Sandy Spring Bancorp(US:SASR)2024-04-23 23:57Financial Data and Key Metrics Changes - The company reported net income of $20.4 million or $0.45 per diluted common share for Q1 2024, down from $26.1 million or $0.58 per diluted common share in Q4 2023 and $51.3 million or $1.14 per diluted common share in Q1 2023 [48] - Core earnings for the current quarter were $21.9 million or $0.49 per diluted common share, compared to $27.1 million or $0.60 per diluted common share in the previous quarter and $52.3 million or $1.16 per diluted common share in the same quarter last year [49] - Total provision for credit losses was $2.4 million, with a provision directly attributable to the funded loan portfolio of $3.3 million, compared to a credit of $2.6 million in the previous quarter [50][51] Business Line Data and Key Metrics Changes - Total assets decreased by 1% to $13.9 billion, while total loans remained stable at $11.4 billion [52] - Investment in commercial real estate loans decreased by $106.5 million or 2%, while the AD&C portfolio grew by $101.3 million or 10% [52] - Commercial loan production totaled $241 million, yielding $168 million in funded production, compared to $245 million and $153 million in the previous quarter [54] Market Data and Key Metrics Changes - Deposits increased by $230.7 million or 2% to $11.2 billion, with interest-bearing deposits increasing by $326.9 million [57] - Non-interest income increased by 11% to $18.3 million compared to the linked quarter, primarily due to wealth management income [65] - The level of non-performing loans to total loans improved to 74 basis points from 81 basis points in the previous quarter [69] Company Strategy and Development Direction - The company is focused on improving profitability, managing expenses, and reducing commercial real estate exposure while diversifying growth in other loan categories [46] - There is a strategic shift towards activities driving core deposits, with a focus on deepening relationships to bring in low-cost deposits [61] - The company plans to maintain a disciplined approach to pricing to improve margins over time, with expectations of margin expansion in the future [67][73] Management's Comments on Operating Environment and Future Outlook - Management noted the challenges posed by shifting economic forecasts, uncertain interest rates, and external geopolitical factors, but emphasized solid fundamentals [47] - The company anticipates that the Fed will cut rates once late in the year, with further cuts expected in 2025, which should accelerate margin expansion [68] - Management expressed confidence in overall credit quality and the ability to navigate the current operating environment [57] Other Important Information - The company reduced total brokered deposits by $55.8 million during the quarter, with core deposits representing 93% of total deposits [60] - Non-interest expense increased by $900,000 or 1% compared to the linked quarter, with a non-GAAP efficiency ratio of 66.73% [74] - The company introduced a new DDA product aimed at clients in the high-yield savings segment to deepen relationships [62] Q&A Session Summary Question: What drives the increase in net charge-offs? - Management indicated that the increase in net charge-offs is difficult to predict, but they typically expect around five basis points of annualized net charge-offs [13][14] Question: Can you provide an update on the health of the D.C. market? - Management noted that a potential reduction in government office space could have a material impact on office properties in D.C. and surrounding areas [38] Question: How is the company managing loan growth expectations? - Management stated that they expect commercial loan growth in the range of 3% for the second quarter, with a focus on C&I lending [25][54] Question: What is the outlook for deposit costs? - Management mentioned that deposit costs have stabilized and they do not expect significant increases moving forward [84] Question: What is the company's view on share buybacks? - Management expressed that while repurchasing shares makes sense, preserving capital is the priority given current uncertainties [94]