STL - Earnings call transcript Q4 2017

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Operator

Good day, and welcome to the Sterling Bancorp Q4 2017 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jack Kopnisky, President and CEO of Sterling Bancorp. Please go ahead, sir.

Jack Kopnisky

Good morning, everyone, and thanks for joining us to present our results for the fourth quarter and year-end 2017.

call Luis the Financial our on Officer. me today Massiani, is Chief Joining

creating by we has in how manner me on results. that taken of today. provides financial us saying will Let that type start to will the company, Earnings the the than the time results The adjusted basis. announcement. we earnings XX% prior quarter we changes grow earnings share but company pleased and progressed will the in our effectively describe we a year. of organization outcomes that enable has sooner were of the increase earnings integration Louise in share we law. have strong the detail expected XX% full million tax $XXX represented acquisition we integrate are over create results for to effective, Astoria and detailed financial quarter high-performing early process the deliver The to and the resounding been of on were which per an the in with charges the and There's pace the to continue acquisition year XXXX and for $X.XX. I were in over the consistently per Astoria at are still and the we year-to-date high-performing do that XXXX XXXX the the much will along are highlight far to

revenue was we the integration plan. ratio that on was reductions average remind of this for would XX.X%. return equity assets average that efficiency and as on return XXXX we basis necessary occurs Our were common I our fully efficiency XXX before was and operating level in The strong reallocations and operating metrics XXXX. XX.X% expense have tangible you tangible drive points enhancements for

line was quality with the and of We X.X%. terrific were levels XX.XX%, our $X.X accretion billion X inclusive very continues quarter billion. at income, along to XXX growth was to for Tier leverage had forecast. strong bank in $X.X was of points, growth was commercial XXXX holding distribution deposit of at, Our the NIM basis began with with Capital the fourth loan strong in system which at leverage again, Credit of team the Commercial be and strong consumer our platform. Astoria approximately solid. company

do, to I As in to realizing but we strong off transaction. a much previously mentioned, are the start have work this of we benefits

is basis, of base we On growing X% an example. capable quarter for deposits. as deposit the and solid, found an are have core annualized We deposits grew the

are operating finding with receptivity Long Island. commercial strong model our to in clients We

and We drive significant to business our revenues leverage we are to existing expenses. talented bring There continue grow in as at retaining opportunity new X bringing to teams. to be enables the of clients, continues level model our operating times that X for professionals to attracting operating us

positive As we with us along transaction share. the tangible EPS significantly book present accretion per has to previously presented, enabled growing value immediately

to over financials. Luis to call Now the detail let me turn the

Luis Massiani

$XX merger you, Thank $XX.X of $XX.X Astoria provide for and XXXX. closed performance of sheet the portfolio billion. update the will deposits and everyone. assets Due the billion, the our Jack, in we to an of review organic billion on the balance year total the of with transition and of morning, I outlook strong impact good our progression total growth, Astoria loans quarter, merger,

to moving merger changes incurred On basis, to laws. charge their $XX loss, tangible $XX.X end. contributed our tangible to value our the a X.X%, have We significant tangible impact reduce several a of restructuring deferred our approximately had of fourth had tax XX% announced pretax prior share income tax GAAP the of in earnings million had approximately related quarter in net did loss and and common and and expense and we strong that million, on common per a year was assets value million. common of to were GAAP pieces tax X pretax per we was assets growth estimated to book relative to book charges expenses performance in value. book per we previously, stockholders positive were significant merger-related on $XX.XX. incurred $XX This as million; merger available There value our tangible tangible capital XX, net to share. At XX% quarter. items common $XXX the As that a share of December equity we and the represents But ratio charges prior

mainly For charges on $XXX financial million. The lower the difference $XXX the merger-related total which charges real due Astoria incurred and for that restructuring and amount estimate we of restructuring our expense initial other transaction million, to below full year locations. the XXXX, the estate initial is center was approximately estimate and our actual between

to related continue integration be additional to estate to our $XXX initial below the on estimate we CAGR. charges incur As will real consolidations. Astoria, mainly continue million further will we We execute of these charges

$X.XX. Our share common million diluted and per to adjusted adjusted stockholders earnings were available earnings and $XX

first rate fourth given decreased in tax stronger-than-expected balance through for continued and business, we finance origination with benefits the growth adjusted and slightly income securities, tax sector in portfolio income and XXXX associated compensation. estimated quarters of municipal Our an was income XXXX. investing growth increase stock-based in from BOLI volumes purchases non-taxable year in full the public was XX.X% effective and quarter The due X decrease the had of which rate XX.X%, the tax our to

of in effective charges expense the the and adjusted Astoria rate the tax Our merger. other incurred merger-related impact excludes

This of in the million, XXXX line quarter million fourth to we which by tax which and Our represents million Astoria net linked the on interest QX the equivalent with basis margin quarter, points over in for our merger. million to of was linked X.XX%, basis quarter This in XX earned $X.X was nearly income linked quarter. was $XX.X mainly equivalent XXX income to for the net due mainly doubled $XXX expected, the compared was in was expectation growth which $XXX for interest quarter. as Tax acquired points. the the was driven XXX accretion loans,

of lost commercial accretion XX.X% this mortgage the by commercial was multifamily mortgage portfolio our Excluding specially and mainly Traditional to a income of basis balance multifamily increase points. mix C&I to comparison, portfolio Astoria loans residential income That change loans composition weighted finance excluding is both finance important, loans loan multifamily of decrease multifamily and XX% portfolio C&I accretion we accretion as we and total decreased a declined The with to XX% targeting mortgages loans income, of X.XX%, The loan a decrease will NIM. loan million. mortgages loans mortgage have loans excluding XXX income our our points, and at the C&I, September our weighted residential income loans XX% and average portfolio traditional multifamily By accretion C&I In and accretion XXX and average NIM is while to loan in a offset approximately at CRE the of with and residential accretion XX residential approximately impact rebalancing our our our by stable portfolio quarter. due XX.X% a the strategy and replacing $XXX diversified yield of us of and and of XX% including merger. loan which of to basis Longer increased the why so and core yields XX% were loan allow financed XXX a CRE basis million, income. are traditional Residential were NIM to loans a linked of commercial fourth approximately by relative yield loans, grew was points, quarter, and due term, $XXX have XX - year-end. portfolio. consumer. of in points basis excluding

We this acquisitions. organic will portfolio and growth do through opportunistic

repositioning $X the securities We portfolio approximately billion purchasing quarter. securities of by completed the have of our in fourth largely

represented of our was assets. As of portfolio billion earning and XX.X% securities XX, December $X.X total

decrease over the and We maintained approximately with the and risk duration comfortable prior composition XXXX. the spot We was on increase X.XX%, XX.X% an The its portfolio. proportion the securities portfolio of profile our portfolio our of quarter. points basis will to in yield XX

of we continue will Astoria to asset $XX.X billion weighted points since We XX, deposit and total retail over through of fund And XX% our our to and been quarter. grow merger, XX% the commercial had earning the in to maintaining in commercial going deposits in average deposit beginning the financial to be loans-to-deposits through of with a December X% a ratio deposits. deposits teams. we'll beta XX%. growth XX assumed ratio balanced At Astoria We able generate mainly time. a portfolio anticipate year basis XXX% Including the has we're deposits network loans-to-deposits and of cost center the banking a and fourth

continue expenses. balance while quarter FTEs, grow was the FTEs have $XXX headcount million, the at Total of efficiency expense tech a compares XX.X%. net maintaining which ratio in X,XXX year. December was the that both controls our to to beginning operating fourth X,XXX and over companies Adjusted We sheet our annualized as basis in XX interest combined operating of was

XXXX. made Astoria savings on generate and through good of have progress continue to integration will the We expense

grew amount the operating - bankers objective announcement loans, have the $XXX the expense of we have year markets. and increasing the adjusted is efficiency This times. of operating since we million, higher. business and and while of outlined All lines for securities, various non-interest of strategic of geographic our by ago, leverage quarter commercial to grew actions XX equal recruited adjusted merger, X.X the Comparing deposits have above revenue driving expenses across $XX.X Since total to million. leverage a the operating this by that

we our leverage. build continue We target and our can that on culture, strategy will achieve personnel in to that generate returns operating and further and fit focus to scale can businesses we investing

Our quality capital asset position both and strong. are

quarter, the points represented charge-offs, $X.X in which total annualized. basis had For loans we XX of million

fair is in $XXX and value due segment XX%. linked XX Astoria losses for at to increased day Our for loan their relative merger the note the non-performing acquired and credit increased loans recorded that $XX loans at non-performing by are XX estimated When our these total acquisition The no in allowance the million carry please loan as coverage quarter. delinquencies past at losses loans date. million allowance of the looking ratios, to allowance our to

ample our capital execute strategy. have We to

December positive of at merger all to well be ratio regular are was ratios X.X%, to capitalized. above our the capital Given to required tangible impact the common amounts equity the XX assets and tangible

continue an of runoff, grow rate. net approximately billion to we in represents see opportunities our Looking which $X.X growth XXXX, to by portfolio loan X%

this our We for and teams do through acquisitions. banking will commercial portfolio

X.X% and environment. interest range deposits the estimated from XXX% of we is to core based reduce full positive will tax for XX% the year X anticipate excluding the s borrowings footprint to in in XXXX. will factoring current in deposit remain on wholesale current X to a will are between utilize to and approximately law, level that and the be range we margin, interest and XX X.X%. be potential grow We rate our estimate change Due XX the yield and equivalent racial is benefits from loan-to-deposit net accretable over our time. rate that accretable to tax will interest including XX not more yield, levels, NIM This decline point and expect We Astoria to basis funds

To and going be repositioning with $X We to commercial yields environment, continue year. favorable the will loan over mortgages core course approximately extent see NIM. resi guidance. growing asset and on will the more to interest billion anticipate forward, increased the there loans loan the of some transition commercial to a upside focus our core our rate is we we that Our portfolio of should classes

the We reduction and we integration integrations of driven $XXX on in real excluding reduction and and centers. will in XXXX. financial continue will systems a by continue Expense will management target OpEx, to million Astoria, headcount, a make intangibles in in amortization of estate progress be to

we law, Jack? full of tax an year With approximately XX% tax at XXXX. rate the in the XX% for effective anticipate change

Jack Kopnisky

to Thanks, a fourth XXXX. of result these the want Luis. had strong in everyone We really terrific XXXX had quarter and who execution hand a of in overall results our as I thank strategy. delivering

an continue returns on a great forward invigorated terrific produces to clients XXXX, creating and high-performing to colleagues. As we company value a for focus our our that for for and shareholders, we environment growing look

straightforward on support objectives: We will grow growth focus First, the the base company. we core the will give to overall of deposit

and online our through growth network, deposit banking commercial growth We will with portals. fuel strong the retail core asset teams financial

we Second, continue side mix. sheet will higher-yielding to to transition of the balance asset the a

real growing higher-yielding to estate organically Our and through loan objective asset targeted by commercial a and relationship-oriented purchases. mix transition C&I to is

Third, focused will through deployment. drive effectiveness expense and we growth operating revenue efficiencies and

demonstrated invest in professionals positive create opportunity and enhanced growth, consistently have significant we while ability support capital. Fourth, and revenue our and drive the continued to expenses to We management redeploying to enterprise operating to the leverage, systems enterprise. risk management we of have

and risk the We systems that grows. enhanced strategy. management the processes develop this we assets, have most valuable developed will as hire, are effective company Fifth, to will that continue executed colleagues retain and our which have effectively be

We high-performing in professionals sales retain continue and attract this support to and model.

culture driven a performance. of high Our be future will by

XX slide, the is this and Finally, to my slide. Page favourite of will direct you I

bank past X have XXXX, original in Since You at increased will and compound the of total assets annual took progress growth XX%. the of a rate outcomes late the see over our over years. we strategy the this

our are per earnings share increased XXX%. annual respectively. rate XX.X%, stock XX.X% growth value over adjusted importantly, has earnings and The compound and More

excited We we the very to on capitalize company marketplace. are growth about opportunities the our the within future, in are and significant well-positioned and

up open questions. it So for now let's

Operator

[Operator Instructions] Jefferies. to our with from first And question Thank you. Haire Casey move we'll

Casey Haire

morning, guys. Good Thanks.

Jack Kopnisky

morning. Good

Casey Haire

I asset start mentioned on want Luis, the loan the growth. to you transition.

pipeline C&I after strong to $X billion If up color a you was down well, what mortgage, you C&I good, mentioned balanced, then overwhelmed but more rundown by know you happened that book as very the mortgage book? the was And you the is resi quarter? the fourth I basis a expect some quarter holding within think I pro million. you trend, us look the a on how that resi the forma resi $XXX I of believe, it at Can give as mentioned in growth remixing.

given color decline and can some billion get run comfortable we $X.X here? Just rate how a

Luis Massiani

Yes.

anticipate merger fourth a that's rising bit faster. in know, continue It's side. rates But rates you more doing is on So we prepayment a in and faster – there's flow the a integration than in been when portfolio a on were little residential If earnings for bit shortfall and of we increase the over it earning just anticipated to for that cash anything, we slower what a environment, the rate first that quarter little had multifamily do or both planning. But be the reduction us redeploy resi to an other and of side, half but might should if go create liquidity time. the the second there if is XXXX. time an - faster asset period in creates assets classes on acquisitions a portfolio

for net on XXXX. be after forecasting full the to off and over over if residential there But to we're of long But So the confident we're it very run course, the being some the seasonality time, volatility we’re confident you able stretches at billion over the that very book. billion will replace year. in some mortgage the look $X of happens growth $X.X that loan

Casey Haire

I to million. loans in The fourth be the mortgage misunderstood. was just And $XXX runoff clear. quarter of And maybe

$X.X very you annualized, not $XXX we C&I, about mentioned, growth real had obviously, pipeline strong commercial secondly, pipelines about it's in commercial and side, Casey. the our full the on And one. We the the especially billion, So pipelines mentioned, coming terms in good you very you lastly, finance are real that into the C&I up commercial of And the on targeted really estate asked as million, are very years. year estate, ended strong. going

have expect good we quarter So another this. on to

Luis Massiani

to for correspondent business want is be runoff do not we that in, clear over than be was Casey, those that negative. let portfolio we originated were The not a But But through the or at resi me faster fact on cash the don't meaningful like, see we are it that side relationships. to have positive was loans That is flowing to be going -- we time. faster what thought us. actually

So an we issue. as see do that not

Casey Haire

Yes.

includes which pro a using was I mean, I mark. Okay. forma, the

have little So mind, in it been my elevated. bit a

Okay.

Luis Massiani

right. That’s Yes.

Casey Haire

deal XX to it Do pass that that between And ratio your here. over you took to, you there? deal say that's I would if a know XXX. do the loan-to-deposit to outside -- I even growth guess, update that want switching know, to you outlook. still range? guide important within - you So loan Any on

Jack Kopnisky

one, portfolio opportunities So along there way. for increasing purchases are the

three s but asset essence, quarter about will from looking of so a So come about in and quarter means loan the were from purchases. growth organic for

to different to stay things seeing more fit But range. time to happen. lots acquisitions seem - increasing a we we out briefly. XXX% XX% there's hundreds So below more want kind We're to be of there do want that we're an to may go our what that of But to in those The there. opportunity are comfortable over loan-to-deposit and ways There ability get that with. - XX% deals ratio. make ultimately

of able We XXXX. forecast can XX% to the XX% So loan-to-deposit terms really that metric we than in during to a create to less the to XXX% point build of ultimately is want ratio. be

Casey Haire

goal for great. or million last earnings still deck, one of X. in year Okay, Is just target And a you that incremental In this it in deck. mentioned you? here achievable guys the for I'm an $XXX not me. XQ seeing

Luis Massiani

It in merger or pro for - the just forma, beginning coming the out is. thought – would. integration them that line faster are The we we laid than to as than-anticipated. thought. achieve for we numbers we're better we from And originally a are probably we The in going is

changes there. we’re – you know, So no

Jack Kopnisky

run we do positive believe based an creating – - basis on know, ongoing whole operating on You driven part of we company was that really the this leverage. as

frankly for than expenses we opportunities revenue And to thought reduce more growth than initially. have opportunities we more redeploy seen seen So we've and thought. we

that So we're guidance. very very, comfortable with

Casey Haire

guys. Thanks, Great.

Jack Kopnisky

Sure.

Luis Massiani

you. Thank

Operator

Securities. from our to question move JMP Emlen with we'll Harmon next And

Emlen Harmon

morning, guys. Hi. Good

Luis Massiani

Hi.

Emlen Harmon

morning. Good

of course a the fourth of level. touched of remarks, the your quarter areas to push target that from the range the you kind can kind Over of the on few you you NIM

just whether shifts can it's just So they and you into in contributed So how other the maybe us range? that you getting or the to explicitly different through loan the areas there? the balance talk sheet mix - NIM

Luis Massiani

Yes.

of in so quarter, we point NIM the that. that So fourth – for had the you XXX starting core

in the XXX, equivalent because Just of and the becomes tax of XXX. rate calculation tax corporate X change the in NIM, that change XX

basis just portfolio, XX was asset earning points works tax about from a in the cash So the change calculation X change it for of you're to off – the in flow bat the no taking just equivalent the NIM. how

For every that approximately down of assets to couple of XX.X% into X in to from to incremental to we billion that replace yielding commercial lower another that, points at securities moving XX% X basis $X classes, asset the XX% points. then basis we're about NIM. today the And the generates the of generates portfolio addition to

are which XX things two to where the those things the upside control, we rate basis points that run you today. is between So have X of approximately to can relative

to right? what's were we me mean, basis XX-year it's you here Today, sitting the to year that, you So with at I XX. ago points. know was spread tell XXX and going at happen addition In rates, a X to

portfolio the of in things executing mix of upside over next XX transition the we like. can we're that basis points on business ability months. focusing type control. that And strategy And this see So that's we the we that into XX approximately the to

Emlen Harmon

provided, And right? to not the that that's clear, be range you in included

Luis Massiani

right. That's

Emlen Harmon

at you the the how you versus run rated to expense a more of on when bit kind updated for XXXX do expect in of of guide on we fully What come outlook, kind portion have, XXXX? is cost expenses. us is much And gave XXXX Astoria the look Yes.

Luis Massiani

of Astoria executed run the have XX% the by of Through the been – have you'll XX% to save rate will then. XXXX, Astoria end

Emlen Harmon

Is in that or fully the rate? run executed

Luis Massiani

fourth in right. Fully the the in quarter. run rate That's

Emlen Harmon

right. Thanks, guys. All

Luis Massiani

Sure.

Jack Kopnisky

Thank you.

Operator

And with to Alex we'll move Twerdahl our question next O'Neill. from Sandler

Alex Twerdahl

Hey, guys. morning, good

Jack Kopnisky

morning. Good

Alex Twerdahl

want up that I question. First question. follow just on expense to

difference Can an And for million. to range quarter target $XXX deck $XXX between us the you tell you just in the what in million are? down third think you drop those X to deck million. this expense had XXXX $XXX targets then that of I

Luis Massiani

executing originally we anticipated. faster we we saves have had than operating are the and We what than expense more originally savings had anticipated found cost

the timing it's issue. both amount an and So

Alex Twerdahl

ended the quarter Okay, quarter. and actually - elaborate great. XX growth at like loan loans pro X beginning And went But down they - then the billion the loans more just like then can X, the quarter forma XX, this at to and little bit to on or think. then around a of even. up average $XX It the I to for happened what you looks you was

the of you which just walk see So talk that parts to little moving those loan and can may more that fair to growth the on question, several part expect are? what particularly be organic of some know the you which the the us through book better during And to basis an in be a you loan C&I amount there's a then seasonalities flattish? portfolios. about quarters quarter? expect I of in second And Maybe quarters seasonality

Luis Massiani

The part. second and third

pop So and the quarters finance fourth always warehouse quarter of of particular, at businesses early part quarter third are residential quarter end the see you stronger business a always at In end. lending in quarter the happens for kind what and the lines. that the commercial second

last across the to you or period growth quarter, or loan warehouse start of days loan relative it's or year business. balance specifically relative commercial as average period the a the all difference that was perspective, between X to end billion - pipeline in from the asset classes. Jack lending driven been end million X $XX.X major growth, the mentioned, strong. strong the fact see the $XXX about balance that of $XX.X of so And every Overall, And or asset of in - billion largely the is the the the by average balance

But third bit the it's you balance of first going in second all see of businesses. drop commercial little you always across-the-board you're in building the know, see to up those some higher you're a off in a quarters quarter. finance So and the those business where of in lines

Jack Kopnisky

reality business We the of that where of weeks is add. close also I'd the we operate of solve closed The this in to X want people we had There that a to ton model is tried quickly. Part that last the some with But our significant are quarter of the of happened into of the side why quarter. end closings some reasons clients. regardless, is in were year tax side that the on the the average towards amount by frankly the just of also C&I issue. the that fourth fourth year. and CRE affected

Alex Twerdahl

Thanks for questions. taking great. Okay, my

Jack Kopnisky

Thank you.

Operator

we'll [Operator from Zwick Instructions] And move next to Stephens. Erik with question our

Erik Zwick

morning, Good guys.

Jack Kopnisky

Good morning.

Erik Zwick

Maybe the NIM Thanks on for deposit regard rate Thanks. outlook. assumptions. XXXX? kind your betas – with expectations are to in your for the comments What back of

Luis Massiani

So what we're seeing today.

XX at if we year, 'XX. beta the to base, we all weren't combined But been deposit obviously, have been run combined was XX and the combined of December December for have the to from of year. since So beginning XX% the to XX that you analytics look the basis,

hikes, more that continue fully the that to anticipate interest Astoria be gradual to the you factor on those we there's going be And the low beta But seeing the account that of is pressure a the will X dictate are I’ll place right? again, where So XX% to where to there's is the anticipate or continue combination call quite footprint - we XX%. that's rate in so rate to X, progression XX%. to hike we balance in going to we should that. when on to XX% beta X, going business between of higher in beta deposit think a loss commercial see traditional X, But - what anticipate we one the - be will we

Erik Zwick

stronger it yield, And those - the little the expect remind for was to expectations than Or expectations and XXXX can for bit what what Have this for changed? you then your have quarter 'XX are? I yield, us accretable maybe accretable a your on anticipated. you accord

Luis Massiani

But of by We portfolio, in that about we to go prepayments. $XX off it's bit stronger are XXXX. $XX by XXXX. to Yes. a million million is million performance assumptions a and XXXX that And yes, anticipated. $XX continue is use the that of now, we anticipate, estimates, course that. good over the originally of driven drop anticipate little into There that still And a number to than think we lot right? million about, for $XXX $XXX But million those will was in remember the the

continue the this it's year. yield. that guidance or a to because going it's our step to to haven't see million good you’re tough So But But - for number down estimate to use on to because accretable - is pinpoint. $XXX the we changed tough

Erik Zwick

if how Got thinking provision the it. I expectations going in your forward, And growth? maybe to one billion for could, last you the are about loan billion given loss $X.X $X

Luis Massiani

quarter. a Should $XX million be about

relative We have been million the of fourth so items in So quarter. the $X by about recorded charge-offs. XXXX. in decrease million cleanup have or this than and this they it little we in But in we in was there couple anticipate having quarter. should what Charge-offs to of $XX linked a care quarter $X.X were that had higher billion took $X a higher bit that million we than we will had and what we

Erik Zwick

taking for questions. Thanks my Great.

Luis Massiani

Thank you.

Jack Kopnisky

Erik. Thanks,

Operator

Fenech move question Hovde we'll And from with to next our Group. Joe

Joe Fenech

Morning, guys.

Jack Kopnisky

Good morning, Joe.

Joe Fenech

about guys, that got the pretty you're so short-term be is a guys Difficulty] at levers confident Hey, you you an there be your hold an Difficulty] quarter over disposal where Luis' create if [Technical if mining you long there a and off earnings in in be term it I given enough appreciate Could resi may or fill to that unable [Technical that accelerated comments on was out. what though situation works it much the may the was run

Jack Kopnisky

can we confident that of lots with. do fill We levers very is that to whole. are the There

- we out or and a securities to the slightly earning same better dynamics. that have from So assets going purchase everything

hole levers that there can if the were one. fill bunch of use So we there a are to

Joe Fenech

loans. Okay. And new the process get the commercial yield on accretion a pick the then I accretion, thought in another question conceptually the up from to with replace is

target. moving understand given, be With the and Luis, you've accretion it's guidance a going to

you until that for best relatively NIM are of really that's as down how get it you to a smooth can winds - work, does As bouncing handoff we kind while of see here all think smooth… going you a or and kind accretion tell, around do is that handoff that

Luis Massiani

good Yes. a That's question, Joe.

been bit see opportunities that will to some going of we to and on look approach plateau you're a by at. looking volatility in bit that a lot to think portfolio going as driven be little there - execute we've little continue I that be the have - will a at of you're a and

how a businesses XX-month the exactly And of numbers want able of going of think from a you're balances anticipate - get to uncertainty based going the on we're guiding But that the time where finds the - we window, some get yes, these level of 'XX, fully business also that place we year. to we in to year out can by December some over to our remember, over to too. nuances to But be that some these seasonal, beginning of work. laid those how see I go the so it's the where a driven there. year, of sectors that. - we down of in in we're then that that specific will we acquisitions to volatility and up And have quickly portfolio you course add lines, to be industry going the And lever

Jack Kopnisky

XX points, to like basis to something maybe not XX like would that. And the be XX volatility or X

Luis Massiani

be that talking not a – – how big It's not perfect. variance little going how about very we're it's a so out. just it shake It's Yes. to from

out lines quarters transactions - public You a have a residential types our you're you're mortgage have relationship-driven of aren’t going business to great is These money estate on to real basis, pumping business steady finance kind commercial where and right? where these example. sector remember the of

You have the book of and quarters types which XX-month a to window, you you then we're and $XXX that million $XXX million of of in here. where book or XX. dynamic seeing get over you growth types have But the quarters you return loans, rate

Joe Fenech

assuming one two rate in then other you for are NIM updated the And How Okay. guidance? quick many hikes guys me.

Luis Massiani

hikes. rate to credit any giving not We're

you right? mentioned we've many of of what a is curve hike how every Because had brought the I essentially as and curve. are me again, flattening tell there the have, shape within rate is, the We

other the incremental are that X concerned will can access on opportunities extent NIM with the guidance NIM. the liquidity. with other that feel overall hikes in and grow, there's -- overall the parts earning with by confident is NIM that funding There's have We and we we levers that the short capital more have pull assets to basis that or we rate So other points. to impact

concerned with more overall growth have if - we rate X, X to ability we're do and X the will there we'll EPS hikes, So a deliver it. be and or a much X there's

Joe Fenech

like, It feel maybe today March net are where December over point Luis all few say months? XX hike, feel next you for like you you safe beneficiary we of see a that to incremental basis are spreads hike the increase these that

Luis Massiani

Yes, that's right.

Joe Fenech

only only a [ph] Astoria. what Okay. XXX about non-performers from for million, it assets? remaining problem increase [ph] that talk up that with million Last came one looks XXX, but me drove were $XX you Can in but like guys,

Luis Massiani

charge-offs the anything about to very to meaningful that We're have feel of going any any we our credits have good still else We quality million across difference portfolios. was confident. individual not representative are $XX of board not very credit the two on that in and Yes. we feel

we half we that things related should NPL that to anticipate off are that quarter. the fully those particularly course had fourth numbers the XXXX, So the of credits these in in of the meaningfully drop first specific

Joe Fenech

Okay. Thank you.

Operator

And from we'll next to Collyn Gilbert our question move [KBW]

Collyn Gilbert

Morning, Thanks, guys.

Jack Kopnisky

Morning.

Collyn Gilbert

of many fortunately. so questions. A answered lot have have them been I

with loan the growth. me just Let start

Sterling and quarter's - the Sterling this loan saw then guess C&I the on side? saw I that dollar dollar saw, you that side reconciling CRE organic the growth guys Just

Luis Massiani

question? the So what's

Collyn Gilbert

Sorry. I and legacy forgot. is quarter? What one. the a - C&I dollar sorry in growth is long amount the CRE legacy of Sterling's it's What

Luis Massiani

million. $XXX

Collyn Gilbert

combined? what For which for was that, - both

Luis Massiani

that for balance and - coming commercial the portfolio, the the XXX For of CRE. from loan that - coming C&I XXX from side

Collyn Gilbert

Okay. Thank you.

question. next Okay,

$XXX It's it million What now. than in the that? driving X.X of less is was quarter. third guidance loan revised Your

Luis Massiani

about I loan that X% third X% loan still we think We quarter, in it's - to we dynamics. growth. XX% to talked growth the have XX%

but showed not billion billion $X.X were So getting numbers. to the range confident quarter, – low don’t of that - end we to are the concerned that the the we're in $X.X third is not $X billion about we we those

Jack Kopnisky

Yes.

the guidance gave to hasn't X% XX% which you it's changed So really is and the really guidance before. we

trying going Just way we're the in to conservative be this. about

Collyn Gilbert

Okay, okay.

Luis Massiani

runoff. driven to by be going the It's

you run cost, So that sizes a right. net in to a remember liquidate assets. of to that get if look to liquidity off actually we those that's There originally as creates than that anticipated. wanted to because it long redeploying But are it we're going far see at assets little stretches us faster other and runoff we for rid time, that just off over we had positive so again,

Collyn Gilbert

I you just then security the I about indicate billion billion, $X see numbers what shook forma your quarter But about I how balances around the what thinking curious, would helpful. targets. that's you Astoria, be maybe the Okay, security out, we $X.X mortgage, And if had is with think talked pro talked know would right.

the understand there have more coming dynamic trying anticipated? than maybe had on what what Just was originally securities the to you to

Luis Massiani

good the saw quarter. fourth opportunity buying We in

what I So that was going reduced in the point is forward, see relative the going be from to slower think you're there's substantially and to securities quarter. in the it of progression - this fourth to growth that as

bit. to good strategy move long-term, assets of But opportunity, about proportion So help take which it. move whenever the we see will a it little to advantage is and plan execute we to X%, a security by total about NIM earning that the of down to

Collyn Gilbert

you Okay. the purchases yield that And were did those? fourth what the the in average on quarter,

Luis Massiani

X%. over Just

Collyn Gilbert

duration? And Okay. the

Luis Massiani

we X in what X have portfolio. to years. the In line with

Collyn Gilbert

okay. Okay,

over on there was And coming it driving helpful. that? less particular with Astoria. - that's lot fee like then Okay, the in that anything seems a Was was line

Luis Massiani

there I the on particular mortgage, things in an - not residential are one is a thing we perspective think a perspective continue. those that and so servicing that is from MSR that

now a annual So a shortfall rate. run $XX little million bit of a about running at that there. right created We're has

$X that we be to the to to to million guidance. the have we to - able and We We about get million to that. do have to have $XX to to the opportunity - our products grow feel that get get that by

we from numbers those think guidance income to perspective. a changed confirm We fee So we hit that we're - haven't for going 'XX.

Collyn Gilbert

Okay.

just the Obviously, then for you with relative - lot a guys that a maybe? dollar et you of Okay, you amount us or NIM. XXXX now targeting a NII range FTE that's on the helpful. cetera, NIM of impact could the And that of have are movement share et Do cetera.

Luis Massiani

that past. in We have shared not the

have don't go to we share I that but forward. with from that that perspective provide So you, range can certainly we guidance as

Collyn Gilbert

Okay, that's helpful.

Okay. And I -- just the then think getting end. to I'm

we What XQ using housekeeping. count? average share be the for should for diluted Just

Luis Massiani

million. XXX

Collyn Gilbert

Okay. All guys. right. Thanks,

Luis Massiani

Great. Thank you.

Operator

next Piper we'll question with to our from And Breese Jaffray. move Matthew

Matthew Breese

Good guys. morning,

Luis Massiani

Morning.

Matthew Breese

I and of the the just to if opening wanted I'm delta the NIM in quarter in core get sorry missed between in back about I better spoken But you've this comments. this October. a what sense

And think initial of it XXX high range the end at the be I was is the discussions that. early to XXX. combined on, would

it to So changed what were that XXX? the driving factors

Luis Massiani

different things. couple a of is there So

and than foremost. balance what we anticipated, securities So we higher originally had had first

about providing between change in equivalent the what - quarter NIM. But is the a difference what misnomer because in essentially is that and at for how outlook the to Second all And we continue quarter NIM. real the little the in much full basis end the so that bit provide really the here that we now of tax right, a the the we to of is guidance guidance combination calculating difference is, provide the is the we changed at an talking - third believe, the the as points we're loan and guidance comes so that XXXX. a day, big X we're that the here third guidance so Matt we’re haven't year over, portfolio of on the

there's lower points it's rid So continuing more of is yielding loan have the we'll not and basis impact and happened, XX impact new again, portfolio potential XX to the what transition from continued that may core of XX flattening to And be Again year assets are to of we the level essentially get the conservative necessarily origination spread place X book XX, curve overall perspective the concerned, be. we of time. NIM, points, a basis the of to what over a higher-yielding assets we today. where the that

to be positive of the That and where said in changed a before difference deposit an is a perspective going this all. we're told anything, third But you the not what a of in very if you the where accretion still is going So is of that types create day, where we our in to we'll issue, we end progression know, is. all earning timing We're to NIM the point everything we in see – it much be we At very achievable. XXXX, quarter. yields. think is into cost, the ability with redeploy to to assets, able of the to the but very at loan core and starting being has equivalent factoring this the they're adjustment, line see

Jack Kopnisky

focuses that on interesting, everybody too, Okay. NIM. It's

an share and to deliver many, to of done have that able that we earnings there this in But we component expect. the important per returns pulled the we that So are always be NIM is levers how many obviously what and we've growth we company, operate. earnings pull

transition. as and So is said, Luis a this sheet big balance

within are to ready a or But year get happen. those NIM estate X% and one earnings is And and earnings we're to of appeal real any operator simple given assets we comfortable it's C&I if pulls X this are So X per numbers example X we've with the X% share tough range to think commercial that of numbers, X.XX% points. is what X assets, guidance be it most numbers different all those I time expected. the anything, trying do we things make those is How there basis return better component very or or to than and The during of that X.XX% create we're over simple assets plus. to the example, those levers to to for of everyone.

things way levers the results. the have performance of set not is about to and But we get than created high of part beginning that. the and we've lots pull Transition company to great that this more of - one is merger frankly we over the that's this returns time, perfect. up So

Matthew Breese

Understood.

with it balance sits? then in And under hike, - incremental margin sheet currently of fed expect do each sensitivity, as you currently what Okay. of terms the impact the the

Luis Massiani

a basis depends, XX every So That see to yields about depends for origination new that X fixed on basis points, incremental points is right? it for you guidance we particular. are assets But which provided of in the X where previously, rate NIM. should

We - continue that again, that with. Matt. to depends, estimate the But up come we be it continue to

a whatever surprise hike, of rate of on lot and asset X X also off a a month month high LIBOR, deposit hike mentioned there's creates because rate have I pressure before. a especially commercial we Just balance accounts that on,

of the pull long going time, points for loan generate portfolio, to short, to basis if of then a a it's growth or in charge types over EPS if where XXX which see if that get on, until our the necessarily That's So in high because this or story quality, for end don't so will you double-digit XXX, dynamic, credit at I going can us, a it's we again think board, which curve NIM why And all it's higher every X have we're it's originate, But NIM. what is all reprice probably see across the is at you're a the controlled assets day, to that about types focus X at we in we control securities assets to the don't increment world things of you of we that the of can the holistically XXX essentially significant the fix composition loans you steepen levers a Bps. into essentially and XX the you run issues. asked rate there.

Matthew Breese

Got it.

in spreads. lot little the provide a talk estate. was with real back commercial City the chatter what we're and I York a was extent And you hearing has X off about a and of New competition, seeing about business? you XX-year volumes, us hoping bit you through what in And Okay. tighter lower last mentioned pipeline I could lot that yields transaction then had you're think I pass have good of hoping to my Jack, but you new a one in the there, could

Jack Kopnisky

Yes.

multifamily from real lot is very And a frankly, a standpoint, we slowed whether absolutely real estate high-end From so it down. estate, high-end a in a there So of do didn't things. anyhow, business lot has because couple had of pipelines, a condos that more or fallen high-priced transactions rental the relationship-oriented. remember, we're our units. so through units brokers haven't slowed multifamily just Multifamily All frankly, slowed. said,

have we clients. lot a So of our

about model In the clients we a board we just the like today and the that talking office about on of number were that contact. fact, of single offer that point have come

it, So New third of in the estate in commercial City. side estate we the stronger strong we've quarter real in real saw seen pretty pipelines. York in Frankly, than

and not they little have pipelines the actually the estate commercial the on or third how less a there's rate frustrating up have transitioned we have increases into completely at activity. quarter higher the of into Prices, the is one today. yields. still prices, that things between exist bit All So interpreted obviously said, real that picked

yields as getting his rate there, side competitive increases environment not we're of how obviously. would you such off the of the as we've rate expect So fixed is that out kind in that especially seen

that challenge out seen we've there. So

rate of things the hikes we're get So with to of the in the yields that are trying folks commensurate some market. to extend some and

market So overall, has that tell the you I slowed.

just but clients we better have relationship are expected rates with not the at a yields were not the increasing They're not of that up increasing. overall. of have. the level have in that that types pipelines are moving little we of they approach they're And some decreasing than because we would bit Our

Matthew Breese

helpful. It's Great. I'm very sorry.

give Just if me you book, residential have in year-over-year expected runoff one last the that? Why on could one. the you color a

Luis Massiani

About $X billion.

Matthew Breese

that Say sorry. I'm again.

Luis Massiani

billion. $X

Jack Kopnisky

billion. $X

Matthew Breese

Understood, okay. Thank you.

Jack Kopnisky

you. Thank

Operator

from from question Bishop [Operator Instructions] next And FIG Partners. we'll take our David

David Bishop

Hey, morning, gentlemen. good

Jack Kopnisky

Hi, David.

David Bishop

to for benchmark of a the try to still additional deposit Maybe about Long may curious and the expectations seasoned especially remix be transition talking manager core the that team Island. [indiscernible] opportunities there adds of what bankers adds, in and deposit side? about relationship growth base, talk of In in terms and

Jack Kopnisky

question. Great Yes.

pipeline cases, have hold its in continue teams. be types have of managers team actually we've we folks of join of significant had actually company. And relationship We've we of that this many is Whether deposit additions We Luis resources in dedicated the competency XX seen teams part part more two And to that significant deposit-centric amount that or we've a of to relationship is our management the done it opportunities. added about a teams. done is have So in year. up added that the in do over teams, to resources we that ways. mentioned model managers We've new that benefits to gathering. treasury have both. to and

add that XXXX. anywhere half from Island. teams them to we during At to X least Again, we to So would end Long be new plan of X on it. have pipeline very would good

we by one, two, and hiring incrementally by have join So very good can folks And existing teams that competency we - that both reinforce flow incremental we to of want think teams. adding us.

David Bishop

you be end exit the think centers. Got the XXXX, it. financial footprint? Maybe close And I XXX of year maybe financial to guess then the year, what the may XXXX you with, you longer-term I look from through rest one do guess, a follow-up center question.

Jack Kopnisky

below XXXX, we to of centers. financial Yes. XXX By the expect end be

more. centers expect next the or to XX to months, XX over we So consolidate financial XX

David Bishop

Got you. more. Thank it. XX

Jack Kopnisky

Yes thank you.

Operator

with question Jefferies. with Haire And we'll next to move our Casey

Casey Haire

guys. Thanks,

of the So bill. to ticked you here to balance fund just sheet borrowing used the quick up question about on guys the securities They as state. XX%

Is opportunity the in what contemplates borrowings? wondering terms that for is an Just break borrowings? that down? Or in baked if the NIM guide of what you guide NIM

Luis Massiani

we It does upside would have. yes, not that is bake it anything But in.

and we of to fund is perspective growth there the borrowings. that asset not deposit was it giving we're replace we're So we asset growth extent funding the those that yet. growth growth, at the - the growth. To to the moment, greater the - deposit earning fund upside anticipate absolutely that, to or that envisioning it Remember positive so right? some earmarked But would than what from have some

Casey Haire

kind Or growth a comes comfortable ceiling? in are that later a is higher little that you in the given And of taking deposit Okay. quarter? XX

Luis Massiani

comfortable We're higher. taking No. it

have the we assets We of the and have. commercial given composition estate sheet real and of residential balance that the amount

We that's $XX available of have close to billion liquidity us.

higher some short-term the extent that that ability actually So sense to that. incremental not the funding is this do - take situation our loan good could fund to But the to shortfall, also a earning generate cover is. intention To it made to to asset we have have that or not we or and fund. is balance number clear line visibility on growth whatever sheet and that the

we'd on over So good have have time. that to visibility

can it at lower. drive number or maintain You XX% that

Casey Haire

Okay, thought one initially magnitude initial that is you your great. cost than of I the thinking. saves. last million just And bit a were mentioned - believe the I you over a the little believe better Luis, was $XXX on little saves. guys cost

number see Just today what you is that as it?

Luis Massiani

XX% about higher. It's

Casey Haire

Great. you. Thank

Luis Massiani

you. Thank

Jack Kopnisky

you. Thank

Operator

time. are there further no queue And the in at questions this

Jack Kopnisky

lot continue of questions. - we is a a but create company. This in what we're going again, great your And parts, for everybody, are create Thanks, moving to deliver. high-performing to confident Okay. very

your for thanks great Have a So for support questions. day. thanks the and

Operator

for you And concludes again, participation. conference. today's your this Thank

You may now disconnect.

Sterling Bancorp (STL) 24 Jan 182017 Q4 Earnings call transcript