STL - Earnings call transcript Q4 2020

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Operator

Good day, and welcome to the Sterling Bancorp 4Q '20 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Jack Kopnisky. Please go ahead, sir.

Jack Kopnisky

Good morning, everyone, and welcome to the fourth quarter and year-end 2020 call.

Luis Ordonez, is Emlen Rowe today Harmon. me Massiani, Rob Bea and Joining people this invited to We more call. start announcements standpoint. from I'll a Maybe with structural just some recent

I really We're the he to take also. to me staff will her. time. was to I report as the will to with And seen, I'd Operating all lot you Ordonez, join I'll look and Bea care encourage of She's a businesses, operate think working areas. will operations of and and President, our her the get technology. oversee excited Officer and us, the our brings to new of Bea have know company, Louis over to forward Chief period Luis corporation, the terrific a really Bank as you lines and of CFO, promoted to and have long and

and challenging resulting We To the rate let's fourth results. near zero the global say turn environment, understatement. massive challenges. year-end a interest a was quarter pandemic XXXX aggressively of be this and the to credit challenges So met would

XXXX. see we from our strong adjusting been model set you'll ourselves for a have to up As our results,

growth; the Our strong in improved company. core reflective those fourth third, had year we we growth credit value; strong increasing and by EPS margin we a secondly, really tangible quarter of have returns quarter and had three be adjusted to by driven We actions results to fourth during continue expansion, a revenue improved book are high-performing had metrics. improved factors; driven one,

strong run our profitability. start let's with So rate

the loans. net worth for to the activity PPP sale seasonal focused $X.XX loans Deposits loans, the points of of accretion times continued had of approximately release, were third deposits. on loans the locations came relative income, sale in quarter. to we $X what in fee expense as Of X% And the third it create revenue million continued $XXX one the fee operating press which as the income, for basis the down disposition municipal fourth created as extraordinary Fee had of quarter. many with increase leverage of outlook. the item, quarters quarter-over-quarter. PPP is expected was versus X% seen trying operating increased million was increased margin to by frankly, physical Adjusted grew from income amount as million As we've the core economic adjusted compared the quarter. we decrease strong Commercial earnings X.X on up total to to versus quarter $X fees income, $X excluding about positive quarter over line the Adjusted And the of positive due outflows a financial or $XX.X $XX a which, per million just million, to have. million We we've our XX charge was linked a in And declined was by our of PPNR, the of quarter. line, expenses many, centers $X.XX you've leverage. to improve. XXXX. were share We

linked increased share points Adjusted stable book ROATCE Year-over-year, improved by XXX to $X.XX basis decreased asset margin funding over return Adjusted quarter. profitability points. X XX by approximately points. from basis value increased total and was basis efficiency margin to improved tangible in value, liabilities expansion points to our improvements improved at net ROATA XX% increased core value XX basis operating points. yields points metrics by Earning X,XXX. quarter. total basis and strong per XX last of XX basis book the Secondly, drove Cost Adjusted points interest basis X%. by X book

levels TA off robust we've and the of flow. have created cash we to a pay earnings the strong coming point dividend, quarter. X we've a Tier of lot continue quarter, level was approximately versus at And We the excess XX.XX very XX.X bank of versus last a have about increase. also earnings then was million quarter, leverage capital specific side. out X.XX XX X.XX basis X.X as shares. last We over during TCE repurchased

present shares to as will look We continue at themselves. repurchasing the opportunities

are in position. Third, credit confident we our

believe are very the loans do loans release do portfolio. decided at levels strong right and are re-rated this loans, point the but coming by decreasing $XXX are estate of We the thing Our delinquency mods medallion did to quarter quarter, of million flow increase to the properties. that classified all. million, cycle, Non-performing reserves. CARES of these medallion core remaining residential very confident off not allowance behind continue supporting they and to during side. and portfolio. some credit we'll And the that's are cash real we wanted remains a our -- of once and for the to us and on the charge-offs. that We improve, borrowers significantly around think estate loans. loan degree Criticized real Loan in of low the in modifications million, These loan loan-to-value relatively losses capital and strong $XX.X down exit total Portfolio comprised reserves. Charge-offs kept to and quarter. virtually non-performing the we reserves to loans flow very carry with declined of constant. million $XX of Act our to X% represents were We every little primarily balance very the feel bit cash We've during Remaining loans, of X.X% having appropriate assets the the at strong challenges. or loss to continued of to -- these that taxi and primarily continue loans We X.XX% are Act related the $XX.X the from the total struggling are taxi loan-to-value commercial X.X% experiencing modifications under was for get are prudent. consciously so. CARES majority We for borrowers. in

in confident our manage lender. again, credit challenging a time. in are We're this generally, We secured to ability

Our are loan C&I in estate our the to by range. be receivables, inventory XX% secured loans side, continue XX% equipment. to of XX% the real on values to or

the As given XXXX credits. evolves, losses through credit issues in of we'll the secured we're in the portfolio, confident to nature our continue ability outcome to these very work and mitigate and of majority the the

evolve been future. to able three different we hire we're that brightest. sets and as that of groups And continue we colleagues, Colleagues, our model in management technology risk on. are and and have types some investing. to really the retain we've best the this bringing model, continue we Finally, That's the targeted to skill invest in of this evolve and the we

the If is peer you do the of groups. per earnings our at top calculation, the FTE revenue and

for lot we of automating two a So we colleagues, things. process, work get lot hard are and two things, office we a colleagues. One, are future. automation digitize a positioned back to our the out trying and lot using a well technology we our are they standpoint, clients of really and they're the our big everything doing resources, of the along and From technology for AI,

and as technology we're technology companies back our in So meaningful. ability making office confident solutions solutions secondly, in then the really technology the to in to Banking-as-a-Service. And bucket, provide are technology is investment we

and there Our income, up clients funding booked the and to view quarter. end is this a other frankly, and top-performing diversity And like technology completed service will by companies providing create that organizations we of out fee and view us. about companies, have six to as first fintech the we to means learn

I'd built been to including out environment succinct around credit, our Third management. We've be rather mention community-bank-like. management. in risk on a risk very management creating piece contemporary to risk regional-bank-like this is than relative We've group,

trying high does So, risk to as is along. of significantly anticipate the future tried level invest management size say and We're a matter. in I'll grow risk go to the model The we've about evolving last we enterprise thing into management.

us think management. items and and attract to colleagues, brightest of before organically heavily through to call we to look open continue questions. enterprise we risk best We the heavily So, to to M&A. the economies data the and technology both scale in grow the in Two allows invest and invest in

First, XX the of Page on our you'll presentation. forecast note

basis expect NIM we and more expected outlook. to earnings. the all improving of and continue happen expect management, technology grow -- to be trends to will are year, executed mentioned, portion that will expenses Core improving be future. income both some modestly, to higher capital will growth grow investing, and shareholders, Fee core than in I revenue revenue into initiatives run also economic people, return as as absolute XXXX. initiatives We that that an against. believe last there'll and undertaking risk all an on to enable we but economic will of be We of And a are we we'll

We obviously, this beyond, targeted up, XX% was They company XXXX above in, a that as work last, very our our to we year, constantly open the through some have capital colleagues. really conditions went number to changed in and as of we're to process, this changed. and the shareholders. of I folks, return I and constantly and a pandemic. And adjusted still they But really folks fantastic thank a before lot have want difficult

great have We clients.

the because, structure that transition. others. many, as strong as the we we the us. with Our way, consumer with enabled teams this and investors. clients really in into appreciate that think deal I both And the than opportunity to capture it there's XXXX us great with We conditions we worked We all commercial by future really to relationship you clients have and through clients appreciate diligently on of board did the we many effectively The the better meetings members. dedicated incremental think, changed, had side,

evolve. we model and beyond. year about have optimistic And think and effective is continue we're to I a will the that

to be go be as there'll think great there'll think opportunities of. There'll forward. a a I advantage challenges of us opportunities but be lot lot we for also, of take I

up why with questions for we don't you have. So, that, open

Operator

Please first take We'll Instructions] from go Casey Haire [Operator our question from Jefferies. ahead.

open. is line Your

Casey Haire

I Good the you. uptick to wanted start classified. the everyone. credit, on in criticized morning, Thank

do more cash to on of well high Number were these be one. properties lot It's secured watermark? a based curious, issue. you that Just you flow expect on very LTVs. you the this a of the then also mentioned And

on provide just rather some on service -- color could some coverage debt you the If coverage?

Jack Kopnisky

Sure.

couple release, there called deferrals chime provide will we whatever things, aspect Two we of or or then want is contained right. were already plan, in majority vast modified form that our some call COVID-related some to the in the payment modification loans of there's to that out of in of of first things the positive migration form that think also there. different I color the and I'll is Rob as and a -- some So, this some

what And fact encouraged or so the we we're are loans very not of this that non-deferred migration, part seeing non-modified by are positively that right.

population continues there two That any and you'll it not been for on part see we've So, until the contained. correspondent quarters. three that be And up working migration the in point, of been that talking that loans of past non-performing about that to this we've been or has loans.

sign even and them, properties, various a equity though it's loans we instances, you're many continue are and a have guarantors the they secondary continued credit -- to credit is loan, on have when owners to up the for and flows from individual So of that, cash payment have loan but migrated property, loan support so today, that a statistics perspective, relationship require you right. the of these cover look of tertiary borrowers, reason The and is maintain repayment the with the most seeing to relying be yes, of relationships In folks because stepping we forms that in individual therefore, credit at ratios see amount the these properties encouraging migrating of guarantor tremendous these them of particular coverage underlying you statistics debt the pandemic, classified, not or service kind they because and essentially perform. of is, strong of streams. getting that are don't that, for to

negative These the shaking the me side part. we're saw here, The step seeing are to with you most issues been we magic Is I is positive is fourth you it sure and And now. we yet. that have I'm loans dealing and quarters migration what assure anticipate the third continue do you're up can that a I ball have is eight that not migration. the quarter, the not for the the maintain popped for on these three crystal people side these seeing progress like again, telling don't performance ball. not are between up as to that something watermark? that the and it's the But fourth high so credit magic loans because, that you're loans in seeing status. quarter, continuing that

And to so that in population. confidence There's going of continue the and comfort out be manage a that and to us we're to quarter. first amount gives the fair second charge-offs some this of going

it is you same not extent that third was do to We of be what significant that migration. -- be are cognizant and again, That's anything as going contemplating And there fact. why as saw it's is is. add? credit to Rob, fourth that of that because what that it's loans. was it's be reserve we further migration, the going quarter with -- what where going to confident anticipate there's the between reserve the to you our don't very that population some as feel you contained We reserve The to today.

Rob Rowe

Yes.

all add that to last would the quarter pocket, operating retail. half ratio. service Half debt as we and And cash of liquidity other Casey, what talking is coming points a the banks years the have in with necessary, then $XXX has level. million, that the hotel asking that couple and described borrowers below if exactly and that so be one-time the been So we're been go about of portfolio hotel guarantors out of I and would is you've about much to we pressure really talked a of project burn in cover coverage of it about of about that could really that, at have are they that sponsors $XXX million our

half So then something very that $XXX working is with. million closely of watching or that other and the so we're

they view, whether there or performing our trend analysis higher every from balance case, pay going of year. the in in clear on. a up that's have everything than that's December. second mean through And a that to and than would do very road very go and is are had the be deals half Retail as an contained potential criticized increased a expected. We at we that's And of what sponsor That interesting for A it the to us probably that's would XX% in of really, there Louis the down month borrowers. below in So the or because there little borrowers, that terms given was that the thought actually make -- if better could classified. determination -- liquidity they're through was is loss. -- that the terms the the it's for we the that our Nonetheless, XX top little are look have and of tenant And that to was guarantor be of said, below of the month rate we would still one-time would that of the classified. either need it criticized DSCR.

Casey Haire

the switching at $X.X surprised guide, $X outlook growth a little just billion, to for 'XX. The to see so I loan billion. Okay, was

I driving Just color I you resi some expect And bake acquisitions? consumer, Is portfolio to in that? color as stabilize. more mean, Does triple some to Just surprised what's it paid? this here? to know, see

Jack Kopnisky

growth. going just organic No, this say, I is was to

that's that, a good and to So, think there's grow. we in acquisitions this, number no net

past. now first in So quarter the we for They're been than have quarter pipeline are pretty have the generally the -- second and they stronger our actually is we remainder strong. the of

public multifamily affordable would thing. sector be So think growth some hold balances the takes traditional of we, of will there administration resi we areas of sector, of continued C&I, the it the housing certain this significant runoff. then, public of CRE, other in and on new as runoff And the this basically, as like sectors and some potential mentioned, counteract the

able target. appropriately confident and see that market So, priced given credit-worthy today achieve we're to pretty the we be is what that in to

Luis Massiani

doesn't It include PPP.

then, and portfolio resi That the quickly off billion. consumer because BPP. include started in we And guide doesn't liquidated portfolio we're $X had the Astoria so for that a three target do that portfolio, you that time. abating out When pretty point, we've some seen But get now consumer merger, of So will place for a over period at years, extend of past of post to at to the some the significant -- behavior, get runoff. because for period. some just is

we're the yet activity and that extent is loans residential going we where runoff And in the down refied low slow anticipate type there we accelerated mortgage that amounts do -- a now on refinance existing seen. small XXXX, seeing of repayments environment, the this rate level have of we which to that continuing the that that likely anticipate been offset are to you substantially So seeing throughout book. side don't same pretty in going originations see whatever down to we've to the haven't

you net-net, a this first in should as to decrease past see happened couple growth book residential you're going year loan going not are to So mortgage overall the the where years. be is -- it's that the

Casey Haire

it. one you saying that Got above And the buyback Thanks. the fourth what would go? XX%. in are And be me. came XX% higher here aggressive than little just than a How and last bit be the now that XX%, catalyst could high to quarter? in guys for The more

Luis Massiani

target of is that per setting shares we're minimum X the year for million next a So, quarter.

progression What million here, I'm going X million, Again, is X.XX%. magic been going from go? -- good generate high 'XX. know to in a quarter. -- the do at we're out there, the number ball use a internal. a our is in we -- shaking on what shares We for time, continue can to that sitting X.X eight fourth on opportunity at that to the sorry, target right? for We're some the It we for X minimum, quite be what X.XX, extent sitting that X thinking is see to is to growth we're long-term million we to is it case. about X.X think talking So about be How depends we how on We're TCE have which sorry.

amount that substantially position generate capital. We generated to in would continue to We a internally be that. above be of

say under whenever X not growth extent type re-up minimum, the a at that we million available the million the from business, shares. that wouldn't get just level. of over capacity current at to to components see through, other But we there. program So increase through and XX.X it of is That's don't that we opportunities likely in we'd the

Operator

question, comes Moss Moving ahead. on next from Securities. it to Riley from Please B. go our Steve

Your line is open.

Steve Moss

I cover already would starting and On quarter debt of shown one-time just more maybe levels the classified? a the driver up third four here, circling migration expected was Good your probably in vacancy the in the have to on refresh -- been morning, guys. of guess Or I just the credit have off are delinquencies? this and data? service back you seeing to quarter

Luis Massiani

refresh is data. a it of So

Jack for and kind -- underwriting of and service the the view regarding that So et an near-term full working coverage alluded not in decision debt as a in and call or a rolls, ratio an then updated let's first this to tax of flow borrowers, re-underwriting of cash and making every some updated is in COVID with underwriting loan cetera, is second review, educated review, of -- information, his getting stage returns, deferral, but a rent prospects kind loan. on the was comments, this now financial it current

a that launch of quarter, of part we talked COVID wasn't approach who So when quarter, but like who very first in is cart one second kind late we deferral, the COVID most for everybody asked got the the again, part, gets asked in the -- deferral. the everybody have first X, a it for COVID the early deferral started early process things calls about one of prior

of of the triggered start position And of comprehensive one so each the that borrowers. what review of a those was

deferral. round most first And They there's loan round those down you to the migrating deferrals, part, off been now, all program the a deferral is for because of the fallen now a deferrals that, of for are reason second so, see just have a but, that decision LTV flow it. at of we're credits that secondary key point, for are triggering classifies is an flow But a X%. cash near-term updated of dynamics alone us, now. of what is making of the prospects of the point being underwriting property this what now what a measure, cash payment

we're credit So classified guarantors with these -- we sources it in on updated a And back secondary under requires before, debt up, or and it good policies, to as service that said is to property to stepping one mention or information. the money but tertiary substandard, or of be that was and our extent repayment special we and folks. now below work seeing each one-time, going getting we are our of alone

Steve Moss

Okay. in of thinking then kind are in curious as charge-offs charge-off second half first just helpful. formation. quarter, guys than terms year drivers and And remaining first you of That's on elevated of I'm the the in of moderate? perhaps the of just the that

Jack Kopnisky

second we are see quarter of good to some loans those as -- that, is the TDRs. a think we those charge-offs, those about loans, become of longer-term that about again, may, substandard way you think progression period elevated the -- time, chunk we where likely the population is think of think More I would of over are loans

coming right? at type when I in point Nobody in property, as first keys it's the so that And in that are So is One hand in time, that fact see to continue right? a And best things essentially that's interest, of a you to were gives equity encouraged us so before, of here amount -- embedded borrowers, to about these by from of this are stage. that turning. we we as everybody's those borrowers, seeing we the a very which think is particularly with right? that the over substantial is of talking not lot we're confidence, the are behavior seeing in folks there's work -- a equity relationships,

there's borrowers, extent result formations faster identify substandard, TDR As about models be to some time, as And a likely you updated that you isn't some and properties discussions, conversations, businesses then, think business negotiations period over to there and recovery. that will to in that going going would Rob, with economic are to of take XX when we start quarter. manifest XXXdays, another to the but going what which second you seeing be than anything greater to probably is quarter more, permanently you charge-off do some in content, itself think -- the in first impaired, that add the there?

Rob Rowe

No, typically, the challenged would standpoint, resolve there because, we not trend, while I various right that portfolio. we agree that And broader their do finality. completely situations, see the from mechanisms rate to to are a a if for have broader away to takes them

rating it not every loan. And team. reserves. at. management We at-risk out through you our look executive anywhere that all nine and qualitative has at all And We criticized slightly, what grown risk, single risk relationship actual near we has entire our months go to have the at then we the just and but next of has our classified have that report six do the that's grown quantitative when grown like and everything, in to

more clarity this not of you something four. would right give we is that's two, quarters can't that it's us. really and so tell But just And uncertainty the in about for three us why that front

Steve Moss

color would where to And helpful. loan guys seeing helpful. days? curious you just That's Any these be of pricing loan Okay. demand, are then there better as with kind

Jack Kopnisky

that and or fourth quarter X X.X%, the of yields for X.XX%. across -- diversified commercial in new rate diversified we're were public the of origination average fixed rate a affordable asset-based loans. around we're -- and forth so business some loans CRE in real the fixed weighted and and verticals. floating or estate The C&I level. that right So And And and seeing is pipeline that in side the housing that's just seeing the mix loans both sector of and X.XX% then factoring lending

'XX, move weighted confidence us, yields X.XX%. X.X% the that average some to and about into of origination comfort we So darn one weighted loan gives that entirety was on seeing of is again, which yields are things X.XX%, close the the that the pretty portfolio, the we're of as average about

So average loan could pipeline have to the see weighted too continue extent on loans. shouldn't much yield, into that the good yield has we that growth chew should a that of weighted type average some support to that we in for

again, So proportion good that. in of this a but perspective And, second of a we the change feel from pipeline the row business where the will it quarter about over -- average is a year, continues pretty 'XX. building course that pipeline we've where that's continues see -- had X.X% weighted that's yield on and we the to to originations, it about the for

Operator

Alex our We'll take Sandler. next ahead. go Piper from now question. It from comes Twerdahl Please

open. is line Your

Alex Twerdahl

the prepaid the prepayment dig the just a the the quarter, bit boosted to bit -- a wanted higher? little just I in little starting with, contribution cetera, kind Louis at the talking from to loan in maybe more moving And fourth about that penalties, you're XXXX. of parts of et NIM for yield, guide

Jack Kopnisky

Yes.

pretty but -- quarter-over-quarter a -- and see points steady perspective the but see just to total it be from to volumes to to We we that -- want the we move wasn't quarter still over into Tough under So it get 'XX, into happens into some quarter, we'll don't in was seeing we're the third next NIM, that quarter, to be will X it it around materially exactly there. -- basis did if be the activity And right say seen it's prepays points greater added but there. some X different. just prepay fourth should as what activity. we've going we're basis going

of points that to fourth basis X it's say for of second, steady X third pretty and although So -- I'd XXXX. that, has prepay been quarter the

So are what to a not we not What -- it prepay of -- NIM higher, next multifamily house, the but there, driver around are it vary seeing? the it still in in great meaningfully amount for somewhere incremental second yes, little particularly of We quarter. first And some bit it's seeing a of side still but and higher. fair -- be a is going year. shouldn't activity trajectory was the we will main there's

Rob Rowe

And then the cost side yes?

Alex Twerdahl

as push and of up it I higher quarter, kind of -- starting my the guess than kind to guide. just was I be model with into a NIM bit of I've come the looking I just kind the little with fourth

said, yield? where with being of close pretty So yields, the X you from yields bps book the now? of are to of I and most to you pressure seeing prepay, X is contribution loan the loan right guess that the or kind clarify, bps of NIM sort -- as just some

Jack Kopnisky

was And the 'XX going It in to most in place of we're X NIM. the bps where the book. is securities pressure see

driven securities depending you're the did. million third sale of $XXX and So the you'll seeing that we're total right? That on a average about So decrease is the greater the weighted activity cash which really the fourth quarter, securities where wasn't in we there $X.XX risk, It just see going -- largely the by in to book was yield was as $X.X between quarter, somewhere size. securities see that's flowing our book, book. reinvestment between to the

book. securities yield the of amount cash difficult handle that's reinvest $XXX you will to And maintain to type would three most activity of million pressure. you that on book. see factor see That's be that billion million at off essentially that or of to securities in of continue thrown $XXX buy to the prepay you of $X where it. kind It securities in back the margin having So

Rob Rowe

to still of the is down thing. there's it then funding this funding, cost of some the room the side of continue on to cost move flip And

on under and NIM. we're over-deliver to So trying promise conservative hopefully be the and

room offsets still So some funding down. of cost that bit -- a move we the to of have the there's is but little --

Jack Kopnisky

is actions of Plenty balance take that to sure. for sheet

Alex Twerdahl

just quarter into range the bit the said . look above you a of just if progresses? kind the I things coming in and you Would of on then CDS expect as that range NIM prepays mean, trend that all to kind first come in. and the year you little based repricing with into

Jack Kopnisky

Yes.

Rob Rowe

Well said.

Alex Twerdahl

M&A. if the outside about bit scale on maybe has M&A, Okay. for if of you're I wanted your what would since guess, and touch which, some really I been just something just to you you a just banks talking kind prepared mentioned want of then still mentioned you've in deals And into changed businesses? of little the I I of this Jack, of consider. wanted types quarters to But remarks, box on a to environment couple kind other traditional it's parameters have If rate looking kind or know interest just in

Jack Kopnisky

Yes.

putting view, things types criteria banks, and my So and ability either think, at, new sources, traditional get one, of markets there's changed. prices. reasonable in is to the opportunity or M&A. reduce We funding nowadays kind costs the in new products three lots at together One And look to frankly, ability of by hasn't of I there's there.

second on The bucket is still side. commercial finance the

pieces. interesting things like those But year, fee oriented the and us that, that this at. adjust opportunities. something many that commercial institutional of portfolios and to some there today though, time example. portfolios is fee we're are looking allows or out of been looking Capital there for syndication we're not buying So which more There at. allow have there that, to markets income asset and companies us businesses oriented that is types change -- mix last as as more that something oriented, are some get pieces into some deeply are There's

on the on is untap. the And area. have third those we area fintech then So

along doing that as of supplement companies we've lot Banking-as-a-Service. us fintech-oriented funds are the But are invested we're to way terrific doing opportunities to and supporters a technology that have accelerate see investment there can to on that and of we're one using what potentially standpoint. from fintech that. how working We we're vendors that some fintech in of an And of it. with advantages couple frankly, a our vendors, allow the working that's funds And acquire

So our integrating it's see, as reviewing. good And and about three acquiring and into we we're those lots capital, of we're pretty that model. categories have you things

it's So those three areas.

Alex Twerdahl

just you the consider? remind opportunities parameters size the geographic and the banks, us of And Okay. then lots on on you that can traditional

Jack Kopnisky

back Northeast would to that Yes, And have all of from would EPS wouldn't year accretive, XX% unless geographic to there be an outside mirrored the virtually, dilutive, tangible earn is have date XX% would book value all than or IRRs on criteria. more from northeast a exceptional more probably be two EPS the total or plus. be deals standpoint. -- that have And XX%, to year situation. one an a no standpoint, done target And probably the accretion we go have to again, have probably these those

Operator

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

Your open. line is

Christopher Keith

to loan a the little growth. dig So more I in wanted to just

talking cause is assuming or have you rollout that, program imagine is, new the impact I C&I to pressure so right question that? perspective. first C&I do you PPP loan would what may So my a how really demand much from I'm about Am on expect in I that And loans? on some do

Jack Kopnisky

done this we've PPP have we round, processing. outsourced PPP, in the what Actually, Yes.

that as the with outsource for want to on resource do focus business a ability we categories to our that company a clients to we've we've our exact some reason, partnered provide of So that so to so highlighted.

Luis Massiani

is So question. a different slightly I think Chris asking

towards lower of So clients. for of around. maybe be PPP of or where directed or of the is an may where profile end It's of kind not target market smaller C&I, this the commercial kind money PPP middle some PPP folks being that's market middle target money, very go of we but business that small, those recipients of

growth. material market, -- have of market access is we So a some commercial for that that, that of targeting kind to more again, that's we're because borrowers but our middle some anticipate there C&I be and commercial market going corporate impact Yes, PPP? able where and may don't middle smaller to middle change,

Christopher Keith

$X lending some to so get growth growth, in expect you that C&I And That's to to to your basis? do organic and an pretty Great. I of return pre-pandemic Okay. close $X.X loan helpful. like segments CRE billion to mean, then, on billion levels

Jack Kopnisky

Yes. do. We

Christopher Keith

Okay.

Luis Massiani

have loan side volume You're pandemic the about is different at going we public sector have the affordable diversified the thing to have through is in any asset good built and to is still origination on dynamics even we the CRE, doing business that them. what point board there so seven to -- see and lines the housing eight growth in well time, given business across different

both there can verticals in what those And to positioned of growth to -- so seen in to continue you type is many we're well we XXXX. XXXX and see -- similar have

at this go to the you sector by progression $XXX if grew look about of public continue million. So That's year. still XXXX, million going to $XXX

to or growing years, in more at see we've seen the than past of So 'XX. same you're some of and those XXXX going that we've for couple the verticals level what growing continue to been

Christopher Keith

there the going are that the maybe bank what do And that the just activity CRE kind that Great. side, of is if of bank well? refinance -- I so or of that from multifamily to impact away imply to I multifamily. seems it are of bank? continue pressured broker And then originated on despite and question you the activity to Okay. that outside of assume seeing would ratios then the Or of coverage #X, part guess of curious have? as transactions service least an with I'm are impact the happening at multifamily in expect continued you are much that runoff the second how is most

Jack Kopnisky

do we see activity. increased No,

flows flowing lower on properties rate they challenges So the having environment. they're looking opportunities cash at refinance vast wise, to at not multifamily. and wherever majority The fine, cash of rate are looking they're are just -- everybody's given with a in

flows they properties are that are or new pre-pandemic, the still the but there. the are So many many, aren't were of properties solid. multifamily there flows same as refinance And

Christopher Keith

guess great. lot And liquidity growth. it, stimulus. to if the last deposit I this strong But that I mean, comments deposit question and on on And one was into bit. just related the government a PPP of wonder experienced industry then your a feed PPP side. Got And the I I and excess think

able going do expect you funds kind since and of do of new necessarily there's put that to those those are runoff not growth through start you and XXXX? Or deposits -- see retain some to to deposit continue be So program be to as the recipient get work? to think your that to customers

Luis Massiani

Yes.

So struggle, smart question. the a that's

deposit that -- our deposits of would our structure that have, the PPP arrangement our So we get the funds still through structure. come the clients

just So as we thing, the security put liquidity seen and money there'd was a you've commercial of on standpoint. government not and do Frankly, their create side, of The through that just flow Luis XXXX, side us, be on the those many companies would there's hold where companies, side think like the will higher balance for also lot an to that level like a from have we be of a think this there on there deposits continued before. there's sheet. places that investment mentioned stimulus

and that kind back individuals continue to general, specifically, in cash think we of So hold hold uncertain companies, cash, times. in these will

be So bottom line strong solid is, that flow still XXXX. pretty we think there'll and a in deposit

Operator

to on question, ahead. comes Bishop from from Dave Seaport Moving Please go next our it Global Securities.

Your line is open.

Dave Bishop

bit bumped A but offset you're expenses, on what question. there by for XXXX the outlook expecting non-interest the side. income obviously, up quick fee In a

mentioned Commercial in higher you in curious and small the of call banking some if of verticals. used terms drivers Just significant you were out, business there you

into on new looking lending where next specifically there's if you're to looking of niches year? sort any the or really you get curious significantly front Just for to hire

Jack Kopnisky

Yes.

have our we're of markets of CRE of as add of year certain There we trade-off. continuing lending be C&I are things on like would to not which certain lender of would like to modify a So standpoint, finance group, innovation with are and say places I and finance the group, in side. a are add kind oriented from invest area. the ones great those lending. more types so ones had capital finance The and our kind is technology to. sectors the we public There a side, -- securitization we'd types the we lending

investment personnel that's So people of one a standpoint. in from piece the

the increases is expense of technology. side other The we're spending money on

our to continue, created the and financial centers, money improve if offering. in you've map the there's to it kind data at downsized distribution on automating physical this both good look more on you side and digitizing of side the our spending way, road we we're the So as client a kind technology offering back And the pretty offices. that of we've

Dave Bishop

year as XX alluded downsizing you centers. you at ended of it relates I physical to think the then to And as just branch -- footprint, the the financial

that where course see XXXX? to Just over of curious to migrating you XXXX maybe the

Jack Kopnisky

effect. it's it's Yes, a interesting positive kind of because

automated allows downsize. use us and people more to digital As mobile and banking, to continue

many XX% So there's we probably of good. been that branches of is -- banking all too pretty my We've in view banking. all of

we'll we think combined I potential per year to started probably look with downsizing. XXX a branches. and basis. We're to on down XX, We're at -- X the as down over XX

Dave Bishop

question. accounting not have accretion housekeeping the just update one then in you if an outlook but I'm on sure XXXX, that? come you purchase And it. Got and curious for disclose this,

Luis Massiani

year. $XX to the $XX David, full the for million year, million for million, full $XX

Dave Bishop

great. Okay, Yes.

Jack Kopnisky

a as point on that, David. Just

we One in the accretion models, had income. much about too of criticisms zero. down the We're we have to

love So these income ago, income. income. non-accretion Two three People core they accretion decretion years ago. hated are years

now down our this we're on to weight one. So fighting

Operator

take from question comes Well Stephens Please go it ahead. Matthew next Breese from Corporate.

open. is line Your

Matthew Breese

A few questions.

the couldn't and substandard special I think the with of First, mention increase help loans. but

have guys proactive disposition. to you real asset taken problem approach this During whole process, a

could the to this we similar the this of earlier what at see see year part or something With of increase loans don't the form "light" time, at the we bucket? an is the asset the loans of saw all? substandard sale If are there's in that tunnel, end you that classified plan of in

Jack Kopnisky

Yes.

Luis Massiani

Yes.

Jack Kopnisky

tell still at right would you we're be just think, of the better now The level point I And I made. peer classified criticized that median than, banks. a absolutely. to Yes, is

close pretty to So we're that.

what deals just quarter. different pretty in last portfolios. there it's maybe disclosed the given a will if as level. confident see given sell very in from these So off minimal got pressure, future third the we'll we bit be any the security you of on the suggested, way feel Again, we the people we little default But

Luis Massiani

three Rob loans sold, good manageable working in so of we've of that exactly we the workout types bank substandard be some the quarter we it's loans right? operational the of These mentioning, and manage office. that class. because the function points type is a credits majority which focused fundamentally been the of very proposition sales to so types of hotel, substandard and a we've So of that loans pressure out different third retail, estate right? are is the on working and able I credits. for in math It's been mortgage, The in talking small the real substandard more the remember, for are that transportation/equipment that quarters than that migration the -- the at have about three that So asset to residential dynamics of much three are of sold, balance of what out different are to of loans these a of commercial types like

plenty talking those, -- So I'm the very And equation Idaho to were to about different truck have is repossess to capital. the out think was forward we were have book, for go or manage absolutely Wyoming for credit that in an but not we make a for Manhattan we when the sense example, slightly and we us on going right? to those. that in for in to us, particular because so going work execute you verticals, hotels about element different transportation it's of there of that to the in Midtown forward essentially will unable we But extent if markets, finance say see secondary of going a that prices that's

against We big have a reserve these things.

period some these them of them, And many the of have of work are, owner so over flowing cash get in types assets. we TDR to best to that we out again, respects, the extent these time,

And full flexibility so we have there.

we of -- some it's -- later. evaluate of than it's are need so So, not not we're always don't we to these part we of rid as getting But what a -- term. farm these way give out substantial very those be of We're a to realize can confident a working a of value here credits. able long we amount work by that to out

Rob Rowe

those special mention, because final and with on Matt, as the other think then referenced, carry with and probably glad substandard, borrowers, you be builds I'm owners have certainly names, mention to as So right? of guarantors, said those economy the thing for it's the just the you plenty to liquidity stuff substandard going pandemic special back, we're side who know those. to you working of And this I through are that

Jack Kopnisky

point. great Yes,

Matthew Breese

at also disruption? really looking charge-offs so as what we just mentioned we a is bucket just expect And statement charge-offs elevated pretty income maybe Should define there's expect the the minimum you the mostly second you there? ample. mentioned follow-up the for come then you occur Could elevated quarter. to of could you from be better And there, charge-offs, us reserve reserve sort to any in

Luis Massiani

Yes.

What charge-off from of we question down we substandard don't delinquency level, the loans moves what stressed XX-, percentage have and we've the the delinquency that stressed migrated perform. is seen have book into particularly of perspective So portion we XX-, of the portfolio not down a we an moved them we specific elevated LTVs have, that know buckets, perspective of LTVs. perspective yet, we have it moving book. which, of Matt. to the continued XX-day of again, that because yet know the that from expected is We do any actually that to migration vast majority what the that

you going stress. extra, very are be that substantial in difficult time. And they comfortable reserves point not one all put and even stressed we at a very say so with be portfolio, we under why. charge-offs to that's of in where the will are will of amount the portfolio confident we But have when level And it's are to happen

and sub-standards being recovery everything different loans these that pool They're we're same to going So exposures thing And economic one in each time. -- larger the will the again, homogeneous -- these loans say is about a good kind exposed of of will thing real about to at larger commercial of dynamic time frames. have them. they're that they the being good estate -- different types not of having bad a goes the to

but the makes this So the we levels different, pinpoint extent each to are portfolio. little versus stress we charge-off to a time highest ability put really we specific can't on to from bit will, that the think these to result the are perspective. -- more is sense we quarter, second is is but more valuation in to the in against how outcome what are one the best number that there's or -- the a over manage of possible going stress that there less it because And the and numbers we reserves outcome there

Jack Kopnisky

we And what affect from the expect on see that asked not you I'd we income question statement, add statement. would the income really statement, income about the today,

Matthew Breese

residential the last is Okay. one me to some been impact just what on that? And you margin. that might that impact. What extent a The do for question loans Alex recovery The interest indicated expect prepay to was had on on asked were the release forbearance. that in continue? have on there

Luis Massiani

kind us loans up residential and we deferrals borrowers loan to so the forbearance the or because the a way going conservative continue, that of transitioned into It initial to perspective side, modify a was very some was the world. programs also taking various encouraged extend basis the the of for from It regarding forth months happening two of into in shape have broader mortgage essentially and there been next X or on X programs form, is government and or just out not of glide forth. we has, we points. of non-government significant. that that non-agency, and on path put mortgages so regarding quarters view That is very three move But residential took there of XX because

still and the them in continue are deferred, residential the the have see we as in loan so we mortgage quarter, And this see to you'll that that deferrals majority side. of

on programs, you loans loans, component of you where being out so interest to loans. those income of putting continue longer-term those that work And as increased you're seeing payment that the on and start that's recognized

not -- points. So was big. it It was but basis X X or

Operator

from And KBW. our Chris O’Cull go Please today final comes question from ahead.

open. is line Your

Chris O’Cull

questions portfolio? carrying what my wanted have up. been the a of you One, what have just couple do guys those to know are? taxi the of do the value And size asked, disclosed -- of already you remaining I of clean but guys Most

Jack Kopnisky

Carrying down million. about to balance $X is

Chris O’Cull

PPP guys And great. the as that? it, fees, remaining then disclose far on Got did you as

Luis Massiani

Sorry, correct? the what question was

Jack Kopnisky

The remaining fees. PPP

Luis Massiani

amount negligible as well. so Not

in that loan the sale PPP still about with forgiveness of million quarter, sale loans XXX that have, related. this in with frame total So $XXX -- the And process necessarily or for isn't taking loan there's we these the clear the frame are holistic loans, that. because those are is a up of not are borrowers on time forgiveness us all kind quick not resolution for of of that that and time

and recognized. numbers of gain driver for you of on And had 'XX. if somewhere sale from that not going But to about set are are not fourth fees it it's first PPP be So PPP the second $XXX,XXX anticipate a year. a have guide big being those aside interest driver quarter should remaining -- of that this PPP net income quarter, we the not of interest -- the for we close income to

Chris O’Cull

held the couple parts it And earlier above it. you're moving quarters this a the obviously, on asset covered like then if even bit guidance. benefit to of -- a Got the at seems going the right out just next I least circling some pretty well are now. prepay income. and kind there's NIM higher quarter the backing back, side was mean And it's on yields of while that range funding I up over the of couple of

that's range the of down be bps to what's above the is coming the on guess, I asset coming driving side? range the where year? into down that course going Or over from X So, compression that

Jack Kopnisky

to think year. Again, going come frankly, full book, Louis absolutely We we forward. to or that And near environment, the that yields a it's rate Yes. is down. going rate you're the and manage this said, pressure biggest pressure environment as asset in point zero that believe remember, have securities can frankly, just we going zero the on

Luis Massiani

combination. a It's

us it's that that weighted we it the the sure. the seen fourth would the way is, comfort of second not I that about provided. have average third levels we to high if to close that we've high stay then of for range substantial think the the that think the quarter you So that, of yield the give that that extent securities end range, about and to be for above that end And X.X%, have slightly would we origination portfolio is the

in spread at loans commercial point real being a originations. new for there we're However, and potential is at time. compress chance loan could estate is all-time there this There are they greater conservative further credit the because because that compression lows spreads credit not there on multifamily and

the the So -- portion -- million $XXX we a do is range of above that we provided.

feel in -- conservative about being there are yields today. is could that average are credit those numbers drive We that. those We lower. But that, where good the spread weighted potential that origination compression

And as so, to going result over you. pressure therefore, that course would that charge well I the of in 'XX happens. some am as

only So go get yes. one around you

Chris O’Cull

wondering in into the decided remarks prepared Go the just you. of you If And really that didn't I we don't I teasing And We're queue. myself of missed to if you of the ahead. And having there's reserves. or I or reserve. said this, the back go actually justify I but through you there. hear at the to still I parts level? X.X I'm not come keep room wiggle sort that think reserve actually was to whether stay just not sorry, consciously your release think level moving talked could sort in about

Jack Kopnisky

Yes.

this million we composition much thought about first couple quantitative as I a think, the of XX. to of reflect the CECL had reserving a the not June and adopted that to everybody the since largely for of And was for of talked in through -- quantitative we've X.X% have was pandemic reserve and models the be the So reserve, when going to CECL, qualitative. Alex, first that is, CECL quarters, what's that that two the not happened quarters and the $XXX adoption requirement continued since degree nearly that we've is

And to these go that to so so all deferrals, driven. were been that in to right? continues be And a anticipation we see, The was substantial reason that chunk were full of to reserve going factor historically, we qualitative that well were as has, of some our not knew we credit migration perfectly end back second going just magically the status. rounds and getting loans things of those normal year and back putting fine and loans with first all of some of and of into come at being this for

some to that classified, of good so And or loans higher a requirement. those level a portion quantitative of against were into them loans going criticized migrate and reserve under those the which requires of reserve

today, are in more of more we -- quarter, reserves. to have allowance chunk the very still We qualitative a what third was So it the have now good is that associated factors with this. relative quantitative

back would coming And of start levels substandard, extent some To and down see to loans thinking out economic But, credits problem you we have to you is the loans. down in substandard for would some X.XX% X% over course the what that reserve get that particularly to over back over toward balances these migration We those the of see those of as so in time, work -- to to order we 'XX. move more total were of should the some component. seeing level would X.X%. see our think some time, X.X%, credits regular continue portfolio of some we number And period is. activity, we pre-pandemic, that of to that, out start improvement way need decrease, materially that reserve think we problem of these right what again, you start that, will to we figure substandard in

or have So end a you're it's say the too anticipate seeing today. of lower to that reserve than second the by early year, if that see first going would we the we this quarter, X.X% to and to in but by answered way. right until fully this lot factors understand that be being XXX% driven what's a we again, And substandard that we are Louis with happen to going of because book. qualitative the conservative continues Yes. substantially

Louis to is in The The been I've think, in high said, outcomes -- is career. seven way that on like as keep we've other my this. through see through right way this. specific reserves improvement Jansky the I over this, been this the cycles answer you very to the qualitative cycles time until, like do

to right will the on, now. only There release will is, goes view reserves year reason hopefully, Our tell. but there's no as time be,

Luis Massiani

Well said, Jack. Appreciate it.

Jack Kopnisky

[Alex]. Thanks,

Operator

There are Jack, closing to back like no to for turn further additional questions. I'd remarks. you, any it or

Jack Kopnisky

everybody, a today, Thanks, time Thanks. Yes. have for and great taking the day.

Operator

And that for Thank participation. today's you call. your concludes

now may disconnect. You

Sterling Bancorp (STL) 21 Jan 212020 Q4 Earnings call transcript