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spk02: Good afternoon and welcome to the Sandy Spring Bancorp Earnings Conference Call and webcast for the second quarter of 2021. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Daniel Schreider, President and CEO. Please go ahead.
spk04: Thank you, and good afternoon, everyone. We appreciate you joining us today for our conference call to discuss Sandy Spring Bank Corps' performance for the second quarter of 2021. Today, we'll also bring you up to date on our response to and regarding the impact from the COVID-19 pandemic. This is Dan Schreider speaking, and I'm joined here today by my colleagues Phil Mantua, Chief Financial Officer, and Aaron Caslow, General Counsel for Sandy Spring Bancorp. Today's call is open to all investors, analysts, and the media. There's a live webcast of today's call, and a replay will be available on our website later today. Before we get started covering highlights from the quarter and taking your questions, Aaron will give the customary safe harbor statement.
spk00: Thank you, Dan. Good afternoon, everyone. Sandy Spring Bancorp will make forward-looking statements in this webcast that are subject to risks and uncertainties. These forward-looking statements include statements of goals, intentions, earnings, and other expectations estimates of risks and future costs and benefits, assessments of expected credit losses, assessments of market risk, and statements of the ability to achieve financial and other goals. These forward-looking statements are subject to significant uncertainties because they are based upon or affected by management's estimates and projections of future interest rates, market behavior, other economic conditions, future laws and regulations, and a variety of other matters, including the impact of the COVID-19 pandemic which by their 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 company's past results of operations do not necessarily indicate its future results.
spk04: Thank you, Aaron, and thank you all again for joining us today to discuss our second quarter financials. We are pleased to report another strong quarter, and we are now one year beyond our acquisition of Revere Bank, and the benefits that strategic partnership continue to contribute to our overall performance. And the same goes for our acquisition of Rembrandt Pendleton Jackson, or RPJ. Quarter after quarter, our results validate that adding RPJ to the Sandy Spring Bank family was the right move. And across our entire wealth group, including RPJ, West Financial Services, and Sandy Spring Trust, we've seen impressive year-over-year growth. Overall, our company is in a great position, And let's start by breaking down some of the highlights from the press release, and then Phil and I will talk you through the supplemental information we also issued today. Today, we reported net income of $57.3 million, or $1.19 per diluted share, for the quarter ended June 30, 2021. This quarter's result compares to a net loss of $14.3 million, or $0.31 per diluted share, for the second quarter of 2020. and net income of $75.5 million or $1.58 per diluted share for the first quarter of 2021. Core earnings were $55.1 million or $1.16 per diluted share compared to $51.9 million or $1.10 per diluted share for the quarter ended June 30 of last year and $56.9 million or $1.20 per diluted share for the quarter ended March 31 of 2021. The provision for credit losses was a credit of $4.2 million compared to a credit of $34.7 million in the linked first quarter. The current and prior quarters provision credits were primarily the result of an improved economic outlook, including a decline in the forecasted unemployment rate. Phil will talk you through the provision credit in more detail when we review the supplemental materials. Shifting to the balance sheet, total assets declined 3% to $12.9 billion compared to $13.3 billion at June 30, 2020. This decline was primarily the result of the net reduction of $179.2 million in loans originated under the Paycheck Protection Program and the $251.5 million decline in the residential mortgage loan portfolio given the robust refinance activity. Excluding PPP, Total loan growth compared to the linked quarter was 1%, with 2% organic growth within the commercial book. Year over year, we saw non-PPP commercial loan growth of 4% and commercial real estate loan growth was 6%. We continue to operate in the season of lower commercial line utilization, higher runoff, and significant borrower liquidity. At the same time, we have momentum as we look into the third and fourth quarter. For instance, quarter over quarter, gross commercial production increased $300 million, or 61%, and funded production increased $214 million, or 75%. And our pipeline looks equally as strong heading into the third quarter. It's important to note that the higher runoff we experienced in the first and into the second quarter was driven primarily by success achieved by our clients, as well as traditional refinancing into the life company market, but not the result of the loss of client relationships. On the deposit side of things, deposits increased 2% during the linked quarter, driven by 6% growth in non-interest-bearing deposits. Deposit growth was 8% during the past 12 months, as non-interest-bearing deposits grew 16% and interest-bearing deposits grew by 3%. This growth was primarily driven by PPP and, to a lesser extent, growth in core deposit relationships. PPP-related deposit retention continues to be strong, and we estimate that approximately 990 million, or 62%, of the combined Round 1 and Round 2 PPP deposits are still on the balance sheet, with 81% of these deposits still being retained in customer checking accounts. Non-interest income increased 15%, or 3.3 million, compared to the prior year quarter, as wealth management income grew 20%, and service charges on deposit accounts increased 62%. Bank card fees grew 42% compared to the prior year given increased transaction volume. Other non-interest income also grew significantly as a result of the full payoff of a purchase credit deteriorated loan as well as contractual vendor incentives. Wealth management income increased 3.3 million year over year as a result of the first quarter of 2020 acquisition of RPJ. and $818 million growth in assets under management across our three wealth franchises. We have exceptional professionals and industry experts in RPJ, West Financial Services, and Sandy Spring Trust, and they continue to attract new clients, deepen existing relationships, and deliver sophisticated service in this highly competitive market. While mortgage banking income in the first two quarters increased 4.5 million compared to the same period last year, mortgage banking income decreased from 10.2 million to 5.8 million compared to the linked quarter. The overall level of mortgage banking income in the second quarter should hold up as we approach the second half of this year. We are extremely pleased with our margin this quarter. The net interest margin was 363 for the second quarter of 2021 compared to 347 for the same quarter of 2020 and 356 for the first quarter of 2021. Excluding the impact of the amortization of fair value marks derived from acquisitions, The current quarter's net interest margin would have been 360 compared to 319 for the second quarter of 2020 and 346 for the first quarter of 2021. The strength of our margin continues to be driven by our ability to effectively manage our cost of funds as our core margin adjusted for PPP and fair value impacts expanded on a linked quarter basis from 342 to 349. This was supported by our payoff of all remaining FHLB advances during the quarter as well. Non-interest expense decreased 22.5 million or 26% compared to the prior year quarter. The prior year quarter included 22.5 million in M&A expense as well as 5.9 million in prepayment penalties from the liquidation of acquired FHLB borrowings. These reductions from the prior year more than offset this quarter's $4.7 million increase in salary and benefit expenses which was driven by staffing increases and annual merit awards that occurred this quarter. The non-GAAP efficiency ratio was 45-36 for the current quarter compared to 43-85 for the second quarter of 2020 and 42-65 for the first quarter of 2021. This modest increase in the efficiency ratio from the second quarter the prior year was a result of the 11 percent growth in non-GAAP expense outpacing the 8 percent growth in non-GAAP revenue. Lower levels of gain on mortgage sales coupled with strategic initiative-based increases in personnel costs and technology-related consulting fees drove the linked quarter increase in the efficiency ratio. Looking ahead, we continue to manage this expense-to-revenue metric to a targeted range of 48 to 50 percent as PPP revenues eventually abate and we continue to make strategic investments in people and technology. I want to provide you a little more color on what's playing into these expenses. We're making strategic staffing and technology investments to build a platform for future growth, facilitate and improve client experience, and help deepen client relationships. Specifically, we're building an omnichannel digital platform with BackBase and implementing an enterprise-wide integration layer with a company called MuleSoft, which enables the design and build of APIs to support the BackBase project. We're also creating a holistic data infrastructure, And all of this is being done with Salesforce.com serving as our main hub for everything we do. For all of this work, we will achieve a more seamless integration with new technologies, and we'll have the flexibility to move to a new core system should we decide to make that type of move. At this stage, we are ramping up on the staffing and consulting front to support this work, and we'll continue to update you in the future on our progress. Shifting to credit quality, Nonperforming loans decreased from 94 basis points in the linked quarter to 93 basis points, an increase from 77 basis points in the second quarter of the prior year. Nonperforming loans totaled $94.3 million compared to $98.7 million for the first quarter of the year. New loans placed on non-accrual during the current quarter were $1.5 million compared to $27.3 million for the prior year quarter and $421,000 for the first quarter of 2021. Loans in non-accrual status at quarter end included a few large borrowings within the hospitality sector with an aggregate balance of just under $41 million. These large collateral-dependent loans had individual reserves of $5.7 million at quarter end. And we recorded net charge-offs of $2.2 million for the second quarter of 2021 compared to net recoveries of $367,000 for the second quarter of 2020 and net charge-offs of $300,000 for the first quarter of 2021. The increase was primarily a result of the charge-off of an acquired pre-pandemic problem credit. The allowance for credit losses was $124,000. or 1.23% of outstanding loans and 131% of nonperforming loans compared to 130.4 million or 1.25% of outstanding loans and 132% of nonperforming loans at the linked quarter. Excluding PPP, the allowance for credit losses as a percentage of total loans outstanding decreased to 1.34% compared to 1.43% at the linked quarter. All in all, credit quality has remained very solid, and the team has done a terrific job managing through the last several quarters. As a result of the accumulated earnings over the preceding 12 months, tangible common equity increased to $1.2 billion or 9.28% of tangible assets at June 30, 2021, compared to $983.4 million or 7.63% at June 30 of 2020. Excluding the impact of the PPP program from tangible assets at June 30, the tangible common equity ratio would be 9.98%. Given the strength of our earnings and capital position, we are likely to be active under our share repurchase program in the coming months, and we also continue to build relationships with both banks and non-banks as part of our M&A strategy. At June 30, the company had total risk-based capital ratio of 15.8, a common equity Tier 1 risk-based capital ratio of 12.5, a Tier 1 risk-based capital ratio of 12.5, and a Tier 1 leverage ratio of 9.5. We will now turn to the supplemental information we also issued this morning. On slide 2, you can see that loans with payment accommodations as of June 30 totaled $216 resulting in 2% of our loan portfolio receiving accommodations compared to 3% in the linked quarter. As we noted in the press release, 93% of the loans that had been granted modifications or deferrals due to pandemic-related financial stress have returned to their original payment plans. Moving to slide three, we have detailed specific industry information, which we've updated and shared the past five quarters. Outstanding balances for each segment and the loan and payment accommodations are as of June 30. On slides four and five, we've broken out where we stand on forgiveness for rounds one and two of the program. As of July 9th, 86% of round one loans have applied for forgiveness and 99.6% of all forgiveness applications submitted to the SBA have received full forgiveness. On slide five, you can see we're in the early stages of our round two forgiveness, and we expect those efforts to continue throughout this calendar year. Now I'm going to take a break and turn it over to Phil who can talk you through CECL and our capital position.
spk05: Thanks, Dan. Good afternoon, everyone. I'm going to pick up on slide number six, where we have our waterfall representations of the movement in our allowance for the second quarter of 2021, which is broken down into the components that reflect the key drivers of the change during the quarter. The change over the course of the current quarter was primarily driven by the reduction in the projected near-term level of the unemployment rate, which, as you know, is a key economic factor in our CECL methodology. This element of reserve release was offset this quarter by an increase due to adjustments to certain qualitative factors and also an increase of $3.2 million in specific reserves. On slide seven is a comparison of our current and more recent economic forecast variables. Our CECL methodology continues to use a Moody's baseline forecast that for the second quarter was a version that was released by Moody's on June 21st. This baseline forecast integrates the effect of COVID-19 and portrays an unemployment rate for our local market that has essentially already peaked and ultimately recovers to a level of 3.12% in the second quarter of 2023. which is a projected unemployment level that would continue to improve, but at a slower pace than in previous quarters. Additionally, the projected levels of year-over-year growth in business bankruptcies and the changes in the home price index as presented contribute to the provision credit for the quarter. Our key macroeconomic variables are further outlined on slide 8. In determining our reasonable and supportable forecast period, we continue to use a two-year time horizon to reflect less uncertainty in the long-term outlook at this time. Similar to the approach taken in previous quarters, we continue to not take into consideration any potential mitigating factors based on what could be perceived as the positive outcome or impact of government programs such as PPP, et cetera. We feel very comfortable that this continues to be the right conservative stance. Conversely, we have chosen to continue to include an additional qualitative factor related to concentration risks that we believe could exist in certain higher-risk industry segments of our portfolio. Slide 9 provides some additional granularity related to our reserve from a portfolio view, where you can see that all of our major categories of commercial loans, with the exception of AD&C, reflect a continuing trend of reserve release. We should note that the 1.26% of reserve reflected here for commercial business loans includes PPP loans in the balance, although there is no reserve required on those loans. As illustrated in the footnote at the bottom of the slide, when adjusting the balance to exclude PPP loans outstanding, the reserve on our commercial business segment would be 2.26%, and our total reserve would be 1.34% of our total loans. Finally, on slide 10 is a trend of our pertinent capital ratios with some brief explanations regarding the treatment of certain items and their impact on the resultant ratios. Included in those comments is an adjusted tangible equity to tangible assets to reflect the impact of PPP loans on the current measure. We feel confident about our capital position as all of our metrics continue to improve as a result of the strength of our earnings this quarter. We've also recently updated our capital stress test. We have constructed our baseline and severe forecast scenarios utilizing the same Moody's baseline forecast incorporated in our CECL calculations and a COVID-based S4 economy in the severe case. We view our overall capital position as strong, which allows us to consider the various capital deployment strategies, some of which Dan mentioned in some of his earlier comments. Sam, back to you. Thank you, Phil.
spk04: Beyond our financials, I just have a few other updates to share with you today. Last quarter, I reported that we were beginning to welcome more employees and clients back to our branches and offices, and those efforts are well underway. Nearly two months ago, our branches fully opened to our clients, and no appointment is needed to access our more than 60 branch locations. I should note that our clients came to appreciate our enhanced drive-through capabilities during the pandemic, so those expanded options will continue to be available at all of our drive-through locations. Non-branch personnel is also back in the office at least 50% of the time, and we will expand in-person operations after the Labor Day weekend. However, we will continue to offer our employees increased flexibility and remote work options. Sandy Spring also continues to earn local and national recognitions. For the third year in a row, Forbes named Sandy Spring Bank one of America's best in-state banks and the number one bank in Maryland. The Washington Post also named us top workplace for the third consecutive year. These recognitions and our strong financial results are only made possible by our remarkable employees, the majority of whom are shareholders as well. So on behalf of the executive leadership team, thank you to all of our people for your tremendous contributions to the success of our company and our culture. And we look forward to continuing to come together in finishing 2021 strong. This concludes our general comments today, and we'll now move to your questions. So operator, we'll take the question. If you can please identify your name and company affiliation as you come on the line, that would be great.
spk02: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question comes from Casey Whitman of Piper Sandler. Please go ahead.
spk03: Hey, good afternoon.
spk08: Good afternoon, Casey. Hi, Casey.
spk03: Hi. Phil, any update first to just the range of the core margin over maybe the back half of the year from the 349 or so range that you had this quarter?
spk05: Yeah, I would probably give you that that core margin is most likely going to compress a bit here as we move through the or remaining half of the year, probably 340, 345 range is where I would put the true core. And we're getting to a point where the fair value piece of things is only a basis point or two difference anyway. So we're going to be pretty close to, absent of PPP impacts from quarter to quarter, we'll be pretty close to reporting that kind of a core as we move forward anyway. But I would go 340 to 345. Okay. And we saw a big...
spk03: jump in the demand deposit, not just bearing deposit this quarter, but what are sort of your bigger picture thoughts of how long those deposits stay with you, or how are you thinking about liquidity back after the year and how that plays into the margin commentary?
spk05: Yeah, Casey, I think that, first of all, as Dan mentioned in his comments, we're still carrying a significant amount of PPP-related deposits And in our internal projections, well, first of all, we're at 61% or 62% of what we think was the total to begin with today. Our internal projections have always had that finally bottoming out at maybe 30 to 35% of the originally original or, you know, oriented deposits from those originations. And so you could see some of that just naturally if our projections in that area come down, could eat into the liquidity position. I mean, we certainly know that, you know, we're sitting on a much larger kind of cash and interest-bearing balance predominantly with the Fed here at the end of the quarter than we normally would. I think it's probably about $600 million, about 4% of assets, which In comparison, a lot of other banks, I believe, is still fairly small relative to the size of our balance sheet. But I think that our first deployment of that over time here through the end of the year would be through additional loan growth that I'm sure we'll talk about here before we're done, as well as we are sitting on about 7% of our total deposits in brokered, of which about $300 million of that is brokered CDs. And about $250 million of that is scheduled to mature in the next six months. So we've got some different levers there to look at as to how to absorb that excess liquidity here for the rest of the year.
spk03: Got it. Do you have any idea how much that $250 million costs offhand?
spk05: That average about seven basis points. It's fairly inexpensive to begin with, but nevertheless, it ranges up to about 10 basis points for any one of those blocks.
spk03: Okay. Understood. I'll just turn the conversation quickly before I hop off to the fees. First, I was just wondering, can you remind us the expected impact of Durbin on the bank card fees and when that is going to occur for you guys?
spk05: Yeah, it doesn't actually occur for us now until next year this time. And I think our estimation on that is $3.5 million, if I'm not mistaken, roughly.
spk03: Okay. All right. Thank you. I'll let someone else hop on.
spk08: All right. Thanks, Casey. Thanks, Casey.
spk02: The next question comes from Catherine Miller of KBW. Please go ahead.
spk01: Thanks. Good afternoon. Hi, Catherine. Hi, Catherine. Phil, you teed up the loan growth conversation, so I'll start there. I just wanted to get your thoughts on where you think loan growth can improve to in the back half of the year.
spk04: Yeah, Casey, this is Dan. Good afternoon. The, you know, what we saw in the second quarter, and I'm focusing my comments predominantly on the commercial book, was, and as I said in my prepared remarks, we were, our production was about 300 million north of where we were in the first quarter, and to put numbers on that, taking it from about 490 million to over 790 million in production. And our pipeline going into the third quarter should point to a pretty consistent level of production. So all that to say is we still feel pretty good about that mid-single to a little north of that single-digit growth in the commercial book just based on the contraction we saw in the first quarter. The only other thing that could modify the overall loan growth picture is if along the lines of what we do with some of this excess liquidity, we could choose to hold some additional mortgages on balance sheets. And that's probably something likely that we would do for the remainder of the year, which would – we'd like to see our mortgage balances kind of get back to where they were, which would allow that commercial growth to make a little bit of a greater impact for us.
spk01: Great. And my follow-up question is just kind of how you're thinking about the M&A landscape today. a number of acquisitions smaller in the southeastern space, and just how you're thinking about M&A potential for y'all in this environment.
spk04: Yeah. No, we're certainly thinking about it, as well as building and continuing to build relationships with those that we think might be good matches for us. So we're certainly not on the sidelines. And we'll look at transactions that we think will benefit the franchise and further our strategic goals. I think our, as we probably mentioned before, I mean, our kind of circle geographically is, you know, probably goes north into southern PA, down through, you know, Richmond, west into the Shenandoah Valley, and then all the way to the Atlantic. And that's kind of the immediate area that we're focused on building relationships. But M&A is going to be a part of what we do, as it has been the last few years.
spk01: Great. That's all got a very straightforward quarter. Thank you.
spk08: Thanks, Catherine. Thank you.
spk02: The next question comes from Brody Preston of Stevens, Inc. Please go ahead.
spk06: Hey, good afternoon, everyone.
spk08: Hi, Brody.
spk05: Hey, Brody.
spk06: Hey, I was just hoping to touch on just maybe utilization rates. Dan, you mentioned they remain sort of near historical low levels. Just wanted to get a sense for what that utilization rate percentage is and where that stacks up relative to this time in 2019. Sure.
spk04: We are, I'll give you an idea of where we are as I pull out my data here because I don't want to misquote. So on the commercial side, end of 12-31 of 20, we were at a 26% utilization rate. That dropped to 23% at the end of the first quarter, and then just slightly under 23% as of 6-30. And to give you some context, normal for us in that tends to range anywhere from the 35% to 40% range. So that's, you know, the big deltas between kind of what's normal and it's drifted down a bit here the last couple quarters.
spk06: Got it. Okay. Thank you for that. And then I did want to ask, just on, you mentioned some of the investments that you've made on the expense side. So I guess, You mentioned the MuleSoft partnership, and so I want to just ask about the nature of that partnership. Are they helping you build APIs to allow other fintechs or BaaS platforms to sort of connect to you, or is MuleSoft a BaaS provider with its own set of APIs that's allowing you to partner with fintechs? Just kind of help me sort of understand the partnership.
spk04: Yeah. A great question. MuleSoft is actually building what we refer to as the integration layer. And then we'll work with us to build the APIs to allow that connectivity to be much more effective than what it is today. But they're actually the integration layer company for us.
spk06: Okay, got it. And then I guess just maybe on that, so is this kind of $63 million or so in core expenses that, you know, the run rate from which we should build off of moving forward, or will there be some ebbs and flows there, Phil?
spk05: Yeah, Verde, I would say there'll be some ebbs and flows. And I think we might have talked about this in the last quarter in terms of just looking, you know, down the road and kind of, you know, year over year looking growth in expenses, you know, taking the current quarter and annualizing it and looking for it to grow 4% to 5% from there. It won't be even just because some of the spends will be in certain periods and some things will get capitalized and some things won't, but, you know, and then reabsorbed into the run rate. So I would use that as a general view towards the future here in terms of what that number will look like in total expenses. And it'll probably continue to be growth in those areas we just reported as well related to both personnel costs as well as consulting professional type fees and things that are all kicked together in support of the these varying initiatives.
spk06: Okay, understood. And then just on the loan portfolio, could you remind us what percent of the loan portfolio is floating rate, and then what percent of that floating rate portfolio is currently at floor levels?
spk05: I think the answer to the first part of the question continues to be somewhere between 25 and 30 percent of the total portfolio. I don't know that I can tell you exactly what percentage is currently residing at the floors. I'd have to research that for you to give you the appropriate answer, Brody.
spk06: Okay. Understood. And then just one last one, maybe for Dan. Just wanted to get a sense from you guys as to how you're thinking about permanently repositioning the deposit base here. Last cycle, you had an above-average deposit beta, and a big chunk of that was due to the time deposits, which you've run down here, similar to other banks. But are you also kind of thinking about shifting away from money market exposure, or how do you kind of get customers to maybe stay more in transaction-oriented accounts as opposed to money markets? Because the money markets can be pretty high beta as well.
spk04: Yeah, I think the money market piece of the business will always be part of what we do, given our kind of the demographics of this market, particularly in the retail book. But I think the strategic answer to your question is our ability to continue to drive small business and commercial relationships. And that's where we've got a tremendous amount of emphasis today, and we know that that's by far the most valuable piece of what we can create from a deposit book. And the team's doing a solid job of that, but that's where we would be focusing our energy.
spk06: Great. Thank you all for taking my questions. I appreciate it. Thank you, Rudy.
spk02: Once again, if you would like to ask a question, please press star, then 1. And our next question will come from Eric Zwick of Benning and Scattergood. Please go ahead.
spk07: Good afternoon, guys. Hi, Eric.
spk05: Hi, Eric.
spk07: First, I just want to check and make sure I heard something right from the prepared comments. Did you indicate that you thought the second quarter run rate for the mortgage revenue was kind of a good base to use for the second half of the year? You did hear that correctly.
spk04: Yep.
spk07: Okay, great. Thank you. And then in terms of the PPP loans, with regard to the round one, Do you have the dollar figure of the remaining fees on that portfolio? I may have missed that. I didn't see it on the slide.
spk05: Eric, this is Phil. I don't believe that that particular number was on there, but given the term of those loans and how close we are to working through that, there's probably only a couple million dollars left of the fees that are related to round one PPP loans. The majority of the fees that are still yet to be recognized or related to round two. And I think that number is, in our deferred account, is around $19 million. Okay.
spk07: That's helpful. I appreciate it. And then just curious, as I was looking on slide six at the waterfall table and kind of curious about the $3.5 million bill for the change in qualitative factors, could you just provide any color to what changed within those factors? And then I think, Phil, you may have also said that you've added a new additional qualitative factor to the model and any color on that as well, if I heard that correctly.
spk05: Yeah, actually, Eric, we had added or adjusted some of those qualitative factors a couple of quarters ago that were related to trying to recognize the additional potential risk in predominantly the segments like the hotel industry or whatever where we felt there were higher risk levels of of things relative to those, so we kind of beefed up those factors around certain industry segments, but we really didn't add that this quarter. We had added that before, so it might have sounded like we had here, but that wasn't the case. I think that the increase in the actual factors this quarter were due to some other concentration levels that hit us in a couple places. might have been a couple of credits that popped through in the acquisition, development, construction portfolio, if I'm not mistaken, that bumped up the basis points that we assigned into that area relative to the size of that portfolio to the overall portfolio and to the way we look at it relative to capital. So that was really the genesis of that additional piece this quarter.
spk07: That's helpful. Thanks, Phil. And then just last one for me, kind of tying back with some of the earlier questioning on the loans and what growth may look like in the back half of the year. And I appreciate the color on the pipeline. Just curious if maybe you could add a little bit on the composition of the pipeline between kind of commercial and consumer from that perspective.
spk04: Yeah, everything I talked about with regard to pipeline being level was all commercially related. The other kind of main consumer loan outside of mortgage that we generate are on the home equity side. And as you might imagine, given refinance activity, that portfolio has been under pressure from a balance standpoint. So the pipeline going into third quarter is really level with what it was going into the second quarter. So still good momentum.
spk07: That's helpful. Thanks for taking my questions this afternoon. Thanks, Eric. Thanks, Eric.
spk02: This concludes our question and answer session. I would like to turn the conference back over to Daniel Schreider for any closing remarks.
spk04: Great. Thank you. And thanks, everyone, for taking the time to participate this afternoon. We'd love to get your feedback on these calls, so you can email your comments to ir.sandyspringbank.com. I hope you all have a great afternoon.
spk02: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
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