STL - Earnings call transcript Q2 2019

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Operator

Good day and welcome to the Sterling Bancorp Q2 2019 Earnings Conference Call.

Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jack Kopnisky, President and CEO. Please go ahead, sir.

Jack Kopnisky

thanks second us quarter and results present everyone, the for of morning, for to joining our Good XXXX.

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

press website We results. quarterly along have on detailed our a with on presentation our release, our provides information which,

sheet we higher balance balance returns, repurchase on common that During update review this quarterly program results, doing the changes in given occurred environment. share our XXXX the highlight you of will call, we outlook and solid are the financial have the remixing create for rate highlight to our that the

XXXX First, on $XXX.X earnings of average higher an higher equity shareholders average solid. tangible second a X% which operating to than $X.XX the per prior income Adjusted share for points. to of basis quarter tangible on Adjusted XXX million, quarter second results Adjusted return and Adjusted quarter. common basis, ago. was return common assets on available our than were was our was XX.XX%. $X.XX quarter flat was was net year

year. operating was increased ratio positive creation XX.X% of $XX.XX book And the share our from tangible over prior continued efficiency XX.X% value has resulting per Our leverage. of

The quarter, We quarters. a the for real majority organically the to the in or for more commercial growth meaningful, good the had net although lender-financed of contribute provides quarter as the revenue increased all mortgage XX% at for growth quarter growth and organic $XXX portfolios public not end but foundation second loan a warehouse, following was net than growth average an did was of net came finance, and XX.X%. for the strong growth estate, revenue the loan commercial basis. annualized organic million Year-over-year, traditional on C&I

that We continued result in loan have organic opportunities loan will strong pipeline net continue growth. commercial of to

our overall portion we Now funding. and not balance core associated do through add growth mortgage grow acquired opportunities see additional intend anticipate multifamily portfolios, selling that We a have residential the to restructured portfolios to we earnings of loan good and and commercial sheet.

quarter, quarters. with ratio loan-to-deposit exceed may for several As this the XX%

We will not exceed XXX%.

by quarter for for Deposit X balances million specific were down reasons. the $XXX.X

decreased First, in million, to The cycles. due second spending municipal seasonal reductions the quarter are balances muni expected. $XXX as

Secondly, and we costs the curve given the driving yield deposit environment, are rate down.

of lower cost we XX actions are basis by deposits points the clients increased taken deposit deposit Our quarter, have future in on X we basis costs quarters. the begin points to non-relationship -- will for but to

of cost total liabilities X by interest-bearing Additionally, points. decreased basis

continues and demand deposits be XX% deposits, Our money XX% savings, deposit rate-sensitive and favorable at mix XX% to markets our XX% CDs.

net core points targeted and broker-driven increased basis XXX interest reduced higher-yielding commercial multifamily Our margin and added points lower-yielding X residential loans basis as we mortgages by loans. to

yields. costs and yields, deposit We through to end to downward borrowing mix, the asset loan origination in shift margin to and results will of continue range costs The a pressure lower short-term year. reduce is the expected reduction range FHLB from in basis of the points moderate commercial the the XXX on ensure rates security core loan the XXX

at year expenses fee loan factoring, the management, $XXX for payroll end income expense to planned expect as income and million $XX.X million. we was fee continue $XXX treasury of swap, expand the at Core businesses. quarter our to as And were amortization Core million. we approximately exclusive

consolidation network consolidation XXX financial charge in network have October center financial noncore $XX.X of of our center strategy. related with quarter, the the During we ongoing XXXX, reduced Since from Astoria our merger our to million XX. centers we to incurred a

centers will the the over be next are to our to We months. of and XX continue rationalize targeted real XX estate course below

back-office operations we confident end million as and reduce -- expense automate real operating sell between expenses with be to XXXX $XXX and we our will estate. core million continue We $XXX that financial a centers,

targeted and and increases loans but remain delinquencies within credit were finance slightly loan. Our our collateralized were were metrics higher due Nonperforming well strong. Charge-offs points. basis The loans an equipment range. levels XX ABL X and capital to

tangible utilized equity capital strong the X.X In and common was X.XX%, shares. to total risk-based capital second quarter, excess at XX.XX%. million was Total repurchase we

We use repurchase to shares appropriate. quarterly authorization. X.XX the repurchase are review approximately basis There in shares on capital of will our and continue our million a as remaining

in we the and more rate and our with ability meet a return and confident growth our to in our challenging environment. future Finally, model are exceed even targets

Our and remix growth enable to us targeted ability strong loan supplement will pricing, improve net interest loan overall with acquisitions revenue we relationship organic With growth interest commercial disciplined -- loan generate core to net margins we core to the deposit portfolio with fund produce the portfolio continue will to net and as the growth. growth funding. continue

and enable allocate the to Our see credit we additional the to quality added where and we to continued strong Credit expense to ensure discipline risk areas will strong, strong has continued us to have area costs resources oversight. results. be returns

we Lastly, significant flexibility. each capital provides that management capital excess generate quarter

the presentation. of our on years Page strategy over is X past reflected The X results of the

compound growth adjusted compound XX%. XX%. rate annual annual growth And EPS been growth of the value Sterling has book our a acquisition Our been rate legacy since tangible has a of

was value previous year. XXXX, X%, grew second and EPS up book quarter by the XX.X% For from tangible of

financial targeted beyond. our metrics achieve for to XXXX and expect We

line for open let's questions. the up So

Operator

[Operator Instructions]

our Nicholas And will question first with come Stephens. today Austin from

Austin Nicholas

kind growth. number, So terms just in us you numbers? in what's on is maybe in an loan then included updated on guide contemplated of organic just that a perspective? remind And assumptions those maybe from of that updated Can the acquisition of there

Jack Kopnisky

Yes.

to confident this volume the targets good and is have pretty said, economy guidance we're feel the All in specific hits those that go so is portfolio segments numbers. we opportunities there We're that. the and that always of rest look the are is acquisitions the organic. And year our to we're opportunities very volume. just and to an seeing than being opportunity that Frankly, at maybe volumes. at lots to organic We the portfolios, evaluating getting more of always acquisitions. there. organic constantly will look pipelines that growth in we're are seeing beyond acquiring pricing now, right the previously, that said, in there's So the and above All portfolio that

Austin Nicholas

more those what April? attractive it guess, just Understood. acquisitions, the on could you're how if was market or thinking talk banks of And can about, than spoke when opportunities I attractive today the than in from and acquisitions is less we market maybe last terms portfolio the and -- you're maybe we in about in be; nonbanks; and what from size seeing what

Jack Kopnisky

interesting frankly, equity too. private trying are of to and, lot remix their Yes. banks firms that portfolios, a It's

So there remixing opportunities. are opportunities that come out of those

billion, a And so maybe looked $XXX we at $X.XX have of billion million so. or to things $X from variety

The So we vast no get frankly, we look them. range the the majority opportunities of obviously want ones to the of through ones screens of right price. at. match that we've We And right say a that will the have the that's at our are types said of that this assets times: only bunch and, credit that are metrics

Luis Massiani

and going business for the longer best dealing a opportunities, to on in as credit a be we've have us especially how focus, banks, OCC-regulated much when working to to lines noncore the That more, box best pricing; for going structure that, gives the comfort exit is and the loans reason is and always with bank, because operational banks management be best not with perspective and with the you're and is what risk past, from do. about they're risk whatever our level in they're and line loan the that much we we strategic Austin, more overall find term. with decided that talked And where framework

are in of Woodforest, transactions $XXX is. that be size. bank. million what completing did some our And looking if which they're is to So likely key million of they're we're going additional successful out be largely $XXX we more that's in similar with a going we where And focus at, than to to to these

Austin Nicholas

getting, selling in little less the today and from rate inbounds then there ability there And for of given sold is you're it. -- outlook there's is maybe at seller Got otherwise you view the those what side? fund or the potentially have may -- outlook in that say assets terms that Do change maybe the just to you're the any would from think to a seeing you banks them? more easily cuts

Luis Massiani

far, There's pop day we another seen other a our And So it. haven't pretty secondary every see vibrant or screen. up radar on we market. opportunity week,

Austin Nicholas

in that. maybe overall you see cadence about I overall we Appreciate exit and we third the the -- margin, updated and on of guide in just deposit And then just terms to -- about we we decline got one, then it, the the can guess in I the the we as think actually towards year, should maybe, the how it. there. -- can of of appreciate as cost could talk of kind that, see Got and second year? end start the And margin; fourth? get deposit the

Luis Massiani

question the answer we'll first. second So

be. dynamic deposit That we full competitive you improved a deposits, ask That good we deposit deposit stayed going have many And twofold. bit, cuts provide you managing accounts as we It's well focused unknown, about this started is is been can a of So on deposits, I'll answer pretty overall so how the has that to there leveling have relationships, that. mix both but the I a big a excess to see the of right, of we cost on but balances little quarter. also in to as rate is has where and And you have on clearer the really off have focus liquidity the short the been forth. answer little question rate on fact loans, yes, -- and where the hike relationships, disciplined. operating book costs

of quarter. us, I little has raise a deposits being to demands or more our some demands think, And meeting competitive so pricing some this and customers to that on led rates from not aggressive in deposit bit

by a to is that followed up, an to with now an a into are have couple that's first of to we're see I actively XX, see figure where keep, going to cost rates and working by to going on we're yet this a have the to to down. that, steeper-decreasing XX% way by beta it, more It's in we I going managers XX% to world a we in which these the we're much quarter, have which you started a to or easy environment, can similar beta deposit see way much the going we going back we conversations always first going working relationship have in down. guess, commercial pretty start to moving did going guess, we start And but of I I significantly. going deposits by this had in months. And their are a of -- to that we hiking basis there deposit that perspective strategies how beta is is earn weeks are X that don't environment bankers the the XX, rates. in rate in in are call are from in of right? to how a headed truly in on an a one, as how world decreasing you're I to we're where impact deposit end -- on think first X potentially on think followed how out the if similar next, XXXX, these we are accelerate clients anticipating to we're -- -- a cut. when not And rate that XX if their deposit over our hike, They're here on do a think all point we beta raise to that impact fourth XX,

to X see up do going the as half On but yet costs is of not of hikes. with see rates to said, by break come year. pace see again are to NIM seeing to already XX And about going see of pressure have rate is do we'll are in to you're the there that beginning down those going in. point it's $X think that some deposit happens on We the in going -- start you and year. you to I going are change at assets the of to billion the I points progression that rate Again and see we -- basis reprice with X or think basis year-to-date that I downward. have LIBOR pretty what tough moved will cut, of the corresponding initially if bigger cuts that floating-rate because that the costs, deposit And net started decrease a about interest the of quickly margin catch back LIBOR XX a that you're

that we face that so of pretty therefore, we that XXX cuts. range X or even we feel And can that the provided good low in to of X maintain rate the end

Jack Kopnisky

Yes.

to on reality game Luis -- we there. And Let doing in that me tell you side all to We've at. there's everybody but setting a deposits have rates just exception this. terms bunch you have going me have couple quarters in well, be you're go A where period of are side. expand of the lower a for competitors give time -- the been argue, it's be The and on the when to this you of time. this to tough out that there said this lowering kind clear read through like the you'll if volume very on let just where long will you play right it's And you too the -- they're place aren't get pricing tough to And what around cycles probably been is and this long, deposit playing rates -- never you of of a rates. us time. it,

deposit aggressive So we've been very rates. at lowering

of looking like clients. deposits relatively just the In company so XX% And have are of things setup, have upon that rate about you more money of your mix them the and, depends particular it with rate for also are high-balance frankly, of have the And about markets our you or insensitive. or in sensitive, relationships that types XX% we CDs rates. your are people type

over really the X again down trying of along deposits but in you're a give rates you create doesn't Austin, so relationship move drive intend that the more. Probably happen at isn't right rates on on it and way. thought but we time, you number. this, it down we'd price a all but period that's funding So happens the continue -- sometimes, which little to than realm you And selectively it more wanted, to and to quarter

Austin Nicholas

to be given everything on it. I No, last see maybe number on side? XXXX in just the year quick operating And cost-cutting appreciate we flat then this one doing expenses the one expenses. just compared Could you're

Luis Massiani

that has again, Short but in answer reducing getting longer, getting of past, out estate, and been related prior we've confident recognition bit not those going XXXX. -- a us we're is relatively yes. here trajectory to realization messy -- always a of our little base are complicated. are we've that. We of the flat and a calls, in actually estate to going But financial real real we see OpEx especially decreasing the where maintain saves out We the bit to feel of here talked very from feel very or taken count headed the about in centers, cost as about expenses financial confident has and we into head realize continue reductions little slightly cost that saves centers the And changed. to we're to

Jack Kopnisky

skinny-down high the And kind under spend, margins go make those company place when this levels you a decreasing and you out again productivity but is of rate people fire, the tells have kind sure -- places, of and right of the this is where that to to are not history environment you you, a to overspend. in right have one of

-- the cost have just map go with kind that expense flat And a lower in quarter. moving base as expense with and decreasing a we X deliberate all comfortable very but down. it a very It we're over again time, road that so looking of base. Luis the overall will said, very, of period at into created we in doesn't been XXXX and or we've go happen happens structure it our about So

Operator

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

Casey Haire

So on the little NIM. color I a guess, more

to So understand. I'm I guess trying

am I and I of like So to still NIM just what to missing -- -- it's just side? a am it the so know the call. Low compress here. not you something just am close you're you're the cut end going coming borrowing like I squaring XXX, guide $X.X core of would it I the be a side, bit -- I'm the but here, would I'm holding saying from be yet borrowing billion that -- a something's on fed XXX. have seems due on seems

Luis Massiani

it where just find side. catches -- on one, matter focus in term; overall commercial how lower-yielding is by the going hit moving a are into that have in a -- going on range, wouldn't continue all but a continued to think, chance the Yes, quickly and up of side, there again we side the do, the loans the The investing sheet; we're of returns that funding [indiscernible]. it higher-yielding a not better think which what we're I happen near having a a, I said going the maturing were in, to that being to it. that's And runoff classes we're I that with a better chunk yields. -- call. is ongoing is the There think risk-adjusted balance go to is equation we Or repositioning be XXX on it's we borrowing close is of whatever doing replaced coming of going asset the doing what loans, pieces and that's is that lot we asset of where substantial we of to

loan focused or amount the past public like not places the sector real our be And side, the the through of the places again that's diversified originating we've then largely where loans have seen been commercial -- and going much most -- to two fixed-rate growth which been in on the by it. are estate commercial side quarters, more where on impacted we've

-- you're loans to end loan looking low and and they're that on forward. we're that loan and yields, feel the that replaced as by composition off to of with that or a we anticipate going with mortgages and that's good types combined So residential continue growth the yields loans below run higher going -- the the opportunities going range. see and And we acquisition can pretty loans that we X.X% of some transition multifamily at, of again the more to at

Jack Kopnisky

this Do step, Yes. by Casey. step

yields loan have the So in generally pretty well. held there

obviously so X% have that rates reprices portion a than or the -- mixing the lower on that X.X% these, and as taking have off or issue with little more We we Luis said, variable loans. X% putting loans are a X.XX% that of

the is You borrowing down, then so have we're going costs deposit repricing we fungible And the costs. the some borrowing of [indiscernible] the most have. costs

So disciplined about again, we're those being driving down.

-- we're with the in probably range; So declines, rate comfortable two comfortable really comfortable.

really may decline up against rate push the Third XXX.

So kind think that's rate cuts on it. but it there we of many are, about how depends how

Casey Haire

if you the Okay. mean, think not went I -- missing hard you -- heard loan-to-deposit one it, ingredient but ceiling XXX% growth. that been munis correctly, I I quarter, you. Jack, against the is a like you're I I ratio the going guess, understand for about if this mean I what deposit has here

the ramp going to guide, is So to are up level? your to the is the is presume, then And really just that down? continue replacement XXX going that borrowings, so would run versus underlying that growth what loan given what -- And to confidence? that that rate what's here, deposits

Jack Kopnisky

Yes.

I'll do I'll on second part. Luis the And So part, borrowings. let the the take first

in of is what sources have many company of build part first the deposits. -- we is the So this we

again -- those you a at a same rate have it, is way. different go with of the can thing about in even a mixes sources broad mix, we've online costs in bank and centers more side. that And deposit longevity volume volume-rate certain you some the think different you you if been experimenting different And functions a deposit certain different the consumer So frankly, the in have the through financial the have to side commercial volumes. funding and the with certain along certain for commercial deposits;

we're this types out go to for you So you and you're where flexibility different parts of to certain where support growth. different the get the asset some at core decline line pretty have to pay confident funding holding sequence your prices. funding go on of in other different funding rates and Again, to can your that

Luis Massiani

we ceiling. I to higher to business -- than when plenty the for a That's a at, XX% that's we would that want operate not good XXX% we if excess than to loans but more find Jack ratio, portfolio originate good a of us we certainly the -- target referred have to, time, -- characterize XXX% long-term have ability want we period ratio as purchase. to identify to available that run the or of to we loan-to-deposit hard We that when to time. liquidity slightly and and at to have that some want liquidity a for

of So businesses. I think increases time, saying, it's this come strategy I X-X-X long-term think period diversifying not loan this growth the again a that loan would of we commercial -- assuming and I a out growth, to to build that away portfolio, there's the for is, mean, the should you you that if good that book don't from need

shouldn't way to really So our characterize a that. ceiling be

Now funding between the that to term, somewhere long intention is profile it XXX%. maintain is, to XX%

property and we have bunch using of includes management a online was alluding deposits. that channels. -- banking we're includes that the channels the And It with centers. are teams. specific not-for-profit. various originate includes doing a the work includes It to, in It different That commercial investments as verticals, we're things we're legal including we financial in making that and Jack to

mixed in, Today, and of mixed So to deposit or generating a there's approach deposits. is coming a diversified -- approach bag to somewhere X% X.XX%. where it's a between

account, that -- substantially which in world And to points. a XXX. basis we we were going high-balance good in a commercial XX lower costs today's years that's to us -- a than be XX cuts X commercial rate number a cost world X that's account, have in at used ago, We somewhere to us between that. lower And

So of but decreasing the I of truly going pretty and especially the costs have And rate to start the we essentially over keep, before, a XXXX. course that. side There's will rate commercial -- earn going -- environment. the to teams on ability moving it's there is in competitors on in it, X, decrease. year. are direction. we cuts to decrease to going our lag The banking and -- as commercial We're of going to said are their a deposits once dynamics X this on be house, There's that pretty confident significantly once rates with market are

Jack Kopnisky

Do you borrowing to talk about costs? want

Casey Haire

Yes.

Okay. me. And last one just for

do The was the And was, to what And I you accelerate as the going I'm this just mean, very runoff, so -- buckets. multifamily quarter. mortgage only quarter. forward? to expect runoff in the that the just $XX million. and happened some slow It so color

Luis Massiani

Yes.

proportion loans. factor that of When essentially So in to decided there's the the prepayments, we portfolios. a -- held had of a that that for nuance million. bigger you bigger The end sale a had remember $XX held the loans to those number loans residential we acceleration or the and of mortgage at have -- to back we seeing that those we retain which decreasing rate started moved we the into remnants X/XX, book. environment And was in

like the in is quarter. same we much total, exactly actually first the the as saw in pretty what runoff So

million roughly in was XXX about -- it over So million just $XXX total.

be multifamily anything, that we in anticipate if faster rate residential with to decreasing book. So actually prepayments going and there both the is environment, mortgage

year, about pretty guiding total So by think XXX anything, been that still of might year. number back half it exceed for if runoff. a the for that good the so That's to we or this of actually we've XXX and million

Operator

with hear from And Arren we'll next Cyganovich Citi.

Arren Cyganovich

in loan in deposit mentioned remarks funding. mentioned associated to just other growth? commercial referring you prepared Or growth, the Is you're what looking of you to, were that you funding the the loan there fund the Jack, associated see avenues kind commercial and -- are you growth? opportunities

Jack Kopnisky

growth, but deposit are primarily it's looking No, other at channels. Yes. we

core we're So commercial of we're things. other experimenting that with, and, deposit from some retail, frankly, but online it's really functions growth looking the at

opportunities of touched things looking some there's part -- and also many the of so upon, we're at also. functions M&A in So along the variety so are that path deposit that there a Luis of verticals that things that are

Arren Cyganovich

terms opportunities opportunities open are just but the then might other you of available more M&A, And on Yes. the to broader finding banks in any a that or portfolios in market? beyond M&A strategic be

Jack Kopnisky

the been It's bank pricing the -- experience are of sell lot are view are buyers of this we've for and they than about there M&A. a -- there -- at for for long pretty an a to want that selling better in been potentially is my is have interesting banks selling. favorable Yes. that about is interested in time. an time This selling talking interesting I talking where I banks, are interested past. again, environment are than banks that in potentially doing They're more banks my the prices. there

create of are we've looking funding, that with have outgrowth is probably outgrowth months combined but more the conversations maybe can apply some had at awful to folks a forward. A normal that get of a M&A again, that you primarily. we're that. And at we -- cost that good is and bank they to look normal that there So practices they saves, so over that than going time, had conversations in to talking. period X the last lot -- folks. interested in company X I lifetime, of are But more an we

happen along but seemingly better there at is things an something is is prices actually separate, of -- awful way. Now opportunities doing making lot the

opportunities. -- And we're so continuing there to at those are look

Operator

on And with Alex move to Sandler we'll Twerdahl O'Neill.

Alexander Twerdahl

to have guys back back would talking the about XXXX? get to off, sure the go by margin. but XXX sick to on first of in I'm it what to Just of are now, margin you right half

Luis Massiani

That I various in decent-sized think asset acquisition of first are would has certainly opportunity, executing and successful a classes. the foremost it on in we diversified the types that yields help. would be a commercial

fast diversified are deposits, end to back we the progression be Second, and to of think betas and high heading from going both we generate on year, the find to into I -- fund are consumer fixed beta type rate, as continue diversified and range. across-the-board of great or how half the long -- to liabilities to dynamics the have favorable we spreads commercial again, the it's to loans; the can and commercial reductions in acquisition potential a getting going -- as with that there's that of of be that -- is to originate going good find with commercial this loans we path those opportunities there's that credit a but

don't XXX, don't consider successful these it's path do we way. layup. see not this minimize to puzzle So we our to I a it in to of pieces are want getting a a the we But if saying there of but and come work layup, that getting by some

Alexander Twerdahl

you XXXX? half And XXXX assuming the this a that another some margin rate are September be do EPS able hike range? to you sort XXXX, at than Like then how and and about one one next Okay. early year, we heading think a in potentially ready into probably a back get think in of to us anyway. investors are Because the looking point more of I week give

Luis Massiani

spreads stand -- the right? think back of they with was of steepness you so it range XXX core little XXX where is today. is more -- we're of and today I And then end or excluding years the our points operated then it we NIM to so. of always basis closer steepness the where bit they between sort were Well, do stayed XXX that, to operated -- we it where XXX-ish, curve a the today, so think accounting X and so early if purchase I and a into high XXX it are you are of but we've or with the at neutral. I it's ago And X to compare when that somewhere perspective back to was I'd We've the we're world versus tell, versus curve, pretty that X-to-XX and where tell that -- -- X-to-XX spreads you think that where from compare where we about

from start perspective that that going a we're of see which in we a so end longer neutral. -- range. hitting time, higher over those are X When short a start of call of little and than help decrease you rate We the to And we being to of in environment. types XX, bit world in of even spreads now again, curve in able basis put it, pretty period portfolio. you least the X can decreasing points a and relative the compensated getting be a XX assets to at more book get of the And in that. XX, So really we're loan think and, between the of, X-, I end we a the in and both originating on get -- or the XX-year -- in securities get can paid basis X-, the

different back relative too especially more a that or come curve. that environment historically, I major see we've a anything it's steeper you'd slightly operated little don't normalized to within rate what So to if we a think difference

Alexander Twerdahl

not your sort? if an about And that any Jack, of comment then landed more earlier, change sales, anticipating acquisition residential some would Okay. loan you

Jack Kopnisky

sure. a Well, acquisition, bank if do you

remix You balance again. whole the sheet

is today you off my transaction. reset statement what bets what as say is we're today, that's would But if are all that, I but a correct. M&A there we on based doing So meaningful -- see

Alexander Twerdahl

as to as or But if that you deposit try left you balance commercial would growth, landed acquisition, opposed sheet. a of like $XXX billion finance fund the million to side $X.X

Luis Massiani

but little a assets fair loan securities book the that portfolio, there'll and so ability a Deposit to be have both are yielding the do amount growth over mix -- be low of pretty we both. still the bit would component there a a in time, of of

Jack Kopnisky

we're which too. trying drive Yes, down our actually loan-to-securities percentage to

level... securities Our

Luis Massiani

[Indiscernible].

Jack Kopnisky

are bit a basis. Yes high on -- too percentage a little

take So lower-yielding lots off of kind fund of we have and securities it. liquidity to

Alexander Twerdahl

color that you that be just about. maybe think, like ABL on choppiness on worried recognize there, working of Okay. little a lot I bit more with some, more behind going for it just comfortable scenes in a to but get substandard. we quarter. does me: us seem attributed should Maybe loans the there's And a nothing I final give this the there's And then you question what's If loans. substandard little can us

Jack Kopnisky

that's all hit there's The out Yes. biggest case. think there some about worried wall, number I big the not thing you to -- is going is and the everybody that's

and if with macro So the comfortable it, loan-to-value. very and standpoint, very about you the of kind the a levels NPLs are think they were delinquency about mix same as we're a ago. year collateral From

XX% side service the portfolio the commercial have a coverage. on entire about on loan-to-value X.XX estate a we real and debt about again, So

-- or receivable, of portfolio C&I total secured accounts XX% about the inventory within On are have equipment. we margin

especially said, Now go ABL be always is monitored out. that'll will all that credits. one it's there that one-offs

we value the So is. know collateral what

total XXX% losses, something the are there total that, to than they XX% the XX% if of the most. or So are at XX% of like rather

we're at. with ratios So at that portfolios of are we're see. very any There with the in very where comfortable charge-off negative we're it's trends we comfortable where no Charge-offs, also. the on

about think these things. we how that's So

So a be in The no were pretty range. strong. continue they very than collateral charge-offs ratios And much on negative are a trends. And macro ago. the a we moderate are things different to will from year these the think not oversight standpoint, low

Operator

Instructions]. [Operator

Next we'll move to RBC Capital with Duong Markets. Steven

Steven Duong

loan technical base growth So a that to on in off, $X.X billion target of used prior $XX.X of off a just question billion you a Is just your guidance? first that billion. $X

Luis Massiani

Correct.

Steven Duong

just Okay. target, your TCE. capital your -- And on Great. then your

math million X repurchased repurchase. shares X.XX% just at you to you is TCE on this X.X ratio given have went still up? walk it how your about this through you and that have the and You million quarter Can

Luis Massiani

Yes.

and some mortgage, is going It's the back back balance multifamily the entirety faster we're What to the get is managing there the stand-alone end to we on runoff are the this of exceeded kind to on the residential potentially actually we're in we by to a we that X.XX% going growth the -- or based if that of of from how X.XX% generation year. end or the sheet us an target. So get capital -- to would today loan where -- And the of we've a basis, organic that back the long-term we've organic better based of of on able we're through that been internal or runoff greater and we're that again, or seen found, second these in the year. portfolio we're or these soon end one opportunities we to bought origination; million one and half X.X of by organic shares on either of this to acquisitions unlikely even year. the growth get not the X.XX% going get if execute

subject quarter. we're TCE continue active to We market of a this that ratios we is you this increased loan capital that sale to We're point, front. we going regulatory being conditions, going million in first Part ratios that true, fact your lot of our the And quarter shares. portfolio our see of and increase the the again. To where buyback quarter. shares the capital full a $X.X -- last is of on billion sold bought X.X the ratios bought impact

we front. in to anticipate our with we the used average as by this second going be get the we on end to be average the the formation this average therefore, it and but of quarter total following if capital "return X.XX% than of next. on sheet review lower -- the quarter, the assets significant we quarter do earning was -- the some assets once million, so isn't in as anticipate to because continuing seeing active balance will half the Board be prices lower this year. And going in purposes, or again were that and that average active ratio" lower that's second make risk-weighted this were potentially up sense. to to were or quarters -- we growth will continue And X.X assets But don't re-upping We unlikely buyback that year,

Steven Duong

Got it.

move just on that. we maybe So

XXXX, any there you've year, this on buyback that is Looking expected a this reason that to do why you're done do you wouldn't to comparable year?

Luis Massiani

wouldn't There we it. reason. There is why a definitive be no reason do would particular not as to

like As we do world. pragmatic we've always the to generating that capital today, we to extent that. ROTCEs we're generate that about and and investment we XX% find opportunities will XX%-plus redeploy said, the To

today, meaningful that same going of this don't in likely we we're the million-plus buy To back turn back XX to up leave side there as seen opportunities then. to we've that, shares place of going the to of world, degree to I to think growth, the we're see buy the that out that it's not And house, buyback level than commercial buying see will a is be capital internal the of XXXX we same the still be we than activity in this maybe about And given both. the the we that what combination to commensurate a on based extent We think a going of type that special will shares. that, well, today. then in we're we year. year, where generation as to but we going we us of create more find as a buyback have going likely especially actively kind likely, continue will to do found More

Jack Kopnisky

it, the about thing things. of The sequence

through business. job capital done delivering we of returns frankly, period best the investing a to makes or aren't it of time is over Our business organic is of when those in shares And we've think there, our us you use the And a good and opportunities buying sense too. back the of view then back right into pretty if controlling destiny invest kind M&A. that

Steven Duong

the just moving And NIM then Right. back again. on

what's So the these -- end for on rate margin that the that's current the $X.X rate the $X.X borrowings at what's borrowing year? billion, that's the borrowings? coming the of cost billion off And

Luis Massiani

basis difference between those is XX the XX approximately X Today, points. to numbers

XX that to are rolling basis off higher. are points So XX things

a basis difference. end from to the year. here in to that from XX are X rates -- point That the is X-rate-cut We number scenario of substantially increase going

We've you go. Steven, closed stayed depends, by why, -- And $X.X design, also that how of to out $X.X on have out that's billion. we, we so And far billion, had on short. depending relatively

could chance had So hike. that continue to comes or short, purposely more trying X/X We of not thinking than to but a play games to stayed be where not would rates anticipating that due. rate trying there

the on out not go on did therefore, that. curve we duration so And

X rates on the what or do of on actually almost if year, X months out to borrow Now relative going we FHLB the X on money X, overnight. will years years, in decision to you or out type overnight based X can that, stay you at the versus X have X, you same better today or can X

other So repriced the second the lower a [indiscernible] year. first in of billion-ish of substantial this a to that or we're $X half reprice balance $X.X that year, half to thing with of in the the is next have or that is ability the of being going good chunk the rate. And billion so

apple have but to at basis bites yes. about the there, of XX going we're points, a bunch it's So

Steven Duong

that just last your there's quarter? the that's move XX right, And if quarter. a let's this -- Do you only for in from and cut the assume just one. cut expect great. -- point -- If the core All rate to below in July, NIM basis the third XXX

Luis Massiani

assets term. to that, impact does, would happens that have it move what's I we envision longer-term roll yields versus don't Near We term, The and going impact be is short -- slightly. origination about envision If what big a don't and impact have it of an $X between asset off how on. bigger the loan major would difference longer that $X that with because billion. billion to roll that or going having be term

acceleration end between percentage. about have So and similar But obviously, of higher-cost prepayments of the that reprice broker on conversely, -- curve. billion of some then we have will activity funding and $X repayment activity or have just liabilities, short prepayment impact the borrowings, deposits a And that asset could we number.

So there's that would we we -- if relatively could that it's well, should we we're and -- likely be to again, but -- below only that neutral pretty one slight able cut, definitely that able to we a a withstand should could chance XXX. slightly have be be

Operator

KBW. Gilbert with And next hear Collyn we'll from

Collyn Gilbert

then if for to million of at that this year apologize. that all your $XX what's covered still does And your income? guys at on you too. or housekeeping are in just Two items, your prior change holding year? that outlook next million, beginning, guide $XX and I mean, just But you Luis, accretion the this for quick I outlook

Luis Massiani

and on side, that caveat that, surrounding by that the Based a it's saying on but there's to I activities that we've going acceleration bit resi the little number. than uncertainties higher some of seen prepayment probably always be multifamily that

be and million, $XX first $XX you of if between the is the that first second to about what this we've million half in So year, closer over which the were year-to-date. think done that we -- to million. $XX running closer just at million about to quarter, path about million million having $XX to to a to definitely $XX $XX There's $XX million

seeing million. that. higher could that that number if decreasing the than on moved start And actually again $X that number by up -- that, rate particular we greater environment be you where to activity, it So prepayment continue see multifamily there a side, in a is chance

Collyn Gilbert

next how just... Okay. much drops year that CECL of off And and with just then

Luis Massiani

relative to a that in. of of change big come would big a essentially long-end so so year tails not because next more acceleration this -- Not is

so and to tail as again plus, next into pretty million longer-term that loans guide longer a -- them that accretion with would still closer accelerated -- and $XX of we back usually the we this Because that the good. for provided kind to feel that get is well. necessarily that tail accelerates And before the year have next $XX year, this to isn't million, of

let relative have would changes, this will If And to guide we next so a this -- definitely year. I know. provided think the for you we impact that that don't big

Collyn Gilbert

Okay, any helpful. then change And provision okay. outlook? in That's just the

Luis Massiani

million today. there around sense envision provision past charge-offs X going enterprise back. about for very and on are We collect should remain. very based seeing $XX good got -- that's would reserve are any that to questions some we And what collateralized. manageable We've and to right quarterly receivable value not here have we We've impact well at we And on equipment the to our those the money the we've seen cases on those see we're protecting interest right our going or there. in that million that We some And be some and X think, credits. we're now. Not accounts quarters. feel we're in substandard a disproportionate $XX -- of obviously been in that

million million to is $XX good So $XX a pretty number. still

Collyn Gilbert

you of Okay, about So for coming loan quarter, in jump then going can and kind is talk construction just construction that on outlook Maybe okay. your side: the what And back... this the forward?

Luis Massiani

construction tax in credit we're connected That's that Everything covered doing the investments, our we're side -- low-income is question. to investments. No, that we housing that. a Everything not yes. have credit good doing

projects. very traditional our is This retail a niche-y component have of where tied or efficience. This an construction find asset construction. construction very construction. So residential business, entirely This is low-income residential a not we to also not credit lot it's and housing is where tax actually or can is -- which we tax returns other you that class like good risk-adjusted in high-end

they're tax actually So free.

manageable. instances, -- as this equity part the tax the very because as So very we And good yields own we takeout in are equity good. the you're make. credit are credit The is long -- is working investment our with of many developers that

-- its actually tax a fund out construction also ourselves it's construction commitment we investor And reached credit take So from the once perspective. hold completion, loan. occurs. the project a we The because once equity we construction

So that lot. we we are -- like business a

to seeing completely going type be increase. a going that of housing. little concentrated be to that see traditional going It's low-income choppier, it's to bit not going in quarter-on-quarter. that's is item not But same but to construction. again the growth It's You're you're a line

Collyn Gilbert

okay. then outstanding of just multifamily York City us can rent-regulated loans? very is the what And balance Okay, That's New you remind helpful.

Luis Massiani

So the rent-regulated multifamily loans.

of of entirety. have billion potentially stabilized, kind billion of some loans, that of Out so multifamily. it about on in of billion remainder of $X.X multifamily rent new traditional type is its total or About million call form $X.XX million be that of $X.X that of got legislations $X is that The so. we've it unit $XXX rent So would to is them rest in co-ops. rent. The amount, by free-rent them impacted controlled of

Collyn Gilbert

that what be do then you happen the And LTVs on million? would have $XXX Okay. to just

Jack Kopnisky

XX%. That's

Collyn Gilbert

question growth said performance still you'd the committed to that know in for your I a Jack, finally, just then and And you your guys okay. you. like. targets are comments and Okay,

Just Should a be we more kind curious just changing is kind EPS about can obviously do given we like of said -- a that the environment kind in target. should growth rapidly, XX% how I go. see just I is think views target? little quite you the past to know think -- -- -- where kind of of -- that broader on Or of you now bit of of kind your a how longer-term

Jack Kopnisky

Yes. and We efficiency like the think ROTCEs the -- ROAs ratios. and things

the at of The comfortable on be that. a what very the XX% long-term still we're XXX, XX%, doing, a we're on mix one depending has the long-term, think EPS, XX% it or on more to I XX%.

see, cycle, but -- you near more that can reset the get what or close So we to believe we -- it's we've kind part all get may X And term, XX%. we more in that, sheet. is over balance is to the XX% think that more. We point X% to -- part pretty back of of quarters this that, we'll done we're last is really the of -- we the the

So you'll EPS. lower see year-over-year

incremental and able accrete be year remainder reset thing, of we've we and XXXX. by changing this that kind selling begin for of should this it growth into Now to off back to the EPS

we is everything reset We've And EPS the to really live we beyond calls, done. unfortunately, on So piece. acquisition the really go to you period, if things. at we've the balance sheet it that's over and now on what does well and way. these a look And accrete continue in micros a so and based last what by along bought it really quarter all those position us more quarter

Collyn Gilbert

why term "broadly," the to... That's I use Jack, Okay.

Jack Kopnisky

know, I yes...

Collyn Gilbert

but look resistance microcosm it like on a of to at -- I a appreciate anyway. the

there. Okay, That's it. all right. I'll all leave I it appreciate I had.

Jack Kopnisky

questions. Yes. By the said way, you two

so... ended You up questions, six with

Collyn Gilbert

anything can never Shocker. short I do version. in

Sorry.

Jack Kopnisky

I -- stunning, you. thank the Quite know.

Operator

next move D.A. David Bishop we'll with Davidson. And to

David Bishop

I'm just curious.

I might bit. pressure be outlook Second the can say, charges. some you the case, -- unusual it expense maintained second the that maybe, there there target unusual on looks that's like something You've or the Is there? like maybe there's if I in quarter, will know perspective. don't if quarter nonrecurring it inflationary looked little from a

Jack Kopnisky

couple million a $X in range $X that, on. up we operational frankly, the screwed had We Yes. million to losses

items but we we're of things those a like up. some it's So there things and, had in nonrecurring. kind are that, number deal frankly, that clean are we wires, issues some with those had fraudulent with that that, some quarter-by-quarter again, comfortable to pretty operational losses, of But we --

So yes.

David Bishop

bit It right, more side did And think, you expanded -- maybe I credit like preamble? on little a I sounds hear management you Did I the right the opening risk house. the on side correct? on of Is probably hear on comments? that the you the from a

Jack Kopnisky

a It's yes. good Yes, pickup.

risk the always sophisticated, on company of one enterprise company. fun to company be evolve bigger And One more things, this things gets of tried the about ahead of continued we've is as the to the management. we've the curve and

we very a manage we've brought in that way. terrific make number in sophisticated can So a of sure and to folks really monitor

very we the company. sophisticated complicated, success underlying ahead very, foundation need that. we've on know again what, and of the the risk had part always to You gets And management as world of more been our be strong has into curve enterprise

been really credit So a the able across-the-board high-performing but we've in risk of area. attract into the folks specifically ton company to

David Bishop

side additional aggressive trends centers bit you guys know out I has seen the from a been been then accounts? little there. at terms more terms funding than you a back And been In have circling it. have impact there's there lost to the you or of any in any Has as attrition to pretty late plan a side? financial here. funding discussion have -- of laid Or all Got the historically. attrition, of shut

Jack Kopnisky

is than experience Yes. what we've our norm better plan that. the No, -- centers, financial better for as our -- than consolidated the is and

to we're trying you to our clients. if about that a company has think create value-added So it, support

consolidate, So have of when deposits value. that, don't ton exiting you transactional long-term happens up what end frankly, in you a

and whatever have You are oriented long-term do strategy the they're of generally once maintain part that relationship control and value they bank relative to of.

been expected a a little of we our out there. than little better norm has what and the bit kind So than bit experience better

financial comments centers; the at So and the we've idea all some we consolidating type we're of of attrition -- of depending on made, in factor the clients. time that situation, having having same the

David Bishop

question. it. And final Got then one

percent earning as some ratio there could be higher assets additional investment a have of Do in there targeted assets? noted runoff, or It's You little runoff, expected. you a securities. than bit a

Luis Massiani

at maybe low XX%, XX%. the end.

David Bishop

I That's all have. it. got Okay,

Luis Massiani

[Indiscernible].

Jack Kopnisky

Yes. No.

Operator

And Matthew we'll move to Piper Breese next, with Jaffray.

Matthew Breese

in XXX get probability get high A honing end of would ability couple complete least by portfolio weight the commentary. one of And end of your actually you year? your How of follow-up acquisition a announce of to questions the -- margin or acquisition portfolio that the you on that, the kind would to at range. part

Jack Kopnisky

That's very funny.

So...

Luis Massiani

year. I been it's the XX%-plus very feel I'd -- no. by Announced the listen. there. again, -- end of say it's We've that, But patient with Matt.

are these X then that to end target years. the next feel puts types And that by the our of we've and we that weighted, to year. we I and credit about very X last so like plenty deals we're criteria. And there's that confident able that forth. doing when out is what very a there but to or done today it this to targets that announcing be re-underwrite where want buying we saw and meets opportunities confident don't happen there comes front this can execute would doesn't of confident right? -- force probability And and earlier to I in feel able did diligence I we -- as on can it opportunity right opportunities box a to in -- do don't would meaningful So do know have and year, one patience we we've we being for out early so feel done virtue put us risk it -- we can things, where we we that other happen that We of ago, same a things and hit much as then of just acquisitions transaction management some We tell confident a the are reserve announce and -- X if amount are year. and our the you just see and the But I being yes. can year there. very that we

Jack Kopnisky

Matt, M&A danger, The is the -- we want don't stuff happens sporadically.

As couple we've a it years, into to a problem. year getting danger That's highly several all models but your is for every put last the a of probable. done deals as bit you Luis said, the

We to trying we're things. go or far don't to So straightforward. on these honest not be -- and mislead too

were then "Well, say, danger... and and what And happen. expectations was folks plenty opportunities thought to but the Luis as happening They didn't and there want to going that's we're relative there's come -- -- there." said, you far out may a So out we So of there our underperform And back ahead not or higher to -- and we are stick the now knitting. don't of it we're to probability get work this there. too to just may going

Matthew Breese

gauge what deals. positive No, totally understand. around body best portfolio to trying as sense just potential I I'm language

Jack Kopnisky

why don't [indiscernible]. we That's video do calls

Matthew Breese

little It what characterize discussion. type M&A second of there's whether out kind well. to are And you candidates? you solely nonorganic more as openness in interest of longer term? extend just seems out-of-market like front that if opportunities a geographies The or on Could still bit could market, whole-bank

Jack Kopnisky

great a question. It's Yes.

that There tell Florida. I opportunities similar-size are fill-in. do really way. opportunities Florida, are There's create but And Florida be Luis least So any from though you see geography loves for along going may would Northeast. that there's opportunities Even not to it's of not to at lower that today, -- that reason right would a don't M&A you I, West opportunities be a to bank Northeast. There's I interesting. we're us smaller Coast types may -- the it's and or I'm so the do the Northeast. that -- we're -- be a now, standpoint, midsize, things.

So the Northeast. -- but would generally it be

Matthew Breese

give segments front to portfolio currently us rolling oars strongest? kind your could terms are pipeline Okay. you team I been many have And the recently? a of have pushing, you where hires an loan strong. sense the stands; What of the new for many then also how sounds wanted on get And of in the teams update then just how completed pipeline here?

Jack Kopnisky

Yes.

that done we've CRE. there. lots the are those the right and model get you out refine lender teams. really out are is still strongest of So and happens It's size feel like strongest finance. have different the It's you is sectors the pipelines teams and we've What It's XX We of the to Those of good. traditional in there, teams. public we are of places this finance. and pipelines C&I. kind teams, mix and added the focus What opportunity

some X a more that going more people now in added found mass. of get a certain last than the years, productive and So teams newer teams We couple critical the that hiring come have be year. to to because out necessarily to we've they more

we're that that those that in especially of There some looking are are to mentioned a of categories that that said, add some right niches at are fulsome teams in. interested in. kind in that people X there are continue All there I of opportunities want number to, to pretty lots now are that we we

So success also, consumer taking to expenses -- that, commercial. we part secret are we've expenses and do over the fundamentally And move basically is our those to to that. of in continue

guidance, because is we you we we we in commercial get favorable of and and produced And online. think over amount -- we that the would [indiscernible] segments there that of we we've and and the a time. that drive are that toward have allocate some returns niches in, that's expense capital amount the think that metrics that markets is the increasing we're the with very risk-adjusted not the centers, We constantly reset expense we're think So -- financial in and where comfortable why expense on of there a the consumer of number, that banking you in the kind certain we're mix spend have.

Matthew Breese

closed, I bit guidance, back incrementally segues you my pipeline those, XX if I of And at it's last have of higher. financial but square just offices, your expense which going think centers X trying into is are a that question, to be this to Right. that look

the juxtaposing physical in? higher this sure bank be And that other to so expense with and you into Is footprint -- areas beyond? kind XXXX make some efforts to dollars for say is outlook. going that slightly the heavily to invested put prepared are to are of what going commercial reduced But specifically

Luis Massiani

So might presentation/timing be I think issue, Matt. that, that just a

higher the that the year. OpEx we side before, is in driven mentioned we how this on slightly is timing saves. so think the -- those of -- the OpEx that we've this for level see isn't just that but are change I incrementally And I in more absolute think coming to of of provided this what number a more or I a of past as -- the realization that of

center as it's consolidations, real said, in just again that And to a -- choppy count in financial just it head the happens. bit messy As related we reduction get how estate. little always of involved is to

XXXX. see you outlook vocal past. a in from I materially would so million materially you're XXXX not to be different see of that's out for been million a think very to year that X -- said think foreseeable a number to the saying X we this don't that in And company we can we've $XXX going the window, We've at operate in type to going OpEx we relative what to OpEx and that see perspective $XXX things in shaking or an where

in outlook we've This that in absolute we're the to and outlook And investments savings that cost on various factors and -- how been that has that investments we're that initiatives, make side. hiring of has in level costs timing It commercial see systems of these the of commercial a we're process going the on back-office deploying the banking is some that incorporates automation able execute people making so teams. not and to technology of more shaking we but changed. out, where

long all is really changing. that's again, term not expense So inclusive. And the guide

of operate going OpEx to are somewhere longer We million to this at million $XXX $XXX between term. company

Operator

this like the or I closing time, Mr. And to Kopnisky that to over session. would additional for remarks. any will turn conclude the call question-and-answer back At Jack

Jack Kopnisky

you. questions, Thank for No, the your company. terrific just And discussion. following appreciate thanks

Operator

that today's call. And you participation. We will thank conclude for your

Sterling Bancorp (STL) 26 Jul 192019 Q2 Earnings call transcript