STL - Earnings call transcript Q3 2020

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Operator

Good day and welcome to the Sterling Bancorp Q3 2020 Earnings 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 of Sterling Bancorp. Please go ahead, sir.

Jack Kopnisky

and our everyone, call. quarter morning, good welcome third to XXXX Hey,

Emlen our me our Investor our Rob and Massiani, is Relations Chief who President Officer Joining person. Luis and group Bank of today – Relations Investor group and one CFO; Credit Harmon, our runs Rowe,

we quarter, of the an a of our model very and – we’ve ramping challenging of we demonstrated A the we up the couple invest made reserves credit third in technology always we a and our We in So, investment we levels improving strong on in on where in for progress continue difficult for had are lot We’ve our to capital our growth. increasing. information a There the the about company. to of that make points quarter; provide strong third lot PPNR. robust core think slides. release of quarter, great on keep strong accreted future space levels time. there’s We really built and environment a ton a press spent capital

the This proposition sector. then investors concentrate I’m value represent and So, X bank for them to open enable does to an that value questions. into as it as really Page the we’re investment proposition trying up tell our going on to to us consider

So, side. on start let’s the hand left

is of quarter-over-quarter. income exclusive For million up quarter-over-quarter. the Revenue quarter, of PPNR up accretion X% is X% $XXX.X

the interest is basis basis which can see, X quarter. margin core we’ve than at higher you stabilized XXX net As the points points, prior

right amount right time we’re returns. loan and assets yields there mix trying the and achieving spending stabilize to to the – were beginning the the or the that’s right are stabilizing in risk-adjusted securities, of get where of most We

points XX in made Deposit think have have lowering points and to have basis decreased to down we Overall, significant to funds points. XX progress cost we costs basis that. come go of have XX XX on basis basis funds. cost of by still points We more

drive to range through working the range. beyond of the basis XXX funding points still the our to and next view in techniques. points quarter down XXX of for cost basis variety We’re a We

can we margin think of range. we that hold type So,

we being driver little performance leverage We growing strong a operating quarter, forward, of our a income growth Our Fee down a and over quarter annualized volumes Deposits on of basis audibly positive of we of expectation an the loan basis almost the buildup loan sale in. was growth municipalities. paid run for in-line continued up was pre-COVID quarter-over-quarter basis. volumes even we continue the generally core loan year-over-year, quarter, million the Average was X.X%, NPLs down purposes tax than but for good levels expectations, We commercial get Also, an deposits $XXX muni strong. period. that. that to demonstrate in were ticket as average severance million year-over-year than an considers the and in on back created quarter we’re average a out okay, XX%. on a XX% X.X%. for be have they fees that’s a back not hitting growth remember transportation with annualized cost annualized sort And PPNR. think we the was to during On were of exception with a that quarter-over-quarter were result even assets. more to low Expenses were up fees, linked little to this $X going small transportation resi able a and basis, coming were as that of with more the do to

XX% than PPNR a on little less points ratio XX%. basis was XXX were efficiency ROATAs ROTCEs a and Our the basis. are

So, we’re in making environment. progress challenging this good

capital. of bank was TCE/TA at Secondly, capital at add level the is the highest XX% capital bank we XX.X%. Total Tier level and the in level continue X level actually, company. was capital of leverage of was to the the This through XXX risk-based a maintain earnings. history robust basis points. we to

continue You book payout value adding our excess in tangible X% most dividend what accretion are in meaningfully is, to XXXX, book through probably to importantly expect be earnings we in and value. tangible see we capital pretty And accrete of we to

things the strong been credit on Third, In in have seen most many of team been of and our metrics. – through and many first strong reserves built have increasing in we the have past, improvements know on which capital, we’ve levels we our period, to we experience that downturns leadership during us have the done. and is focused maintain of to three economic that have we do

resolve small saw that early this to loan credit to Secondly, long quarter. to good you decided address we is thing do building issues as one the is resi in example in a And in ticket the NPLs strong NPLs, and reserves third us because and time it of would be these loss transportation. sell

for for the quarter. So, allowance credit losses the was XXX%

is reserves very, through We and tell have of us, reserves. it time than we strong the the year very expect believe that that very, think the right that has to higher actually range. We the that a end level but models to kind this maintain of of would

in on based receivable or and equipment accounts that one by keep lend our estate by business we secured are We real and – are a assets. collateral-based inventory others also two We loans ways, emphasizing lender.

a to our book, So, on about the it, which of the CRE portfolio. half side loan value for about is XX% of there’s

loan a receivable, value; side of that its C&I on other it’s loan to or the other thing, multifamily CRE, secured this XX% XX% the equipment. the XX% is on with the value. to portfolio, side, And closer accounts little in inventory of whole cut to half Just

is our go relatively So, default But our have given that cycle. we we low. loss – view is this as will challenges through the

with these are the that we the levels can well-collateralized So, we losses and most in knowledge cases. loans of control vast majority along believe, reserve the the way within

and expected. sales slight the slightly points or resi what transportation. basis Without $XX been transportation that is NPLs the and – XX% to million X%. obviously, is outside You’ve flow that down primary were quarter, We’ve of credit that NPL the X% ticket we’ve have has quarter-over-quarter seen driver down with rate rest relatively the had the about that’s XX crit/class categories. increase than have also improved of more X%. million and $XX the a we Delinquencies driven the in down of are small in to sale trends a from The NPLs stable. charge-offs third little deferral improved.

twosies we for over we’re losses through to of point that in again, see within future, the that. So see we but our what in to levels, be losses, again, potential ability to we effective system good onesies is that fourth model and reserved confident future. continue the control we view believe a control come we’ll the our have the into

to our the adjust we’re – So, that changing deal to environment in clients the we changing with client and model continue needs.

we to things of maybe, model. consumer all our add to first, and commercial if focused target So, about – we model all continue built think people, contemporary on and you to wanted we think be And value to components high-value we we tried clients. have we can be are that, a very segments, we areas, not this where four we to

branch Secondly, this is model. a light

the treasury meaningfully and teams. that have resources physical our distribution we reduced and with So, replaced online and

And technology consumer Third, it’s the side. on value the relationship-oriented commercial model, future. that moved of deliberately a the both point for in this sense platform advisors and is good we’ve to very contact then a the single a that create provide finally,

We’re able the – be making digitize and company automation a manual to clients, out and also several drive of spend, automation to our the over comprehensive the investments within it XX% years, the colleagues. be in about in take company, significant to increase the to technology into offerings our to all platform, all next functions will

So, technology things, those clients we time they high-tech this want want and don’t balance this right with that is the are both of a the side, just just they relationship We – to approach side, believe investments kind and want things. want make very both want approach. don’t relationship we they of of those to these the

that asset classes. in is our point diversity Second have significant we

can the you use. classes asset on see we different page So, X,

around last stabilize several very the find around risk-adjusted at that years to where to good – returns, in loan moving capital time, effective yields. again, we the through to return, create moved period capital and We’re try the yield of adjusted we’ve – so risk this

our we that diversity is point do in reach. geographic have Third

So, for the outside. quarter, York New XX% Metro, came XX% originations from of all from originations came the third

So around right the again, risk-adjusted capital move find tried we to returns there. out to

have commercial and make the to as business. years do diversity, and is lender, and of XX%. consumer final have non-public choose, CAGR accreted terrific opportunity a pick of market then on York and forward. over loans amounts And point side. middle the we we’ve the we go we where a value to New is had both on of as past models, Metropolitan plenty total the there’s opportunities the basis and our book primarily our So, the companies we there’s public five on as tons by significant place a

evolve sure for to per the We we versus and performer trends, PPNR, model that the continue this frankly, peers, we levels, core improving going growth, future. efficiency believe for we on its have forward. have point model the our credit traditionally strong equity, return the on And strong return make is top capital to the robust earnings EPS assets, core built to allowance – contemporary very that be been losses, or that credit and to a top our given and whether continue last revenue levels, FTE

immediately. share resume going We’re buyback to our program

ratios. targeting XX% total near-term We’re payout

– capital. we’re far where at of our metric best this a plenty by the from with have traded. comfortable stock We think has is where is standpoint. return We we’re given,

confident outlook this would you’ll in to about is essentially, that confident on over resuming XX resuming do page XXXX we’re grant shares we’re but find more that XX, buybacks, for So, rest that million the our we’re we feel we fourth board The and in last of more that. authorized opportunities, a the of have point us quarter. and the immediately see little

opportunities. back $XXX confident so, are third kind interestingly We’re in the the the starting terms pretty loan pipelines they pipelines million to second levels of growth of again. $XXX the pre-COVID of to pipelines – growth end at net picking at ran to team, quarter, quarter back the significantly our get million. up in enough, loan are into down and

well lot So, there. ratio We’ll a the loan there to deposit XX%. below are of keep opportunities out

mentioned to repurchases operating range, XXX XXX, expenses margin, we it fee before, the I As range, the be XXX net in share continue million to And expect effective in now I XXX to said, a the the income range. as would and core rate. interest have then, in Capital do we Management million tax $XXX low opportunity loss to starting the $XXX is to

remiss open they’ve months questions, from a their I hard difficult the is I’d tails thank Before They the last coming for offices. home, colleagues our off; up have fantastic. this and greatly in worked if everybody. didn’t back into time been I be six some over really, this have really working and been cases

done. So, have you colleagues really all appreciate great clients. our all the great to of that our things Thank

most most to part, clients goes models how on. adjust have figured it’s the as For out the of interesting, time their

time more entice that put that been board, point everything stuck bring work support worked really investors. have We fluid this, We’ve to our us kind with enabled is done, and company the questions we And the to really going with along us – to model with our the effort They’ve gone a appreciate in terrific tough through most they of traditionally our the the investors it’s been forward. board money keep money, needs into we’ve and been the are they’ve hope have as in, interaction has ideas had and meeting the were really supportive speed often way. And relationship companies our communities the twice final been there lot we’ve and with great like on investors board the new that us that’s going great communities important and members. through probably times. the support And spend as them and strong up to clients and to volunteers as have we community. to hard to terrifically So, on. to finally, great then of have

more So, resources beyond we’ve communities gone and provide above part that are to the of. corner the in back we

for appreciate interest the and So, let’s in it your company open questions. up

Operator

go Casey Jefferies. Thank ahead. please you, first We will take from sir. [Operator now our question Instructions] from Haire

Casey Haire

morning, Good Thanks. guys.

Jack Kopnisky

Casey. morning, Good

Casey Haire

Obviously, you through back that was buyback. take arrived I and discussion, us you payout that go ratio, over how you on are was to up Can higher guys time? want change, XX% might you how guys first that one regulator start it picked you switch to at or the that just something and a might the on. that

Jack Kopnisky

the maintaining sure sheet making target, on picked picked Casey, and over to unfold. with capital and balance the of see kind have number we happens growth that we that a change still near-term XXXX that’s whatever based as we flexibility, perspective, time that a that we and target capital from will management to support

is kind deem of think that So, continues see want take best of growth with of to be buying sense, will stock lot the makes attractive think – the stock level. the and and it’s don’t it over essentially substantial – self-selected at we greater target advantage we to a provides adjust opportunities when price we a at that we that we to it us to time we way characterize flexibility a

over going that’s So, quarters. couple self-selected and it’s to we’re for but the what of targeting time, adjust next

Jack Kopnisky

I did review with I’d to Fed we that, and OCC. And the the this think add

we’re that what they doing. are So, understanding

Casey Haire

quarter just switching to X.XX% this sounds fourth with Jack, guys like you here. Great. Then even beyond X.XX% to NIM, comfortable are range Understood. the the

You’ve on but run the of and there it room is – come like more done should But the fourth eventually, funding a great here. side that in out. quarter sounds job to things

lower over the environment. So the have and sheet, into you – a assets what then balance rolling rate

X.XX%, to keep NIM running quarter? X.XX% beyond So, in the next – the between fourth the confidence the what’s underlying

Jack Kopnisky

I the is way would Yes. characterize near-term. this

confident and in loan and then unfolds. that yields. we’re that of and the So, see we’ll lot security of mix think beginning I into going part XXXX, how loan A beyond yields unknowns

the or side. first up we gone where lending tick of in quarter But couple near-term, started XXXX. a the to a So, up of that’s actually rates have seen quarter categories. really have on categories, a They’ve some fourth

see we’ll where Beyond that, we up. end

Casey Haire

Okay.

to on another of bps asset that you’re XX yields, of, money loans will NIM more fair funding – the cost funds new whatever sort the of fourth yields way And the so Is to and much going a get cost are track characterization? the quarter. So, not in then the beyond securities.

Jack Kopnisky

Yes.

I think there’s room.

lower cost one caveat with basis that room year funds that there, in well. there I next So, Casey, XX of think as point is on move that

funds of done on from cost kind of strategies still. doing a a So, perspective, the of from perspective not deposit a and various the borrowings total fundings we’re chunk pricing still in wholesale perspective tax some substantial

Certainly, in there growth dictated room. to earning on selective asset is do. pressures. is the But and where there So, going yields funding as year, driven to as very not much going and are side by be the earning asset much be what we’re potential we room next there’s is

better of various the think can profile in in book that find than securities returns risk-adjusted decreasing asset We’re classes. well. are commercial going we asset portion securities and a total duration to shorter draw book to We investing down earning as our mix finance represent the that going our that’s with

to And so moving see the and continue make balance that blocking and the sheet we and us highest kind possible sustain around you’re going NIM. of to sure tackling,

about you So, that is rate I you low were absolutely could it maintain good point, can say, static static to portfolio and bringing think a would think that you this? a you’re have up flat type sustain longer-term to I If rate a very we the rate perspective, risk environment, portfolio get continue and includes environment; to not, that which the profile. going resources and to asset NIM find But capital returns places, risk-adjusted get allocate where credit paid we’re allocate do. this paid and manage classes, and best it various both we risk to to to interest is We the profile. what from and

being do price our side So earning that, all – to year, profile that’s aggressively pathway and to that of you of to the is earn very the able deposits. we the modifying will house there to NIM asset type keep to definitely, – continuing by have next but that keep know down

yet. We’re and not on borrowings deposits wholesale down

Casey Haire

okay. Understood,

The But sound obviously, we’re should the forward. provision and same, outlook, special confident about you a ACL we And all from know with the Just and on the provision assuming the outlook levels last me. today data guys I outlook. the how stays X.XX% a dependent one forecast mention up-ticked think going very little.

Just a near-term. provision little color the on

Luis Massiani

Yes.

first to and broken So, the the we’ve bit and having to to sell the think type proactively call, to uptick mention where special these migrate kind “Oh I’m everybody you this, mention, increased.” quarter of little continue that in beginning record special an loans have it’s quarter of saw dynamic, been manage classifications mention actively special of like, those through and same the deja addressing, we where the loans we’ve had loans modifying aggressively because they Again, – loans God, going call, was putting credit deferral, going perspective. on from – should gone and migrating through we’re loans credits stopped first never I we’re and classification vu modification been what very so in and be – from to of said us a through their my has – a

deferral seeing those so wait what and run and decided based of deferral continue get ahead some the we’ve has we and of – – periods them in component on what migrate mention So, again, of of position that not seeing to borrowers uptick special to loans and today, – and loans those to forth loan where the are we’re is to this, on we special for continue out.

provisions uptick greater deferrals in run and So, having this the a special perspective of mention from to ahead get out. a not of Act once substantially CARES loans we’re of then trying kind of

for were modifications of if regular scenes. the continuing way part, as to the manage basis not we’re So, the most essentially happening behind credit classifications

Second represented that get you out is, we’re if qualitative adjustments take that are GAAP that a still with at purposes. factor X.XX%, for X.XX% very that amount essentially we allowance have today we loans, substantial X.XX%, by of Again, the we PPP allowance ratio. the that thing comfortable X.X% have to instead and the it our making we’re for about of

that the like We – to that charge-off in annualize in million to charge-off levels to this It’s to foreseeable at to where portfolio we’ll of – going the for we’re stay likely about similar types of if the charge-offs. those we’re is. perspective. anticipate for the $XX continue So, into rate sales, $XX you And had continue it replenish future going we to future. from that excluding quarter, going ratio we that that comped had million and you have types foreseeable allowance our

losses to than higher thing be as – that but which quarters, for provision continue in be quarter So, in It’s is fourth had that to the quarters, three had last seeing quarter-over-quarter. the we same in loan levels will the continue We that well. couple we’ve next over it anticipate the think of should the it lower. pre-pandemic decreased

Casey Haire

Great, you. thank

Jack Kopnisky

you. Thank

Operator

our now will Piper ahead. from Please Sandler. Twerdahl Alex from We next go take question

Alex Twerdahl

morning, guys. good Hey,

Jack Kopnisky

morning, Alex. Good

Alex Twerdahl

if in in. or kind just themselves first a underwriting ability ratios, a make wait-and-see seems things controversial Hey, in me geography, somewhat looking and of lot done as environment, approach not whether take bit geography underwriting can of you right of from you you on and off, out? what like little of loans tread the feel bit really a is I and become the was and some to a York outside terms wondering, values, that us of an service and work on property now a Maybe, of New coverage kind like you it people an things of seeing little forward ground update had or debt can has give where that what to you’re to still City they’ve

Jack Kopnisky

Yes, interesting. Yes. it’s

City. everybody So, depth writes New about the York of

Metropolitan a there great opportunity. place massive is diversity First, New York is and City in

people. York. there New in XXX,XXX small are Metropolitan about think XX it, you is business or There if – million So, businesses

is Metropolitan I and City, I think area more $XXX,XXX that public in companies. – the about in there’s XXX than there the have XXX,XXX revenue businesses there think in

if York, Metropolitan you of took So the through – in diverse. industries I and types it’s extremely New

not lots there. it’s walking us geeks bunch There So, diversity are just out of a around. like around of finance

one, So player. case, relatively and small our in we’re

Metropolitan We’re still the market York. X% in share about New of

credit kind So, someone for pick can of after. and what go we us, like we of choose types

So, see of opportunity. lot we a

on and kind building seeing choosing many deals picking we are many, then teams of of deals Our do. to and what want many, types

very, So, very have values Absolutely. high come down? Yes. values previously? Were

a Kopnisky – personally I So, this Jack a comment, comment. Sterling not is

there and long time. My York and prices industries different think the reset they areas pandemic for one on have now This period prices a view be would but New especially, I a in. – of different depending this, come high is you’ve type City no varying at they estate, amounts down go it cause down have what thought that by real been of would that – times. have really cycles, for prices come through and been

models of way said have deal adjust the out this to in that I So, figured their most companies we with process. a

this there you having comfort. York. Metropolitan constantly we you this it in very loan-to-values, gives low into with When So, of go plenty view is as, good a New opportunity

values go lot in a to What of make – also there money finding XX%, have still a we’re amount New that Metropolitan come of York. an have room of say is is if at it. is loan-to-value you incredible lot to sense XX%; your down of So, by out you

with lots come of cash real that balances where So, have we’ve look have to down come value. had people couple us to wanting a at instances, of estate in

cash that for cash hotel properties the performers always portfolio a is being for something transformed there portfolios, up may example, line. about work hotel in. to side else, the of our be buying in at – plenty continuing the were view going out. My those is quarter they is end, may even to of being up that on So, not end the there but hotel hotels to They sitting they’re areas end

There’s very come So, have Prices down. values many in this diverse market. – opportunities. a general, is

opportunities people buy with lots come to and cash to values. down, As find of in discounted there come at are prices

feel in the that amounts a a and As we the confident we against values lender, again, values. have that the being lender, loan have collateral-based pretty we

So, may is boutique use were But example. I or not go rates. usually example; a transition. place, $X. into may through pass going pastries bit I pastry a They’ve be a French place this that good about like lowered when the New York of their it a you the

You out The lot pay that French for – a went out know a of could business people shop $X went the little pastry. of business.

Somebody is going lower; with new The rent to afford have people the $X that be maybe, little in to will come well in will pastry, the do pastry able will future. and a or more a that. $X business a bit be

happening to that’s in that’s you was know, of New wanted areas in probably happening than think metropolitan Alex, view and York. York. New It especially I more but many my

Alex Twerdahl

No.

of that and on kind it’s it? Was of reinstating what before here’s process I OCC Anyway, get that so, – we them just that the feedback give future just it every a the and call March, to “Hey, next it to the foreseeable and said see sort want you extremely back end. and go to did the read commentary for end, city buyback. going it was to and question. to up I know I actually saying, sort commentary it opine like? they’re on is what’s until or giving the think buyback lot because happening on give we’re you all know. it’s it’s heads-up the was quarter a helpful of to to kind have doing.” actually on a it of a you some Fed challenge you Did in the just Was they there headlines record, is before what now And of that

Luis Massiani

best more to latter. former the guess I way of it Alex, the than characterize that is the it, was

intentions unless now been notified. how the have that but strategy have way buybacks be regulators the So management it’s regulators And there’s reinstatement quarter fourth with all need no – just the – the at there to no, tied envision strategy not this buyback, to capital quarters, to our course of reviewed management material quarter, of capital related. in those don’t next and every of essentially that over as we and regular we we regulators change conversations, address conversations regulatory point the part things is to then our the And the a unfolding have again, and going we with point. we for regular –

to we all talk Now, the the regulators time.

I can’t had conversations like that this to every quarter, have we This So, regular the we – dynamic. with it’s conversation not particular way every just of on regulators tied month. part was specific

Alex Twerdahl

helpful. just That’s it. then Got question. And final a

Just from did actually a can quarter? sale flow that fourth October, modeling P&L standpoint, the the is during how PPP that the you through in

Luis Massiani

or so, get it if entered we’ve agreement, in next So, it first We the but we’ve so, – to going completed the into, it of week slips, it November. have week entered we an not call the will yet. the sale we’re slip done think that

there recorded. C&I So, loans, that’s an $X in PPP net on that that our of we to there where impact yield is $X.X is associating which to connected completing. the no don’t of be loans loans And is are about see million is that is Net-net million the any risk sale – fee to are sold. not being going the increase

some those that loans, that has that fee And SBA cost the originating so of from it so million. netted and we received out so and of the $X origination forth has gross

Alex Twerdahl

after do Okay. first that for PPP tranche? or And for anymore sales you will loan it this is

Luis Massiani

now. sales loan for for it that’s No.

it. million that the we’re loans amount of $XXX are the are going that selling are to it’s loans we with So, processing between, balance and obviously there that there associated has we of the loans, selling with smaller are balance so loans – require a substantial smaller a under – so difference is of kind units requirements. is, forgiveness, is to the difference no The documentation slight smaller loans real relative $XX,XXX, loan

better we components we’ve we isolated service portfolio operational that that decided and result of to to there’s most out that than loans be kind was to are that potentially the able going folks those positioned of of the in are So, amount are. complexity, PPP the we thought there,

rest focus a and going books be with going to stay of of see on is be because not kind to disappearing going we’re portfolio to So, us, amount the decreasing should we’re should will anticipate that the that or we loan substantial settle. on processes our loans there those forgiveness kind of – of

in well. of should quarter the the of those loans part forgiven first of by the envision as be portfolio or the we next and should the rest off quarter, Some PPP start most getting books year the fourth

Alex Twerdahl

questions. taking Thanks my Great. for

Jack Kopnisky

give New you one York point City. more Alex. Hey, I’ll on

One other thing missed Metropolitan that of the it is this on numbers is area.

Westchester into Island, go it’s to not is Boroughs, where that Connecticut; and it’s Midtown back to the in XX% but tourist offices, all like now flows Jersey, people you driven. actually everything about is way traffic. all back The talk most If would normal and to essence, of New and basically in we’re right probably area the XX% the normal, Downtown,

it’s rest So, back where New the about pretty York active The activity, come normal those areas, or metropolitan of strong. probably are less back activity. less really the seems of less there – like is come XX% and and

Luis Massiani

Manhattan. activity from amount exposure of of but have dedicated activity meaningful or company perspective. a Yes. for don’t it’s on a some, that’s lot Island We And all to destination do Alex, we tourism not that portfolio have our at the the

Alex Twerdahl

you. Thank Perfect.

Operator

Keith ahead. Davidson. We now D.A. go take from from question our Please next Christopher will

Christopher Keith

question. for Thanks guys. my Hey, taking

Jack Kopnisky

Good morning.

Christopher Keith

a the loan over wondering us you’re sense which mix. those buckets? the in of pipeline you asset And in and categories growth maybe, managing quarters tell if to the magnitude guys So, next can was talked strength the seeing I you about just some few and

Jack Kopnisky

Yes.

to feel the the medical especially things C&I. thing. distribution and real are in the There risk technology warehouse, side is lending both of finance in that some opportunity So, area. finance are sectors and opportunity this return commercial in grow like estate, the opportunity doing. of we’re traditional we adjusted some of There leverage areas the is that innovative area, in There confident

to types yields, lower be and it’s So, tend better those of areas along frankly, risk returns, there. higher that overall

growth of low-double being are digit, in those returns risk-adjusted pretty types view as rates. the probably and those So, we areas opportunities high-single strong digit

Christopher Keith

a loan yet? it. you And do the growth then Got sense for XXXX have total

Jack Kopnisky

not. do We

work right through We’re be. and working that numbers should we’re now, those what to going through

So, for now. we’re our finalizing XXXX plans

I a a get prepared the as trying we’re – is kind in all and to strong too sideline, as We would beyond. XXXX – for XXXX just have tell things of you to a do

whether we’re good growth the XXXX. – trying we’ve what it’s loss into out – like with in provisions But of category. – sure loan things on and loan to that, we the done So, or the reserves and the not we come have momentum some margins that this or articulated going make

Christopher Keith

Got it.

Thank that reprice CRE helpful. for the that’s the the at? And quarters? tell few amount can to have loans us a are you you you. just where on And set side, are Okay, margin then next sense on coming do over

Jack Kopnisky

flows coming it’s are it of type on loans along coming category. We are don’t go path, interesting, the the from and – of category depending deals ahead. the coming depends anywhere X.XX. on Yes, type cash out – that There on of on in X.XX They this. are the to

Luis Massiani

Yes, the a portfolio. third it’s about of

out next XX of the that event of is the a the of months. months next XX So, over months portfolio a reprices sort the XX had third pricing there or over loans, billion months to of to about that $XX XX some

the that, biggest with is going activity. to what Chris, question prepay on be happens Now, mark

on on loans, York New improve but to at much that prepays means negatives is, and levels. is the still is be shape time incremental stronger accelerate, We have same that relative there probably multifamily going and – area of and some what line it there with the in pretty kind That’s pace. a activity positives I faster – better quite to started prepay credit CRE how manageable and rebound of that rate today. pre-pandemic the If – of continues a kind to means economic but at activity to see and guess is – is City it than gets some in

So, I we take would rate. think that that’s a that trade-off

we that means locally, very requirements. should offsetting kind kind of of So, there better conditions for start see likely that some you – prepay faster means is macroeconomic better backdrop borrowers, which seeing provisioning activity,

asset So, faster would asset in kind and earning earning in negatives seeing and CRE pressure. and result but positives some and yield of the prepay yes, that, incremental puts takes the activity in

So it’s book. third about a the of

Christopher Keith

much. Yes, that’s you so Thank perfect.

Operator

ahead. our take next now question will from go Moss We Steve from Securities. B. Please Riley

Steve Moss

Good Morning.

Luis Massiani

Morning. Good

Steve Moss

here. think pay-out kind Just that talk the Just guys that? or do When about curious you you following is recent guys on earnings, a of the about how near-term earnings, quarter you interesting, maybe buyback on thinking month on up a it’s near-term most about basis? it are six

Luis Massiani

annual be to going It’s an metric.

where at take to we are. going look we’re a So,

where hard to we I saying multiply rolling of said as per-quarter so going well. quarters that’s this quarters you don’t we’re because want fast – mathematical and a on look are of kind And the an approximate time that that not from basis. and means why perspective to last the pay can we rule firm four a it four what it’s that’s this What So, there XX%, at of is has out. calculation

we’re it, people return essentially support trades we type long So, that where us longer-term that to recover, and a get allows capital return and as also opportunities we allows near-term earning which What us stated sheet, to the at of that to to I on impression. how today. about shareholders retain of thinking continue capital of that before the whatever perspective, anticipate – to balance price want capital stock and meaningful from to is, strategy that we what growth amount kind is, continues to see happens

how about there’s calculated. to don’t come think if quarters that want over – a impression thinking anticipate this is it’s specific that what pretty you a the the would how rolling with to – saying you to means about I again return four following of we’re So mathematical were away quarters from strategy you approach it. capital then But to four close get and

Jack Kopnisky

turn on this one we wouldn’t Frankly, to thing. Yes. be a if just is this quarter going

Luis Massiani

Correct.

Jack Kopnisky

clear, XXXX, this longer a is thing some believe this of this the we for period that happens be is, right to that – unless do dramatic to we think just is there’s in well event So time.

Steve Moss

Okay, that’s hotel helpful. concern. book And then Jack, you mentioned about a the quarter a is of

resolutions of your is to what with to kind and approach as Just those workouts borrowers? curious potential

Jack Kopnisky

through we’re that – in our hotels. that a all we’re that. but very comfortable – number how it, we think be about – it, adjust longer-term out worth we of to if exposure, category, with The we’re Yes, of have of out quarters comfortable about are look good model clients. in with we $XXX three working it will quarter million figuring – They and very, change loan people you those that have their hotel a pretty at values with work of so it those to

things. So, things you sometimes sometimes those what sometimes of is do in buyer. you collateral, you those you restructure, all types another take find the It’s

we did how here, One the money job They’re of the well banks in And they’re that is frankly we that very area. a workout and in of other really of they some the the get our very some we’re terrific deal from credits. happy this these with larger and brought to prior sophisticated things in back they’ll challenged good of out facilitating do workouts things. folks

Luis Massiani

very that third $XXX it’s that’s or highlighting did through the get screen. more million, why of do that What and million, that. and annualized one much of those quarter perspective, credit, at that all on the in we And is, DSCR in have do four pandemic we’re timeline $XXX have we properties only newspapers. I But we’re an it times, the that add than said, on look from in our worth and expect individual of but our would names. capacity we the easily radar is the would as The net in about hotel we a five that’s read it in both liquidity, cases really kind not sponsors would focused Jack have thing they that significant half

Steve Moss

I that. very Thank you much. Okay. appreciate

Jack Kopnisky

you. Thank Yes.

Operator

Please from now from next question Gilbert We KBW. go will our Collyn ahead. take

Collyn Gilbert

morning, Thanks. guys. Good

Jack Kopnisky

morning. Good

Collyn Gilbert

I start of see hold migrate levels XXXX tax for rate, does do levels you Do to in an and terms higher or what of really gave to you it that will come obviously easy that guidance income Luis be provisioning starting down? first. you as the question with – XXXX. into you expect But

Luis Massiani

migrate will higher. It

were will the migrate higher closer it to prior we pandemic. So where to

be low of – total to than that proportion So amounts we relative rate XX% put a the tax higher earning quarter. is – increase, sort tax it of should have that continue as high overall pre-pandemic but kind to at kind the But is we which down to XX.X% to assets let this – to that’s levels, to is we assets proportionate assets it going it to have continuing be our XX%. tax recorded efficient efficient teens that move of of of that going

move up conservative XX.X% the to be it, that purposes, to side. to for modeling on call so I So, or back XX%

Collyn Gilbert

imply to Okay, loan curious quarter. allow for Obviously Can bit then be the nice that’s what’s you that year? growth now to seeing guess driving a going fourth you’re And fourth the okay, going are I good coming maintaining your guys in, what just growth just of expecting I talk growth little to growth just about quarter. loan that are mean, and helpful. which on in that’s to you kind you in see outlook. the Is as you guide, that would loan some the –

Jack Kopnisky

Yes.

I So that it’s mentioned. actually the same categories

finance things traditional pre-pandemic I but and of failed there question, are things, closer like things the the finance it’s seeing public innovation, estate finance, of some areas, out getting lender add types C&I, and So to starting build real last lender they’re to guess pipelines I levels. all to in like those

we those be to to types So, able confident make. of feel as find build, the that right pretty credits we’ll

Collyn Gilbert

Okay.

on helpful. then that’s OpEx the Okay, And just side.

savings some the be you’ve reductions initiatives you yet will there going you cut guys have? point, – savings FTEs or and OpEx tech that are from seen flat. to indicated guide But be held during reinvested of in So have those the digital quarter. some at those Do just we the guys some

Jack Kopnisky

Reinvested.

for the have the followed is So time so to trying which today now, similar we quite strategy – efficient. we some than that to of that which we level more run At OpEx OpEx. have cut darn at company we’re pretty continue we

dollars those And reinvest do. strategy where places of scalable company to of into where places redesign kind kind be so, and growth the opportunities, to models our we continues see don’t staffing in we across

going why a it’s to guide. that is So – it’s flat

going to the to are to This We quarter next. of replacing happen that going OpEx. immediately not from some one be is

profitable term, that of level there company it OpEx $XXX where million at can think able be to but best relatively quarter the we So grow we we next running in where call range by where $XXX places decrease what way. million longer happens in the might of more a a we to into more efficient, OpEx will scalable, one be get reinvesting is more that dollars we that buck – those the think to that, bang for for

Collyn Gilbert

color quarter. maybe anticipating that to range. understand one-offs – lastly, charge-offs. expecting on That’s outlook this net talked we last the about you are I in helpful. just quarter Jack, then that this you’re Luis, gave of and not if more think more the be you’re kind did Just there’s think is Is to charge-off of you... And for way more you of And net to hold I Okay. going in loan to any saying normalized much trying – what sale? kind

Luis Massiani

didn’t that. I say I say that. didn’t

Collyn Gilbert

All Okay. right.

my So is… question

Luis Massiani

a a question, question. Yes, that’s – it’s great it’s a good good was

like record. a broken that, I hate again, think I sound to

focus strategy much since stream we there is the on mean can anything kind earning been that perspective of of and of will side our of to that kind we started related this for the of to to of – to we credit as stuff really on growth that charge-offs mortgage commercial business we other other how of a from see we day the early that, Similar and we to the to quarter. strategy think identified in our that as will continue as one advantage have want aren’t to as take of by cycle popping is the lines have opportunities business assets end kind rid we or rid components for the as has non-core to If up absolutely can this we I get like what, year. us, over don’t loan and the other that opportunities – we from that provision of – this, get enter credit assets I or this possibly residential losses on. focus opportunities the particularly quickly cleanse

a to So seeing to aggressively in this we’re are saw stable and kind places in you we’re anticipate similar With the said, classes going of credit. us continued asset continue core to We that charge-off that in what quarter. to growing. manage rate, where

sales, progressive we classes So, quarters. close – to we C&I that opportunity but should where that our a on say churn, places the might the asset couple of commercial kind core non-core specific what I grow, last assets it’s of charge-offs and would and going be to side, to core of don’t approach of essentially kind programmatic CRE we we some credits be we’ve don’t for relatively do to see we think seen the execute the components those where are business of a regular good for what way

Collyn Gilbert

Okay.

on about the right. you if then that think reserve, So

reserve So you allowed that the already assigned reserve lower. has quarter, bleed there some the those charge-off were which took to to this that guys

because Can reserve trying key. trying that give Just Just and part provisioning net little obviously the we charge-offs, qualitative. know model is numbers is mean higher that tighter you around of X.XX% about going see I going bit think X.XX%, that’s said sorry, and to be a to I’m any you if elevated that? – to the to what– what to

Luis Massiani

ACL loans migrate a see provision – so towards to you down that start You’ll would seeing over time, to X.X%. X.X% total

integrate going – of of rid X.X% a have again, get charge-offs of higher level kind to these perspective from as the of of a you a the a stable can that there decrease the on factors. regular simply, kind CECL We to loss of and of what loan we composed of kind content, chunk you think we forecast see fair you where there and those provide if see call that those, would portfolio – be time. over from way modeling see today that are. given amount X.XX% kind of over substantial to of going those maintain detail And are steady that, again, that, a components – and allowance dictated, is of by inline assumption, macroeconomic that’s is again, portfolio time so types you relatively Now as or qualitative components allowance today it of of is we some

that don’t managing similar know should quarter, So higher ball. proactively it’s out is of content run rate, just – what have day, every in don’t loans which of crystal month. books. where are to I you think, appears a core we charge-off classes content going every magic saw to how core to representative of loss there is in the is you we what continue this the some kind exactly charge-offs again, not We But – asset businesses originate and that be

Rob Rowe

Luis we Collyn, magic said, So as crystal have don’t ball. a

about we’ve It know elements that hard, pandemic through So the to driven. it’s this impacts what’s right. different, right, certain not all is ever service economy environment as of it’s and been it’s model that we and this before,

this very which to So that’s you situation, why it I figure know, makes it difficult out. trying it in know

Luis Massiani

time. But our X.XX% reserve migrate slower over

Collyn Gilbert

Yes.

super Okay. That’s helpful.

I had. Thank guys. all That’s great. Okay,

Jack Kopnisky

you. Thank

Luis Massiani

Thank you.

Operator

now Inc. We Please Breese Instructions] [Operator from will Stephens, our take go Matthew ahead. from next question

Matthew Breese

Hey, good morning.

Luis Massiani

Matt. morning, Good

Matthew Breese

question Just a Maybe there. Collyn’s line just different. little of following bit up on

charge-off Should that that’s potential selling warranted? consider asset So that if you achieve expect reserve it or there the like, that contains a disposition. is already we you of if case would is clearly you problem of helps it goal seems the think book the the the portions portion expedited

Luis Massiani

Yes.

Jack Kopnisky

Yes.

Matthew Breese

we Okay. one to step take if were And that further.

down deferrals to have $XXX-some-odd-million. you So,

out get like to now. reserve – of Do you see covers, loss had content of right you contains tomorrow, you on the that future get deferrals the you out the loans tomorrow? to all that of all you If reserve mentioned were try all the like portfolio feel to you it feel problem – if

Luis Massiani

that to those So, contemplate part one we that [indiscernible] is, loans of because of yes, as the but of you’re that one every laying rid short the we get don’t isn’t out hypothetical to answer want deferrals.

the to is to a getting that impaired a amount and confident some regular. pandemic path that are a deferral are very on that – back those temporarily clear substantial clear there are we So, that have have that of because of loans

to path sell would is try many company those be that because if loans, in and realize for clear and So, borrower we and be to that because back that I of debt content temporary think that of get some feet able time. guess there difficult loans, loss it’s I were be the a answer to to people impairment a those service on a question to would is it the there over that to able no

yes, short portfolio. the that current we, covers we – in answer is So reserve loss content see the

through components going that one temporary just need payment it going of and credits. support of book able of make those payment underlying Second as deferrals part substantial of not about if because this over question amount of that period are we time, of deferral some know we think are goes be to be that to on are that there are thinking kind of is, – to the that all – each don’t substantial this, bad about as, based that those circumstances

Matthew Breese

Okay.

Rob Rowe

what coming up, country you rate that York is say as brought It is you would on since area it Matt, has lagged down. of unemployment the I New coming down. now, the Metro know, rest

to levels. is transportation expect rate of you’ll is down in the because transportation do lot, the So the deferrals, – country and resi is see this that’s down. finance, would we we pre-pandemic that that’s because this significantly lagging to still even why a but very in back unemployment month production will decline goods on know Equipment actually coming coming continue

on – as highlights the that some just book well. So, just

Matthew Breese

in that quarter? deck to the I bps, measure five it’s should And a September to and the X.XX% the good widened previously. couldn’t that, the now Okay. then, was we What fourth the X.XX% X.XX% to that way quarter? you notice X.XX% help margin what but margin one into for is for by maybe fourth And read range from proxy

Luis Massiani

we and finished about in of call, we that. on have portfolio, cost near at to floating as X.XX% we borrowings before, alluded yet that going to rate amount substantial at XX% the loan the of than of as the that talked do managing our the higher quite maintain NIM deposits repriced So, with to have of what we cost Jack confident which we’re Again, think we fourth book earlier our about particularly point. wholesale quarter, stable this loans, ability term are is has down not to

rate our you And pressure we’re part to you’re the the it the – refinance in margin side book start repricing that just it’s of part because there. so getting now And into pay-downs, on not of seeing house. do, the incremental the activity of fixed do now longer takes of

think and of type kind other good we of term, of kind types of changing the earning decreasing and comes of find where stable asset – mix, rate us going fixed assets is and that the securities, the away to we so ability The to new opportunity think avenues – NIM lower tax trying it the longer-term before that’s discussion good we again, to opportunities asset near forth. classes, to It’s, what reallocation kind the a is of moving from there that’s for had maintain of see some – for kind longer-term efficient So to right. back tax of – – where that that that, origination assets, the rate, slightly to we NIMs be, challenge is is discussion where increasing.

is So, term. next to pressure dynamic But tougher year NIM. X.XX% is we to like and there that X.XX% where near range is the the always

Matthew Breese

Understood.

this repeatedly the of focused one And create me, operating last quite the then that like Jack, from company that you’ve operating real top bit feel How leverage. that XXXX? And a can you over think moved strengths generating leverage one you interest was years in one in quarter you environment? positive rate do is is the on this sustainable higher. make is that do line Okay. the point And

Jack Kopnisky

Yes.

toughest easy, the adjustments kind the this. out we good over frankly on. we’ve we’re It years along that’s not but of but part figuring focused So, by what that’s been way, of far, the pretty mixes the is and the about said, as

the to We’re expenses make and make company more driving this that you’re sure the we focused the to into on than in how platform And and contemporary. revenue more along able more technology investments be growth factored you way? – can is the

– So, working that’s we toward. are we’re

we our able operating So, leverage. be create will is to expectation positive that

to businesses. to make that sure as and We down nits gnats of And do you there’s frankly, to happens. get proactively always plenty have to that the manage opportunity

times isn’t to going way. you’re pretty action is be and going always to great and revenue where the opportunity with that where to and have along there expense as been there’s to times opportunity grow scenarios, So like you going both taking fund good other cut in to have the expenses. you’re of crazy, revenue those We’ve

to we that that think do future. opportunity So, the there is into

Matthew Breese

Thanks for That’s my taking I That’s great. all had. questions.

Jack Kopnisky

Thank you.

Operator

questions. for closing or to any appears turn like this additional At to to the There remarks. host be time, the back further conference I’d no

Jack Kopnisky

money on everybody, the to it’s know Have back during Thanks on a you company free hope the consider any and tough Just you appreciate the forth. the investing been phone, call we feel questions, company. of more in we last you thank have will lot. six everybody. day following the and too months communication a all We us. appreciate to please you and great if And you of

Operator

participation. today’s you Thank gentlemen disconnect. and your now for may concludes you call. Ladies This

Sterling Bancorp (STL) 22 Oct 202020 Q3 Earnings call transcript