Sandy Spring Bancorp(SASR) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported record net income of $56.7 million or $1.19 per diluted common share for Q4 2020, compared to $28.5 million or $0.80 per diluted common share for Q4 2019, and $44.6 million or $0.94 per diluted common share for Q3 2020 [11] - Total assets grew by 48% to $12.8 billion compared to $8.6 billion in Q4 2019, primarily driven by the Revere Bank acquisition and participation in the PPP [14] - Loans and deposits grew by 55% and 56% respectively, with total loans at year-end of $10.4 billion compared to $6.7 billion at the end of 2019 [15] Business Line Data and Key Metrics Changes - Non-interest income increased by 58% or $13 million compared to the prior year quarter, driven by a 248% increase in mortgage banking activities and a 28% growth in wealth management income [18] - Commercial loans grew 52% or $2.6 billion, excluding PPP loans, while consumer loan growth was 11% [16] - Mortgage origination activity set a company record, exceeding $2 billion for the year, with 57% of production being refinance activity [19] Market Data and Key Metrics Changes - Non-interest-bearing deposits grew by 76%, while interest-bearing deposits grew by 47% [17] - The net interest margin was 3.38% for Q4 2020, stable compared to the same quarter in 2019 [21] - Non-performing loans increased to $115.5 million, representing 1.59% of outstanding loans, compared to $41.3 million or 0.62% at the end of 2019 [29][32] Company Strategy and Development Direction - The company plans to close three branches in Q2 2021 as part of ongoing branch rationalization efforts [52] - Management emphasized the importance of scale and operating leverage for future growth, focusing on enhancing service offerings in commercial enterprises and wealth management [121][126] - The company aims to maintain an efficiency ratio between 48% to 50% in 2021, anticipating a decline in mortgage revenues [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the capital position, with all key metrics holding steady or improving slightly due to strong earnings [49] - The company remains focused on managing expenses and investing in technology for future growth [28] - Management acknowledged the challenges posed by the pandemic but highlighted the resilience shown in integrating acquisitions and supporting clients [9][54] Other Important Information - The company established a contingent liability of $1.6 million to reserve against unfunded commitments due to the adoption of CECIL [26] - The company donated $600,000 to support COVID-19 response efforts at local hospitals [54] - The company has hired over 150 new employees since transitioning to a remote work environment [56] Q&A Session Summary Question: Any unusual activity in the other fee line this quarter? - Management noted heightened activity in extension or commitment fees and a significant amount of swap fee income of about $900,000, suggesting a reasonable run rate for other fees [64][66] Question: What is the outlook for mortgage production? - Management indicated that about 60% of production in the quarter was refinance, with a net gain on sale margin of approximately 278 basis points, which is higher than the previous quarter [71][72] Question: Can you provide details on the hotel book and non-accruals? - Management explained that the majority of deferrals are within the hotel portfolio, with $132 million still in deferral and $180 million having resumed normal payments [76][81] Question: What is the outlook for the margin and balance sheet restructuring? - Management anticipates the margin to remain steady in the high 330 to 340 basis points range, with continued efforts to let high-priced CDs run off [88][90] Question: What are the plans for share buybacks? - Management stated that share buybacks would be opportunistic, based on market conditions rather than a set timeframe [95][96] Question: Any thoughts on M&A activity? - Management indicated that while M&A will continue to be part of the growth strategy, there are no immediate plans for acquisitions in 2021 [98]