Sterling Bancorp(US:SBT)2023-05-01 19:15Financial Data and Key Metrics Changes - The company reported a breakeven quarter with a slight growth in tangible book value, primarily due to improvements in the mark-to-market on held-for-sale securities [31] - Margin experienced some compression, attributed to the cost of subordinated debt, which is estimated to impact the margin by approximately 12 basis points at current rates [33][61] - Deposits were reported just under $2 billion, with a slight increase of about $25 million since the collapse of Silicon Valley Bank [35] Business Line Data and Key Metrics Changes - The company adopted the Current Expected Credit Loss (CECL) model on January 1, resulting in a $0.5 million increase to retained earnings, mainly due to the short-term nature of the construction portfolio [10] - There was a decline in overall allowance primarily due to the transfer of residential delinquent and non-accrual loans to held for sale, while an increase in commercial real estate provisions was noted due to economic forecasts [12][13] Market Data and Key Metrics Changes - The company noted that the current economic environment has led to concerns in the commercial real estate sector, prompting increased provisions in that area [13] - The management expressed concerns about the overall banking environment, referencing recent bank failures and their impact on the deposit insurance fund, which has cost between $40 billion and $50 billion [28][29] Company Strategy and Development Direction - The management outlined three main objectives: settling with the DOJ, addressing long-term delinquent loans, and tackling the expensive subordinated debt [32][33] - The company is focused on improving liquidity and reducing reliance on broker deposits, which was a significant concern when the current management took over [39] - There is an intention to clean up the balance sheet further, with expectations of potential recaptures in reserves as the company continues to address its financial position [47] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, indicating that the costs associated with legal settlements should decrease in the upcoming quarters [44][46] - There is an expectation of increased regulation in the banking sector, with a hope that it will be more forward-looking rather than reactive to past issues [41] - The management is confident in the current reserve levels and does not foresee significant additions unless there are substantial new originations [21] Other Important Information - The company has engaged an independent advisor for the sale process of non-accrual and seriously delinquent residential loans, with expectations to conclude the sale by late May [36] - The management emphasized the importance of transparency in financial reporting, opting to keep all debt securities available for sale rather than held to maturity [35] Q&A Session Summary Question: What is the yield on the loans that took a haircut? - Management estimated the yield to be in the mid-5% range, with a significant portion of those loans in non-accrual status [6] Question: Is there any appetite for capital actions like share repurchases? - Management indicated that addressing the subordinated debt is a priority, and they have sufficient liquidity to consider such actions [22][25] Question: How does the company view margin pressure with potential rate hikes? - Management acknowledged the difficulty in predicting margin trends but expressed confidence in their ability to manage the impact of rising rates [52][53] Question: What is the status of the subordinated debt? - Management confirmed that the subordinated debt is callable, and they have the option to call some or all of it at par [56][61]