Sandy Spring Bancorp(US:SASR)2022-10-20 20:52Financial Data and Key Metrics Changes - The company reported net income of $33.6 million or $0.75 per diluted common share for Q3 2022, down from $57 million or $1.20 per diluted common share in Q3 2021 and $54.8 million or $1.21 per share in Q2 2022 [10] - Core earnings were $35.7 million compared to $44.2 million for the linked quarter and $58.2 million for the prior year quarter, primarily due to the provision for credit losses and expected decline in mortgage banking income [11] - Pre-tax, pre-provision income for the quarter was $64.1 million, a 6% increase after adjusting for prior quarter gains [12] - The provision for credit losses was a charge of $18.9 million, compared to a credit of $8.2 million for the prior year quarter [13] Business Line Data and Key Metrics Changes - Total loans excluding PPP increased 21% to $11.2 billion compared to $9.3 billion at September 30, 2021, with commercial loans net of PPP growing by $1.6 billion or 21% [14] - Consumer loan portfolio decreased 6.2% year-over-year, while commercial pipeline was $1.3 billion compared to $1.7 billion at the linked quarter end [17] - Non-interest income decreased by 31% or $7.5 million compared to the prior year quarter, primarily due to economic impacts on mortgage banking and wealth management income [22] Market Data and Key Metrics Changes - Total assets were $13.8 billion, a 6% increase year-over-year, and 10% excluding PPP balances [14] - Deposit growth has been challenging, with deposits decreasing 2% over the past 12 months [17] - The net interest margin for the current quarter was 3.53%, slightly higher than the prior quarter, but expected to compress to the low 330s in the coming quarters [20][21] Company Strategy and Development Direction - The company is focused on growing client relationships and investing in technology and human capital while managing credit quality and operating costs [8] - Plans to launch a sophisticated online account opening platform in early 2023 to enhance client experience [19] - The company aims for an 8% to 10% loan growth expectation for 2023, driven by existing and new client demand [74] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the unprecedented environment due to inflation and recession expectations but remains focused on long-term growth [7] - The increase in provision for credit losses was driven by growth and an assumed greater probability of recession [28] - Management sees no inherent signs of weakness in the major sectors of the loan portfolio despite the increase in provision [28] Other Important Information - The tangible common equity ratio decreased to 7.98% of tangible assets, attributed to share repurchases and rising rate impacts [32] - The company paid a special one-time bonus to employees in August to support them amid inflation [35] - Sandy Spring Bancorp ranked number 23 among the 300 largest publicly traded banks in the country [36] Q&A Session Summary Question: Margin forecast and deposit costs - Management expects net interest margin to be in the low 330s due to rising funding costs and the need to replace wholesale funding with deposits [40][41] Question: Deposit growth strategy - Growth is expected from money market accounts and CDs, with efforts to stabilize DDA balances [46] Question: Credit quality outlook - The large provision this quarter was influenced by growth and macroeconomic factors, with expectations for a potential decrease in future provisions [61][62] Question: Loan growth expectations - Management anticipates loan growth in the range of 8% to 10% for 2023, contingent on funding capabilities [74] Question: M&A activity - The company continues to explore M&A opportunities but has no immediate updates [80]