SANDY SPRING BANCORP INC (SASR)·Q1 2024 Earnings Summary

Executive Summary

• Net income was $20.4 million ($0.45 diluted EPS); core earnings were $21.9 million ($0.49), as higher provision expense, lower net interest income, and modestly higher opex offset stronger fee income .
• Deposits grew 2% quarter-over-quarter (+$230.7 million) with core deposits (ex-brokered) up $286.6 million; loan-to-deposit ratio improved to 101% from 103%, and borrowings were reduced by $353.4 million via BTFP payoff and lower FHLB advances .
• Net interest margin compressed only 4 bps to 2.41% and management said margin bottomed and should expand 2–4 bps per quarter in 2024 absent Fed cuts; with cuts, expansion could be ~10 bps per 25 bp cut — a key narrative shift toward stabilization/expansion .
• Credit metrics improved: NPLs/loans fell to 0.74% (from 0.81%); ACL/loans rose to 1.08%, and net charge-offs were a low 0.04% annualized, aided by nonaccrual payoffs and an OREO transfer .
• FY2024 outlook calls for mid-single digit deposit growth, low/mid-single digit loan growth, NIM 2.45–2.55%, opex $66–$68mm per quarter, and efficiency ratio in the mid-60% range, under a base case of one 25 bp Fed cut in Dec-2024 .

What Went Well and What Went Wrong

What Went Well

• Core deposit growth and funding mix: Total deposits +$230.7 million QoQ, with core deposits ex-brokered +$286.6 million; brokered time deposits reduced by $55.8 million, improving funding resilience .
• Fee income strength: Non-interest income +11% QoQ to $18.4 million, led by wealth management (+$0.7 million on 3% AUM growth) and higher mortgage banking and credit-related fees .
• Margin stabilization and positive tone: "We are encouraged that the rate of net interest margin contraction slowed, and we experienced margin improvement during the month of March," with expectation of 2–4 bps per quarter NIM expansion in 2024 absent Fed cuts .

Management quotes:

• “We continued to gain momentum this quarter in several critical areas, including growing core funding and maintaining a strong liquidity position.” — Daniel J. Schrider, CEO .
• “We remain focused on expanding client relationships through enhanced products, services and digital solutions…” — Daniel J. Schrider .
• “We believe that the margin has bottomed out this quarter… we see the margin expanding throughout the remainder of 2024.” — Management on the call .

What Went Wrong

• Earnings pressure from provision and NIM: Total provision for credit losses was $2.4 million (vs. a credit of $3.4 million in Q4) and NIM compressed to 2.41%, driving EPS down to $0.45 from $0.58 in Q4 .
• Higher opex and efficiency ratio: Non-interest expense rose 1% QoQ to $68.0 million; GAAP efficiency ratio worsened to 69.60% (from 68.33%) reflecting net revenue pressure .
• Noninterest-bearing deposits declined 3% QoQ (-$96.2 million), reflecting seasonal runoff in commercial and small business DDA, partially offset by strong interest-bearing growth .

Financial Results

Segment/KPI breakdown:

Non-interest income composition (Q1 2024):

Guidance Changes

Note: No quantified FY2024 guidance was provided in prior quarter materials; the above represents new disclosures and management outlook .

Earnings Call Themes & Trends

Management Commentary

• “We continued to gain momentum this quarter in several critical areas, including growing core funding and maintaining a strong liquidity position. We also continued to uphold our credit quality through prudent risk management and our hands-on approach to working with our clients.” — Daniel J. Schrider, Chair, President & CEO .
• “As we move through the year, we remain focused on expanding client relationships through enhanced products, services and digital solutions and by delivering local and remarkable client service.” — Daniel J. Schrider .
• “We are encouraged that the rate of net interest margin contraction slowed, and we experienced margin improvement during the month of March… we see the margin expanding throughout the remainder of 2024 by 2 to 4 basis points per quarter.” — Management .
• “Per quarter, we’ve got between $250 million and $350 million of fixed rate maturities for the rest of this year… repricing up the curve in excess of 100 basis points.” — Management on loan repricing .
• “Our expectation is that we would be able to move our deposit base relatively quickly once the Fed does begin to reduce interest rates… closer to 10 basis points per quarter of margin improvement [per 25 bp cut].” — Management .

Q&A Highlights

• Margin sensitivity and trajectory: Fixed-rate loan repricing maturities of $250–$350 million per quarter in 2024 (then $200–$250 million in 2025), repricing “up the curve” >100 bps; margin expansion expected even in a stable rate environment .
• Deposit costs and products: Cost of interest-bearing deposits moderated late in Q1; retail high-yield savings rate at 4.5%; current CD offers at 5% (7-month) and 4.75% (14-month) .
• Buybacks and capital: Buybacks “make entire sense,” but capital preservation prioritized near-term given uncertainty; strong CET1 and total capital provide flexibility .
• Fed-linked deposits: ~$300–$500 million of deposits directly tied to Fed funds, fluid daily .
• Credit outlook: Net charge-offs likely in 5–10 bps annualized range; multifamily monitoring around newer builds and stabilization assumptions, but no significant concerns; small office asset moved to OREO with collateral coverage .
• Market risk: Potential government office space reductions in D.C. could affect large floor-plate offices; SASR exposure geared to small professional offices .

Estimates Context

• S&P Global (Capital IQ) Wall Street consensus EPS and revenue estimates for SASR were unavailable due to a mapping issue; as a result, comparisons to consensus for Q1 2024, Q4 2023, and Q3 2023 could not be provided at this time [SpgiEstimatesError].
• Where estimates become available, key comparison points would include diluted EPS ($0.45) and net revenue ($97.7 million) for Q1 2024 relative to consensus, with particular focus on NIM progression and provision expense .

Key Takeaways for Investors

• Funding momentum: Core deposit growth and reduced brokered reliance strengthen liquidity and lower funding risk; watch sustained growth in savings and DDA as catalysts for NIM expansion .
• Margin inflection: Management’s “bottomed” NIM comment and quantified expansion path (2–4 bps per quarter; ~10 bps per 25 bp cut) is a positive narrative shift, supportive for multiple/stock reaction on confirmation in Q2 .
• Credit normalization with discipline: NPLs reduced and ACL modestly higher; focus remains on CRE, with active portfolio management (OREO disposition potential) — monitor office/multifamily repricing through 2024 .
• Fee income tailwinds: Wealth management benefited from AUM growth; mortgage banking recovering; track sustainability of high-single-digit fee growth vs. guidance .
• Capital and returns: Strong capital ratios (CET1 10.96%, total 15.05%); dividend maintained at $0.34; buybacks paused, but could resume with improved visibility — potential medium-term upside lever .
• Operating discipline: Expense control within $66–$68mm per quarter and mid-60% efficiency ratio targets are critical to earnings durability in a low-2s NIM context .
• Near-term trading: Watch Q2 evidence of NIM expansion and continued deposit mix improvement; any additional CRE credit noise or slower expense normalization could pressure the story, while tangible proof of margin/fee growth should be supportive .