Sandy Spring Bancorp Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 24, 2023

There are 8 speakers on the call.

Operator

Welcome to today's Sandy Spring Bancorp Inc. Earnings Conference Call and Webcast for the 3rd quarter. My name is Jordan, and I'll be coordinating your call today. I'm now going to hand over to Dan J. Schrider, President and CEO to begin.

Operator

Dan, please go ahead.

Speaker 1

Thanks, Jordan. Good afternoon, everyone, and thank you for joining our call to discuss Sandy Spring Bancorp's performance for the Q3 of 2023. This is Dan Schrider and I'm joined here by my colleagues Phil Mantua, Chief Financial Officer and Aaron Kaslow, General Counsel and Chief Administrative Officer. Today's call is open to all investors, analysts and the media. There's a live webcast of today's call and a replay will be available on our website later today.

Speaker 1

Before we get started covering highlights from the quarter and then moving to your questions, Aaron will give the customary Safe Harbor statement.

Speaker 2

Thank you, Dan. Good afternoon, everyone. Sandy Spring Bancorp will make forward looking statements in this webcast that are subject to risks and uncertainties. These forward looking statements include statements of goals, intentions, earnings and other expectations, estimates of risks and future costs and benefits, Assessments of expected credit losses, assessments of market risk and statements of the ability to achieve financial and other goals. These forward looking statements are subject to significant uncertainties because they are based upon or affected by management's estimates and projections of future interest rates, market behavior, other economic conditions, future laws and regulations, and a variety of other matters, which by their very nature are subject to significant uncertainties.

Speaker 2

Because of these uncertainties, Sandy Spring Bancorp's actual future results may differ materially from those indicated. In addition, the company's past results of operations do not necessarily indicate its future results. Thanks,

Speaker 1

Aaron. When we spoke with you last quarter, we underscored that some of our most pressing priorities included growing core funding, improving liquidity and expanding our client base. And I'm pleased to report today that we're showing impressive results on all of those fronts. These gains are not only important to our performance today, but they pave a way for us to continue to deepen and expand our client base in the future. We're also moving the needle on key metrics such as reducing our loan to deposit ratio and commercial real estate concentration as well as our reliance on non core funding.

Speaker 1

And additionally, our credit quality remains very strong as we enter the season of greater economic uncertainty. And to add to this momentum, we are preparing to launch this month a more sophisticated, secure and user friendly digital banking platform. This platform will give our clients more control and make it easier for them to bank when and how they want to bank with us. This enhancement Comes on the heels of an improved online account opening platform that we launched just 6 months ago. Between our highly competitive products, Talented bankers and now seamless account opening process, we achieved over 1% client base growth this quarter representing over 1500 new clients to our bank.

Speaker 1

So we're already gaining traction and seeing results and we're confident these investments will continue to unlock additional growth opportunities for us. So So with that, let's review Q3 financial results. Today, we reported net income of $20,700,000 or $0.46 per diluted common share for the quarter ended September 30, compared to net income of $24,700,000 or $0.55 per diluted common share for the 2nd quarter and $33,600,000 or $0.75 per diluted common share for the Q3 of 2022. The decline in the current quarter's net income compared to the linked quarter was a result of the one time pension settlement expense associated with the previously disclosed termination of the company's pension plan, coupled with lower net interest income. Current quarter core earnings were $27,800,000 or $0.62 per diluted common share compared to $27,100,000 or 0.60 per diluted common share for the previous quarter and $35,700,000 or $0.80 per diluted common share for the quarter ended September 30, 2022.

Speaker 1

The increase in core earnings compared to the previous quarter was a result of the lower provision for credit losses, lower salaries and employee benefit expense and lower marketing expenses offset by reduced net interest income. The provision for credit losses directly attributable Funded loan portfolio for the current quarter was $3,200,000 compared to $4,500,000 in the prior quarter and $14,100,000 in This quarter's provision was primarily a result of increases in individual reserves on a few commercial lending relationships, which were partially offset by a qualitative adjustment related to the reduced probability of recession. Additionally, during the current quarter, the company reduced its reserve Shifting to the balance sheet, total assets remained stable at $14,100,000,000 compared to $14,000,000,000 at June 30. Total loans declined by $69,300,000 1% to $11,300,000,000 at September 30, compared to $11,400,000,000 at June 30, 2023. Total commercial real estate and business loans declined $79,200,000 quarter over quarter due to a $107,000,000 or 10% in the AD and C portfolio.

Speaker 1

Investor and owner occupied commercial real estate loan portfolios remain relatively unchanged And commercial business loans in line increased $31,100,000 or 2%. Residential mortgage loans grew $16,000,000 or 1% mainly due to the migration of construction loans into the permanent residential mortgage portfolio. Overall, the loan portfolio mix remain relatively unchanged compared to the previous quarter. Commercial loan production totaled 323,000,000 yielding $96,000,000 in funded production. This compared to commercial loan production of $313,000,000 yielding $160,000,000 in funded production in the Q2 of the year.

Speaker 1

Given softer loan demand as a result of both the rate and economic environment, We expect funded loan to production to fall between $100,000,000 $200,000,000 per quarter over the next couple of quarters. While we continue to focus on the deposit acquisition and retention side, we're closely monitoring loan demand and core deposit growth to determine the appropriate Pages 22 through 24 of our supplemental deck provide more detail on the composition of our loan portfolios. The granularity on our commercial real estate portfolio and specific commercial real estate composition in the urban markets of DC and Baltimore. Shifting to deposits, total deposits increased $192,100,000 or 2 percent to $11,200,000,000 compared to $11,000,000,000 at June 30. During this period, total interest bearing deposits increased $258,100,000 or 3%, while non interest bearing deposits line $66,000,000 or 2%.

Speaker 1

Growth in interest bearing deposit categories was driven by savings accounts and core time deposits, which increased by $277,400,000 $263,700,000 respectively. These increases were partially offset by the $155,800,000 decrease in brokered time deposits as we reduced our reliance on wholesale funding sources and the $177,500,000 decrease in money market accounts. So excluding broker deposits, total deposits increased $349,500,000 or 4% quarter over quarter Represented 90% of total deposits compared to 88% in the linked quarter, reflecting the continued stability of the core deposit base. The deposit growth during the quarter resulted in the loan to deposit ratio declining to 101% at September 30 from 104% at June 30, 2023. Total uninsured deposits at September 30 were approximately 33% of total deposits.

Speaker 1

As I shared in prior quarters, we continue to offer our customers reciprocal deposit arrangements, which provide FDIC deposit insurance for accounts that would otherwise to exceed deposit insurance limits. During the quarter ended September 30, 2023 balances in the company's reciprocal deposit accounts Increased by $131,600,000 Slide 17 of the supplemental deck provides more color on our commercial deposit portfolio, which represents 58% of total core deposits, the majority of which is in a combination of non interest bearing and money market accounts. With an average length of relationship of 9.5 years, the portfolio is well diversified with no concentration in a single industry or single client. Likewise, on Slide 19 of the supplemental deck, you can see the breakdown of our retail deposit book. With an average length of 11.5 years, The retail deposit portfolio represents 42% of our core deposit base with no single client accounting for more than 2% of total deposits.

Speaker 1

Total borrowings declined by $57,800,000 or 4% at September 30 compared to the previous quarter, driven by a $50,000,000 in FHLB advances. The outstanding balance of borrowings through the Fed's bank term funding program remained unchanged at $300,000,000 at quarterend. At September 30, contingent liquidity which consists of available FHLB borrowings, Fed funds, Funds through the bank term funding program as well as SX cash and unpledged investment securities totaled $6,100,000,000 for 168 percent of uninsured deposits. At September 30, total cash and cash equivalents were $717,600,000 an increase of $287,500,000 or 67% compared to the linked quarter, primarily a result of the strong deposit growth I mentioned earlier. Non interest income for the Q3 of 2023 increased by 1% or 200,000 compared to the linked quarter and grew by 3% or $500,000 compared to the prior year quarter.

Speaker 1

The current quarter's increase was driven by higher wealth management income and higher lending related fees and was partially offset by lower BOLI income due to mortality proceeds received in the 2nd quarter. Income from mortgage banking activities decreased $135,000 compared to the linked quarter and total mortgage loans grew 47,000,000 Future levels of mortgage gain revenue is expected to fall between $1,000,000 $1,500,000 in the 4th and 1st quarters. Wealth management income increased $360,000 to $9,400,000 and assets under management at quarter end totaled $5,600,000,000 representing a 3% decrease since June 30. For the Q3 of 2023, the net interest margin was $255,000,000 compared to $273,000,000 for the Q2 of 2023 $353,000,000 for the Q3 of 2022. As we shared last quarter, the margin continues to be impacted by high market rates, fierce deposit competition and clients moving excess funds out of non interest bearing Compared to the linked quarter, the rate paid on interest bearing liabilities rose 36 basis points, while the yield on interest earning assets increased 8 basis points, resulting in the quarterly margin compression of 18 basis points.

Speaker 1

The margin for the month of September came in at 2.5%. We anticipate the margin will compress in the high 2.40s in the 4th quarter and potentially maintain a similar level in the Q1 of 2024. We would look for 5 to 7 basis points of margin expansion per quarter for the rest of 20 This expectation is predicated on 1 more Fed bump of 25 basis Before year end and then no further increases or any rate cuts throughout 2024. Non interest expense increased $3,300,000 or 5% compared to the linked quarter and 6.7 1,000,000 or 10% compared to the prior year quarter. As I stated earlier in the call, this quarter included a one time 8,200,000 dollar pension settlement expense related to the termination of our defined benefit plan.

Speaker 1

And the previous quarter included $1,900,000 of severance related expense associated with staffing adjustments. So excluding these items from the current and previous quarter, total non interest expense declined by $2,900,000 or 4%, driven by lower expenses associated with salaries, employee benefits expense and marketing. Excluding the pension settlement costs, 3rd quarter expenses totaled approximately $64,300,000 The 4th quarter run rate of expenses We'll include some additional spends related to our technology initiatives as certain capitalized costs and related current period costs are expected to be recognized. 2024 expense levels are currently being evaluated as part of our annual planning process with the current expectation for overall core expense, excluding the pension and severance related costs to increase by no more than 3% to 4% on a year over year basis. The non GAAP efficiency ratio was 60.91 for the Q3 of 2023 compared to 60 have been negatively impacted by the declines in net revenue and growth in non interest expense as we continue to invest in the future.

Speaker 1

So while the recognition of our technology investments comes at an inopportune time when revenue is under pressure, we will be well positioned to grow using newly introduced Digital capabilities as the rate environment improves, the shape of the yield curve normalizes and the economy expands. Let's shift to credit quality. Overall, credit quality remained stable as the ratio of non performing loans to total loans was 46 basis points compared to 44 basis points last quarter. These level of non performers compare to 40 basis for the prior year quarter and continue to indicate stable credit quality during this period of economic uncertainty. At September 30, non performing loans totaled $51,800,000 compared to $49,500,000 at June 30 $44,500,000 at September 30, 2022.

Speaker 1

Total net charge offs for the current quarter amounted to $100,000 compared to $1,800,000 for the Q2 of 20 $3,500,000 of net recoveries in the Q3 of 2022. The allowance for credit losses was $123,400,000 or 1.09 percent of outstanding loans and 2 38 percent of non performing loans, compared to $120,300,000 or 1.06 percent of outstanding loans and a coverage ratio of 2 43% at the end of the previous quarter. At September 30, the company had a total risk based capital ratio of 14.85, A common equity Tier 1 risk based capital ratio of 10.83, a Tier 1 risk based ratio of the same 10.83 and a Tier 1 leverage ratio of 9.5% and all of these ratios remain in excess of the mandated minimum regulatory requirements. And before we move to your questions, I'd like to acknowledge a leadership announcement that we made last month. Our Chief Financial Officer, Phil Mantua I will retire from the bank at the end of March 2024.

Speaker 1

As you all know on the call throughout Phil's 24 year, 10 year, he's played an instrumental role in And we all want to extend our sincere appreciation and congratulations to Phil. And we are actively interviewing for his successor. So Please stay tuned. And with that, Jordan, we can move to our first question.

Operator

Thank Our first question comes from Russell Gunther of Stephens. Russell, the line is yours.

Speaker 3

Hey, good afternoon, guys.

Speaker 1

Hi, Russell. Hey, Russell.

Speaker 3

Hey, I wanted to start on loan balances. So I hear you on the funded production for the next Quarter is down a bit from where we've been in the past few. What are the guideposts we should be looking for in terms of when you might be able to hit the switch to more net loan growth. Deposits are improving, wholesale funding is coming down, but what more do we need to see?

Speaker 1

Yes. Russell, this is Dan and Phil might chime in as well. The last couple of quarters we've kind of targeted Funded loan production to kind of match runoff as we were working on improving the liquidity position, which we've done. Our appetite for funded loan production is higher than that 150 now. I think it's really more of a function of Demand and demand that is rationally priced.

Speaker 1

So we could probably today move to $250,000,000 in funded production, which would net out at about $100,000,000 of growth a quarter. But demand the uncertainty in the economy is really softened demand and there are There are still some players on the smaller bank side that are not pricing commensurate with today's yield curve. And so We're picking our spots and as soon as we see availability in the market, we're prepared today to increase that

Speaker 3

Okay. That's very helpful color, Dan. Thank you. Just switching gears to the margin, I appreciate the outlook there. Given the higher state of funding to date, how would you think about the NIM Absent a Fed hike and then kind of similarly asked question, what do rate cuts mean to you?

Speaker 3

And I know that that's not something you're currently

Speaker 4

Yes, Russell, this is Phil. I don't know that that next Our anticipated 25 basis point move really or absence thereof really makes a whole lot of difference in our current thinking about where the NIM goes in the next quarter or 2. We have already just in terms of Now having experienced nice pickup in growth in categories that we would like to see on the deposit side, Pull back on some of the rates that we're currently offering on the high end. So for example, we have been running a 5.5% CD offering, I think it was an 8 month CD for a number of months. We pulled that back completely and other things by at least 50 basis points to test to see whether or not we can try to preserve a little bit of margin here even in the face of the possibility of the Fed making that move.

Speaker 4

So either way, I think that The guidance here into that high 2.40s takes kind of all of that into consideration. And then from the standpoint of Looking into 2024, as Stan mentioned in his comments, without anything else going on from the Fed standpoint, 5 to 7 basis Certainly, that can be accelerated when and if they decide to cut rates because I think we would be pretty Quick to try to follow that downward trend. And then that expansion might be more like double what We suggested 5% to 7% being more like 10% to 15%. And I think we've commented on that in the past as it relates to a margin pickup quarter over quarter. Like what we saw on the way up, depends on how quickly they cut and what chunks they cut on the way down, which probably clearly won't be as nearly as Aggressive is what we saw on the way up.

Speaker 3

All right, Phil. Thank you. And then just last one for me on the expense side of things. Sorry if I missed it, but your thoughts on 4Q, I mean, great result this quarter getting to cost saves. Just what type of Step up do you expect to see from the digital transformation that comes online?

Speaker 3

And I know you're working through 2024, But just bigger picture, does this tech spend step you up beyond perhaps just an inflationary growth rate? Or How should we directionally think of non interest expense going forward?

Speaker 4

Yes, Russell, good question. And So the technology piece that relates to what's coming on board here in the Q4 as we put things Endymotion is probably on a run rate basis about $1,000,000 quarter to quarter. And then In addition to that, in the Q4, there are costs of just doing this, the initial kickoff, which is probably worth another $500,000 That part shouldn't reoccur, but the cost is related to just the ongoing Element of bringing that what's been on a CapEx basis into the run rate is probably about $1,000,000 into the Q4 and beyond. And then from that point on, looking at the inflationary piece as well as where we've guided towards that 3% to 4% into year over year relative to 2024 to 2023. So that's been taken into consideration.

Speaker 3

Okay, great. Thank you, Phil. That's it for me guys. Thanks for taking my questions.

Speaker 4

Sure. Thanks Russell. Thanks Ross.

Operator

Our next question comes from Casey Whitman of Piper Sandler. Casey, please go ahead.

Speaker 5

Hey, good afternoon.

Speaker 3

Hi, Casey.

Speaker 5

Just going back to the margin, maybe If we just switch gears to the asset side,

Speaker 6

1st, can you kind

Speaker 5

of ballpark where new loan production is coming on or where it was in the month of

Speaker 4

September. Yes, I'd be glad to. So overall commercial pricing, the Average yield on all production during the month of September was around 8.25%, and it has been at that level for a couple of months here. And so we would anticipate, again, given that we want to price Appropriately for the growth or the production that we are willing to take on, we'd like to see it in That same vein. And with that, about 80% to 85% of that production at those levels It was variable or floating rate in nature.

Speaker 5

Okay. And so maybe can you walk us through sort of the quarterly repricing we can expect to see on the loan side just in the static rate environment to get to sort of your margin expectations for 2024?

Speaker 4

Yes. So on the asset side, as it relates to what would help feed that 5 to 7 basis points to the margin On the loan side, it would probably be, if we look into The Q4 and beyond, we probably see a pickup of about 8 to 10 basis points In the next quarter and then probably similar to the margin 5 to 7 basis points on a quarter by quarter basis.

Speaker 5

All right. And then switching gears, just as the environment maybe stabilizes a bit, Just given your growth outlook, what's your current appetite for buybacks at the stock price? Or what would it take for you to get more aggressive there?

Speaker 1

Yes. Casey, this is Dan. I think we mentioned the Last time, we continue to have an authorization out there and it's probably more a function of Looking forward to the next couple of quarters and making sure we feel as confident as we do today with regard to the credit environment. So I would say sitting here at the moment, just make there's a lot of uncertainty out there. It's become more uncertain with world events and so I think capital is pretty important, but we could feel different in the short run and be active particularly at where we're trading right now.

Speaker 5

Understood. And just going back, this is just thinking about the loan deposit ratio. Obviously, that came down this quarter. But Do you have a spot where you're kind of comfortable with that running? And how does that kind of play into the outlook, the loan growth outlook?

Speaker 4

Yes, Ketan, this is Phil. I think we're very comfortable right where we are today, we're hovering around 100%. I think as we move forward in time and not any time being immediately thereafter, We would probably want to manage it further down into the mid-ninety percent range, but again, Not any quarter in the more current couple of quarters out. So, I think you would probably expect with what we were just talking about margin wise and otherwise to see it stay in around 100% kind of around 100% level.

Speaker 5

Okay. Makes sense. Thank you.

Speaker 2

You're welcome, Casey.

Operator

Our next question comes from Catherine Mealor of KBW. Catherine, the line is yours.

Speaker 6

Thanks. I just wanted to ask a quick Clarifying question on the expense guide you gave Dan. So when you said 3% to 4% growth in 2024 for 2023, I thought you It included the pension expense or did you mean that off of an operating expense number?

Speaker 1

Yes. Yes. I was netting out the pension expense number.

Speaker 6

Great. Okay. So take that out and then that's all right. No, I just want to I don't want to grow it up to the Yes. Okay, great.

Speaker 6

Joe, that is

Speaker 4

You want to take the pension and And the severance costs from this year, which are roughly $10,000,000 away from the base for 23% and then applied 3% to 4% growth rate on that number.

Speaker 6

Great. Okay. Okay. And are there any and that's still Relative to the to where your revenue is, it still potentially could give you a year of negative operating leverage just depending how things go with the margin. Are there other things you can do on the expense side If revenue still seems really challenging next year or is there just do we just need to kind of wait until We get in a better rate environment to really see us pull back into positive operating leverage mode.

Speaker 1

Yes. Catherine, there are always things that we can Continue to look at and we will. I don't have anything to announce today, but between continued looking at Headcount in certain areas, branch rationalization, those things tend to take a little more time. I think the real turn performance is going to come in a better rate environment in all reality.

Speaker 4

Yes, I would agree. I mean, that's kind of things that Dan is suggesting and maybe some other things that we could consider Kind of what was alluded to in the part of the planning process comment early into the call was we're evaluating all the different things that we might Have at our disposal, but I think when it's all said and done, the puts and takes, I think that's kind of where we think we're going to end up.

Speaker 6

Okay, understood. And then on credit, you talked about just a couple of specific reserves coming on And seeing are some commercial loans. Can you just give us some commentary on kind of what you're seeing on those credits that are seeing incremental stress? And then any change to classifieds or criticized loans that we should be aware about this quarter as well?

Speaker 1

Yes. Trends in criticized classifieds still are non events, Catherine, I think the I hate to refer to anything happening in credit as a one off because it just comes back to like bite you in the butt. But what we are seeing thus far are, I'll give you a little color, Real estate loan that owner gets notified that a tenant is not going to renew, but that's Still a year out and we're recognizing that if they don't then there could be cash flow Issues and as a result, taking a conservative approach to setting aside some reserves. That's an example. We're not seeing anything Thematically, if you think about our book, we've talked a lot about office, which for us is Predominantly suburban with minimal exposure in the urban areas and most importantly mostly professional office space with number of units that are a little easier to turn as opposed to large floor plate type of exposure.

Speaker 1

So I think The risk we're trying to understand and managing that is probably more around rates higher for longer as that book reprices Over the course of time than what we're seeing in from an occupancy standpoint in near term. Our hospitality portfolio, I think weathered very well during the pandemic and that continues to perform. Our retail portfolio, which is the largest exposure within Cree also performed extremely well during the pandemic when it was under some pressure When everybody was locked up at home. So we're continuing to look out 12 months, 24 months, it's what's coming on the Pricing side and getting ahead of that and then doing the same with we have a multifamily portfolio That with some coming out of construction into perm and monitoring those absorption rates compared to what Was expected and some of those are getting extended out, but we've got credible borrowers and guarantors that can stand behind that. So I think it's realistic that over the course of time if we end up in a more of a credit cycle, there's going to be scratches and dents as we drive We're not seeing anything dramatically that gives us concern about our reserve levels, with you if we see things changing as we have been in

Speaker 3

the past.

Speaker 6

Great. And then maybe if I could ask one last one. Just on Deposit Remix, it was nice to see the non interest bearing mix shift flow a little bit from the levels we've seen earlier in the year. What's your I know it's hard to know, but what's your gut on where that kind of percentage as a percentage of deposits balances out?

Speaker 4

Yes. Casey, this is Phil again. I think I'm sorry, Catherine. My bad. I think we feel like that the DDA piece Has stabilized now to a good place.

Speaker 4

I'm not sure we anticipate a lot of growth necessarily there in the short term, But I also think we're pretty confident we're not going to see much more of the to your question, the remix of the DDA Declining from its current levels around 27%, 28% of total deposits. If anything, the remix Kind of behind the scene is that we continue to allow the brokered wholesale money to run down and run off the balance sheet, which is already occurring through the current quarter where we've already had an additional $100,000,000 roll off and there's another $150,000,000 Scheduled to mature that we don't plan to reengage on because we're still seeing Really good growth in those other interest bearing categories. So that's probably more where we see The remix and if anything related to DDA, but again, we feel good about where it's landed and that's fairly stable.

Speaker 6

Great. All right. That's all I got and congrats on your retirement, Phil.

Speaker 4

Thank you.

Speaker 1

Thank you, Catherine.

Operator

Our next question comes from Manuel Mavas of D. A. Davidson. Manuel, please go ahead.

Speaker 7

Hey, guys. In your NIM outlook for kind of the turn into next year, Does that assume any difference in the rate of growth on the loan side?

Speaker 4

No, not really. Manuel, this is Phil. No. I think that's implied at this point as well is the And general guidance as it relates to just matching off with funding at the moment.

Speaker 7

Got it. It's all driven It's all driven by that. It's just not a real price there.

Speaker 3

Okay. Correct. And

Speaker 7

Should we just kind of assume a beta that kind of matches that guide? Do you have like kind of a rough The positive beta peak with that NIM assumption?

Speaker 4

Yes. I would say that in terms of Looking at the forward aspect of the deposit side, I mean, it's clearly, As it has been here, a much slower pull in terms of The overall movement in the cost of interest bearing deposits. So I would think it's Again, similar to 4, 5 bps quarter to quarter within that on the funding side as well. Just again because of some of the remix that I mentioned earlier and our desire to try to control it at this point Given my earlier comments about pullback on the rates.

Speaker 7

No, that was great. That's going to lead into kind of my next question is, So you pulled back on rates and it sounds like you're easily feeling good about running off some of the broker deposits. So, like you pulled back on rates and you're still seeing success on the promotions is what I'm trying to get to.

Speaker 4

Yes. I mean, that's still got to play itself out. That's just kind of Current practice here within the last couple of weeks, so we've got to see that we can prove that out, but that is the current Thinking behind the way we're looking at it for the foreseeable future, yes.

Speaker 7

With the savings growth and the CD growth, You've been experimenting with different channels over the last couple of quarters. What channel has kind of worked best? I know there was At the periphery of your footprint, there's been some a lot of RN outreach in your branches. What channel has kind of driven this deposit growth

Speaker 1

Yes. Manuel, this is Dan. Good afternoon. I think it's really been a blend of things. We've had success with our online storefront that we launched earlier in the year and that's generated about 1800 new accounts over the course of the year, not just the And it's been more than half of that has been new like new client balances coming in.

Speaker 1

But at the same time, we've used some digital outreach to prospective clients through some data that we combined with internal data and some purchase information to reach out specifically to Kind of the affluent client that or the heavy depositor client in the marketplace and we've had tremendous success and bringing dollars into that. And so that's been digital outreach with branch person follow-up and that's probably been the biggest piece. And then 3rd would be the activities from the commercial bankers who quite frankly ever since the end of the first quarter With SVB failure and what followed was a much greater outreach and connectivity to our commercial deposit base Initially from a retention standpoint, but the follow on activity has been growth in those deposit relationships and expanding them. So I would say it's more than one initiative, but all three have been additive.

Speaker 4

Yes. Manuel, I would also add that, that High yield savings growth, which is really that balance is really at to date more than doubled, has been on a non advertised basis. So as Dan outlined, it's been direct more direct marketing and contact than it was any kind of Advertised type of special and we still had that kind of significant success.

Speaker 7

I really appreciate the color here. On the commercial lender piece, That's great. Can you is there kind of a pipeline expected there? Is that something you can Yes, I know it's lumpy, I'm sure. Is there a way to kind of quantify kind of the pipeline there and kind of overall deposit growth over into next year?

Speaker 1

I don't think there's a way to quantify it as we look forward other than to say That the commercial I think we've gone from this is Probably an easy way to say commercial lenders to commercial bankers. And that's not a criticism of the bankers. Our For the last, obviously, several years, the focus has been on asset growth because funding it was not an issue And the world changed. And so they have done a tremendous job of really changing and shifting focus to Include deposit gathering along with asset generation. So and that will continue and that's been built into their reward mechanisms in In terms of incentive plans and pipeline management and overall expectations of production.

Speaker 1

So That's not going to change as we go into 2024.

Speaker 7

I appreciate that. My last question is, is talent acquisition still an important driver? Or do you kind of feel that you've shifted behaviors among your Now commercial banker base that you feel comfortable with it as it stands at least through 2024?

Speaker 1

I think the shift in expectation and behavior has been really solid. But we will always be looking For folks that will help us expand client relationships, not just in Commercial Banking and C and I specifically, but also in the wealth space. Now the challenge for us is to make sure we're doing that while maintaining our overall headcount at a reasonable level to fit that Expense growth expectation that Phil spoke of. So, I think we always have to be open to adding good talent to the organization.

Speaker 7

Thank you for the commentary.

Speaker 1

Yes. Thanks, Manuel. Yes.

Speaker 4

Thank you.

Operator

Our next question is a follow-up from Russell Gunther of Stephens. Russell, please go ahead.

Speaker 3

Hey, guys. Thanks for taking it. I just forgot to ask you earlier. We have seen some hiccups in shared national credits this quarter industry wide. I just was hoping for some commentary about your thoughts on the asset class and then What your exposure is today?

Speaker 1

Yes. We do not We do have participation book right now. Our total participations bought is Just north of $186,000,000 but they are all like club deals with local banks that we've helped out and first Vice versa, on the flip side, we have about $250,000,000 that had been put out in terms of sold participations, but we're not active in the SNC business.

Speaker 3

That's great. All right. Thanks, Dan. Thanks for taking the follow-up, guys.

Speaker 7

Sure, sir.

Operator

We have no further questions on the phone line. So I'll hand back to Dan for any closing remarks.

Speaker 1

Thank you, Jordan. Thanks everyone for joining today's call and we'd love your feedback if there's things we could do to make our call more effective. So please reach out. But Thanks again for your time, and have a great afternoon.

Operator

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.

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Earnings Conference Call
Sandy Spring Bancorp Q3 2023
00:00 / 00:00