process, will but this and you probably the This is a but a normal. there's as wave, want above is been it average what clears. think saying it's it's them to average. while of not

again seen we've pick So treasury yields up now.

sure. expectations, So maybe not that will change their

David Bishop

growth maybe high loan on sort growth that to opposed as single-digit maybe mid-single-digit an basis, of a all organic rate. that Putting does together, maybe imply a

curious Just maybe holistically.

John Asbury

to want do Rob, you speak to that?

Robert Gorman

Yes.

still calling we're for mid-single-digit growth, So Dave. loan

So even seeing despite here. we're some of the headwinds

John Asbury

of Yes, supportive we that. think the pipelines are

William Cimino

everyone, and on for quarter. talking with today's next you Dave, forward to today thanks, us look Thank all. Thanks, joining you call. We

Operator

Thank participation. you your for

a day. great have disconnect. now Everyone, You may

Sandy Spring Bancorp (SASR) 21 Oct 242024 Q3 Earnings call transcript