Q4 2023 Sandy Spring Bancorp Inc Earnings Call

January 23, 2024

Good afternoon.

Thank you for attending today's Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the fourth quarter of 2023. My name is Megan and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to Daniel J. Schrider, CEO and President of Sandy Spring Bancorp. Daniel, please go ahead.

Thank you for attending today's Sandy Spring Bancorp, Inc. Earnings conference call and webcast for the fourth quarter of 'twenty 'twenty. Three my name is Megan and I'll be your moderator for today's call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if he would like to ask a question. Please press <unk>.

Megan: Star one on your telephone keypad.

Megan: I would now like to pass the conference over to Daniel J, Shrider, CEO and President of Sandy Spring Bancorp Daniel Please go ahead.

Thank you Megan and good afternoon everyone. Thank you for joining our call to discuss Sandy Spring Bancorp's performance for the fourth quarter of 2023. This is Dan Schrider and I'm joined here by my colleagues Phil Mantua, our Chief Financial Officer, and Aaron Kaslow, General Counsel and Chief Administrative Officer.

Megan: Thank you Megan and good afternoon, everyone. Thank you for joining our call to discuss Sandy spring Bancorp's performance for the fourth quarter of 2023.

Speaker Change: This is Dan Schrader and I'm joined here by my colleagues, Phil Mantua, Our 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 is a live webcast of today's call, and a replay will be available on our website later today. Before we get started covering highlights from the quarter and taking your questions, Aaron will give the customary safe harbor statement.

Speaker Change: Today's call is open to all investors analysts and the media that there was a live webcast of todays call and a replay will be available on our website later today.

Speaker Change: Before we get started covering highlights from the quarter and taking your questions Aaron will give the customary safe Harbor statement here.

Aaron M. Kaslow: Thank you, Dan. Good afternoon, everyone. Sandy Spring Bancorp will make forward-looking statements in this webcast that are subject to risks and uncertainties.

Aaron M. Kaslow: Dan Good afternoon, everyone.

Aaron M. Kaslow: Early 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.

Aaron M. Kaslow: These forward-looking statements include statements of goals, intentions, earnings, and other expectations.

Aaron M. Kaslow: 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.

Aaron M. Kaslow: Estimates of risks and future costs and benefits.

Aaron M. Kaslow: Estimates 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 managements 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.

Aaron M. Kaslow: The very nature are subject to significant uncertainties because of these uncertainties Sandy spring bancorp's actual future results may differ materially from those indicated in addition, the companys past results of operations do not necessarily indicate its future results.

Aaron M. Kaslow: 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.

Speaker Change: Thanks, Aaron. Once again, good afternoon, everyone, and thank you for joining today's call. I have to admit, I'm pleased to wrap up 2023. Given the challenges our industry faced after the bank failures last spring, which resulted in rapid and significant increases to funding costs, we swiftly and effectively responded to our clients' needs.

Thanks, Darren once again, good afternoon, everyone and thank you for joining today's call I have to admit I am pleased to wrap up 2023, given the challenges our industry faced after the bank failures last spring, which resulted in rapid and significant increases to funding costs, we swiftly and effectively responding to our clients' needs.

Speaker Change: Despite the year's challenges, there were definitely some positive outcomes.

Aaron M. Kaslow: Despite the year's challenges there were definitely some positive outcomes.

Speaker Change: we put an immediate emphasis on reaching out to our clients

Aaron M. Kaslow: We put an immediate emphasis on reaching out to our clients.

Speaker Change: First to allay any fears, answer their questions, and then ultimately find solutions to meet their needs.

Aaron M. Kaslow: First to allay any fears answer their questions and then ultimately find solutions to meet their needs. The results were inspiring and revealed the depth of a loyalty to our company and the port importance of personal connections.

Speaker Change: The results were inspiring and revealed the depth of loyalty to our company and the importance of personal connection.

Speaker Change: Over the past several quarters, we have successfully grown core deposits, stabilizing our deposit base and reducing our reliance on non-core funding.

Aaron M. Kaslow: Over the past several quarters, we have successfully grown core deposits stabilizing our deposit base and reducing our reliance on noncore funding at.

Speaker Change: At the same time, we've improved our liquidity position and expanded both our retail and commercial client base over the past year.

Aaron M. Kaslow: At the same time, we have improved our liquidity position and expanded both our retail and commercial client base over the past year.

Aaron M. Kaslow: The year also included a shift in focus and strategy is aimed at diversifying the asset base by growing more small business and C&I relationships and deemphasizing the level of growth in our commercial real estate portfolio.

Speaker Change: The year also included a shift in focus and strategies aimed at diversifying the asset base by growing more small business and C&I relationships and de-emphasizing the level of growth in our commercial real estate portfolio.

Speaker Change: In 2023, we also implemented several new or improved technologies.

Aaron M. Kaslow: In 2023, we also implemented several new or improved technologies. These enhancements provide clients with greater access to our products and services and give us new ways to deepen existing relationships and develop new ones through digital offerings and digital fulfillment.

Operator: Good afternoon,

Megan: Thank you for attending today's Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the fourth quarter of 2023.

Speaker Change: These enhancements provide clients with greater access to our products and services and give us new ways to deepen existing relationships and develop new ones through digital offerings and digital fulfillment.

Megan: My name is Megan, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to Daniel J. Schrider, CEO and President of Sandy Spring Bancorp.

Speaker Change: We're excited about how these new technologies will continue to enhance our capabilities and client delivery as we progress through 2024.

Aaron M. Kaslow: We're excited about how these new technologies will continue to enhance our capabilities and client delivery as we progress through 2024.

Speaker Change: So with that, let's jump right into the financial report.

Aaron M. Kaslow: So with that let's jump right into the financial results today.

Speaker Change: Today we reported net income of $26.1 million or $0.58 per diluted common share for the quarter ended December 31, 2023 compared to net income of $20.7 million or $0.46 per diluted common share for the third quarter of 2023 and $34 million or $0.76 per diluted common share for the fourth quarter of 2023.

Aaron M. Kaslow: Today, we reported net income of $26 1 million or <unk> 58 per diluted common share for the quarter ended December 31, 2023, compared to net income of $20 7 million or <unk> 46 per diluted common share for the third quarter of 2023, and $34 million or <unk> 76 per diluted common share for the fourth quarter of 2010.

Megan: Daniel, please go ahead.

Thank you Megan, and good afternoon everyone.

Thank you for joining our call to discuss Sandy Spring Bancorp's performance for the fourth quarter of 2023.

This is Dan Schrider, and I'm joined here by my colleagues Phil Mantua, our Chief Financial Officer, and Aaron Kaslow, General Counsel and Chief Administrative Officer. Today's call is open to all investors, analysts, and the media.

Aaron M. Kaslow: Two.

Speaker Change: The increase in the current quarter's net income compared to the linked quarter was a result of a lower provision for credit losses coupled with lower non-interest expense, partially offset by lower net interest income and non-interest.

Aaron M. Kaslow: The increase in the current quarters net income compared to the linked quarter was a result of a lower provision for credit losses, coupled with lower noninterest expense, partially offset by lower net interest income and noninterest income.

There will be a live webcast of today's call, and a replay will be available on our website later today. Before we get started covering highlights from the quarter and taking your questions, Aaron will give the customary safe harbor statement.

Speaker Change: The current quarter's core earnings were $27.1 million, or $0.60 per diluted common share, The current quarter's core earnings were $27.1 million, or $0.60 per diluted common share,

Aaron M. Kaslow: The current quarters core earnings were $27 1 million or <unk> 60 per diluted common share.

Speaker Change: compared to $27.8 million or $0.62 per diluted common share for the quarter ended September 30 and $35.3 million or $0.79 per diluted common share for the quarter ended December 31, 2020.

Aaron M. Kaslow: 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.

Aaron M. Kaslow: Impaired to $27 8 million or <unk> 62.

Aaron M. Kaslow: Per diluted common share for the quarter ended September 30, and $35 3 million or <unk> 79 per diluted common share for the quarter ended December 31 2022.

Speaker Change: Core earnings were positively affected by lower provision for credit losses, but it was offset by lower revenues and an increase in non-interest expense after adjusting for the pension settlement expense incurred in the third quarter.

Aaron M. Kaslow: Core earnings were positively affected by lower provision for credit losses, but it was offset by lower revenues and an increase in noninterest expense after adjusting for the pension settlement expense incurred in the third quarter.

Aaron M. Kaslow: 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 Change: So I want to pause here and dig into the movement in our credit quality metrics as well as the allowance for credit loss.

Aaron M. Kaslow: So I want to pause here and dig into the movement in our credit quality metrics as well as the allowance for credit losses.

Speaker Change: Ratios relating to non-performing loans fell during the quarter due to our decision to move two commercial credit relationships to non-accrual. We've been working closely with both relationships over several quarters as they've migrated towards this current status.

Aaron M. Kaslow: Ratios relating to nonperforming loans fell during the quarter due to our decision to move to commercial credit relationships to non accrual we've been working closely with both relationships over several quarters as they've migrated towards this current status.

Speaker Change: No surprises here, and our decisions reflect our strong credit risk management practices.

Aaron M. Kaslow: No surprises here and our decisions to reflect our strong credit risk management practices.

Thanks, Aaron.

Speaker Change: The ratio of non-performing loans to total loans was 81 basis points compared to 46 basis points last quarter and 35 basis points at the prior year.

Once again, good afternoon, everyone, and thank you for joining today's call. I have to admit, I'm pleased to wrap up 2023. Given the challenges our industry faced after the bank failures last spring, which resulted in rapid and significant increases to funding costs, we swiftly and effectively responded to our clients' needs. Despite the year's challenges, there were definitely some positive outcomes. We put an immediate emphasis on reaching out to our clients, first to allay any fears, answer their questions, and then ultimately find solutions to meet their needs.

Aaron M. Kaslow: The ratio of nonperforming loans to total loans was <unk> 81 basis points compared to 46 basis points last quarter, and 35 basis points at the prior year quarter as mentioned the current quarter's increase in nonperforming loans was related to two investor commercial relationships, one within the custodial care industry and another with a multifamily.

Speaker Change: As mentioned, the current quarter's increase in nonperforming loans was related to two investor-commercial

Speaker Change: one within the custodial care industry and another with a multifamily residential property.

Aaron M. Kaslow: <unk> property.

Speaker Change: These two relationships accounted for $42.4 million of the total $47.9 million of loans placed on non-accrual during the quarter. The custodial care relationship required an individual reserve during the current quarter. This is a unique circumstance due to the untimely passing of the operator. However, we are working with other principals to sell the underlying property.

Aaron M. Kaslow: These two relationships accounted for $42 4 million of the total $47 9 million.

Aaron M. Kaslow: <unk> placed on nonaccrual during the quarter.

Aaron M. Kaslow: Custodial care relationship required an individual reserve during the current quarter. This is a unique circumstance due to the untimely passing of the operator. However, we are working with other principles to sell the underlying properties.

The results were inspiring and revealed the depth of loyalty to our company and the importance of personal connection.

Over the past several quarters, we have successfully grown core deposits, stabilizing our deposit base, and reducing our reliance on non-core funding.

Speaker Change: As for the multifamily property, we established an individual reserve earlier this year due to challenges with leasing up and generating adequate cash flow to support the loan.

Aaron M. Kaslow: As for the multifamily property, we established an individual reserve earlier this year due to challenges with leasing up and generating adequate cash flow to support the loan. The borrower has been extremely cooperative and we will continue to work together towards a resolution we believe that in both cases, we are adequately reserved.

At the same time, we've improved our liquidity position and expanded both our retail and commercial client base over the past year. The year also included a shift in focus and strategies aimed at diversifying the asset base by growing more small business and C&I relationships and de-emphasizing the level of growth in our commercial real estate portfolio. In 2023, we also implemented several new or improved technologies. These enhancements provide clients with greater access to our products and services and give us new ways to deepen existing relationships and develop new ones through digital offerings and digital fulfillment. We're excited about how these new technologies will continue to enhance our capabilities and client delivery as we progress through 2024. So with that, let's jump right into the financial report. Today, we reported net income of $26.1 million, or $0.58 per diluted common share, for the quarter ended December 31, 2023 compared to net income of $20.7 million, or $0.46 per diluted common share, for the third quarter of 2023 and $34 million, or $0.76 per diluted common share, for the fourth quarter of 2023.

Speaker Change: The borrower has been extremely cooperative and we will continue to work together towards

Speaker Change: We believe that in both cases we are adequately reserved.

Aaron M. Kaslow: The provision for credit losses attributed to the funded loan portfolio for the current quarter was a credit of $2 6 million compared to a charge of $3 2 million in the previous quarter and $7 9 million in the prior year quarter.

Speaker Change: The provision for credit loss is attributed

Speaker Change: to the funded loan portfolio for the current quarter was a credit of $2.6 million compared to a charge of $3.2 million in the previous quarter and $7.9 million in the prior year

Speaker Change: The reduction in the provision during the quarter was a result of a change in the composition of the loan portfolio, a decline in the probability of an economic recession, and updates to other qualitative adjustments used within the reserve calculation.

Aaron M. Kaslow: The reduction in the provision during the quarter was a result of a change in the composition of the loan portfolio a decline in the probability of an economic recession and updates to other qualitative adjustments used within the reserve calculation.

Speaker Change: These factors were partially offset by the aforementioned individual reserve on the investor real estate

These factors were partially offset by the aforementioned individual reserve on the Investor real estate loan.

Speaker Change: designated as non-accrual during the current quarter, coupled with a slight deterioration and other relevant economic factors in the economic forecast.

Aaron M. Kaslow: Designated as non accrual during the current quarter, coupled with a slight deterioration in other relevant economic factors and the economic forecast.

Speaker Change: In addition, we reduced the reserve for unfunding commitments by $900,000, a result of higher utilization rates on lines of credit.

Aaron M. Kaslow: In addition, we reduced the reserve for unfunded commitments by 900000, a result of higher utilization rates on lines of credits.

Speaker Change: Total net recoveries for the current quarter amounted to 100,000 compared to net charge-offs of the same amount for the linked quarter and 100,000 of net recoveries for the fourth quarter.

Aaron M. Kaslow: Total net recoveries for the current quarter amounted to 100000 compared to net charge offs of the same amount for the linked quarter and 100000 of net recoveries for the fourth quarter of 2022.

The increase in the current quarter's net income compared to the linked quarter was a result of a lower provision for credit losses coupled with lower non-interest expense, partially offset by lower net interest income and non-interest.

Speaker Change: too.

Speaker Change: Overall, the allowance for credit losses was 120.9 million or 1.06% of outstanding loans and 132% of nonperforming loans.

Aaron M. Kaslow: Overall, the allowance for credit losses was $129 million or 1.0% to 6% of outstanding loans, and 132% of nonperforming loans compared to $123 4 million or 1.09% of outstanding loans and 238% of nonperforming loans at the end of the <unk>.

The current quarter's core earnings were $27.1 million, or $0.60 per diluted common share. The current quarter's core earnings were $27.1 million, or $0.60 per diluted common share, compared to $27.8 million, or $0.62 per diluted common share for the quarter ended September 30, and $35.3 million, or $0.79 per diluted common share for the quarter ended December 31, 2020. Core earnings were positively affected by lower provision for credit losses, but this was offset by lower revenues and an increase in non-interest expense after adjusting for the pension settlement expense incurred in the third quarter. So I want to pause here and drill into the movement in our credit quality metrics as well as the allowance for credit loss. Ratios relating to non-performing loans fell during the quarter due to our decision to move two commercial credit relationships to non-accrual status. We've been working closely with both relationships over several quarters as they've migrated towards this current status.

Speaker Change: compared to $123.4 million or 1.09% of outstanding loans and 238% of nonperforming loans at the end of the previous quarter.

Aaron M. Kaslow: Previous quarter.

Speaker Change: and 136.2 million or 1.2% of outstanding loans and 346% of non-performing loans at the end of the fourth quarter.

Aaron M. Kaslow: And $136 2 million or one 2% of outstanding loans, and 346% of nonperforming loans at the end of the fourth quarter of 2022.

Speaker Change: too.

Speaker Change: Shifting to the balance sheet, total assets remain stable at $14 billion compared to $14.1 billion at September 30th.

Aaron M. Kaslow: Shifting to the balance sheet total assets remained stable at $14 billion compared to $14 1 billion at September 30.

Speaker Change: Total loans increased by $66.7 million or 1% to $11.4 billion at December 31, 2023 compared to $11.3 billion at September 30.

Aaron M. Kaslow: Total loans increased by $66 $7 million or 1% to $11 4 billion at December 31, 2023, compared to $11 3 billion at September 30.

Speaker Change: Commercial real estate and business loans increased $62 million quarter over quarter due to the $50.3 million and $50.2 million growth in the AD&C and commercial business loan and lines portfolios respective.

Aaron M. Kaslow: Commercial real estate and business loans increased $62 million quarter over quarter due to the $53 million and $50 2 million growth in the agency and commercial business loan in lines portfolios, respectively. However, this growth was partially offset by a $33 $3 million decline in the investor commercial real estate loan.

Speaker Change: However, this growth was partially offset by a $33.3 million decline in the investor commercial real estate loan portfolio.

Aaron M. Kaslow: Portfolio.

Speaker Change: Quarter over quarter, total mortgage loan portfolio remained relatively unchanged.

Aaron M. Kaslow: Quarter over quarter total mortgage loan portfolio remained relatively unchanged.

Speaker Change: Commercial loan production totaled $245 million, yielding $153 million in funded production for the quarter, and this compares to commercial loan production of $323 million, yielding $96 million in funded production in the third quarter.

Aaron M. Kaslow: Commercial loan production totaled $245 million, yielding $153 million in funded production for the quarter and this compares to commercial loan production of $323 million, yielding $96 million in funded production in the third quarter of the year.

No surprises here, and our decisions reflect our strong credit risk management practices. The ratio of non-performing loans to total loans was 81 basis points compared to 46 basis points last quarter and 35 basis points the prior year. As mentioned, the current quarter's increase in nonperforming loans was related to two investor-commercial relationships, one within the custodial care industry and another with a multifamily residential property. These two relationships accounted for $42.4 million of the total $47.9 million of loans placed on non-accrual during the quarter. The custodial care relationship required an individual reserve during the current quarter. This is a unique circumstance due to the untimely passing of the operator. However, we are working with other principals to sell the underlying property. As for the multifamily property, we established an individual reserve earlier this year due to challenges with leasing it out and generating adequate cash flow to support the loan.

Speaker Change: We expect funded loan production to fall between $150 and $250 million per quarter over the next two quarters.

Aaron M. Kaslow: We expect funded loan production to fall between 150 and $250 million per quarter over the next two quarters given the stability. We've achieved in the core deposit base. We are open to more lending activity that achieves profitability targets.

Speaker Change: Given the stability we've achieved in the core deposit base, we're open to more lending activity that achieves profitability targets.

Speaker Change: Shifting to the supplemental deck we provided, pages 22 through 24 show more detail on the composition of our loan portfolio.

Aaron M. Kaslow: Shifting to the supplemental deck, we provided pages 22 through 24 show more detail on the composition of our loan portfolios.

Speaker Change: Data related to specific property types in our commercial real estate portfolio and specific commercial real estate composition in the urban market.

Aaron M. Kaslow: Data related specific to specific property types in our commercial real estate portfolio and specific commercial real estate composition in the urban markets of DC and Baltimore.

Speaker Change: New this quarter, beginning with slide 25 and ending with slide 29, you'll find details related to our retail, multifamily, office, flex slash warehouse, and hotel portfolio.

Aaron M. Kaslow: New this quarter, beginning with slide 25, and ending with Slide 29, you will find details related to our retail multifamily office flex slash warehouse and hotel portfolios. Each slide details the number of loans clients and balances our breakdown of fixed and floating rate debt.

Daniel J. Schrider: and several new or improved technologies. These enhancements provide clients with greater access to our products and services and give us new ways to deepen existing relationships and develop new ones through digital offerings and digital fulfillment. We're excited about how these new technologies will continue to enhance our capabilities and client delivery as we progress through 2024. So with that, let's jump right into the numbers. Today we reported net income of $26.1 million, or $0.58 per diluted common share, for the quarter ended December 31, 2023, compared to net income of $20.7 million, or $0.46 per diluted common share, for the third quarter of 2023 and $34 million, or $0.76 per diluted common share, for the fourth quarter of 2022. The increase in the current quarter's net income compared to the linked quarter was a result of a lower The current quarter's core earnings were $27.1 million, or $0.60 per diluted common share, compared to $27.8 million, or $0.62 per diluted common share, for the quarter ended September 30 and $35.3 million, or $0.79 per diluted common share, for the quarter ended December 31, 2020.

Speaker Change: Each slide details the number of loans, clients and balances, a breakdown of fixed and floating rates,

Speaker Change: The timing of maturities or interest rate adjustments, delinquency status, the number and balances of non-performing loans, and the geographic breakdown of the portfolio.

Aaron M. Kaslow: Timing of maturities or interest rate adjustments delinquency status the number in balances of nonperforming loans and the geographic breakdown of the portfolio.

Speaker Change: We thought it would be helpful to provide some more detail on these subportfolios given some of your questions in prior call.

Aaron M. Kaslow: We thought it would be helpful to provide some more detail on the sub portfolios given some of your questions in prior calls.

Speaker Change: As you can see as you review these slides we're lending in our primary market that we know well. We have one delinquent credit among all reference portfolios and just a handful of non-performing loans that have been subject to early identification and appropriately reserved.

Aaron M. Kaslow: As you can see as you review the slides we're lending in our primary market that we know well we have one delinquent credit among all referenced portfolios and just a handful of nonperforming loans that have been subject to early identification and appropriately reserved.

The borrower has been extremely cooperative, and we will continue to work together towards. We believe that in both cases we are adequately reserved. The provision for credit loss attributed to the funded loan portfolio for the current quarter was a credit of $2.6 million compared to a charge of $3.2 million in the previous quarter and $7.9 million in the prior year. The reduction in the provision during the quarter was a result of a change in the composition of the loan portfolio, a decline in the probability of an economic recession, and updates to other qualitative adjustments used within the reserve calculation. These factors were partially offset by the aforementioned individual reserve on the investor real estate, designated as non-accrual during the current quarter, coupled with a slight deterioration and other relevant economic factors in the economic forecast.

Speaker Change: Importantly, we are not seeing a theme emerging in any single portfolio.

Aaron M. Kaslow: Importantly, we are not seeing a theme emerging in any single portfolio.

Speaker Change: We feel very good with regard to our overall credit quality and our ability to manage

Aaron M. Kaslow: Feel very good with regard to our overall credit quality and our ability to manage this thing.

Speaker Change: On the deposit side, total deposits decreased $154.5 million or 1% to $11 billion compared to $11.2 billion at September 30.

Aaron M. Kaslow: On the deposit side total deposits decreased $154 $5 million or 1% to $11 billion compared to $11 2 billion at September 30.

Speaker Change: During this period, non-interest bearing and interest bearing deposits declined $99.7 million and $54.7 million respectively.

Aaron M. Kaslow: During this period noninterest bearing and interest bearing deposits declined $99 7 million and $54 7 million respectively. The decline in noninterest bearing deposit categories was driven by lower balances in small business and title company commercial checking accounts.

Speaker Change: The decline in non-interest bearing deposit categories was driven by lower balances in small business and title company commercial checking.

Daniel J. Schrider: Core earnings were positively affected by lower provision for credit losses, but it was offset by lower revenues and an increase in non-interest expense after adjusting for the pension settlement expense incurred in the third quarter. So I want to pause here and drill into the movement in our credit quality metrics as well as the allowance for credit losses. Ratios relating to non-performing loans fell during the quarter due to our decision to move two commercial credit relationships to non-accrual. We've been working closely with both relationships over several quarters as they've migrated towards this current status.

Speaker Change: The decrease in interest bearing deposits was due to a $253.1 million reduction in broker time deposits.

Aaron M. Kaslow: The decrease in interest bearing deposits was due to a $253 $1 million reduction in brokered time deposits and $111 $9 million decrease in money market accounts.

Speaker Change: and 111.9 million decrease in money markets.

In addition, we reduced the reserve for unfunding commitments by $900,000, a result of higher utilization rates on lines of credit. Total net recoveries for the current quarter amounted to $100,000 compared to net charge-offs of the same amount for the linked quarter and $100,000 of net recoveries for the fourth quarter, too. Overall, the allowance for credit losses was 120.9 million, or 1.06% of outstanding loans and 132% of non-performing loans. Compared to $123.4 million, or 1.09% of outstanding loans and 238% of non-performing loans at the end of the previous quarter, and 136.2 million, or 1.2% of outstanding loans and 346% of non-performing loans at the end of the fourth quarter, too. Shifting to the balance sheet, total assets remained stable Total loans increased by $66.7 million or 1% to $11.4 billion at December 31, 2023 compared to $11.3 billion at September 30. Commercial real estate and business loans increased $62 million quarter over quarter due to the $50.3 million and $50.2 million growth in the AD&C and commercial business loan and lines portfolios, respectively.

Speaker Change: These declines were partially offset by $265.9 million in growth in our savings deposit.

Aaron M. Kaslow: These declines were partially offset by $265 $9 million in growth in our savings deposits.

Speaker Change: Excluding broker deposits, total deposits increased by 85.5 million or 1% quarter over quarter and represented 92% of total deposits compared to 90% at the linked quarter, reflecting continued stability of the core deposit base and reduced reliance on wholesale funding.

Aaron M. Kaslow: Excluding broker deposits total deposits increased by $85 5 million or 1% quarter over quarter and represented 92% of total deposits compared to 98% at the linked quarter, reflecting continued stability of the core deposit base and reduced reliance on wholesale funding sources.

Daniel J. Schrider: No surprises here, and our decisions reflect our strong credit risk management practice. The ratio of non-performing loans to total loans was 81 basis points compared to 46 basis points last quarter and 35 basis points the prior year. As mentioned, the current quarter's increase in non-performing loans was related to two investor commercial relationships, one within the custodial care industry and another with a multifamily residential property. These two relationships accounted for $42.4 million of the total $47.9 million of loans placed on nonaccrual during the quarter. The custodial care relationship required an individual reserve during the current quarter. This is a unique circumstance due to the untimely passing of the operator, but we are working with other principals to sell the underlying property. As for the multifamily property, we established an individual reserve earlier this year due to challenges with leasing it out and generating adequate cash flow to support the loan. The borough has been extremely cooperative, and we will continue to work together towards a resolution.

Speaker Change: The loan to deposit ratio did increase to 103% at December 31st from 101% at September 30th.

Aaron M. Kaslow: Loan to deposit ratio did increase to 103% at December 31 from 101% at September 30.

Speaker Change: Total uninsured deposits at December 31 were approximately 34% of total deposits.

Aaron M. Kaslow: Total uninsured deposits at December 31 were approximately 34% of total deposits.

Speaker Change: Slide 17 of the supplemental deck provides more color on our commercial deposit portfolio.

Aaron M. Kaslow: Slide 17 of the supplemental deck provides more color on our commercial deposit portfolio.

Speaker Change: that portfolio represents 57% of the core deposit base, the majority of which is in a combination of non-interest bearing and money marketing.

Aaron M. Kaslow: That portfolio represents 57% of the core deposit base. The majority of which is in a combination of noninterest bearing and money market accounts.

Aaron M. Kaslow: Sure.

Speaker Change: Overall, you can see that we have an average length of relationship of nine years.

Aaron M. Kaslow: Overall, you can see that we have an average length of relationship of nine years.

Speaker Change: The portfolio is well diversified with no concentration in a single industry or class.

Aaron M. Kaslow: The portfolio is well diversified with no concentration in any single industry or client.

Speaker Change: Likewise, on slide 19 of the supplemental deck, you can see the breakdown of our retail department.

Aaron M. Kaslow: Likewise on slide 19 of the supplemental deck you can see the breakdown of our retail deposit book with an average length of 11 four years.

Speaker Change: with an average length of 11.4 years.

Speaker Change: This portfolio represents 43% of our core deposit base with no single client accounting for more than 2% of total deposits.

Aaron M. Kaslow: This portfolio represents 43% of our core deposit base with no single client accounting for more than 2% of total deposits.

Daniel J. Schrider: We believe that in both cases, we are adequately reserved. The provision for credit loss attributed to the funded loan portfolio for the current quarter was a credit of $2.6 million compared to a charge of $3.2 million in the previous quarter and $7.9 million in the prior year quarter. The reduction in the provision during the quarter was a result of a change in the composition of the loan portfolio, a decline in the probability of an economic recession, and updates to other qualitative adjustments used within the reserve calculation. These factors were partially offset by the aforementioned individual reserve on the investor real estate, designated as non-accrual during the current quarter, coupled with a slight deterioration and other relevant economic factors in the economic forecast.

Speaker Change: Total borrowings were unchanged across all categories at December 31 compared to the previous quarter.

Aaron M. Kaslow: Total borrowings were unchanged across all categories at December 31, compared to the previous quarter.

Speaker Change: and at December 31st, Contingent Liquidity, which consists of available FHLB borrowings, Fed funds, funds through the Federal Reserve's discount window and the Bank Term Funding Loan Program, as well as SS Cash and Unpledged Investment Securities, totals $6 billion or 162% of uninsured deposits.

Aaron M. Kaslow: And at December 31, contingent liquidity, which consists of available <unk> borrowings fed funds funds through the federal reserve discount window and the bank term funding loan program as well as excess cash and Unpledged investment Securities totaled <unk> 6 billion or 162% of uninsured deposits.

However, this growth was partially offset by a $33.3 million decline in the investor commercial real estate loan portfolio. Quarter over quarter, total mortgage loan portfolio remained relatively unchanged. Commercial loan production totaled $245 million, yielding $153 million in funded production for the quarter, and this compares to commercial loan production of $323 million, yielding $96 million in funded production in the third quarter.

Aaron M. Kaslow: <unk>.

Aaron M. Kaslow: Noninterest income for the fourth quarter of 2023 decreased by 5% or $800000 compared to the linked quarter.

Speaker Change: Non-interest income for the fourth quarter of 2023 decreased by 5% or $800,000 compared to the lean quarter and grew by 16% or $2.3 million compared to the prior year quarter.

And grew by 16% or $2 3 million compared to the prior year quarter to.

Speaker Change: The quarter over quarter decrease was driven by lower income from mortgage banking activities due to lower sales volume and partially offset by an increase in bullying.

Quarter over quarter decrease was driven by lower income from mortgage banking activities due to lower sales volume and partially offset by an increase in bully income.

Daniel J. Schrider: In addition, we reduced the reserve for unfunded commitments by $900,000, as a result of higher utilization rates on lines of credit. Total net recoveries for the current quarter amounted to $100,000 compared to net charge-offs of the same amount for the linked quarter and $100,000 of net recoveries for the fourth quarter of 2022. Overall, the allowance for credit losses was 120.9 million, or 1.06% of outstanding loans and 132% of non-performing loans. This compares to $123.4 million, or 1.09% of outstanding loans and 238% of non-performing loans at the end of the previous quarter, and 136.2 million, or 1.2% of outstanding loans and 346% of non-performing loans at the end of the fourth quarter. Shifting to the balance sheet, total assets remain stable at $14 billion compared to $14.1 billion at September 30.

Speaker Change: Income from mortgage banking activities decreased $890,000 compared to the link quarter due to a reduction in origination activity. At the same time, total mortgage loans grew 42 million as loans moved out of construction and into the perm quarter.

Aaron M. Kaslow: Income from mortgage banking activities decreased $890000 compared to the linked quarter due to a reduction in origination activity at the same time total mortgage loans grew $42 million is loans moved out of construction and into the Perm portfolio.

We expect funded loan production to fall between $150 and $250 million per quarter over the next two quarters. Given the stability we've achieved in the core deposit base, we're open to more lending activity that achieves profitability targets. Shifting to the supplemental deck we provided, pages 22 through 24 show more detail on the composition of our loan portfolio, data related to specific property types in our commercial real estate portfolio and specific commercial real estate composition in the urban market. This quarter, beginning with slide 25 and ending with slide 29, you'll find details related to our retail, multifamily, office, flex slash warehouse, and hotel portfolio. Each slide details the number of loans, clients, and balances, a breakdown of fixed and floating rates, the timing of maturities or interest rate adjustments, delinquency status, the number and balances of non-performing loans, and the geographic breakdown of the portfolio. We thought it would be helpful to provide some more detail on these subportfolios given some of your questions on the prior call.

Speaker Change: Originations have been impacted as a result of the interest rate environment, which continues to dampen home sales and refinancing activities.

Originations had been impacted as a result of the interest rate environment, which continues to dampen home sales and refinancing activities.

Speaker Change: As we look forward future levels of mortgage gain revenue is expected to be between 1.1 and 1.3 million in the first quarter and between a million and a half and two million in the second quarter due to typical spring season out.

Aaron M. Kaslow: As we look forward future levels of mortgage gain revenue is expected to be between one one and $1 3 million in the first quarter and between 1 million and a half and $2 million in the second quarter due to typical spring seasonality.

Aaron M. Kaslow: Wealth management income decreased 172000 to $9 2 million and assets under management at quarter end totaled 6 billion, representing an eight 4% increase since September 30.

Speaker Change: Wealth management income decreased $172,000 to $9.2 million and assets under management quarter end totaled $6 billion, representing an 8.4% increase.

Speaker Change: on September 30th.

Speaker Change: For the fourth quarter of 2023, the net interest margin was 2.45%.

Aaron M. Kaslow: For the fourth quarter of 2023, the net interest margin was 245% compared to 255% for the third quarter and $3 two 6% for the fourth quarter of 2022.

Daniel J. Schrider: Total loans increased by $66.7 million, or 1%, to $11.4 billion at December 31, 2023, compared to $11.3 billion at September 30. Commercial real estate and business loans increased $62 million quarter over quarter due to the $50.3 million and $50.2 million growth in the AD&C and Commercial Business Loan and Lines portfolios, respectively. However, this growth was partially offset by a $33.3 million decline in the investor commercial real estate loan portfolio. Quarter over quarter, the total mortgage loan portfolio remained relatively unchanged.

Speaker Change: compared to 2.55% for the third quarter and 3.26% for the fourth quarter.

Speaker Change: This decline was a result of high market rates.

Aaron M. Kaslow: This decline was the result of.

Aaron M. Kaslow: Hi market rates competition.

Speaker Change: Competition for Deposits, and Clients Moving Excess Funds Out of Non-Interest-Bearing

Aaron M. Kaslow: Competition for deposits and clients moving excess funds out of noninterest bearing accounts.

Speaker Change: Compared to the linked quarter, the rate paid on interest bearing liabilities rose 25 basis

Aaron M. Kaslow: Appeared to the linked quarter the rate paid on interest bearing liabilities rose 25 basis points, while the yield on interest, earning assets increased nine basis points, resulting in the quarterly margin compression of 10 basis points two basis points of which was related to the recognition of the $42 7 million in non accrual loans late in the quarter.

Speaker Change: while the yield on interest earning assets increased nine basis points.

Speaker Change: resulting in the quarterly margin compression of 10 billion.

Speaker Change: two basis points of which was related to the recognition of the $42.7 million in non-accrual loans late in the quarter.

Speaker Change: and the corresponding adjustment of interest in

Aaron M. Kaslow: The corresponding adjustment of interest income.

As you can see as you review these slides, we're lending in our primary market that we know well. We have one delinquent credit among all reference portfolios and just a handful of non-performing loans that have been subject to early identification and appropriately reserved.

Speaker Change: Anticipating three Fed rate cuts during the second half of 2024, we expect the margin to bottom out in the first quarter in the low 240s.

Daniel J. Schrider: Commercial loan production totaled $245 million, yielding $153 million in funded production for the quarter. This compares to commercial loan production of $323 million, yielding $96 million in funded production in the third quarter. We expect funded loan production to fall between $150 and $250 million per quarter over the next two quarters. Given the stability we've achieved in the core deposit base, we're open to more lending activity that achieves profitability targets. Shifting to the supplemental deck we provided, pages 22 through 24 show more detail on the composition of our loan portfolio, data related to specific property types in our commercial real estate portfolio, and specific commercial real estate composition in the urban market of D.C. involved. New this quarter, beginning with slide 25 and ending with slide 29, you'll find details related to our retail, multifamily, office, flex slash warehouse, and hotel portfolio. Each slide details the number of loans, clients, and balances, a breakdown of fixed and floating rates, the timing of maturities or interest rate adjustments, delinquency status, the number and balances of non-performing loans, and the geographic breakdown of the portfolio.

Aaron M. Kaslow: Anticipating three fed rate cuts during the second half of 2024, we expect the margin to bottom out in the first quarter in the low $2 40.

Speaker Change: and then to rebound in the second quarter and throughout the remainder of the year by seven to 10 basis points per quarter.

Aaron M. Kaslow: And then to rebound in the second quarter and throughout the remainder of the year by 7% to 10 basis points per quarter.

Speaker Change: We would also expect the Fed to continue rate cuts throughout 2025.

Aaron M. Kaslow: We would also expect it to continue rate cuts throughout 2025.

Speaker Change: which would allow the margin to move above 3% during

Aaron M. Kaslow: Which would allow the margin to move above 3% during the second half of next year.

Importantly, we are not seeing a theme emerging in any single portfolio.

Speaker Change: in the second half.

Speaker Change: Non-interest expense for the fourth quarter decreased 5.3 million, or 7%, compared to the linked quarter, and 2.8 million, or 4%, compared to the prior year quarter.

Aaron M. Kaslow: Noninterest expense for the fourth quarter decreased $5 3 million or 7% compared to the linked quarter and $2 8 million or 4% compared to the prior year quarter.

We feel very good with regard to our overall credit quality and our ability to manage. On the deposit side, total deposits decreased $154.5 million, or 1%, to $11 billion compared to $11.2 billion at September 30. During this period, non-interest-bearing and interest-bearing deposits declined $99.7 million and $54.7 million, respectively. The decline in non-interest bearing deposit categories was driven by lower balances in small business and title company commercial checking. The decrease in interest-bearing deposits was due to a $253.1 million reduction in broker time deposits and an 111.9 million decrease in money markets. These declines were partially offset by $265.9 million in growth in our savings deposits. Excluding broker deposits, total deposits increased by 85.5 million or 1% quarter over quarter and represented 92% of total deposits compared to 90% at the linked quarter, reflecting continued stability of the core deposit base and reduced reliance on wholesale funding.

Speaker Change: The previous quarter included $8.2 million in pension settlement expense related to the termination of the company's pension.

Aaron M. Kaslow: Previous quarter included $8 2 million and pension settlement expense related to the termination of the company's pension plan.

Speaker Change: Excluding the pension settlement costs, total non-interest expense increased by $2.8 million,

Aaron M. Kaslow: Excluding the pension settlement cost total noninterest expense increased by $2 8 million or 4%.

Speaker Change: As I shared last quarter, we expected our expense run rate to include additional spending during the fourth quarter related to our technology initiatives, including higher professional income.

Aaron M. Kaslow: As I shared last quarter, we expected our expense run rate to include additional spending during the fourth quarter related to our technology initiatives, including higher professional and consulting fees.

Speaker Change: For 2024, we expect that the overall expense growth for the year to be essentially flat to 2023 levels.

Aaron M. Kaslow: For 2024, we expect that the overall expense growth for the year to be essentially flat to 2023 levels. Once you adjust 2023 amounts for the pension termination costs and severance paid which together were approximately $10 million.

Speaker Change: Once you adjust 2023 amounts for the pension termination costs and severance paid, which

Speaker Change: The non-GAAP efficiency ratio was 66.16% for the fourth quarter compared to 60.91% for the third quarter of 2023 and 51.46% for the prior year quarter.

Aaron M. Kaslow: The non-GAAP efficiency ratio was 66, 16% for the fourth quarter compared to $60, 91% for the third quarter of 2023 and $51, 46% for the prior year quarter.

Speaker Change: Both GAAP and non-GAAP efficiency ratios have been negatively impacted by the declines in net revenue and growth in non-nutrient expense as we continue to investigate.

Aaron M. Kaslow: Both GAAP and non-GAAP efficiency ratios have been negatively impacted by the declines in net revenue and growth in noninterest expense as we continue to invest in the future.

Speaker Change: And at December 31st, the company had a total risk-based capital ratio of 14.92%, a common equity Tier 1 risk-based capital ratio of 10.9%, a Tier 1 risk-based capital ratio also of 10.9%, and a Tier 1 leverage ratio of 9.5%.

And at December 31, the company had a total risk based capital ratio of $14, 92%, a common equity tier one risk based capital ratio of 10, 9% a tier one risk based capital ratio also of 10, 9% and a tier one leverage ratio of 951%.

Daniel J. Schrider: We thought it would be helpful to provide some more detail on these sub-portfolios given some of your questions on prior calls. As you can see as you review these slides, we're lending in our primary market, which we know well. We have one delinquent credit among all reference portfolios and just a handful of non-performing loans that have been subject to early identification and appropriately reserved. Importantly, we are not seeing a theme emerging in any single portfolio.

Speaker Change: all of these ratios remain well in excess of the mandated minimum regulatory

The loan to deposit ratio did increase to 103% at December 31st from 101% at September 30th. Total uninsured deposits at December 31 were approximately 34% of total deposits. Slide 17 of the supplemental deck provides more color on our commercial deposit portfolio; that portfolio represents 57% of the core deposit base, the majority of which is in a combination of non-interest-bearing and money marketing. Overall, you can see that we have an average length of relationship of nine years. The portfolio is well diversified, with no concentration in a single industry or class.

Aaron M. Kaslow: These ratios remain well in excess of the mandated minimum regulatory requirements.

Speaker Change: Before I move to your questions, I'd like to briefly comment on the retirement of our CFO, Phil Mantua.

Aaron M. Kaslow: Before I move to your questions I'd like to briefly comment on the retirement of our CFO Phil Man two.

Speaker Change: I'm pleased to announce today that Charlie Cullum has been named Deputy Financial

Aaron M. Kaslow: I am pleased to announce today that Charlie column has been named Deputy financial.

Speaker Change: Chief Financial Officer and Treasurer, and he will transition to serve as our CFO upon Phil's retirement. As such, Phil will extend his retirement date until the end of the year to support this transition and leadership.

Daniel J. Schrider: We feel very good with regard to our overall credit quality and our ability to manage it. On the deposit side, total deposits decreased $154.5 million, or 1%, to $11 billion, compared to $11.2 billion at September 30. During this period, non-interest bearing and interest-bearing deposits declined $99.7 million and $54.7 million, respectively. The decline in non-interest-bearing deposit categories was driven by lower balances in small business and title company commercial checking.

Aaron M. Kaslow: <unk> financial officer, and Treasurer, and he will transition to serve as our CFO. Upon <unk> retirement as such Bill will extend his retirement date until the end of the year to support this transition in leadership.

Speaker Change: and that concludes my comments and now we'll move to your questions.

Aaron M. Kaslow: And that concludes my comments and now we'll move to your questions. So magan, we can move.

Speaker Change: moved to the question.

Magan: Move to the questions. Please.

Speaker Change: Absolutely.

Magan: Absolutely.

Speaker Change: If you would like to ask a question please press star followed by one on your telephone keypad. If for any reason you would like to remove that question please press star followed by two. Again to ask a question press star one. As a reminder if you're using a speakerphone please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

Speaker Change: And so you would like to ask a question. Please press star followed by one on your telephone keypad.

Speaker Change: If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.

Speaker Change: As a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question. We will pause briefly ask questions are registered.

Likewise, on slide 19 of the supplemental deck, you can see the breakdown of our retail department, with an average length of 11.4 years. This portfolio represents 43% of our core deposit base, with no single client accounting for more than 2% of total deposits. Total borrowings were unchanged across all categories at December 31 compared to the previous quarter, and at December 31st, Contingent Liquidity, which consists of available FHLB borrowings, Fed funds, funds through the Federal Reserve's discount window and the Bank Term Funding Loan Program, as well as SS Cash and Unpledged Investment Securities, totaled $6 billion, or 162% of uninsured deposits. Non-interest income for the fourth quarter of 2023 decreased by 5% or $800,000 compared to the lean quarter and grew by 16% or $2.3 million compared to the prior year quarter.

Daniel J. Schrider: The decrease in interest-bearing deposits was due to a $253.1 million reduction in broker time deposits and $111.9 million decrease in money market. These declines were partially offset by $265.9 million in growth in our savings deposits. Excluding broker deposits, total deposits increased by 85 and a half million or 1% quarter over quarter and represented 92% of total deposits compared to 90% at the linked quarter, reflecting continued stability of the core deposit base and reduced reliance on wholesale funding. The loan to deposit ratio did increase to 103% at December 31st from 101% at September 30th, while total uninsured deposits at December 31 were approximately 34% of total deposits. Slide 17 of the supplemental deck provides more color on our commercial deposit portfolio. That portfolio represents 57% of the core deposit base, the majority of which is in a combination of non-interest bearing and money markets. Overall, you can see that we have an average length of relationship of nine years. The portfolio is well-diversified, with no concentration in a single industry or class.

Speaker Change: Our first question comes from the line of Casey Whitman with Piper Sandler Your line is now open.

Speaker Change: Our first question comes from the line of Casey Whitman with Piper Sandler. Your line is now open.

Casey Whitman: Hey, good afternoon.

Hey, good afternoon.

Speaker Change: Hi.

Speaker Change: Hi, Casey. Hi, Casey.

I see.

Casey Whitman: Hi, I just wanted to touch on that expense guide you just gave, Dan, because I think last quarter you were guiding to a little bit more growth in 2024. So I was just curious, I know fourth quarter there was a little jump there, but I just wanted to make sure we're all on the same page. Are you talking about no growth sort of off that fourth quarter level or the 2023 full year level and sort of what I guess has changed your outlook? Between what we were talking about last quarter.

Speaker Change: Hi.

Speaker Change: Just wanted to touch on that expense guide you just gave Dan because I think last quarter, you were guiding to a little bit more growth in 'twenty four.

Speaker Change: I was just curious.

Speaker Change: The fourth quarter.

Speaker Change: Sometimes I just wanted to make sure. We're all on the same page and you said, hey, you're talking about no growth put them off that fourth quarter level or about 2023 full year level.

Speaker Change: Sort of what I guess has changed your outlook between what we were talking about last quarter.

Speaker Change: Yeah Casey this is Phil.

Casey Whitman: Yeah, Casey, this is Phil. First to answer the question about the

First to answer the question about.

Philip J. Mantua: We're talking flat basically year over year annual amounts after adjusting for the

Speaker Change: The projection.

Speaker Change: We're talking flat basically year over year annual amounts after adjusting for the Cup.

Philip J. Mantua: a couple of one-time things that occurred through in 2023.

Speaker Change: A couple of onetime things that occurred through in 2023.

Philip J. Mantua: and so you know quarter to quarter it may look similar to the fourth quarter and it may not just depending on different things that come through from a seasonal standpoint first quarter has some

Speaker Change: And so quarter to quarter. It may look similar to the fourth quarter.

And it may not just depending on different things that come through from a seasonal standpoint first quarter has some.

The quarter over quarter decrease was driven by lower income from mortgage banking activities due to lower sales volume and partially offset by an increase in bullying. Income from mortgage banking activities decreased $890,000 compared to the previous quarter due to a reduction in origination activity. At the same time, total mortgage loans grew by 42 million as loans moved out of construction and into the permanent quarter. However, originations have been impacted as a result of the interest rate environment, which continues to dampen home sales and refinancing activities. As we look forward, future levels of mortgage gain revenue are expected to be between 1.1 and 1.3 million in the first quarter and between a million and a half and two million in the second quarter due to the typical spring season out.

Philip J. Mantua: Blip ups in different types of, you know, reengagement of employee taxes and stuff like that. So overall, though, you know, flat, maybe maybe 1% growth overall in expenses, but it's

Speaker Change: Slip ups and different types of.

Re engagement of point taxes and stuff like that so.

Daniel J. Schrider: Likewise, on slide 19 of the supplemental deck, you can see the breakdown of a retail department with an average length of 11.4 years. This portfolio represents 43% of our core deposit base, with no single client accounting for more than 2% of total deposits. Total borrowings were unchanged across all categories at December 31 compared to the previous quarter, and at December 31st, Contingent Liquidity, which consists of available FHLB borrowings, Fed Funds, funds through the Federal Reserve's discount window and the Bank Term Funding Loan Program, as well as SS Cash and Unpledged Investment Securities totaled $6 billion, or 162% of uninsured deposits. Non-interest income The quarter-over-quarter decrease was driven by lower income from mortgage banking activities due to lower sales volume and partially offset by an increase in bullion. Income from mortgage banking activities decreased $890,000 compared to the previous quarter due to a reduction in origination activity.

Speaker Change: Overall, though.

Speaker Change: Flat, maybe maybe 1% growth overall in expenses.

Philip J. Mantua: what Dan quoted was really looking at the whole year over the whole year.

Speaker Change: With that quote of Israeli looking at the whole year over the whole year.

Speaker Change: Yeah, okay.

Speaker Change: Yes, okay.

Speaker Change: Sounds good. Maybe just thinking about deposits and deposit costs. Do you think or given the sort of guide that your NIM has is close to inflection next quarter is the assumption that I guess, you know, deposit costs will sort of peak?

Speaker Change: Okay.

Speaker Change: Maybe just thinking about deposits and deposit costs or do you think or given the sort of bad debt.

Speaker Change: Thanks to inflection next quarter as an assumption that I guess, yes.

Speaker Change: Deposit costs will peak.

Speaker Change: peak then and then I was also curious just sort of how you're thinking about the level of knowledge bearing. Do you think you can sort of hold those here or start to see some growth or what's the outlook?

Speaker Change: Peak then.

Speaker Change: And then I was also curious just sort of how youre thinking about the level of my understanding.

Speaker Change: Do you think you can.

Speaker Change: A whole bunch here or start to see some growth, but what's the outlook there.

Speaker Change: Yeah, Casey full again.

Speaker Change: Yeah, Casey. Phil again. I don't think there's any question that in terms of the overall deposit costs here, there may be a little bit more incremental increase in the deposit costs in the interest bearing area into the first quarter and maybe even a little bit into the second quarter.

Wealth management income decreased $172,000 to $9.2 million and assets under management quarter end totaled $6 billion, representing an 8.4% increase, on September 30th. For the fourth quarter of 2023, the net interest margin was 2.45%, compared to 2.55% for the third quarter and 3.26% for the fourth quarter. This decline was a result of high market rates. Competition for Deposits, and Clients Moving Excess Funds Out of Non-Interest-Bearing, Compared to the linked quarter, the rate paid on interest bearing liabilities rose 25 basis while the yield on interest earning assets increased nine basis points, resulting in the quarterly margin compression of 10 billion, two basis points of which was related to the recognition of the $42.7 million in non-accrual loans late in the quarter, and the corresponding adjustment of interest in, Anticipating three Fed rate cuts during the second half of 2024, we expect the margin to bottom out in the first quarter in the low 240s, and then to rebound in the second quarter and throughout the remainder of the year by seven to 10 basis points per quarter.

Casey Whitman: I don't think there's any question that in terms of the overall deposit costs here.

Casey Whitman: There may be a little bit more.

Casey Whitman: Incremental increase in the.

Casey Whitman: And the deposit cost into the.

Casey Whitman: In the interest bearing area into the first quarter, and maybe even a little bit into.

Into the second quarter.

Speaker Change: um but we do anticipate our ability to rebuild some of those DDA balances throughout that period which helps from a from an overall you know net basis to allow the

But we do anticipate our ability to rebuild some of those DDA balances throughout that period, which helps from a from an overall net basis to allow that.

Speaker Change: The margin to bottom in that first quarter and then start to come back up in the second quarter and beyond.

Casey Whitman: The margin to bottom in that first quarter, and then start to come back up in the second quarter and beyond.

Speaker Change: We also got some, um...

Casey Whitman: We also got.

Casey Whitman: Okay.

Speaker Change: Yes, go ahead, I'm sorry.

Speaker Change: Yes go ahead I'm sorry go ahead.

Speaker Change: No, go ahead with the rest of your questions first.

Speaker Change: No no no no.

Rest of your question first.

Speaker Change: I was just going to say there's also some...

Speaker Change: I was just going to say there's.

Speaker Change: Some.

Speaker Change: There's also some remix going on, you know, in the borrowings area as well. We plan to pay back the bank term funding program in April, so that will help as well. I think the average cost related to that $300 million is about 4.9%. So there's a couple different things going on there and other maturities in the home loan bank advance area that will run off more expensive funds. And we'll probably just reduce the overall cash position to maximize for the margin improvement.

Speaker Change: There's also some remix going on.

Daniel J. Schrider: At the same time, total mortgage loans grew $42 million as loans moved out of construction and into the PERM quarter. However, originations have been impacted as a result of the interest rate environment, which continues to dampen home sales and refinancing activities. As we look forward, future levels of mortgage gain revenue are expected to be between $1.1 and $1.3 million in the first quarter and between $1.5 million and $2 million in the second quarter due to typical spring season outages. Wealth Management Income decreased $172,000 to $9.2 million, and assets under management at quarter end totaled $6 billion, representing an 8.4% increase.

Speaker Change: Borrowings area as well we plan to payback.

Speaker Change: Bank term funding program.

Speaker Change: In April so that will help as well I think the average costs related to that $300 million is about four 9%.

Speaker Change: So theres a couple a couple of different things going on there or another maturities in the home loan bank advance area that will run off more.

Speaker Change: More expensive funds and we will probably just reduce the overall cash position to maximize for the for the for the margin.

We would also expect the Fed to continue rate cuts throughout 2025, which would allow the margin to move above 3% during the second half. Non-interest expense for the fourth quarter decreased 5.3 million, or 7%, compared to the linked quarter and 2.8 million, or 4%, compared to the prior year quarter. The previous quarter included $8.2 million in pension settlement expense related to the termination of the company's pension. Excluding the pension settlement costs, total non-interest expense increased by $2.8 million. As I shared last quarter, we expected our expense run rate to include additional spending during the fourth quarter related to our technology initiatives, including higher professional income. For 2024, we expect that the overall expense growth for the year will be essentially flat to 2023 levels. Once you adjust 2023 amounts for the pension termination costs and severance paid, which The non-GAAP efficiency ratio was 66.16% for the fourth quarter compared to 60.91% for the third quarter of 2023 and 51.46% for the prior year quarter.

Speaker Change: Margin improvement.

Okay.

Speaker Change: Thank you. And then on the other side, can you remind us sort of where new production, new loan production is coming on versus the 525 yield of the overall book?

Speaker Change: Thank you and then on the other side.

Speaker Change: Can you remind us what a way or no.

Speaker Change: Production, new loan production is coming on versus that 525 yelled at the overall book.

Speaker Change: You've got a lot of room to go there, right?

Is that a lot of room to build there right.

Speaker Change: Yeah, this quarter overall commercial production averaged about

Speaker Change: Yeah this quarter overall commercial.

Speaker Change: Production averaged about.

Speaker Change: 8.3% and about half of the overall production was floating rated.

Speaker Change: Eight 3% and about half of the overall production was floating rate.

Daniel J. Schrider: September 3rd. For the fourth quarter of 2023, the net interest margin was 2.45%, compared to 2.55% for the third quarter and 3.26% for the fourth quarter. This decline was the result of high market rates. Competition for Deposits and Clients Moving Excess Funds Out of Non-Interest Barriers Compared to the linked quarter, the rate paid on interest-bearing liabilities rose 25%, while the yield on interest-earning assets increased 9%, resulting in a quarterly margin compression of 10, two basis points of which were related to the recognition of $42.7 million in non-accrual loans late in the quarter and the corresponding adjustment of interest income. Anticipating three Fed rate cuts during the second half of 2024, we expect the margin to bottom out in the first quarter in the low 240s and then to rebound in the second quarter and throughout the remainder of the year by seven to 10 basis points per quarter.

Speaker Change: Versus fixed.

Speaker Change: versus Fix. In the, you know, the overall new yields ranged, you know, in the owner occupied area some of those rates were in the six and a half to seven percent range. The ADC portfolio was more in the eight to eight and a half percent range. And then true commercial lending was anywhere from seven and a half to eight and a half in terms of new money yield.

Speaker Change: And that the overall.

Speaker Change: New yields ranged.

Speaker Change: And in the owner occupied area. Some of those rates were in the six 5% to 7% range. The ADC portfolio was more in the eight to eight 5% range.

Speaker Change: And then true commercial lending was anywhere from seven five to eight and a half.

Speaker Change: In terms of new new money new money yield.

Speaker Change: Okay.

Speaker Change: Thank you, and I appreciate the margin, guys. I'll let someone else jump on. Yes, sure.

And I appreciate the margin guidance.

I'll start Bob.

Bob: Yes sure.

Speaker Change: Thank you.

Bob: Thank you.

Speaker Change: Our next question comes from the line of Russell Gunther with Stevens Incorporated. Your line is now open.

Bob: Our next question comes from the line of Russell Gunther with Stephens incorporated your line is now open.

Russell Gunther: Hey, good afternoon, guys.

Both GAAP and non-GAAP efficiency ratios have been negatively impacted by the declines in net revenue and growth in non-nutrient expense, as we continue to investigate.

Russell Gunther: Hey, good afternoon guys.

Russell Gunther: I wanted to also follow up.

Russell Gunther: I wanted to follow up on the margin discussion if I could in terms of

And at December 31st, the company had a total risk-based capital ratio of 14.92%, a common equity Tier 1 risk-based capital ratio of 10.9%, a Tier 1 risk-based capital ratio also of 10.9%, and a Tier 1 leverage ratio of 9.5%. All of these ratios remain well in excess of the mandated minimum regulatory requirements. Before I move to your questions, I'd like to briefly comment on the retirement of our C I'm pleased to announce today that Charlie Cullum has been named Deputy Financial Controller, Chief Financial Officer, and Treasurer, and he will transition to serve as our CFO upon Phil's retirement. As such, Phil will extend his retirement date until the end of the year to support this transition and leadership, and that concludes my comments, and now we'll move to your questions.

Russell Gunther: Follow up on the margin discussion if I could in terms of.

Russell Gunther: The three cuts that you're expecting in 24, if we think about the beta on the way down, what does your kind of 7 to 10 bps recovery per quarter assume for a...

The three cuts that you're expecting in 'twenty four if we think about the beta on the way down what does your kind of seven to 10 bps.

Russell Gunther: Covering per quarter assume four.

Russell Gunther: deposit beta with those cuts.

Russell Gunther: Deposit beta with those cuts.

Speaker Change: Yeah, yeah, that's a great question. So first of all, Russell, this is Phil again.

Speaker Change: Yeah, Yeah. That's great question. So first of all this is Phil again.

Daniel J. Schrider: We would also expect the Fed to continue rate cuts throughout 2025, which would allow the margin to move above 3% during the second half. Non-interest expense for the fourth quarter decreased 5.3 million, or 7%, compared to the previous quarter, and 2.8 million, or 4%, compared to the prior year quarter. The previous quarter included $8.2 million in pension settlement expense related to the termination of the company's pension. Excluding the pension settlement costs, total non-interest expense increased by $2.8 million, or $4.3 million.

Philip J. Mantua: We've got a cut anticipated in June, September, and then in December. So effectively for the second half, it's really two cuts that are going to impact the second, the third and fourth quarter within that.

Phil: We've got a cut anticipated in June September and then in December so effectively for the second half. It's really two cuts that are going to impact that.

Phil: The second.

Phil: Third and fourth quarter.

Phil: Within that.

Philip J. Mantua: We've assumed a similar type of beta relative to our money markets and

Phil: We've assumed a similar type of beta relative to our money markets and other.

Phil:

Phil: Our money markets and.

Philip J. Mantua: and other checking products in that 40% range. But on the high yield savings that we've run here and has had significant growth in it, our beta assumption on that is more like 90%, could even be more than 100% depending on how aggressive we think we can be. And so, you know, we're anticipating a pretty significant pullback for every, you know, every 25 basis points that we get back from the Fed.

Phil: And other checking products in that 40% range, but on the high yield savings that we've run here and has had significant growth in our beta assumption on that is more like 90% could even be more than 100% depending on how we how aggressive we think we can be.

Operator: Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from the line of Casey Whitman with Piper Sandler.

Daniel J. Schrider: As I shared last quarter, we expected our expense run rate to include additional spending during the fourth quarter related to our technology initiatives, including higher professional income. For 2024, we expect that the overall expense growth for the year will be essentially flat to the 2023 level. Once you adjust 2023 amounts for the pension termination costs and severance paid, which together were approximately $1,000,000. The non-gap efficiency ratio was 66.16% for the fourth quarter, compared to 60.91% for the third quarter of 2023 and 51.46% for the prior year. Both GAAP and non-GAAP efficiency ratios have been negatively impacted by the declines in net revenue and growth in non-interest expense as we continue to invest.

Phil: And so we're anticipating a pretty significant pullback for every every 25 basis points, but that we get back from the fed.

Speaker Change: Okay, and then

Speaker Change: Okay and then.

Speaker Change: has any anything shifted in terms of the funding mix like do you do you guys have any deposits formally indexed to fed funds that would reprice more immediately how should we think about that

Phil: Just.

Has any anything shifted in terms of the funding mix like you guys have any deposits, formerly indexed to fed funds.

Casey Whitman: Your line is now open.

Casey Whitman: Hey, good afternoon.

Hi Casey.

Casey Whitman: Hi Dan, I just wanted to touch on that expense guide you just gave, because I think last quarter you were guiding to a little bit more growth in 2024. So I was just curious. I know in the fourth quarter there was a little jump there, but I just wanted to make sure we're all on the same page.

Phil: With reprice more immediately how should we think about that.

Speaker Change: we don't have anything formally

Speaker Change: We don't have anything formally.

Speaker Change: that's per se tied directly. Everything's really management discretion. But that's the way we look at it is trying to mimic or mirror as much of the Fed funds cuts as we can in various areas. And again, we've also got kind of behind the scenes a fairly significant amount of brokered CDs that are scheduled to mature throughout the

Speaker Change: That's per se tied directly everything's really management discretion, but that's the way we look at it as trying to mimic.

Speaker Change: Mimic or Mira as much of the fed funds.

Are you talking about no growth sort of off that fourth quarter level or the 2023 full year level and sort of what I guess has changed your outlook?

Speaker Change: Cuts as we can in various areas and again, we've also got kind of behind the scenes is fairly significant amount of brokered Cds that are scheduled to mature throughout the year.

Daniel J. Schrider: And at December 31, the company had a total risk-based capital ratio of 14.92%, a common equity Tier 1 risk-based capital ratio of 10.9%, a Tier 1 risk-based capital ratio also of 10.9%, and a Tier 1 leverage ratio of 9.5%. All these ratios remain well in excess of the mandated minimum regulatory requirements. Before I move to your questions, I'd like to briefly comment on the retirement of our CFO, Phil Man I'm pleased to announce today that Charlie Cullum has been named Deputy Financial Controller, Chief Financial Officer, and Treasurer, and he will transition to serve as our CFO upon Phil's retirement.

Casey Whitman: Between what we were talking about last quarter.

Speaker Change: throughout 2024 as well.

Speaker Change: Throughout 2024 as well.

Yeah, Casey, this is Phil. First to answer the question about the, We're talking flat basically year over year annual amounts after adjusting for a couple of one-time things that occurred in 2023, and so you know, quarter to quarter, it may look similar to the fourth quarter, and it may not just depend on different things that come through from a seasonal standpoint. First quarter has some Blip ups in different types of, you know, reengagement of employee taxes and stuff like that. So overall, though, you know, flat, maybe maybe 1% growth overall in expenses, but it's what Dan quoted was really looking at the whole year over the whole year.

Speaker Change: In fact, we've got about $430 million at 4.5% scheduled to mature throughout the year, $172 million of that at $470 million and change in the first quarter alone. And then there's about $250 million of home loan bank advances that are going to mature during the year, and that's averaged at about $460 million, and about $50 million of that at $475 million is in the first quarter as well.

Speaker Change: In fact, we've got about $430 million at four 5% scheduled to mature throughout the year of $172 million of that at $4 70 and change in the first quarter alone.

Speaker Change: And then it was about $250 million of home loan bank advances that are.

Speaker Change: Go to mature during the year and Thats average at about $4 60, and about $50 million of that at $4 $75 in the first quarter as well.

Speaker Change: Okay, that's great color, Phil. Thank you. Maybe just switching gears on the expense conversation that was had.

Speaker Change: Okay, that's great color. Thank you.

Speaker Change: Maybe just switching gears on the expense conversation that was had.

Speaker Change:

Speaker Change: I understand the directional guide but from a big picture strategic perspective kind of where do you stand in the digital transformation phase and that spin that I believe is now in the run rate are there ongoing projects you know below the radar that are captured into that flat expense guidance I know when spread was more challenged I think you guys had strategically pushed some things a bit further so just curious from a big picture perspective you know where that all stands.

Daniel J. Schrider: As such, Phil will extend his retirement date until the end of the year to support this transition and leadership, and that concludes my comments, and now we'll move to your questions. Absolutely. If you would like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you would like to remove that question, please press star followed by two.

Speaker Change: I understand the directional guide, but from a big picture strategic perspective kind of where do you stand.

Casey Whitman: Yeah, okay. It sounds good. Maybe just thinking about deposits and deposit costs. Do you think, or given the sort of guide that your NIM has is close to inflection next quarter, the assumption that I guess, you know, deposit costs will sort of peak? peak then, and then I was also curious just sort of how you're thinking about the level of knowledge transfer. Do you think you can sort of hold those here or start to see some growth, or what's the outlook? Yeah, Casey.

Speaker Change: In the digital transformation phase and that spend that I believe is now in the run rate are there ongoing projects below the radar that are <unk>.

Speaker Change: Captured into that flat expense guidance I know when spread was more challenged I think you guys had strategically pushed some things a bit further so I'm just curious from a big picture perspective, where that offset.

Operator: Again, to ask a question, press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from the line of Casey Whitman with Piper Sandler. Your line is now open. Hey, good afternoon.

Speaker Change: Yeah, good. Russell, this is Dan. What we rolled out,

Speaker Change: Yes.

Daniel J. Schrider: Russell This is Dan.

Phil again. I don't think there's any question that in terms of the overall deposit costs here, there may be a little bit more incremental increase in the deposit costs in the interest-bearing area into the first quarter and maybe even a little bit into the second quarter, but we do anticipate our ability to rebuild some of those DDA balances throughout that period, which helps from an overall net basis to allow the margin to bottom in that first quarter and then start to come back We also got some, um...

Daniel J. Schrider: What we rolled out.

Daniel J. Schrider: and, you know, kind of fully completed in 23 in the end of the beginning of the fourth quarter was everything retail related, retail online banking, retail mobile, P2P capabilities, integrated online account opening.

Daniel J. Schrider: And kind of fully completed in 'twenty, three and the end of the.

Daniel J. Schrider: Beginning of the fourth quarter was.

Daniel J. Schrider: <unk> retail related retail online banking retail mobile pay.

Casey Whitman: Thank you. Thank you. Hi Dan, just wanted to touch on that expense guide you just gave, because I think last quarter you were guiding to a little bit more growth in 2024. So I was just curious if, I know, fourth quarter, there was a little jump there, but I just want to make sure we're on the same page. Are you sort of, are you talking about no growth sort of off that fourth quarter level or the 2023, like, full year level? And sort of what, I guess, has changed your outlook from what we were talking about last quarter? Yeah, Casey, this is Phil.

Daniel J. Schrider: <unk> capabilities.

Daniel J. Schrider: Integrated online account opening.

Daniel J. Schrider: So those are all running and there will be obvious iterations to that, but not at the same, you know, expense rate as as the initial build on the on the.

Daniel J. Schrider: So those are all running and there will be obviously iterations to that but not at the same.

Daniel J. Schrider: Expense rate as the initial build.

On the on the.

Daniel J. Schrider: planning side of things is taking that platform and building out our small business and then our commercial online capabilities that's in the design phase right now in all likelihood the build out of that would probably not begin to occur until very end of 2024 into 25.

Daniel J. Schrider: Planning side of things is is taking that platform and building out our small business and then our commercial online capabilities. That's in the design phase right now and in all likelihood.

Casey Whitman: Yes, go ahead; I'm sorry.

Casey Whitman: No, go ahead with the rest of your questions first.

I was just going to say there's also some... There's also some remix going on, you know, in the borrowing area as well. We plan to pay back the bank term funding program in April, so that will help as well. I think the average cost related to that $300 million is about 4.9%. So there's a couple different things going on there and other maturities in the home loan bank advance area that will run off more expensive funds. And we'll probably just reduce the overall cash position to maximize the margin improvement.

Daniel J. Schrider: The build out of that would probably not begin to occur until the very end of 2024 into 'twenty five.

Philip J. Mantua: I first answer the question about the, I would say, we're talking flat basically year-over-year annual amounts after adjusting for the couple of one-time things that occurred in 2023. And so, you know, quarter to quarter, it may look similar to the fourth quarter, and it may not, just depending on different things that come through from a seasonal standpoint. First quarter has some, I think you'll see a lot of flip-flops and different types of, you know, reengagement of employee taxes and stuff like that. So, overall, though, flat, maybe, maybe 1% growth overall in expenses, but it's not a big deal because Dan Quota is really looking at the whole year over the whole year. Yeah, okay. It sounds good.

Daniel J. Schrider: and then and then within that run so that's not built into that run rate for 24 conversations what I'm trying to say and then what is built in are a number of smaller projects that are just aimed at helping us to put into practice some of the digital capabilities we have.

Daniel J. Schrider: And then and then within that so that's not built into that run rate for 'twenty four conversations what I'm trying to say and then what is built in or a number of smaller projects that are aimed at helping us to put into practice some of the digital capabilities. We have in terms of automated us.

Daniel J. Schrider: of automated underwriting, automated small business delivery, and those types of things. And those will be things that are being built out throughout the course of 2024.

Daniel J. Schrider: Your writing automated small business delivery and those types of things and those will be things that are being built out throughout the course of 2024.

Casey Whitman: And then on the other side, can you remind us sort of where new production, new loan production is coming from versus the 525 yield of the overall book? You've got a lot of room to go, right?

Speaker Change: Okay got it Dan that's very helpful and then the last one for me just on the loan growth side of things I think I missed your comment in terms of where your what your target is but if you could share kind of what you're directionally looking for from a loan volume perspective

Speaker Change: Okay got it.

Helpful. And then the last one for me just on the loan growth side of things I think I missed your comment in terms of where your what your target is but if you could share kind of what you're directionally looking for from a loan volume perspective.

Yeah, this quarter overall commercial production averaged about 8.3%, and about half of the overall production was floating rated versus Fix. In the, you know, the overall new yields ranged, you know, in the owner-occupied area, some of those rates were in the six and a half to seven percent range. The ADC portfolio was more in the eight to eight and a half percent range, and then true commercial lending was anywhere from seven and a half to eight and a half percent in terms of new money yield.

Speaker Change: Mix, and then just kind of overall comfort zone from loan to deposit ratio if that's ultimately going to be the governor.

Speaker Change: Mix and then just kind of overall comfort gel from loan to deposit ratio, if that's ultimately going to be the governor.

Philip J. Mantua: Maybe just thinking about deposits and deposit costs here. Do you think, or given the sort of guide that your NIM has, is close to inflection next quarter, is the assumption that I guess, you know, deposit costs will sort of peak? I was also curious how you're thinking about the level of knowledge-bearing. Do you think you can hold those here or start to see some growth, or what's the outlook? Casey full again.

Speaker Change: Yeah, I think going into 2024, and I think we're going to stay flexible as to what we see happening in the market, both from a pricing, demand, and then having obviously the funding side of things also be a driver there, but our plan was to be somewhere in the mid to upper single digits by the end of the year in loan growth, driven predominantly by the

Speaker Change: Yeah.

Speaker Change: Don't you know going into.

Speaker Change: 2024, and I think we're going to stay flexible as to what we see happening in the market.

Casey Whitman: Okay.

Casey Whitman: Thank you, and I appreciate the margin, guys. I'll let someone else jump on.

Speaker Change: Both from a pricing demand and then having obviously the funding side of things also be a driver there.

Yes, sure.

Thank you.

Operator: Our next question comes from the line of Russell Gunther with Stevens Incorporated.

Speaker Change: But our plan was to be somewhere in the mid to upper single digits by the end of the year in loan growth.

Russell Gunther: Your line is now open.

Philip J. Mantua: I don't think there's any question that, in terms of the overall deposit costs here, there may be a little bit more incremental increase in the deposit costs into the interest-bearing area in the first quarter and maybe even a little bit into the second quarter. But we do anticipate our ability to rebuild some of those DDA balances throughout that period, which helps from an overall, you know, net basis to allow the margin to bottom in that first quarter and then start to come back up in the second quarter and beyond. We also have some... Yes, go ahead. I'm sorry.

Russell Gunther: Hey, good afternoon, guys. I wanted to follow up on the margin discussion if I could in terms of the three cuts that you're expecting in 24, if we think about the beta on the way down, what does your kind of 7 to 10 bps recovery per quarter assume for a deposit beta with those cuts?

Speaker Change: Driven predominantly by.

Speaker Change: our C&I work, our owner-occupied real estate, probably low single digits on the commercial real estate side of things, really overcoming runoff that we see in that. We could see some growth if, depending upon what the long end of the curve does in the mortgage space, and have more of an appetite to put some 5-1, 7-1, 10-1 type of arm product in the portfolio, but that's really gonna be driven by

Speaker Change: Our C&I work our own.

Speaker Change: Owner occupied real estate, probably low single digits on the commercial real estate side of things really overcoming runoff that we see and that we could see some growth if depending upon what the long end of the curve does.

Yeah, yeah, that's a great question. So, first of all, Russell, this is Phil again. We've got a cut anticipated in June, September, and then in December. So, effectively, for the second half, it's really two cuts that are going to impact the second, the third, and fourth quarters within that. We've assumed a similar type of beta relative to our money markets and other checking products in that 40% range. But on the high yield savings that we've run here and have had significant growth in, our beta assumption on that is more like 90%, and could even be more than 100% depending on how aggressive we think we can be. And so, you know, we're anticipating a pretty significant pullback for every, you know, every 25 basis points that we get back from the Fed.

Speaker Change: In the mortgage space and having more of an appetite to put some.

Speaker Change: 570, 110, one type of arm product in the portfolio, but that's really going to be driven by.

Speaker Change: you know what we're able to achieve from a profitability standpoint so there's a little bit of so from an overall plan standpoint mid to upper single digits that could move more favorably if conditions you know

Speaker Change: What we're able to achieve from a profitability standpoint, so there's a little bit up.

Philip J. Mantua: Go ahead. No, go ahead with the rest of your questions first. There's also some mixing going on in the borrowings area as well. We plan to pay back the bank term funding program in April, so that will help as well. I think the average cost related to that $300 million is about 4.9%. So there's a couple of different things going on there and other maturities in the home loan bank advance area that will run off more expensive funds, and we'll probably just reduce the overall cash position to maximize the margin improvement. I got it.

Speaker Change: From an overall plan standpoint mid to upper single digits that could move more favorably if conditions.

Speaker Change: allow that to happen.

<unk>.

Speaker Change: Allow that to happen.

Speaker Change: on a loan-to-deposit ratio, we actually, the last...

Speaker Change: On a loan to deposit ratio, we actually the last.

Speaker Change: a handful of months. We're tracking on either side of 100%. And in our case, we always have a little deposit runoff, particularly within the commercial book at the end of the year, which is what kicked it back up. We went into December with it right around 100. Over time, we think that needs to come down into the mid-90s, but we're not sprinting towards that. We just think that will happen over time.

Speaker Change: Handful of months.

Speaker Change: We're tracking on either side of a 100%.

Speaker Change: And in our case, we always have a little deposit run off particularly within the commercial book at the end of the year, which is what kicked it backup we went into December with it right around 100.

Okay, and then, has anything shifted in terms of the funding mix, like do you guys have any deposits formally indexed to fed funds that would reprice more immediately? How should we think about that? We don't have anything formally that's per se tied directly. Everything's really management discretion. But that's the way we look at it, trying to mimic or mirror as much of the Fed funds cuts as we can in various areas. And again, we've also got kind of behind the scenes a fairly significant amount of brokered CDs that are scheduled to mature throughout 2024 as well. In fact, we've got about $430 million at 4.5% scheduled to mature throughout the year, $172 million of that at $470 million and change in the first quarter alone. And then there's about $250 million of home loan bank advances that are going to mature during the year, and that's averaged at about $460 million, and about $50 million of that at $475 million is in the first quarter as well. Okay, that's a great color, Phil.

Speaker Change: Over time, we think that needs to come down into the mid nineties, but we're not sprinting towards that and we just think that will happen over over time.

Philip J. Mantua: And then, on the other side, can you remind us sort of where new production, new loan production is coming on versus the, you know, 525 yield of the overall book? You've got a lot of room to go there, right?

Speaker Change: All right, Dan, I appreciate it. That was very helpful. That's it for me, guys. Thank you for taking my questions.

Speaker Change: Alright, Dan I appreciate it that was very helpful. That's it for me guys. Thank you for taking my question.

Speaker Change: Okay.

Speaker Change: Thanks.

Philip J. Mantua: Yeah, this quarter's overall commercial production averaged about 8.3%, and about half of the overall production was floating rated versus fixed. In the, you know, the overall new yields ranged, you know, in the owner-occupied area, some of those rates were in the six and a half to 7% range. The ADC portfolio was more in the eight to eight and a half percent range.

Speaker Change: Thanks Ross.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Emmanuel Navas with D.A. Davidson. Your line is now open.

Speaker Change: Our next question comes from the line of Emmanuel Novice with D. A Davidson your line is now open.

Speaker Change: Yeah.

Emmanuel Novice: Hey, good afternoon can you talk a little more about the.

Emmanuel Navas: Hey, good afternoon. Can you talk a little bit more about the kind of comfort on a deposit side and kind of where you're seeing the core inflows that kind of drives a little bit better growth expectations on the loan side next year?

Emmanuel Novice: Kind of comfort on the deposit side and kind of where youre seeing.

Emmanuel Novice: The core inflows that debt.

Casey Whitman: And then true commercial lending was anywhere from seven and a half to eight and a half in terms of new, new money, new money yield. OK. Thank you, and I appreciate the margin guide. I'll let someone else jump on.

Emmanuel Novice: Kind of drives a little bit better growth expectations on the loan side next year.

Emmanuel Navas: Yeah, Manuel, this is Phil. As it relates to the current flows within the deposit base, they continue to be in the featured time deposit products that we're offering predominantly on the retail side, kind of midterm, you know, one year to

Speaker Change: Yes, well this is Phil.

Phil: As it relates to the current flows within the deposit base.

Russell Gunther: Thank you. Our next question comes from the line of Russell Gunther with Stevens Incorporated. Your line is now open.

Phil: They continue to be in.

Phil: Featured time deposit products that we're offering predominantly on the retail side.

Russell Gunther: Hey, good afternoon, guys. I wanted to follow up on the margin discussion, if I could, in terms of the three cuts that you're expecting in 24, if we think about the beta on the way down, what does your kind of 7 to 10 BIPs recovery per quarter assume for a deposit beta with those cuts? Yeah, yeah, that's a great question. So, first of all, Russell, this is Phil again.

Phil: Kind of mid term.

Phil: One year to fifth one year to two year type of.

Philip J. Mantua: one year to two year type of maturity tenures currently with

Russell Gunther: Thank you. Maybe I'm just switching gears on the expense conversation that was just had.

I understand the directional guide, but from a big picture strategic perspective, kind of where do you stand in the digital transformation phase and that spin that I believe is now in the run rate? Are there ongoing projects, you know, below the radar that are captured into that flat expense guidance? I know when spread was more challenged, I think you guys had strategically pushed some things a bit further, so just curious from a big picture perspective where that all stands.

Phil: Maturity tenures currently.

Phil: Yes.

Philip J. Mantua: that, you know, the

So.

Philip J. Mantua: the best offered rate at around 5% but I don't know that we're looking for that particular rate to last a whole lot longer into the future. Still seeing good growth on the high yield savings account. That continues to lead the way. Our other interest checking products are fairly stable. The money market area still is one that we think needs to turn the corner and go in the other direction. That's been a little more difficult. I think we're optimistic about the things we can do on the demand deposit side here given the nature of the type of lending we want to do going forward and how that should alter the view towards the complementary type of deposit gathering that would go along with more commercial lending. I think that's part of where we are at and how we see it moving forward as well.

Phil: The best offered right at around 5%, but I don't know that we're looking for that particular rate to last a whole lot longer into the future.

Phil: We're still seeing good growth on the high yield savings account that continues to lead the way.

Philip J. Mantua: We've got a cut anticipated in June, September, and then again in December. So effectively, for the second half, it's really two cuts that are going to impact the second, you know, the third and fourth quarters. Within that, we've assumed a similar type of beta relative to our money markets and other money markets and other checking products in that 40% range. But on the high yield savings that we've run here and have had significant growth in, our beta assumption on that is more like 90%, could even be more than 100%, depending on how aggressive we think we can be. And so we're anticipating a pretty significant pullback for every 25 basis points that we get back from the Fed. Okay, and then.

Phil: Our other.

Phil: Interest checking products are fairly stable the money market area still has one net.

Operator: Yeah, good.

Russell, this is Dan. What we rolled out, and, you know, kind of fully completed in 23 in the end of the beginning of the fourth quarter was everything retail related, retail online banking, retail mobile, P2P capabilities, integrated online account opening. So those are all running and there will be obvious iterations to that, but not at the same, you know, expense rate as as the initial build on the on the, planning side of things is taking that platform and building out our small business and then our commercial online capabilities that's in the design phase right now in all likelihood the build out of that would probably not begin to occur until very end of 2024 into 25, and then and then within that run so that's not built into that run rate for 24 conversations what I'm trying to say and then what is built in are a number of smaller projects that are just aimed at helping us to put into practice some of the digital capabilities we have, of automated underwriting, automated small business delivery, and those types of things. And those will be things that are being built out throughout the course of 2024.

Phil: We think needs to kind of turn turned the corner.

Phil: The other direction, that's been a little more difficult and I think we're optimistic about the things we can do on the demand deposit side here.

Phil: Given the nature of the type of lending we want to do going forward.

Phil: How that should.

Phil: Alter the view towards the complementary type of deposit gathering.

Phil: Go along with more commercial lending so I think that's part of where we're at and kind of how we see it moving forward as well.

Philip J. Mantua: Manuel, this is Dan. I'll also mention that we're really optimistic about what our digital capabilities are going to provide in the generation of new relationships.

Phil: Well. This is Dan I'll also mention that we're really optimistic about what our digital capabilities are going to provide.

Philip J. Mantua: Has anything shifted in terms of the funding mix? Like, do you guys have any deposits formally indexed to Fed funds that would reprice more immediately? How should we think about that? We don't have anything formally.

Phil: On the generation of new relationships.

Daniel J. Schrider: you know with with 23 being what it was with the noise around

Phil: With with 23 being what it was with the noise around.

Philip J. Mantua: That's per se tied directly; everything's really management discretion. But that's the way we look at it, trying to mimic or mirror as much of the Fed Funds cuts as we can in various areas. And again, we've also got kind of behind the scenes a fairly significant amount of collateralized CDs that are scheduled to mature throughout the year, throughout 2024 as well. In fact, we've got about $430 million at 4.5% scheduled to mature throughout the year, $172 million of that at $470 million and change in the first quarter alone. And then there's about $250 million of home loan bank advances that are going to mature during the year, and that's averaged at about $460 million, and about $50 million of that at $475 million is in the first quarter as well. Okay, that's a great color.

Daniel J. Schrider: deposit outflows or disintermediation, you know, our integrated account opening that we kicked off

Phil: Deposit outflows or disintermediation or our integrated account opening that we kicked off with some of our new digital technology.

Daniel J. Schrider: and some of our new digital technology.

Daniel J. Schrider: you know we open for us significant over 2,200 new accounts in the over the course of time since we kicked that off.

We opened for us significant over 'twenty 200, new accounts in the over the course of time since we kicked that off.

Daniel J. Schrider: but over half of that

Phil: But over half of that.

Daniel J. Schrider: or I'm sorry, about a third of that are checking account relationships. Over half new client acquisitions

Phil: I'm, sorry about a third of that or checking account relationships.

Russell Gunther: Okay, Dan. That's very helpful. And then the last one for me, just on the loan growth side of things. I think I missed your comment in terms of where your target is, but if you could share kind of what you're directionally looking for from a loan volume perspective, Mix, and then just kind of overall comfort zone from loan to deposit ratio if that's ultimately going to be the governor.

Phil: Over half of new client acquisitions.

Daniel J. Schrider: you know about 46% are deep in the existing relationship so we have our teams

Phil: About 46% or deepening existing relationships. So we have our teams.

Daniel J. Schrider: in retail and commercial, mortgage and wealth.

Phil: In retail and commercial mortgage and wealth.

Daniel J. Schrider: laser focused on deep

Phil: Laser focused on deepening.

Daniel J. Schrider: digging into the relationships that they have within those verticals that may not have full banking relationships. So they're going after that really hard. We're using some outside data to be able to go out after prospective clients, again, using our digital tools. And so we think there's some real upside for us.

Phil: Digging into the relationships that they have within those verticals that may not have full banking relationships. So theyre going after that really hard we're using some outside data to be able to go out after prospective clients again, using our digital tools and so we think there's some real upside for us to to drive some deposit growth new relationship growth.

Yeah, I think going into 2024, and I think we're going to stay flexible as to what we see happening in the market, both from a pricing, demand, and then having obviously the funding side of things also be a driver there, but our plan was to be somewhere in the mid to upper single digits by the end of the year in loan growth, driven predominantly by the, our C&I work, our owner-occupied real estate, probably low single digits on the commercial real estate side of things, really overcoming runoff that we see in that. We could see some growth if, depending upon what the long end of the curve does in the mortgage space, and have more of an appetite to put some 5-1, 7-1, 10-1 type of arm product in the portfolio, but that's really gonna be driven by you know what we're able to achieve from a profitability standpoint so there's a little bit of so from an overall plan standpoint mid to upper single digits that could move more favorably if conditions you know allow that to happen, on a loan-to-deposit ratio, we actually, the last.., a handful of months.

Daniel J. Schrider: to drive some deposit growth, new relationship growth with capabilities that we've never had before.

Phil: With capabilities that we've never had before so.

Daniel J. Schrider: we're counting on that to be meaningful.

Daniel J. Schrider: So thank you. Maybe I'm just switching gears on the expense conversation that was just had. I understand the directional guide, but from a big picture strategic perspective, where do you stand in the digital transformation phase and that spend that I believe is now in the run rate? Are there ongoing projects below the radar that are captured in that flat expense guidance? I know when spread was more challenged, but I think you guys had strategically pushed some things a bit further.

Phil: We're counting on that to be meaningful as we move through 'twenty four.

Speaker Change: That's really helpful. Did I understand right on the loan growth guidance about like mid to upper single digits across the whole year or kind of accelerating to the back half or both?

Phil: That's really helpful.

Phil: Did I understand right on the loan growth guidance about like mid to upper single digits.

Phil: Across the whole year or kind of accelerating into the back half or both.

Speaker Change: Can you just kind of help with the timing a bit?

Speaker Change: Can you just kind of help with the timing a bit.

Speaker Change: Yeah, I think traditionally our first quarter is is soft. That's a demand driven soft. So I think it probably builds towards the second through through fourth quarter.

Speaker Change: Yeah, I think traditionally our first quarters.

Speaker Change: As soft demand driven soft.

Speaker Change: So I think it probably builds towards the second through fourth quarter of the year.

Daniel J. Schrider: So just curious from a big picture perspective, where that all is Yeah, Russell, this is Dan. What we rolled out and kind of fully completed on 23, at the beginning of the fourth quarter was everything retail related. Retail online banking, retail mobile, P2P capabilities, integrated online account. So those are all running.

Speaker Change: and rates help with that or you're you feel like you could you're comfortable in the matter

Speaker Change: And rates help with that or.

Speaker Change: Feel like you could you're comfortable no matter.

Speaker Change: what the rates do. I mean, I expect some cuts, but.

Speaker Change: What rates do you think.

Speaker Change: I mean, I think we're comfortable.

Speaker Change: Yeah, I don't think that's necessarily I don't think that's necessarily

Speaker Change: Yeah, I don't think that's necessarily.

Speaker Change: Yeah.

Speaker Change: you know, cut driven. I mean, rates clearly have had an impact on a number of real estate related projects. They just don't work at the rates at the pricing today. But in what we're going after in terms of small business, C&I relations,

Speaker Change: Cut driven.

We're tracking on either side of 100%. And in our case, we always have a little deposit runoff, particularly within the commercial book at the end of the year, which is what kicked it back up. We went into December with it right around 100.

Speaker Change: Rates clearly have an impact on a number of real estate related projects that they just don't work at the rates.

Daniel J. Schrider: And there will be obvious iterations on that, but not at the same expense rate as the initial bill on the planning side of things is taking that platform and building out our small business and then our commercial online capabilities. That's in the design phase right now. In all likelihood, the build out of that would probably not begin to occur until the very end of 2024 or even into 25. And then within that, so that's not built into that run rate for 24 conversations, what I'm trying to say.

The pricing today, but what we're going after in terms of small business C&I relationships.

Speaker Change: and winning more market share from existing lenders in the market, it won't be right.

Over time, we think that it needs to come down into the mid-90s, but we're not sprinting towards that.

Speaker Change: And winning more market share.

Speaker Change: From existing lenders in the market it won't be rate dependent.

We just think that it will happen over time.

Speaker Change: but it's more second half.

Russell Gunther: All right, Dan. I appreciate it.

Speaker Change: But it's more second half of the year.

Russell Gunther: That was very helpful.

Russell Gunther: That's it for me, guys.

Speaker Change: Thank you guys. Appreciate the comment.

Speaker Change: Okay. Thank you guys I appreciate the comments.

Russell Gunther: Thank you for taking my questions.

Operator: Thanks. Thank you. Our next question comes from the line of Emmanuel Navas with D.A.

Speaker Change: Sure.

Speaker Change: Thank you.

Speaker Change: There are currently no further questions registered so as a reminder it is star 1 on your telephone keypad.

Davidson. Your line is now open. Hey, good afternoon.

Speaker Change: There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.

Can you talk a little bit more about the kind of comfort on the deposit side and kind of where you're seeing the core inflows that kind of drive a little bit better growth expectations on the loan side next year?

Daniel J. Schrider: And then what is built in are a number of smaller projects that are just aimed at helping us to put into practice some of the digital capabilities we have, such as Automated Underwriting, Automated Small Business Delivery, and those types of things. And those will be things that are built out throughout the course of 2024. Okay, got it, Dan.

Speaker Change: there are no additional questions waiting at this time so I'll pass the conference back over to you Mr. Schrider for closing remarks

Speaker Change: There are no additional questions waiting at this time, so I'll pass the conference back over to you Mr. Schneider for closing remarks.

Yeah, Manuel, this is Phil. As it relates to the current flows within the deposit base, they continue to be in the featured time deposit products that we're offering predominantly on the retail side, kind of midterm, you know, one year to, one year to two year type of maturity tenures currently with that, you know, the best offered rate at around 5%, but I don't know that we're looking for that particular rate to last a whole lot longer into the future. I am still seeing good growth on the high yield savings account. That continues to lead the way. Our other interest checking products are fairly stable.

Schrider: Thank you Megan and thanks everyone for joining today's call and for your questions. If you have any others please reach out and let us know how valuable the call was.

Thank you Meghan and thanks, everyone for joining today's call and for your questions.

Speaker Change: If you have any others, please reach out and let us know how valuable the call was.

Daniel J. Schrider: That's very helpful. And then the last one for me, just on the loan growth side of things. I think I missed your comment in terms of where you are and what your target is.

Speaker Change: And do we have another one or we could.

Speaker Change: Do we have another one or are we good?

Speaker Change: No.

Speaker Change: I guess not okay. Thanks, everyone have a great afternoon.

Speaker Change: Okay. Thanks, everyone. Have a great afternoon.

Daniel J. Schrider: But if you could share kind of what you're directionally looking for from a loan volume perspective, mix, and then just kind of overall comfort zone from loan to deposit ratio if that's ultimately going to be the governor. Yeah, I think, you know, going into 2024, and I think we're going to stay flexible as to what we see happening in the market, both from a pricing demand perspective, and then, you know, having, obviously, the funding side of things also be a driver there. But our plan was to be somewhere in the mid to upper single digits by the end of the year in loan growth, driven predominantly by our C&I work, our under-occupied real estate, and probably low single digits on the commercial real estate side of things, really overcoming the runoff that we see in that.

Yes.

Speaker Change: That concludes the Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the fourth quarter of 2023. Thank you for your participation. I hope you have a wonderful rest of your day.

Speaker Change: That concludes the Sandy Spring Bancorp, Inc earnings conference call and webcast for the fourth quarter of 2023. Thank you for your participation I Hope you have a wonderful rest of your day.

The money market area is still one that we think needs to turn the corner and go in the other direction. That's been a little more difficult. I think we're optimistic about the things we can do on the demand deposit side here given the nature of the type of lending we want to do going forward and how that should alter the view towards the complementary type of deposit gathering that would go along with more commercial lending. I think that's part of where we are at and how we see it moving forward as well.

Speaker Change: That concludes the Sandy Spring Bancorp, Inc. Earnings

Speaker Change: That concludes the Sandy Spring Bancorp, Inc earnings.

Manuel, this is Dan. I'll also mention that we're really optimistic about what our digital capabilities are going to provide in the generation of new relationships, you know, with 23 being what it was with the noise around deposit outflows or disintermediation, you know, our integrated account opening that we kicked off and some of our new digital technology, we opened for us significantly over 2,200 new accounts in the course of time since we kicked that off, but over half of that, or, Over half of new client acquisitions, you know, about 46% are deep in the existing relationship, so we have our teams in retail and commercial, mortgage, and wealth laser focused on deep digging into the relationships that they have within those verticals that may not have full banking relationships. So they're going after that really hard. We're using some outside data to be able to go out after prospective clients again, using our digital tools. And so we think there's some real upside for us, driving some deposit growth, new relationship growth with capabilities that we've never had before. We're counting on that to be meaningful. That's really helpful.

Daniel J. Schrider: We could see some growth if, depending upon what the long end of the curve does in the mortgage space, and we have more of an appetite to put some 5-1, 7-1, 10-1 type of arms product in the portfolio, but that's really going to be driven by, you know, what we're able to achieve from a profitability standpoint. So there's a little bit of...

Daniel J. Schrider: So from an overall plan standpoint, mid to upper single digits, that could move more favorably if conditions, you know..., allow that to happen. On a loan-to-deposit ratio, we actually, for the last..., a handful of months, we're tracking on either side of 100%. And in our case, we always have a little deposit runoff, particularly within the commercial book at the end of the year, which is what We went into December with it right around 100%.

Daniel J. Schrider: Over time, we think that needs to come down into the mid 90s, but we're not sprinting towards that. We just think that will happen over time. All right, Dan. I appreciate it. That was very helpful. That's it for me, guys.

Did I understand right on the loan growth guidance about like mid to upper single digits across the whole year or kind of accelerating to the back half, or both?

Russell Gunther: Thank you for taking my questions. Thank you. Our next question comes from the line of Manuel Navas with DA Davidson. Your line is now open. Hey, good afternoon. Can you talk a little bit more about the kind of comfort on the deposit side and kind of where you're seeing the core inflows that kind of drive a little bit better growth expectations on the loan side next year? Yeah, Manuel, this is Phil.

Can you just kind of help with the timing a bit? Yeah, I think traditionally our first quarter is soft. That's a demand-driven soft. So I think it probably builds towards the second through fourth quarter, and rates help with that, or you feel like you could, you're comfortable in the matter what the rates do. I mean, I expect some cuts, but yeah, I don't think that's necessarily. I don't think that's necessarily, you know, cut driven. I mean, rates clearly have had an impact on a number of real estate-related projects. They just don't work at the rates at which they are priced today. But in terms of what we're going after in terms of small business, C&I relations, and winning more market share from existing lenders in the market, it won't be right, but it's more the second half. Thank you, guys.

Philip J. Mantua: As it relates to the current flows within the deposit base, they continue to be in the featured time deposit products that we're offering predominantly on the retail side, kind of midterm, you know, one year to, one-year to two-year type of maturity tenures currently with that, you know, the best offered rate at around 5%, but I don't know that we're looking for that particular rate to last a whole lot longer into the future. I am still seeing good growth on the high-yield savings account. That continues to lead the way. You know, our other interest-checking products are fairly stable. The money market area is still one that we think needs to kind of turn the corner and go in the other direction. That's been a little more difficult.

I appreciate the comment. Sure.

Thank you.

Operator: There are currently no further questions registered, so as a reminder, it is star 1 on your telephone keypad. There are no additional questions waiting at this time, so I'll pass the conference back over to you, Mr. Schrider, for closing remarks. Thank you, Megan, and thanks everyone for joining today's call and for your questions. If you have any others, please reach out and let us know how valuable the call was. Do we have another one, or are we good? Okay. Thanks, everyone. Have a great afternoon! That concludes the Sandy Spring Bancorp, Inc. Earnings Conference Call and Webcast for the fourth quarter of 2023. Thank you for your participation. I hope you have a wonderful rest of your day.

Philip J. Mantua: And I think we're optimistic about the things we can do on the demand-deposit side here, given the nature of the type of lending we want to do going forward and, you know, how that should alter the view toward the complementary type of deposit gathering that would go along with more true commercial lending. So I think that's part of where we are at and kind of how we see it moving forward as well. Manuel, this is Dan.

Daniel J. Schrider: I'll also mention that we're really optimistic about what our digital capabilities are going to provide in the generation of new relationships, you know, with 23 being what it was with the noise around deposit outflows or disintermediation, you know, our integrated account opening that we kicked off, some of our new digital technology. You know, we opened, for us, significant, over 2,200 new accounts over the course of time since we kicked that off. But over half of that, I'm sorry, about a third of that are checking account relationships, over half new client acquisition, you know, about 46% are deep in the existing relationship. So we have our teams, in Retail and Commercial Mortgage and Wealth, laser focused on deep digging into the relationships that they have within those verticals that may not have full banking relationships. So they're going after that really hard.

Operator: That concludes the Sandy Spring Bancorp, Inc. earnings report.

Daniel J. Schrider: We're using some outside data to be able to go out after prospective clients again, using our digital tools. And so we think there's some real upside for us, to drive some deposit growth and new relationship growth with capabilities that we just never had before. We're counting on that to be meaningful as well.

Manuel Navas: Did I understand right on the loan growth guidance about like mid to upper single digits across the whole year or kind of accelerating to the back half or both? Can you just kind of help with the timing a bit? Yeah, I think traditionally, our first quarter is soft. That's a demand-driven soft.

Daniel J. Schrider: So I think it probably builds towards the second through fourth quarter. And rates help with that, or do you feel like you could be comfortable in the matter? What rates do. I mean, I expect some cuts, but... Yeah, I don't think that's necessarily... Rates clearly have had an impact on a number of real estate-related projects. They just don't work at the rates, at the prices today.

Daniel J. Schrider: But in terms of small business, C&I relations, and winning more market share from existing, you know, lenders in the market, it won't be right, but it's more the second half. Thank you guys. Appreciate the comments. Sure. Thank you. There are currently no further questions registered, so as a reminder, it is star one on your telephone keypad.

Operator: There are no additional questions waiting at this time, so I'll pass the conference back over to you, Mr. Schrider, for closing remarks. Thank you, Megan, and thank everyone for joining today's call and for your questions. If you have any others, please reach out and let us know how valuable the call was. Do we have another one, or are we good?

Daniel J. Schrider: Okay. Thanks, everyone. Have a great afternoon. That concludes the Sandy Spring Bancorp Inc. earnings conference call and webcast for the fourth quarter of 2023. Thank you for your participation. I hope you have a wonderful rest of your day.

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