Sandy Spring Bancorp(US:SASR)2022-07-22 00:13Financial Data and Key Metrics Changes - The company reported net income of $54.8 million, or $1.21 per diluted common share for Q2 2022, compared to $57.3 million or $1.19 per diluted common share for Q2 2021, and $43.9 million or $0.96 per diluted common share for Q1 2022 [10] - Core earnings were $44.2 million, down from $45.1 million for the linked quarter and $58.4 million for the prior year quarter, primarily due to the provision for credit losses and a decline in mortgage banking income [10][20] - Total assets increased to $13.3 billion, a 3% increase year-over-year from $12.9 billion, and a 2% increase from the linked quarter [12] - The provision for credit losses was $3 million, reflecting significant growth in the loan portfolio and management's assessment of recession probability [10][11] Business Line Data and Key Metrics Changes - Total loans, excluding PPP, increased 17% to $10.8 billion compared to $9.2 billion at June 30, 2021, with commercial loans growing by $1.3 billion or 17% [13] - Funded commercial loan production increased 60% to $805 million compared to $503 million for the same quarter of the prior year [14] - The consumer portfolio decreased by 7% year-over-year, while the pipeline remained robust at $1.5 billion [15] Market Data and Key Metrics Changes - Year-over-year deposits increased by 1%, driven by a 3% growth in noninterest-bearing deposits [17] - Interest-bearing deposits remained relatively unchanged at $6.8 billion [17] - Noninterest income increased by 34% or $9 million compared to the prior year quarter, primarily due to a $16.7 million gain from the sale of the insurance business [20] Company Strategy and Development Direction - The company completed the sale of its insurance business to enhance noninterest income and established a partnership with HUB International for improved insurance offerings [9][20] - The management emphasized a focus on strategically growing deposits to support continued loan growth [8] - The company aims to maintain a balance between commercial and commercial real estate transactions in its pipeline [15] Management Comments on Operating Environment and Future Outlook - Management acknowledged uncertainty in the marketplace but expressed confidence in client readiness to grow and the company's ability to support them [6][7] - The management expects continued solid loan growth, with a target of 8% to 10% growth for the year, although competitive pressures may affect this [35] - The company is closely monitoring asset quality and expects to maintain strong credit metrics despite potential recessionary pressures [26][27] Other Important Information - The tangible common equity ratio decreased to 8.45% of tangible assets, attributed to share repurchases and rising interest rates impacting the value of securities [28] - Noninterest expense increased by 3% compared to the prior year quarter, including transaction costs related to the sale of the insurance business [25] - The company received multiple workplace recognitions, including being named a top workplace by the Washington Post [30] Q&A Session Summary Question: What is driving the recent loan growth? - The primary driver of loan growth is the engagement of the broader team post-PPP, with a strong pipeline of opportunities despite local market disruptions [33][34] Question: How does the company view deposit growth and costs moving forward? - The company plans to match deposit growth with expected loan growth and may become more aggressive in pricing to remain competitive [40][41] Question: What are the expectations for expense growth in the second half of the year? - The company anticipates a year-over-year expense growth of around 4% to 5%, contingent on successful hiring and strategic initiatives [46][47] Question: How has the company managed to reduce nonperforming loans? - The reduction in nonperforming loans is attributed to resolving sizable relationships and conducting thorough portfolio reviews [59][60] Question: How does the company plan to handle deposit rates amid rising interest rates? - The company has been managing deposit rates on a case-by-case basis and anticipates needing to adjust rates more aggressively in response to Fed actions [61][62] Question: What is the impact of the insurance business sale on future revenues? - The insurance business contributed approximately $7 million in revenue and $6 million in expenses in 2021, which will be removed from future models [66]