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SANDY SPRING BANCORP INC (SASR)·Q4 2024 Earnings Summary

Executive Summary

  • GAAP net loss of $39.5M (-$0.87 diluted EPS) driven by a non-cash $54.4M goodwill impairment tied to the pending Atlantic Union Bankshares (AUB) merger; core earnings rose to $21.0M ($0.47 core EPS), up ~17% q/q .
  • Net interest income increased 6% q/q and 5% y/y; net interest margin expanded to 2.53% (+9 bps q/q) as deposit repricing outpaced asset yield declines .
  • Deposits ex-brokered grew $32M q/q to 94% of total; interest-bearing deposits rose while noninterest-bearing declined, reflecting ongoing mix normalization; liquidity capacity stood at $6.3B (147% of uninsured deposits) .
  • Credit quality stable: NPLs/loans improved to 1.03% (from 1.09% in Q3), ACL/loans increased to 1.16%; lower provision q/q ($4.5M vs. $6.3M) .
  • Merger catalyst: Fed approval received; special shareholder meetings set; management reiterates strategic benefits including scale, CRE portfolio actions, and capital raise to de-risk the pro forma balance sheet .

What Went Well and What Went Wrong

What Went Well

  • “We are pleased with our fourth quarter results, most notably our improved net interest margin, growth in core earnings, and reductions in brokered deposits,” said CEO Daniel J. Schrider, highlighting core operating momentum despite headline GAAP loss .
  • NIM expanded to 2.53% (+9 bps q/q), driven by a 26 bp decline in interest-bearing deposit costs; core EPS improved to $0.47 on higher net interest and non-interest income, and lower provision .
  • Non-interest income rose 10% q/q (+$1.9M) on BOLI mortality proceeds, swap fees, and stronger wealth management income, partially offsetting mortgage banking softness .

What Went Wrong

  • $54.4M goodwill impairment tied to AUB merger drove GAAP net loss and elevated GAAP efficiency ratio to 124.61%; adjusted non-interest expense also increased on M&A costs and compensation .
  • Noninterest-bearing deposits fell $98.1M q/q as commercial checking balances declined, reflecting mix shift pressure on funding base .
  • NPLs/loans higher y/y at 1.03% vs. 0.81% last year; net charge-offs increased q/q to $1.7M, though still modest in absolute terms .

Financial Results

Income Statement and EPS

Metric ($000s, except per-share)Q4 2023Q3 2024Q4 2024
Net Interest Income81,696 81,412 86,086
Provision/(Credit) for Credit Losses(3,445) 6,316 4,468
Non-Interest Income16,560 19,715 21,646
Non-Interest Expense67,142 72,937 134,241
Pre-Tax Income/(Loss)34,559 21,874 (30,977)
Net Income/(Loss)26,100 16,209 (39,453)
Diluted EPS (GAAP)$0.58 $0.36 $(0.87)
Core EPS (Non-GAAP)$0.60 $0.40 $0.47

Margins and Efficiency

MetricQ4 2023Q3 2024Q4 2024
Net Interest Margin2.45% 2.44% 2.53%
ROA (GAAP)0.73% 0.46% (1.09)%
ROTCE (GAAP/Non-GAAP)9.26% 5.88% 5.46% (GAAP); 6.80% core
Efficiency Ratio (GAAP)68.33% 72.12% 124.61%
Efficiency Ratio (Non-GAAP)66.16% 69.06% 67.16%

Balance Sheet, Liquidity and Credit

MetricQ4 2023Q3 2024Q4 2024
Loans ($000)11,366,989 11,491,921 11,537,966
Deposits ($000)10,996,538 11,737,694 11,745,665
Assets ($000)14,028,172 14,383,073 14,127,480
TCE/TA8.77% 8.83% 8.84%
NPLs / Loans0.81% 1.09% 1.03%
ACL / Loans1.06% 1.14% 1.16%
Liquidity: Unused Sources ($B)—$6.3B (146% of uninsured deposits) $6.3B (147% of uninsured deposits)

Loan Composition (Period-End, $000)

SegmentQ4 2023Q3 2024Q4 2024
Commercial Investor Real Estate5,104,425 4,868,467 4,779,593
Commercial Owner-Occupied RE1,755,235 1,737,327 1,748,772
Commercial AD&C988,967 1,255,609 1,327,292
Commercial Business1,504,880 1,620,926 1,653,135
Residential Mortgage1,474,521 1,529,786 1,537,589
Residential Construction121,419 53,639 49,028
Consumer417,542 426,167 442,557
Total Loans11,366,989 11,491,921 11,537,966

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance (Q4 2024)Change
Net Interest MarginFY 20242.45%–2.55% (Q2 outlook) No formal update; delivered 2.53% in Q4 Maintained range (result within guide)
Efficiency Ratio (Non-GAAP)FY 2024Mid-60% area (Q2 outlook) No formal update; 67.16% in Q4 Slightly above guide
Quarterly Expenses (Adj. Non-Interest)Q4 2024$68–$70M/quarter (Q2 outlook) $79.8M excluding goodwill impairment; +M&A and comp Higher (driven by M&A and comp)
Fee Income GrowthFY 2024High-single digit (Q2 outlook) Non-interest income +31% y/y in Q4; +10% q/q Above guide (Q4 result)
DividendQ4 2024$0.34/qtr $0.34 declared Maintained
Tax RateFY 202424%–26% (Q2 outlook) Not updated in Q4 8-KN/A

Note: Company provided detailed FY 2024 outlook in Q2; no formal guidance update in Q4 given pending merger; comparisons above reflect actual Q4 delivery vs prior guide .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Interest Rates & NIMNIM stabilized, expected modest expansion 2–4 bps per quarter; deposit beta downcycle mid-40s NIM held 2.44%; rate cuts (50 bps) compressed term rates; deposit repricing expected NIM expanded to 2.53% on lower deposit costs Improving
Deposits & LiquidityCore deposits 94%; brokered reduction; liquidity 154% of uninsured deposits Deposit mix shifted toward interest-bearing; liquidity $6.3B (146%) Deposits ex-brokered +$32M; liquidity $6.3B (147%) Stable/Robust
Credit & CREACL/loans ~1.10%; NCOs 5–15 bps guided NPL increase tied to single AD&C loan; proactive reserve building NPLs/loans improved to 1.03%; ACL/loans 1.16% Mixed but stabilizing
Merger & Regulatory—AUB all-stock merger announced; CRE sale up to $2B; $350M equity via forward sale Fed approval received; special meetings set Advancing
Non-Interest IncomeWealth mgmt/AUM growth; BOLI mortality-related income Other fees and BOLI drove q/q increase BOLI mortality proceeds and wealth fees lift q/q Strengthening

Management Commentary

  • CEO Daniel J. Schrider: “We are pleased with our fourth quarter results, most notably our improved net interest margin, growth in core earnings, and reductions in brokered deposits” .
  • On merger actions and de-risking: AUB CFO Rob Gorman detailed the 0.90x exchange ratio, targeted CRE loan sale up to $2B, and equity forward sale ($350M plus $52.5M greenshoe) to bolster CET1 and reduce CRE concentration and L/D ratio .
  • On portfolio quality and CRE sale logistics: management priced ~200 high-quality performing CRE notes; service retained; solving for CRE concentration (<300%) and L/D metrics .

Q&A Highlights

  • CRE sale pricing and impact: Sale assumed “low 90s” price vs par including ~5% rate mark and ~1.5% credit mark; headwind to earnings offset by strategic de-risking .
  • Regulatory and concentration targets: Pro forma CRE concentration targeted ~272% (holdco), ~280% (bank); L/D expected <90% post actions .
  • NIM and deposit costs: Margin expected to expand in 2025 as deposit rates reprice down; modeled mid-40% deposit beta on the downcycle .
  • Loan growth playbook: Atlantic Union plans to overlay C&I capabilities (equipment finance, ABL, FX, treasury) onto SASR footprint targeting middle market; revenue synergies not modeled but expected .
  • Originations and hedging: New loans ~7.00–7.05% yields in Q3; no definitive hedging on CRE sale due to cost; marks reflect market rate moves .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable due to a Capital IQ mapping limitation for SASR; as a result, a formal comparison to Street was not possible. Models should reflect: non-cash goodwill impairment ($54.4M), improved NIM (2.53%), lower provision q/q ($4.5M), and higher adjusted non-interest expense from M&A and compensation .
  • We recommend revisiting FY25–26 estimates to incorporate the merger pathway described by AUB/SASR (equity raise, CRE sale, accretion dynamics) and the deposit cost trajectory discussed on the call .

Key Takeaways for Investors

  • The GAAP loss was driven solely by a non-cash goodwill impairment tied to the merger; core operations improved q/q with core EPS at $0.47 .
  • NIM expanded to 2.53% on lower deposit costs; further margin support likely as deposit rates continue to reprice down per management’s commentary .
  • Deposit base stable with brokered reduction and liquidity capacity at $6.3B (147% of uninsured deposits), supporting funding resilience into 2025 .
  • Credit remains manageable: NPLs/loans improved to 1.03%; ACL/loans rose to 1.16%, with modest net charge-offs; watch AD&C and investor CRE trends .
  • Expense pressure tied to merger and compensation lifted adjusted non-interest expense; expect normalization post-transaction and integration .
  • AUB merger is a tangible catalyst: regulatory approvals progressing; planned equity raise and CRE sale de-risk pro forma capital and concentration metrics, setting up EPS accretion and rapid TBV earn-back as outlined by AUB .
  • Dividend held at $0.34/share; near-term capital priorities remain merger-aligned with strong regulatory ratios and TCE/TA at 8.84% .