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SBT Sterling Bancorp

Participants
Tom O'Brien Chairman, CEO, and President
Steve Huber CFO and Treasurer
Ben Gerlinger Hovde Group
Nick Cucharale Piper Sandler
Jeremy Zhu TCW
Anthony Polini American Capital Partners
Call transcript
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Operator

Good morning, everyone, and thank you for joining us today to discuss Sterling Bancorp's financial results for the first quarter March 31, of 2021.

Joining us today from Sterling's management team are Tom O' Brien, Chairman and CEO, and President; and Steve Huber, Chief Financial Officer and Treasurer. Tom will discuss the first quarter's results, and then we'll open the call to discuss questions.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements with respect to the future performance and financial condition of Sterling Bancorp that involve risks and uncertainties. Various factors could cause the actual results to differ materially from any future results expressed or implied by such forward-looking statements. discussed the company's company's are are filings, factors on available Web two in SEC the which These site. The update company call. any to forward-looking statements disclaims made during any obligation the

to non-GAAP directly most GAAP quantitative site measures. available which to contains for release compared refer press the may not substitute management are Additionally, intended on supplement The the but the and measures Web financial to time, GAAP today, the like information as the measures. well to discussed over ahead. O'Brien. turn of as please to to I At Tom this be reconciliation a non-GAAP go would call Tom,

Tom O'Brien

to the to still before remained I with reported in good we're everyone. certainly been the The factors share flat keep long our the since pressured, XXXX of investigations change quarter. the reviews per my outlined too didn't additional the all and X.XX%, tenure. and rates you, Thank bank too, to it quarter And liquidity the we during we first going I highlights, numbers released on were the have of of the net quarter expenses joined, We're half that Right. in ultra was and results just essentially be today. low multiple due morning, interest at continues sheet. predominantly experiencing, Sterling income. $X.XX Almost its the on then in Generally, much. Credit reported related and that but dealing financial margin press the balance release.

holding do $XX debt, now capital just continue over losing be levels, callable the [agreement] of pretty maturity. note levels we which next healthy. I'd years, But have the in at and capital five keep unit to worth the is its the its capital bank-only [Ph] million mind, On company

costs there time that to from company obviously begin at bank. the So, considered. be precluded this And holding need at we additional to liquidity some point we are dividend the from moving company need since consider holding are at to up

that's so. attention -- our that'll our quarter next or something get focused So, attention in the

as perspective remains centered to Going portfolios. the the to real continue construction concern credit, note, back I in commercial and estate the from my

manage rating the what the are, We quality the or understanding portfolios guarantors, to the down risk the proper to these of try very the to and quality get exposures to project. continue of aggressively the property

-- So in that. some extent -- and basically and have basically lot just construction are every progress each we past to come have because maturity, but and them. reappraise for we on long one and the commercial that due we've the of an made had we've takes to -- re-underwrite them, of awful that side, inflated and loans time. loans up a To And

in list non-accrual, are XX an and that's said category of as too. where earlier, I that caution but conservatism, maturity several abundance So, And those that the gone there past for the by we risk that's, is days. bank have understanding and I think as

of Keep as a but point parts, saw, also. basically proposition Other nearing been wind or as still and for lot our are moving begin our required of approved On courts. past expeditiously are get that the the settlement absolute we now agreement including it I'm action the to did expensive an this mind and investigations think company and possible. we are Notwithstanding submitted that, OCC as next that's much matters, closure working so diligently are there the and in the OCC the down bank control. the months. completion, has to, out DOJ you the securities I by announce, should sure positive with side, under as two look-back been to in to at and class the And formal

the noticed, all I time said, with fully you as the our the pretty effort against probably hear that cooperate begun But about take out certain continue. to individuals, control, item same of both much to continue and and at that we has have it will and those. and we as anticipate Justice that We Department of action you OCC do. And are

that, with what's probably best So, everybody's on to mind. and always questions take see

you'd for operator, the if So, open questions. up line any

Operator

Thank you.

will We Ben Hovde question the session. question-and-answer begin come now And Please the [Operator from ahead. will Group. with first go Instructions] Gerlinger

Ben Gerlinger

good guys. Hey, morning,

Tom O'Brien

Ben. Hey,

Ben Gerlinger

understand or last which level wondering much out year. it -- just call, the the rough I the kind legal of for And said is your 'XX that guys was you if two-thirds I you think if near be could of I control, any based expense on will wondering XXXX levels, you of a definitely some on in imply ramp completely the of was I back-half would guidance. give pretty the had so of thoughts that. updated expenses would kind down but

Tom O'Brien

year I completed. ratchet time and think, to to down. to second-half as for start the class look hopefully then is yes, expenses start back And we down dramatically, but we what of wind not completed, said the securities matters is the action other this expected down some step of was as in last the

has our it's see respect at of really point. changed expenses. these that start second-half extraordinary still gradual And So, expectation to the this in the will diminution nothing that

Ben Gerlinger

you. Got

you they're months you of and had more helpful. get windows loans? any just into to pretty opportunities I'm line over and if well, curious concrete, of the out advantaged any repurchase Okay, of, kind opportunity that repurchase you are And of your narrow. timing then that's somewhat see next moments that could I loan? in if so sight six control, the

Tom O'Brien

do repurchase we kind right; complex a we've you're some of quarter. And the take time operation. and one -- they finished It's documentation. during Yes, are

in we're in more the We than have somewhat quarter. completed larger we expecting quarter that one this the first is one

one one got more certainly about we've the the sponsor million it, but opportunities, much the that the really $XX is in or is those free call it's that time July can't XXX think by category. [technical was And difficulty]… XXs until I so, be smaller probably, that might $XX securitization or up repurchase This the think the XXX year just next we given I million. is then in to

Steve Huber

that's correct. piece range The $XX be million Yes, the smaller in XXXX. July remaining will

Ben Gerlinger

you. Got

anything just -- Okay. of entity more you're they color was of And I was the guess thinking open it kind sold you that to bit process might it's I target how and selling I current specifically, to of any well? Were first? or was that was bid a the curious or on branch, the you picture, really bigger able one-off. sort the completely and Washington provide of the like be then curious a them and went person, or kind Bellevue, ask little then about "Footprint," talking of a not Washington they one did approach to or as it in one

Steve Huber

there's Well, parts two of it.

the had First, core and is single been very it but employees. fairly Washington for business there, very, said, good business. some the a branch branch good We motivation, just successful, was very really exactly Bellevue, it our had some is and a market remote

our of And And frankly that's reasonable this an the process, federal application so Sterling spoke do and And most we've some why on stakeholders, best employees, had itself. the terms and interested fair did. regulator, exit of and for the, was a to to customers, in with yes, way interest. first There our success number was banks. in we their transaction all the of look we to the practice our chances of for

Ben Gerlinger

you. Got

Well, in set Thanks. I'll back Okay. that's help. queue.

Steve Huber

Sure.

Operator

question will Sandler. The Please with Cucharale next come Nick from Piper go ahead.

Nick Cucharale

and How are Hi, you? Steve. Tom

Tom O'Brien

Nick. morning Good

Steve Huber

Fine. Good morning.

Nick Cucharale

morning. Good

current of how us liability side, and your expected you much is the can the the in remind On to rates offering there? venture CD second quarter portfolio

Tom O'Brien

handle Steve to wanted that.

Steve Huber

we at are million of We're $XXX I speak down the down with category of those Yes, that XX those choose the million of around piece significant million. choose $XXX CD rates currently to We're basis a portfolio. about they again XX that to bank, in CDs the which to remain bank. expecting if to to point expecting can are quarter reprice third have $XXX CDs, the the to substantially that. reprice with million months of maturing is into a stay which $XXX pretty approximately, assuming Yes, they second

Nick Cucharale

great coming up anticipate demand That's to near-term? stable it pretty the likely origination And from loan color. quarter-to-quarter. the is in pretty ramping on Or the consistent front, then period? in be Do you

Steve Huber

going time ramp on I of look awful like the we going portfolio's past to think the It's near-term, it's to have overhang. the lot through the that spend exactly an regulatory in the up. easy with We recent past. and not

that demand So, grip. to we're in, look the to meet we'll wouldn't communities I but for explosive the and anything continue credit

Nick Cucharale

Thank taking you my for questions.

Steve Huber

Sure.

Operator

question Our Jeremy next come Please will (sic). ahead. [Operator [TCW] go Zhu with from Instructions]

Jeremy Zhu

obviously, Hi so… Tom, it TCW is

Tom O'Brien

all right. Yes,

Jeremy Zhu

the and there balance. ways question coming you purchase have Quick portfolio. a about still cash? loan have some Advantage I thinking pretty the cash any on that using CDs due balance, cash elevated the of other you're know Are you

Steve Huber

there to weren't have Now the repurchase. we really, we of level was we build no Jeremy, cash determine would way loans welcomingly Advantage that the because

we be with quarterly prepared year deposit So like XX-K be out the that. then and And coming happen some of of that things the all news for filings given flows to whatever to last had that. was and delayed

were abundance that taking others an raise declined. offer their built loans process who on advantage and the we're And to of repurchase So and the liquidity in those us up we hands up caution. and have have our

-- this you the through point. sale that branch up that And will know on of saw as the off much that bit pretty let also. first a ago, discussed Washington in it both pricing, take that's minute we why we'd So, what them of deposits at see liquidity little a our run some State we of quarter you'll the needs context

and much which situations that So, in level give better or get haven't and and to not. And our like think a risk the to us who help to and the of in that the seen in advantage that normal loan banks our we tried liquidity, working things in stabilize then more in investors is credit worried that's margin you and have down the with I've a these always we system alike. back people to clients reputational we should branches, damage, to and way hope to who pretty I communicate now really we of with been going we've know

Jeremy Zhu

Yes.

the working have words, a -- in pretty the you think visibility needs just down point, cash through [multiple it's other in this you slowly speakers]… of good at that sort of that So

Tom O'Brien

when better than I the I bank. joined did much we mean… Yes,

Jeremy Zhu

Yes.

you advantage performing buyback Are when loans? them back loans, non-performing loans the or buying are apart? these you So,

Tom O'Brien

interested buyback Well, reduced were portfolios principal the the in with loan at balance, that mortgage into for the the the that it's purchase time original the it, on forth entered taking paid we we the who we sets up were we but premium basically on formula us those repurchase, on the agreement pay and that sale.

XXX million we million and that we sold we now up cost. would XXX, the is if buy million of loans XX to for instance, repurchase million, we you year recall, at at and for last So what reserve called XXX, the XXX XX set that if account back

reserve. then hit point say discount for I XX process on So seller a have entire we include, the has time going we'd this portfolio closer and to time in income in if to so would as $XX buyback power. this float the us, fair valuing the to And was statement. depends a does repurchased the purchase. that out X% been sorry. million really million much it market from repurchase And through we case, I portfolio. as And to of am at then we rates comes be at interest of the that of loans case, that the we that it two of of that the a

be might there be some So slow non-accruals loans. regular pays, just there There performing be and might might in some obviously there.

than X% seen say, part, modest, For own portfolio. the to relatively the And no bank worse have most that's what for X%. been at the non-accrual been percentages our we've I'd

Jeremy Zhu

mark that, a that part answers And of load Has you'll small of on second other you than portion you a rather there the looking my then unload do interest that and or? your just lot Hopefully, of discount any at been of were par think at portfolio. also question. resi

Tom O'Brien

first we $XX loans want that to We sell on per advantage million had many intend the at system. non-performing going about the to year-end. things at or just help the of time that in so didn't sale I We overload million And what was them. just I is $XX marked quarter to saying

$X.XX begin So the this I where done is. will on we market, And the are is get soon as of sale to XX-Q worse my mark down soon than that as expectation be dollar, the we we're now price marked will had to filed, marketing and we quarter. no hopefully mark process the actively And that be and it think the them as at going the as

Jeremy Zhu

Thank you.

Tom O'Brien

Sure.

Operator

question-and-answer session. had a This It Instructions] that come seems in. concludes me. question [Operator just our we Excuse to

Tom O'Brien

Okay.

Operator

American that will go question Anthony Please come from And sir. ahead Capital next Polini with Partners.

Anthony Polini

Hi, Tom. Hi, Steve.

Tom O'Brien

doing Anthony? you are How

Steve Huber

Hi, Anthony.

Anthony Polini

myths Great game night. last

how hard did quarter? you guys this try to So find charge-offs

Tom O'Brien

we're may focus we're it's or make what press I might especially We some sure a to knows? little institutions -- of think we was going why have quarter to than said release careful face? given with But I always a instruction. but the try bit that, benign Anthony, had that's may undoubtable just expect. And not other in the Who one more this

of the that loans million think to kind and say level say we'll I okay, the see balance there's going among million to because we're not commercial -- the it of we're elevated, between worried I about. loan not charge-offs. balance, construction then think different and of I the perspective, that, $XX portfolios, non-accrual is I'll to I reserve mentioned, so have worry that's the $XX there's and content down non-performing some that, would about of I the break as the the From

Anthony Polini

toward necessarily you Now we we I that have if quarter? an increase of in wouldn't the charge-offs, like allocated assume percentage in the And increase a high have, allowance that worrisome $XX in that had in portfolio. provision is million that

Tom O'Brien

allowance I mentioned, is the had and pretty quality Yes, some in recoveries stable, quarter. credit the as which we been has the during

that why didn't much. really move so that's So

to that these have San for the deterioration that of of some the recover product of we on in Francisco Anthony, And some to That's generically commercial my flows. akin as type in pretty loan. actually it's kind those assessment, fair a valuation construction, slower loans kind what if referred But in of have or and view, hotel a losses that's room SROs to cash single occupancy, occupancy. think realized well I in the and are accounted are and like, terms of we but allowance.

yes, an So, portfolio. it's but look for that elevated at it remains to concern seen, be we as us

Anthony Polini

Do sorry. you have I'm handle now? a good

Tom O'Brien

I has No, to middle, is, I or feel worry. with say my construction I the feel stuff. general completed, project in if started, the that's mean, going if was never okay, I but construction it's the where

a originally And success and you're not we really closely, can in it middle, control of marketing some the good I the completed, process and that monitor at have until they the about some start with get near are Those pretty as got and they they're So we've in just original those. underwriting there you elevated in chances, structure. marketing completion, but there's the valuations think to period. But intended. for concern marketing feel these them the

Anthony Polini

the How big was branch? Bellevue

Tom O'Brien

$XX million, Steve?

Steve Huber

million in $XX it's Yes, deposits.

Anthony Polini

handle the company moving now, you a where Do of good pretty size a good this end have what pretty is the target? of still that be year? idea the, by Or will

Tom O'Brien

you the little harder of ideally, probably capital that's my year, the billion number all this of in structure sheet a California, to it's of low mix $X that look the balance distribution a the guess. the and product the you'd retail end levels, in say, the at is By in opinion. branches, Ideally, if

Anthony Polini

Well, think it's guys. I but And I you. doing Okay. great you're a you tough, I job. congratulate Thank know

Tom O'Brien

you. appreciate I Anthony. Thanks,

Steve Huber

you. Thank

Operator

Tom back O'Brien This for Please to the ahead, concludes like remarks. sir. go turn would closing to session. conference the over question-and-answer I any

Tom O'Brien

you. Okay, thank

we're we're these it's up the to here. It's investors going appreciate for we and the that forward happy in in in have interest interest our look always public your Bancorp Sterling I challenging, have chance efforts and have Just opportunity, times you. and to next your and wouldn't a appreciative our through certainly Thank calls our we for investors to for we're quarter. and with in but not the we this catch and process

Operator

conference you The today's Thank now for concluded. has presentation. attending

You now disconnect. may