Q2 2023 Sterling Bancorp Inc (Southfield MI) Earnings Call

Good morning, everyone. Thank you for joining us today to discuss Sterling Bancorp's financial results for the second quarter ended June 30th 2023.

Joining us today from Sterling's management team are Tom O'brien, Chairman, CEO and President and.

And Walter Burkey controller.

Tom will discuss the first quarter results and then we'll open the call to your questions.

Before we begin I'd like to remind you that this conference call contains forward looking statements with the with respect to the future performance and financial condition of Sterling Bancorp that involve risks and uncertainties.

In particular forward looking statements may be made on this conference call regarding to the economy and financial markets government investigations credit quality, the regulatory scheme governing the company's industry.

Competition in the Companys industry interest rates, the company's liquidity, the company's business and the company's governance.

Any forward looking statements made during this conference call are based primarily on the company's current expectations and projections about future events and trends that the company believes may affect its business financial condition results of operations prospects business strategy and financial needs.

Various factors could cause actual results to be materially different from any future results expressed or implied by such forward looking statements.

These factors as well as examples of forward looking statements are discussed in the company's SEC filings, which are available on the company's website.

These are not exhausted, new risks and uncertainties that emerge from time to time.

It is not possible for the company to predict all risks and uncertainties could have an impact on the forward looking statements made during this conference call.

The company disclaims any obligation to update any forward looking statements made during this call.

Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures.

The press release available on the website contains the financial and other quantitative information to be discussed today as long as the reconciliation of the GAAP to non-GAAP measures.

At this time I'd like to turn the floor over to Tom O'brien Tom.

Thanks, very much Jamie good morning, everyone.

Hope you're all enjoying the summer months.

Yeah.

Released our second quarter earnings day, and I just saw weeks.

Our.

<unk> five cents, a share probably adjusted down to three cents in and operating.

Level.

The bullet points in the press release, I think really tell the story of them.

What's kept us busy during the second quarter.

Obviously the <unk>.

<unk> got a lot of pressure.

Due in large measure to the interest cost of the sub debt.

A little over 11%.

I think the impact of this cost was <unk>.

<unk> cute.

In both the first and second quarter.

As overall rates kind of plateaued and.

That ratcheted buyer so.

We were anxious to get that redeem and we'll have a little bit of impact in the third quarter on that for about two weeks of cost and that'll.

That'll be the end of it.

The bank remains highly.

Highly liquid.

This is very well capitalized and.

For the companies.

Efforts and all the work involved in the various investigations.

Yeah.

One of them.

Costs and.

Outcomes of those different investigations, but I think we're at the point, where we can.

Actually begin to make some strategic type clients, where the institution that's been.

Not available to us the last couple of years, primarily because we had to.

Okay.

Have a pleasant.

Investigations from the different government agencies.

Really precluded us from doing much of anything strategically other than.

Getting out of the penalty box, where we're at so.

I think you know prospectively.

Opportunity for us.

Yeah, certainly clearer now.

And I do think that this quarter mostly represents.

The final chapter of the company's turnaround.

I think particularly the the outside.

Hence load that we've been carrying and well.

We will begin to moderate.

And the benefit from all of the different actions, we've taken over the last few years.

We will begin to bear some fruit.

As our financial performance becomes more predictable.

We will continue to fully cooperate with the Doj and the OCC in there.

Ongoing investigations and to individuals' conduct.

But again that's me.

Sterling, Thanks, Sterling Bancorp our world.

Yeah.

Through that process and we.

We're in the final stages of.

Settling out the.

But D O J.

Oh settlement was approved by the court.

Just recently and.

For those who might be interested there will be a special master appointed by the court within the next few weeks.

And.

Master will.

Then determine the.

Process for.

Shareholders, who are eligible.

Submitting their claims eligible shareholders would be.

None.

Insider.

Shareholders.

And those.

Who purchased stock in.

In the period between the IPO and late 2019.

So that process won't become.

Explaining by the special Master once Thats established and.

And we will you know were prepared to fund that as soon as that is required.

I would add.

You know kind of generally though that the.

The cost to <unk>.

The repair Sterling.

Obviously, no secret, but it's been an enormous drain on our shareholders.

The consequences of their decisions and bad behaviors is something I've dealt with.

And witness my entire career and.

I guess the only thing I can say is there's just no upside to short term thinking in this business.

It seems to continue to happen time and time again, but there is.

The price you pay is so outsized benefit you might be seeing.

But as I mentioned.

Continue to cooperate with the agencies as they are.

Pursue there.

There are other investigations, but I think from a bank's perspective, the company's perspective, we're them well.

We're pretty well.

Looking at all the stuff in the rearview mirror.

The.

Oh Walter is on the call with me Who's our controller and I, just walk or people just kind of give a little bit.

Hmm.

Color on the impact of the.

Sure.

Net interest margin in the quarter and the impact of the.

Sub debt and what you Mike.

Expect would be the you know the <unk>.

Pat.

Going forward from redeeming.

Sure Tom So.

This quarter, our margin of 2.64% declined.

Nine basis points quarter over quarter as Tom had mentioned.

It was largely due to the increase in cost of our.

That base.

As we look at the impact of the sub debt we redeemed at mid July . So we will have two weeks of the expense in the third quarter.

Let's see the sub debt and then the impact on short term cash would.

It would be a margin compression, but we calculated to be approximately 23 basis points.

Impact.

In the second quarter that.

Well continue into the future.

Yeah. Good thank you.

Yes.

The level of interest rates right now in the competition for bank deposits.

That's kind of a funny turnaround from.

I know a year or so ago.

The the outcome of the failures in March.

Continue to reverberate in the industry.

And.

You know I suspect there'll be.

Our continued high pre.

Premium.

Liquidity and.

And some you know some careful.

Review of.

Tangible common equity and the impact of.

Hey, OCI.

And the.

And the industry's financial statements and and more particularly on the.

The impact of held to maturity securities.

Obviously.

As I've mentioned.

Got it many many times, we carry our held to maturity.

And.

Our available per sale securities are generally relatively shorter term.

So.

But nonetheless there.

There is market.

Exposure, there, but nothing.

Unusual consequence.

So with that.

Probably best to take questions because I'm always.

And to hear what's on People's minds.

Learn more about <unk>.

What everybody is thinking so Jamie if you want to open it up for questions.

Ready to go.

Ladies and gentlemen at this time, we will begin the question and answer session.

I'd like to ask a question please press star and one.

To withdraw yourselves from the question queue, you May press star and two if.

If you are using a speaker phone, we do ask that you. Please pick up your handset prior depressing the numbers to ensure the best sound quality.

Again that is star and then one to join the question queue.

We'll pause momentarily to assemble the roster.

Okay.

Once again, if you'd like to ask a question. Please press Star then one.

And gentlemen at this time I'm showing no questions I'd like to turn the floor back over to you Mr. O'brien for any closing remarks.

Okay. Thank you.

I suspect the.

Summertime has.

Several of our normal questionnaires.

Either busy yesterday, obviously, we had.

Two announcements in the banking industry with <unk>.

One in Virginia, and obviously Pac west still out in California, but.

Now that may be some sense that give us some sense that the capital markets are.

Kind of becoming unproven and more friendly to Uh huh.

<unk> and <unk>.

Conversations among banks, so I think that's.

That's certainly welcome welcome news and the.

Oh no.

The balance of the.

The process in the capital markets will be determined over the.

Now the next few weeks and months and but as I said I think there's probably some reason for.

Good optimism in terms of valuations and opportunity.

Throughout the industry.

So with that I.

Certainly hope everybody enjoys the.

The August period, as we kind of get into the second half of the summer and we'll look forward to the.

The opportunity to be together.

Third quarter conference call in October .

Well, thanks very much.

Ladies and gentlemen, with that we'll be concluding today's conference call and presentation. Thank you for joining you may now disconnect your lines.

Yeah.