Q1 2024 Sandy Spring Bancorp Inc Earnings Call

Participants

Daniel Schrider; Chairman of the Board, President, Chief Executive Officer of the Bank; Sandy Spring Bancorp Inc

Aaron Kaslow; Executive Vice President, General Counsel, Company Secretary; Chief Administrative Officer of the Bank; Sandy Spring Bancorp Inc

Charlie Cullum; Treasurer, Deputy Chief Financial Officer; Sandy Spring Bancorp Inc

Catherine Mealor; Analyst; Keefe, Bruyette & Woods North America

Casey Whitman; Analyst; Piper Sandler Companies

Russell Gunther; Analyst; Stephens Inc.

Manuel Navas; Analyst; D.A. Davidson & Company

Daniel Cardenas; Analyst; Janney Montgomery Scott LLC

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for joining today's Sandy Spring Bancorp earnings conference call. My name is Tia and I will 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 will now pass the call over to Daniel J. Schrider, CEO and President, please.

Daniel Schrider

Yes, thank you, Ed, and good afternoon, everyone.
Thank you for joining us to discuss Sandy Spring Bancorp's performance for the first quarter of 2024. This is Dan Schrider speaking, and I'm joined here by my colleagues, Phil Mantua, our Chief Financial Officer, Charlie column, Deputy Chief Financial Officer, and Aaron Kaslow, General Counsel and Chief Administrative Officer. That 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 cover the customary Safe Harbor statement.

Aaron 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. 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 and other economic conditions. Future laws and regulations and a variety of other matters, 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 or In addition, the Company's past results of operations do not necessarily indicate its future results.

Daniel Schrider

Thanks here. And as you read in our press release today, we reported several strong categories this quarter, including core deposits, fee income, our liquidity position and asset quality. At the same time, we remain focused on improving our profitability as well as continuing to shore up core funding, manage expenses and reduce commercial real estate exposure while diversifying growth in other loan categories. We operate in a region with a strong local economy, which we'll continue to use to our advantage as we navigate a challenging operating environment for our industry. That includes shifting economic forecasts, an uncertain interest rate picture and a national election in November as well as unrest in many parts of the world. And despite these external factors, our results show that our fundamentals are solid and we have 156 years of experience navigating business cycles and much more throughout our history.
So with that, let's review the results for the first quarter. Today, we reported net income of $20.4 million or $0.45 per diluted common share for the quarter ended March 31st, compared to net income of $26.1 million or $0.58 per diluted common share for the fourth quarter of 2023 and $51.3 million or $1.14 per diluted common share for the first quarter of 2023. Current quarter's core earnings were $21.9 million, or $0.49 per diluted common share compared to $27.1 million, or $0.60 per diluted common share for the quarter ended December 31st and $52.3 million or $1.16 per diluted common share for the quarter ended March 31st, 2023 this quarter's decline in net income and core earnings compared to the linked quarter was driven by an increase to the provision for credit losses, lower net interest income and higher noninterest expense. Total provision for credit losses for the current quarter is $2.4 million. Provision directly attributable to the funded loan portfolio was $3.3 million for the current quarter compared to a credit of $2.6 million in the previous quarter and a credit of $18.9 million in the prior year quarter. The current quarter also included a credit to provision on unfunded commitments of $900,000 because of higher utilization rates on lines of credit. Within our CECL methodology, we adjusted risk factors for specific industries and commercial real estate segments this quarter, which caused an increase to the provision. However, it was partially offset by lower individual reserves and the reduced probability of an economic recession.
Shifting to the balance sheet, total assets decreased 1% to $13.9 billion compared to $14 billion at December 31st. Total loans were stable at $11.4 billion compared to the previous quarter. Investment commercial real estate loans decreased $106.5 million or 2% quarter over quarter. While the ADC portfolio grew $101.3 million or 10% during this period. Commercial business loans in total mortgage and consumer loan portfolios remained relatively unchanged. And overall, the loan portfolio mix remained consistent compared to the previous quarter. As expected, commercial loan production was softer this quarter due to normal seasonality and our continued curtailment of CRE growth. Commercial loan production totaled $241 million, yielding $168 million in funded production. This compares to commercial loan production of $245 million yielding $153 million in funded production in the linked quarter. We do expect funded loan production to fall between $200 million and $250 million per quarter over the next couple of quarters. And based on pipelines, we expect commercial loan growth in the 3% range in the second quarter, given the stability we achieved in our core deposit base, we are building pipelines of more lending activity that achieves profitability targets. However, we are being margin conscious and exercising pricing discipline with whatever we produce. If you look at the supplemental information we released this morning, Pages 7 through nine provide more detail on the composition of our loan portfolio's data related to specific property types in our commercial real estate portfolio and specific commercial real estate composition in the urban markets of DC and Baltimore.
And on Slides 16 through 20, we provided detailed commercial real estate overview of our retail multifamily office, Flex flash warehouse and hotel portfolios. As you may notice, when reviewing these slides, we are lending in our primary market that we know well. We have three delinquent credits among all reference portfolios and only a handful of nonperforming loans that have been subject to early identification and appropriately reserved. We continue to feel good about our overall credit quality and continue to stay close to our clients, assessing credits that are subject to repricing throughout the year and closely monitoring other portfolios.
On the deposit side, we continue to gain momentum in our ability to grow core funding. Many of our key initiatives are tied to core deposit generation. Deposits increased $230.7 million or 2% to $11.2 billion compared to $11 billion in the linked quarter as interest bearing deposits increased $326.9 million, while non-interest bearing deposits declined $96.2 million. Strong growth in the interest-bearing deposit categories was mainly within savings accounts, which grew by $303.9 million compared to the linked quarter, interest checking and money market accounts increased $64.5 million and $51.6 million respectively, while time deposits decreased $93 million, the decline within non-interest bearing deposit counter parties was driven by lower balances in commercial and small business checking accounts. We attribute the first quarter decline in non-interest bearing deposits to seasonal runoff, but we did start to see DDA growth in the later half of the quarter, which is a positive. We reduced total brokered deposits by $55.8 million during the quarter. Excluding broker deposits, core deposits represented 93% of total deposits compared to 92% in the linked quarter, reflecting continued strength and to build stability of the core deposit base. The deposit growth during the quarter resulted in the loan to deposit ratio declining to 101% from 103% at December 31st, and total uninsured deposits at March 31st were approximately 33% of total deposits across the Company. We continued to shift continue the shift in strategy to focus on activities driving core deposits. All lines of business are laser focused on deepening relationships with an effort to bring in low-cost deposits. Over the course of 2023, we generated over 2,200 new deposit accounts with our high-yield savings product. To turn these accounts into full relationships. We recently introduced a new DDA product, specifically aimed at this client segment as well as our wealth businesses continue to outreach to these clients as well. Additionally, we know that there's a high correlation between home equity products and core deposit relationships. To that end, we recently enhanced the automation of our home equity products to make the application process easier and cut the delivery of the closed loan by over 50%.
Final example is leveraging our success during PPP, not that we want to repeat that event, but we did learn the effectiveness of delivering to clients through automation and the Small Business Administration. With that, we recently brought in a team of SBA lending officers focused on driving small business relationships to the bank, accompanied by the report business accounts. There's just a few examples of our continued focus on core deposit growth as well as diversification of our lending activity.
Shifting to other liabilities, borrowings declined $353.4 million at March 31st compared to the previous quarter due to the full payoff of $300 million in outstanding borrowings through the Federal Reserve's bank term funding program and $50 million reduction in FHLB advances. I'm pleased to report for the first quarter of 2024. Noninterest income increased by 11% to $18.3 million compared to the linked quarter over the year over a year basis, noninterest income grew by 15%. This improvement is primarily due to wealth management fee income and the performance of the market during the quarter. Assets under management at quarter end totaled $6.2 billion, representing a 2.8% increase since December 31st. And we are pleased with the success of Sandy Spring trust and our two wealth management subsidiaries, especially as it relates to the retention of our clients and all segments of our wealth business continue to be optimistic about the balance of 2024 compared to the linked quarter. Income from mortgage banking activities and credit related fees increased $1.1 million. Our expectations for mortgage banking revenue should fall in the $1 million to $1.5 million range per quarter. During the first quarter, the mortgage loan portfolio was relatively unchanged. Housing supply continues to be a challenge which lowers mortgage demand on the part of consumers. Our net interest margin was 2.41% compared to 2.45% for the first quarter of 2023 and 2.99% for the linked quarter. We are encouraging. We're encouraged that the rate of net interest margin contraction slowed, and we experienced margin improvement during the month of March since 2023. The competitive landscape has shifted somewhat in our market and the competition for deposits via rates is generally less aggressive compared to the fourth quarter or 2023. The rate paid on interest-bearing liabilities rose 10 basis points, while the yield on interest-earning assets increased nine basis points. This reflects our disciplined approach to pricing in order to improve the margin over time. Looking ahead, we believe that the margin has bottomed out this quarter and even with the change in the outlook regarding future Fed driven rate cuts, we see the margin expanding throughout the remainder of 2024 by 2 basis points to 4 basis points per quarter. We believe the Fed will cut rates just once late in the year, and we further anticipate four rate cuts during 2025, which should accelerate our margin expansion during that next year toward a low 3% margin by year end 2025.
Noninterest expense for the current quarter increased $900,000 or 1% compared to the linked quarter to $68 million this quarter is representative of where we see expenses going forward and we look to manage in the $66 million to 68 million range per quarter going forward, the non-GAAP efficiency ratio was 66.73% for the first quarter of 2024 compared to 66.16% for the linked quarter and 56.87% for the first quarter of 2023. The increase in the non-GAAP efficiency ratio, reflecting a decline in efficiency from the first quarter of 2023 to the first quarter of 2024 was primarily the result of the 13% decline in non-GAAP revenue, while not GAAP expenses increased only 1%.
Shifting to credit quality, the level of nonperforming loans to total loans improved to 74 basis points compared to 81 basis points in the fourth quarter of 2023. This quarter's rate reduction was due to several full payoffs and the transfer of one investment commercial real estate loan from nonaccrual to other real estate owned. Total nonperforming loans during the first quarter amounted to $84.4 million compared to $91.8 million for the previous quarter. And new loans placed on nonaccrual during the first quarter of 2024 or $1.5 million compared to $47.9 million in the linked quarter and $19.7 million in the first quarter of 2023. Total net charge-offs for the current quarter amounted to $1.1 million compared to recoveries of 100,000 for the fourth quarter of 2023 and 300,000 of net recoveries for the first quarter of 2023. The change in the current quarter's allowance is mainly qualitative and is based on more favorable economic forecast assumptions, less portfolio concentration in investor real estate loans and improvement in overall credit administration across all portfolios. At March 31st, the Company had a total risk-based capital ratio of 15.05, a common equity Tier one risk-based ratio of 10.96. Tier one risk-based capital ratio of 10.96 in the Tier one leverage ratio of 9.56. These ratios remain well in excess of minimum regulatory requirements.
And before we conclude our call, I want to update you on a couple of items. As I mentioned at the top of the call, Charlie column is with us today the transition toward film into his retirement during this year is going extremely well. So as with this call and burn during current recent and upcoming investor meetings, we'll continue to introduce Charlie to our partners in the investment community and we are also pleased to issue our third annual corporate responsibility report entitled fear for the future of our community. I encourage you to visit our website to learn more about our efforts to support our clients, communities and our workforce.
So this concludes my comments, and we'll now move to your questions.

Question and Answer Session

Operator

We now we can move to questions if you would like to ask a question, please press star followed by one on your touch-tone keypad. If for any reason you like to remove that question, please press star followed by two again to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking you. We'll pause here briefly to allow questions to generate in queue.
First question comes from the line of Catherine Mealor with KBW. Please proceed.

Catherine Mealor

Thanks. Good afternoon, but yes, that will start in the margin. I appreciate that you took rate cut out of your guidance. So unit per quarter increase is less than maybe we were thinking if we were getting cuts this year in an environment where we come in, I don't see rate cuts to a stable rate environment.
And can you talk maybe first about just kind of the pace of loan repricing that you expect to see maybe what percentage or dollar amount of loans, fixed rate loans you've got on tap to reprice this year. And as I think loan yields increased about six bps this quarter is that kind of a pace that we should expect to model and over the back half of the year?

Charlie Cullum

Catherine, this is Charlie. Yes, I think the pace of that the pace of loan repricing should remain relatively consistent throughout the rest of the year. It will pick up a little bit as we approach the second half of 2024 and then even a little higher as we head into 2025 up per quarter, we've got between $250 million and $350 million. Our fixed rate maturities for the rest of this year, and it falls a little bit to $200 million to $250 million for 2025. But the all of those loans are going to be repricing up the curve up in excess of 100 basis points. So that's really what contributes to the expansion in loan yields without the movement in the yield curve.

Catherine Mealor

Okay, great. And then on the deposit side, it seems like you mentioned, Dan, that you started deposit cost started to stabilize in the back half of the quarter and March was even down a little bit. Can you talk a little about where deposit cost ended the quarter? And is there any are we in a scenario where you could actually see deposit costs. The Cline as we move into 2Q are not quite there yet,

Charlie Cullum

I got them as Charlie had gone up. So overall deposit costs did decline from February to March by 3 basis points. So our cost of interest-bearing deposits was 30.55% in February and 30.52% in March. I would anticipate some moderation of deposit costs. I don't know if I would expect a continued decline. The recent expectations around Fed cuts have cause time deposit rates to spike back up a bit, but I don't expect significant increases in deposit costs as we go forward. I think that has stabilized at this point.

Catherine Mealor

And maybe one follow-up on that. Where's your high-yield savings account kind of average rate right now?

Charlie Cullum

So we pulled the retail high-yield savings rate down to 4.5% as of the end of the quarter.

Catherine Mealor

And then your new CD costs are coming on around where today?

Charlie Cullum

We have a 5% CD for seven months out there currently, and a 14-month at 4.75% have a pretty healthy blend of the two.

Catherine Mealor

Great. Very helpful. Thank you.

Charlie Cullum

It's Jonathan.

Operator

Thank you. The next question comes from the line of Casey Whitman with Piper Sandler.

Casey Whitman

Yes, hey, good afternoon, please. Pasted, just going along with Kevin's questions on the margin. I guess how helpful Can you remind us just how helpful the first rate cut would be for you? Can you drop depository rates quickly then? Thanks.

Charlie Cullum

And our expectation is that we would be able to move up our deposit base relatively quickly once the Fed does begin to reduce interest rates. So here we're guiding somewhere in the two to four basis points per quarter improvement without the cuts with the cuts, it's a little more than twice that closer to 10 basis points per quarter of margin improvement. And part of that expectation isn't just related to the short end moving, but it's anticipating the long end doesn't drop significantly. So we get some value out of some normalization in the shape of the yield curve as well as the short end coming down.

Casey Whitman

And that's 10 basis points a quarter with every 25 basis points cut?

Charlie Cullum

You mean exactly? Yes, yes, we're going to get about 40% of the time.

Casey Whitman

Okay. Okay. And then on the asset side, I think Katherine asked about the loan yields, but same question just on the securities book. What do you have naturally repricing over the next year or two or maturing?

Charlie Cullum

Yes. So the securities portfolio reprices about $15 million to $20 million per month from those yields are pretty low low twos to mid twos. So they're repricing up the curve quite a bit. Our strategy right now is to buy seasoned MBS and a floating rate kind of a blend of the two a barbell strategy. So we're getting average yields close to 6% or greater on a blended basis between the two. So we should see some nice improvement and the overall yield on that securities portfolio as we progress throughout the year.

Casey Whitman

Okay. I'll switch gears. I did want to say we appreciate the outlook slide you guys you guys provided today and Okay. Just looking at capital, just given where the stock is today, can you remind us your view on buybacks is buy back shares here, something that might make sense for you or would you rather hold capital?

Daniel Schrider

I would answer it this way, Kathryn, it makes entire sense to us to be repurchasing shares. But I think that it's just with some of the uncertainty. And as we work our way back from a profitability standpoint, I think preserving is probably item number one. But so I regret that we're not in the position to be active at the moment, but that could change with more clarity and the environment around us but we're not looking to be active in the immediate future,

Casey Whitman

Congrats, thank you.

Operator

The next question comes from the line of Russell Gardner with Stephens. Please proceed.

Russell Gunther

Good afternoon, guys. Russell, I wanted to ask on the loan growth discussion. Dan, you mentioned expectations in the second quarter, around 3% for commercial. Just to expand upon that a bit, if you're able to share where the pipeline stands today versus maybe linked quarter and then from a mix perspective, your target between kind of CRE, C&I, what the drivers may be?

Daniel Schrider

Yes. So in terms of mix perspective, we are we're basically allowing ourselves to grow take care of some existing clients on the CRI side of things without materially growing that portfolio. So over time, we'd like to see it shrink as a concentration of capital. That's not necessarily by shrinking the portfolio a whole lot, but just not just keeping it, it's pretty level. So the emphasis is going to be in the C&I and owner and accompanying owner-occupied lending activities as well as some uptick in consumer lending activities as we ramp up our home equity. But I would say that the pipeline is more consisting more of a C&I and that blends from kind of small business to what we look at it as kind of our bread and butter community commercial as well as our move upmarket into into middle market. So I think it's a blend of of all. So the most of what you're going to see in funded production in quarter over quarter that I commented on is going to be in that C&I and and accompanying owner-occupied commercial real estate.

Russell Gunther

It is great. Thank you. And then you mentioned the team of SBA lenders brought on intra-quarter. Any additional kind of thoughts around recruiting how you characterize the environment for the ability to bring over some 10s likely with the CNI background and your appetite to do so what the opportunity set yes, yes, probably less so on the team side of things outside of what we just recently did with building out that SBA, which is it's very early.

Daniel Schrider

We have the producers and now we're just getting them geared up. But on the on the other commercial and middle market activity, it's more one-off than it is bringing in teams. Is there opportunities we've been successful thus far in bringing in new folks and that goes for treasury management as well. And most of those folks that we can attract our commercial bankers at or with the kind of the unnamed super regional and larger players that come this that find what we can deliver in terms of capacity products and services are comparable to the largest banks but we do it in a it's a higher touch way. And so that's where we can we can win in terms of attracting talent, we're competitive in terms of comp. So and we obviously want to grow our commercial business. It's we're going to get it.

Russell Gunther

Thanks, Dan. And then just a follow up with regard to the margin discussion in a as we get rate cuts if we get rate cuts, can you just do you share the percent of deposits you guys had indexed to Fed funds or that you think would for the $4 million that were removed pretty immediately.

Charlie Cullum

And today, we have say in the $300 million to $500 million range of deposits that are directly tied to Fed funds outside of broker client relationships that are tied to Fed funds. But that number is fluid as those balances move around.

Russell Gunther

Perfect. Okay, great. And then thank you for that last one for me. In terms of the transfer into NPL from the CRE credit, is there any additional color you can disclose there?

Daniel Schrider

On the you talked about the move out of MPL into other real estate owned?

Russell Gunther

Yes, I'm sorry. Yes, thank you.

Daniel Schrider

Yes, Andrew? Yes, it was a young, small small office property that dumb we actually took back into Oreo and we still believe that based on most current appraisal that we're collateral good on that. So we think we'll successfully move move out of it. But it was again, it was a small property in market that we don't see sit on the books for what for long.

Russell Gunther

Okay. And then are you able to share with the decline in value from the updated appraisal was and

Daniel Schrider

I don't have that, but I know it far exceeds our carrying costs.

Russell Gunther

Got it. Okay. Hi, guys. Thanks for taking my questions. That's it for me.

Aaron Kaslow

Thanks, Russell.

Operator

Your next question comes from the line of Matt may you will not have us with DA Davidson. Please proceed.

Manuel Navas

A good afternoon. The way it will rise, okay. What drives the increase in net charge-offs to range is a bit higher than kind of your recent experience. It's still low at 5 basis points to 50 basis points both. But what are you watching most? What kind of has you surely for that range in this year, you might outperform it, but just kind of any added thoughts on that net charge-off range for the year?

Daniel Schrider

Yes, yes. I mean, well, this is Dan. That's a really tough one to predict. And the further we get into the year that obviously the easier it is to predict because things take a while to kind of move through a credit process. If things go south, there is nothing material about what we saw this quarter, smaller, some of the few smaller credits that come as we went through the cycle. We typically we just speak plainly. We typically look at about five basis points of annualized net charge-offs a year in any given year. And then we normally come in with one or two or zero. I think in all likelihood, if you will, I've kind of described the what we're seeing on the credit side of things is maybe some things and dance along the way, but nothing that significant. So I don't have a projection of where NCO's will end up for the year, but as they ended up in the in the 5 basis points to 10 basis points annualized number that would appear to be reasonable. We don't we don't have an outlook that points to that, but I'm just saying it wouldn't be unreasonable.

Manuel Navas

I noticed to the extra portfolio disclosures that multifamily and hotel have a little bit more loans are pricing this year as a percentage of total. Anything there that you're kind of reserving extra for? Or is it you're as confident as ever? There is everywhere else? It seems.

Daniel Schrider

Yes. I think the on the multifamily portfolio is pretty diverse. We've got properties that are in urban settings. We have properties in suburban on the ones that are there. We're watching closely and we don't have any significant concerns about are the ones that have come out of the ground the last couple of years that have yet to stabilize. And we're clearly underwritten on a trend of rents that was going up over time. And so those those might be assets that ultimately are closer to breakeven than maybe the projected cash flow coverages during underwriting. So it's yes, both occupancy, some change in the interest rate environment and in the urban settings, the fact that some of those initial tenants never paid rent and it takes a while to get rid of them are all going to aim to probably a little bit of short-term cash flow pain, again, closer to breakeven than than maybe the underwritten cash flow coverage that was expected. But nothing that's giving us it concerned.

Manuel Navas

Okay. I appreciate that. I appreciate the disclosures here. Just kind of shifting shifting topics. You talked a little bit about better fee income and for the guide for the year. Wealth Manager is a big part of that. You talked about the AUM increase. Are there other like kind of fees within wealth management that are also driving that? Or is it mainly the market doing well, it can do just as well. Was there any seasonality to this first quarter's results in part on the on the wealth management side?

Daniel Schrider

No, the only the only item and it did not affect this quarter. The I think it might hit from time to time, and it's not significant relative to the overall is if we have a disposition of a trust within our trust division that may have some one-time fees. But but what you what you saw and what you would expect for the remainder of the year is going to be driven by both market performance and our ability to attract new assets under management.

Manuel Navas

And it is really interesting that you're seeing well, you're testing it and probably see some early success. Can you talk a little bit more about that from cross-sell with the high yield savings account? I think that kind of speaks to your branding and kind of strength that these high yield savings that you've brought on are able to cross-sell. Can you just talk a little more about that early success so far?

Daniel Schrider

Yes. It is early. Yes, we spent a good bit of 2023 just focusing on stabilizing the core deposit base. And the outreach, as I mentioned, is both from our commercial bankers our folks in our retail offices and our wealth management grows that are reaching out. And we as I've also mentioned, we created a DDA account. We think that has attributes that are it will be a very attractive to the profile of the client that's in the high yield savings. And so I think next quarter we'll have worth more data on our success in driving into those portfolios. So little bit a little bit early at this point, but I do believe And history would support, I think where you are going Manuel and that is the reputation of the bank. The relationship approach we take, I think, gives us a higher probability of deepening those relationships and turning them into full bank clients.

Manuel Navas

Thank you for the color.

Operator

Thank you. The next question comes from the line of Daniel Cardenas with Janney Montgomery Scott.

Daniel Cardenas

Please see afternoon, guys. Kind of now, could Dan, could you maybe could you maybe give us an update on the health of the DC market, potentially what kind of an impact there could be if the government does decide to reduce its office space? Substantially in the coming couple of years as there's a proposal out there, too potential to do so.

Daniel Schrider

I think it it could have obviously a material impact on office in and do you see surrounding areas now the return to work within government agencies hasn't happened. That's really a function of whether they dispose of the property and let the leases roll and I think it's going to affect those properties that are the large floor plate office buildings that are very difficult to re-tenant in a short window of time. And so I do believe it could have an impact on investors in those types of properties are tough to predict. How much Dan do you have an impact it would have. But we look closely at our book. We don't have exposure to those large floor plate relationships. We've stayed it's small professional office space, smaller individual units that are easier to retenant with service businesses where being being present is important for from an occupancy standpoint, but it doesn't it certainly could have an impact. I don't think it will have a material impact on us. But Tom but it would in investors in that type of property.

Daniel Cardenas

Okay. All right. Thanks all. My other questions have been asked and answered. Thanks.

Daniel Schrider

Thank you.

Operator

Thank you. Again to ask a question, please press star one follow-up also briefly to a la carte. It, there are no additional questions left. I will hand it back to the management team for closing.

Daniel Schrider

Thank you. And thanks. Thank you again, everyone for joining our call this afternoon. If you have any other questions, please feel free to reach out to myself, and we'll be glad to give you the answers, but we appreciate you spending your time and hope you have a great afternoon.

Operator

That concludes today's conference call. Thank you. You may now disconnect.