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SBT Sterling Bancorp

Participants
Larry Clark Senior Vice President, Financial Profiles, Inc.
Tom O'Brien Chairman, Chief Executive Officer & President
Steve Huber Chief Financial Officer & Treasurer
Vince Staunton TCW
Anthony Polini American Capital Partners
Ross Haberman RLH
Call transcript
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Operator

Good afternoon, everyone and welcome to the Sterling Bancorp Incorporated Third Quarter 2020 Conference Call. My name is Jamie, and I will be your operator today. At this time, all participants are in a listen-only mode. This call is being recorded and will be available for replay through November 12, 2020 starting this afternoon at approximately one hour after completion of this call. At this time, I'd like to turn the conference call over to Mr. Profiles Financial of Clark Inc. Larry Mr. Please go ahead, Clark.

Larry Clark

Thanks Thank today us the quarter everyone. financial you, and good third XXXX. Jamie for of to for joining results day, discuss Bancorp's Sterling

Tom we'll us results quarter O'Brien, Steve Joining your for Chief and call the begin Officer open and to Tom Financial the questions. of with from company an Huber, Chairman, and overview the President; today call CEO and will the afterwards Treasurer. then are the financial

to are like forward-looking the forward-looking disclaims factors These I'd the involve made SEC begin, expressed O'Brien. company's you by to company's which on that over to any statements. future be contains company we Before call. uncertainties. financial could that Tom? website. call this conference turn remind results results are I'd to or The Sterling Tom materially statements such the implied Various this update actual statements forward-looking discussed risks to and Bancorp in like available respect to the different with cause time, the future during call condition from At obligation performance factors any and of filings, any

Tom O'Brien

was My respect thanks comments I I has here timely discussing and time and the I recently Sterling issues fulsome third won't completed of for families any these Larry and a those completed annual the at will SEC first being you, XX-K been exam litigation effort disclosure just That but issues, by any get very call this date. for a to in virus. very of our with the and at today. results of two of can impact and Thank Great. been the the to of major all of quarters XXXX remained course, taken ago. XXXX time filings to the the our bank past not investigation of will all ultimately and be hope that the or outlook. our fixes quarter as filed you end we've initial making be here efforts I filed. on the in Simultaneously, soundness short for of a refer your and the OCC. of through year period successfully to and you there's up due everyone terms successful do. underwent have undertaking healthy And its and Today, week questions I all remedial answer with the so a we're a bank trying lot and safety

So there declined we're time hasn't -- on interest spend Margin low been my time drag credit. the a $XXX,XXX really to which some biggest probably some busy. XXX a issues OpEx and NPA In quarter loss rates The quarter to basis air. a about points are two come breakeven. XX for to points been had all basically basis reporting perspective, of the margin. on loans. lot and of is basically of up From We've third combination non-performing

lending of real from risk most lending. couple noticed and you've recent the commercial years, an structure over company the followed valuation. increase the credit and where you is in estate finding are If probably we That construction

the a put the perform product, loan few not commercial to having continues on Advantage origination virus the quite Secondarily, while side well. COVID-XX has on disclosed too but The credit pressure of many. of borrowers, defects our all

Advantage in portfolio Additionally, paydowns robust. fairly that remain

linked the down where residential are have loan XX%. see several are forbearance by towards negatively better you release, press families the portfolio second there days eye being the cases remain category, past we an the maturity to or quarter with and the -- more. documenting chart committed pretty due declined As impacted. securing almost from of are COVID-related the is loans in reevaluated from Each is the can of these the that supportive they've or Nonetheless, residential highs in Sterling non-performing bank's predominantly forbearance portfolio the substantially that in in quarter XX In position.

probably opinion think many hotel, banks bulk exposed that it's I favorable There think safe restaurants will to I say quarters. signs to for credit election will will as over emerging pressures is around denial. airlines, to few here is is and retail, am strong I have Deposit do all well. future noise to time loans. anybody's, not think that build better a previously flows of and are so virus My the with next liquidity these and back the the this prepare we economic the us some I not on. are that country loans. some positioned construction among that struggle of and on sold buy are but this ball serve as to We than But calamity. at been no and heavily strong Sterling believer and we crystal as ultimately a weather ours cloudy My Advantage Sterling degree

brought about we bought discussions in with are just million and under investors. $XXX have back million back where we far So $XXX -- that remains

terms In substantial remedial obviously, to litigation. cost shareholder addition the of of of operating work is consultants cost and including and the expenses, our the the experts

get as Sterling as is compliance firmly as into expeditiously strong and first and to goal Our possible. foremost regulatory

and they will are we inconsequential challenges will succeed. regulatory take Our properly time to but not remediate,

the the can is know interest company. to should is the terms obviously of long-term only and But expensive. say and of the that best in thing your you executive will you team bank management your I Board act it that In litigation, always

our left well announcement wish investment of Board announced has changes agreement registered the to of quantum. Sinatra we've Board, concurrent there. the We sell our with in Peter certainly adviser future. some our the Speaking Peter

WL services also to at companies Ross the at years had long bank Denny And the capital of & long observer the investing Denny and in audits worked extensive appointment from as Co. down KPMG for and Talmer community that a Boards. as into Steve Additionally, and markets where and served Kim Sun. in Board Gallotta we has He partner a experience had leadership in at announced Steve career space. largest our several financial community he a bank analytics. a at he experience Director was capacity

benefit fortunate of combined to have our are We in experience the their boardroom.

So like we are transition new in mode It's moving a kind into here. of house.

risk and old any time one. victory are You to being the where new out is have right basically laps is of in we now. we crippling. that's here or get the Good and get the time for it which settled one transition isn't In middle progress but made, be takes else

a management identifying advisers sole and me and with experienced every of else and here. day with We group problems working is very the fixing strong Everything secondary. have goal of

we're are here point. happy at to take I So questions this Steve and and

Operator

first [Operator today question. from your Our Instructions] Vince comes Staunton question with TCW. ahead from go Please

Vincent Staunton

guys. Hi

Tom O'Brien

It's Vince. Nathan. Hey

Tom O'Brien

sorry. Vince, was I That am

Vincent Staunton

specifically a construction loans $XX.X nonperforming loans. the have regarding of I question construction the million

Tom O'Brien

Right.

Vincent Staunton

Could on just you what color And basically these additional be provide some color helpful. projects some type would of are?

Tom O'Brien

a them. X. level assess them I last payoff Sure. or some retail matured that's multifamily and because that. I'm about think just the week we're everything space see I concerned couple I'm to of my I some it's in of about actually everything it exactly of what there. here. is or are. also XX is where of kind going through And single-family to trying there's of not There's in office it. had or in there. construction bulk anything are new it's don't the about we've There's them. like we million Yes lot -- Vast concern construction. bulk of a And is would me say

we're watching So carefully. them

was exit going our a you a will loan it relative what value to matured equal is? good What forward But collateral saw it the we're finish value taking will to cost pretty The of. very be look the charge-off construction is Some we're out to And as appraisal. during at quarter others what I just has ultimate where project And not probably much lively. the loan extending stands think the the if is. okay. was really the one

difference the to loan. and that just with trying between our careful them. wrote we We're So off be

general or they Beyond homes that it's been most not single-family where have if values whether bit on economy. in for finished. get a areas little have good what the to strong, but happens desirable residential least But part in at it's the dependent

Vincent Staunton

at Given they're in some of the nonperforming? or are -- them least why given they are industry single-family it's in

Tom O'Brien

Because past they're due maturity.

So the they're XX under classic which is definition days maturity past nonperforming. of

Vincent Staunton

Okay. I'm struggling they why gone single-family prices are up? of wondering just have given themselves

Tom O'Brien

the that And have just That XX% the what where done going finish. if to if advertised. make was would be somewhere done, expect and ultimate they to is, it there's to anticipated we are. Well tell That go. finish you there to we time lot what easier project of as to done is the or the close got pretty is it's money XX% where sure to deal. or But that. projects a enough finish developer the The to the just we budget we've value no capacity it it

Vincent Staunton

Okay.

Tom O'Brien

I that in the because the also dead not they're heightened They're say NPA category would not in But water concern. pristine. just they're there's

Vincent Staunton

to how stay expenses It in quarter-over-quarter. it this even you was long up Okay. significantly of expect elevated terms And at do non-interest level?

Tom O'Brien

hoping But things more litigation tough It's quarter. predict. I'd as But -- towards It's quarter say, that. quarter. probably certainly will -- hard of say was like I'm were current quarter. have high be a predict to this yes. is expensive. they're quarter to to would going peak I was they they're come kind really the to it. I in I start But Very tough to Certain to down. through hard get near to This say just a this it's nowhere as and third very this but would predict. first elevated

Vincent Staunton

guys. Thanks Okay.

Tom O'Brien

Vince. Thanks

Operator

And our your Partners. Capital go next with question. American question Polini Anthony Please ahead from comes from

Anthony Polini

this is… tom Hey

Tom O'Brien

Anthony you? how are

Steve Huber

Welcome race. to the rat

Anthony Polini

assets built this workout considering that Just quarter? When was now? expense ultimate this shape you you looking think and What a drew that at think Do do look about that the a problem you bulk follow-up do any and the expense type more into side thinking guess you took you of of guess I I'm what something workout? I me you things the take? most probably at is built a are sale reserve What like these you're will more quarter. here. that think

Tom O'Brien

from do anybody's say That's in got never again. that just I've family a And just I I life is visions residential two that. on of would my not I've house street. on owner-occupied something the put interest. Well it a generally won't

So how I out. those play don't know

certainly As I there. we'll some. have has really said the been But credit quite performance good

will On I dig done go. I've hard would and I mean that, that done to side too Pretty commercial right the I've I've don't done to lose. nothing think consider. foreclosures. workouts. I've we now bulk there's early say. predict sales. where done

I as stuff definitive some things think would prefer like I things like cases structure rolls rent achievable see and to say -- and them like I I I when or and some said that stronger of that. would describe more in guarantors

use financially. going to And of So, how do lot, -- -- around probably that to couple the sale the do at hundred to individual just much at What's really what goodness, your it it's have is I it's that's it's wouldn't you not earlier, realize is I to -- to the the A thing stuff, I got today. properties end not or those day tell that can't how to of are time million. with of Anthony, the there -- much Sun. as begin -- an best But analysis and mean we've best what's a I how necessarily. capital? many just It's bulk work And sold we and take an I you dogs said if of do there's a money?

Anthony Polini

the the in surge that Given in down comfort we fact about take NPAs, came provision should half? that

Tom O'Brien

I March went concerns. guess Yes, quarter. in the yes, March quarter. -- That a up bunch it the whole -- some anticipated the the March was Well, that

good calculated number support know. I -- any a everything right said the some I with and like analysis based then take procedures to we I come and any what is absolute As provision we provision in up terms allowance, and here But through quarter, the and guess. you every on take some you go the look quarter the of your comfort would the number.

Anthony Polini

that loss in the this is or assess point, feel can non-performing mean I moving at the comfortable I really a you target? it more, guess is direct the question portfolio content do you

Tom O'Brien

have think to things, just I But it's stand say think period. We for of And to uncertainty reasonably I going my we I certainly where said, -- this I moment, but well. market troubled assessed. in there's that. the lot around, gets -- get of in I'll city bank -- think not we're at signs especially the market. of centers in well the economy there over when through experience at for pretty lot outside doing are is as that demand the years, the least a other There's There's competitive. the thing of loans time the a liquidity very this

So we'll see.

-- -- credit to as I would some are said Sterling some experience, experience degree and and pressures think to I that things think is going going I earlier, is ultimately many charge-offs. to

I think that who doesn't is anybody denial. admit in

Anthony Polini

You have million, $XX about million? originations some did this quarter $XX

Tom O'Brien

We did.

Anthony Polini

What was in? that

Tom O'Brien

I ownership York what pretty liken New and co-op in some the California. multiple Southern bit in kind in a market like predominantly Northern City been guess FICC to then would residential tenants residence common joint generally and these -- of loans some a good. loan, a of was There it They've These, of building. California I little a we call

we're with think happy pretty generally those. I

Anthony Polini

Okay. Have NASDAQ had with conversations you recently?

Tom O'Brien

Just good ones.

Anthony Polini

Okay.

the is of your issues? regulatory/legal that least So

Tom O'Brien

got think Yes. get and because they now then quarters. year-end -- out. quarter were and very No, we third And the to two I understanding, we a had to a window NASDAQ tight do such just

of understanding, to half our get would highly and at the So, of legal from But lot the go there's there. then XXXX we A least I lot ask advisers confident to and XXXX. to a just firm. of a they accounting not of through were to bank was people and ask which ask kind our lot within

was I you, much to how was can't NASDAQ. that with was And time and all deck. underestimate on the work it but And we're everybody good. hands fine pressures So

Anthony Polini

it I'm to regulators I'm the named for makes Good. a Sinatra. wondering, Quantum of big fan at the anyone your But assess easier sale if risk the company?

Tom O'Brien

hurt. doesn't certainly It

Anthony Polini

Good answer.

Tom O'Brien

No problem.

Anthony Polini

the you're better given survival business lack call model? of mode any new it, you a knee-deep I to But in we'll have for word. know thought

Tom O'Brien

had Tuesday on this I discussion week. have. We actually a about that Board healthy meeting at the

got as can't okay. for you department bulk bank to of back, We business the diversified do. or a So the think We them say, mix. it's business to we've one and the say, look go can't try we department more -- here, I explain -- no can product, that we whatever growth on might else and can a C&I I essentially some in longer but or fall leasing product to because say be to everybody, its careful had in

start I anything to -- So the of To the to kind full end regulator and my we this you for for the for comfort have some -- credit and assessment why of and ask build honest, what systems the where understanding other than given world, you not to is brand-new at had That's product. be your to that run the product if stand to as one them. to with regulatory time me we the go and impact the by fix go some bank. typical talent in remarks. doing And economic regulator a you it's a you're that and we're to the said going through should have that to risk

consider. Our are We've of the that job to that can look past regulatory business so we we got is the have build and here. the should get here that really the out some lines and opportunity that compliance at other there to repairs

Anthony Polini

Okay.

$XXX about have balance You cash million in now. the

Tom O'Brien

Yes.

Anthony Polini

to Does What you do thoughts it think What sense sense to does shrink? – your make there? are reinvest? make it

Tom O'Brien

loans we've buy there we've dollars that sold Well, offered still to million XXX-some back. that are previously got of out

keep And the for that. so to liquidity I've got

amount of liquidity which looking liquidity, out at category. in excessive balance of I the is the – sheet, that So then wouldn't put you million net on money billion if XXX-and-some not of you're that a $X.X

some of it's stories balance of a back So adjust in end I no going – up of shrinking can buying problem sheet And either. two kind the If accordingly. the the to we're not loans million then there. couple fact, we $XXX have the

Anthony Polini

one still the well be I capitalized? that bank is Okay. appears very to guess the thing consistent

Tom O'Brien

we so Liquidity Board that Yes. But one about work on. are things Capital and bank I to That's working is well through things is we reasonably the okay. is the holding at when good. went – have capital that strong. talked company with things the of level that

contingencies strategically this capital. where go at loss try short But well. not think You various about point, for I'm to and I with plan worried don't that run small the quarter, the here the things even in mean in

Anthony Polini

you today. that’s to just want Well, congratulate have I Okay. all I guys.

you’re Thank think a doing great I you. job.

Tom O'Brien

We are trying. it, Thank you. Appreciate Anthony.

Operator

question from RLH. your Haberman with question. comes from ahead next Our Please go Ross

Ross Haberman

been Hi, most have answered. my Tom, questions I'm sorry, of

Tom O'Brien

Okay

Ross Haberman

to or you low deposit do you And the or margin margin continue you. next further Just I four three, room two, about affecting there the rates? is that how one spread. forward? the so, for we the going don't lower these or rates know for question much If see see Thank quarters to CD

Tom O'Brien

Good to the of built tenure room from about Yes, I always the my here in – Advantage hear you. early because lower. returns We to liquidity we buybacks. There's sure. loan had

are I – years. two – are going rates to you for think going like don't be be fed they to the said low because difficult margins rate

take So I that's the here. what window as

with Credit think while are Sterling the here. I But that banks margins and lending would like I NIM and most widen under may think for be pressure. see So helpful. spreads going and margins you'll to us a struggle

Ross Haberman

you. of Thank Best luck.

Tom O'Brien

you. Thank Yes.

Operator

like ladies for to time the over no remarks. gentlemen, And call O'Brien showing Mr. turn I'm back this Instructions] to at [Operator questions. I'd and additional conference closing any

Tom O'Brien

for all thank as the today. started beginning your call I interest and Sterling that's in for participating in Well, and great you

filings the and to on the fix time. interest before continue and we've We third have do quarter everything get then release. will I you. year-end. you are plan the And hard straight know laid We it investment it, at working in work and filed your Thank to we're we things in here on your appreciate But press to XX-Q away. out diligently that

Operator

Ladies do with call. and thank today's gentlemen, that conference We we'll you for conclude attending.

lines. now may disconnect You your