Sterling Bancorp(US:SBT)2022-08-15 23:21Financial Data and Key Metrics Changes - The company reported a net loss of $2.2 million or $0.04 per share, primarily due to extraordinary items and legal costs [4][5] - Total expenses were reported at $19.5 million, with a significant portion attributed to legal and investigation-related costs [5] - The margin improved by 13 basis points, from 2.82% to 2.95%, despite a reported decline from 3.03% to 2.95% due to one-time recoveries in the previous quarter [9][10] Business Line Data and Key Metrics Changes - The company transitioned to an outsourced platform, Promontory MortgagePath, for residential home lending, which is expected to save approximately $3 million annually in fixed costs [6][8] - The margin for the quarter was impacted by various one-time items, but the overall direction for margin improvement is anticipated as deposit costs rise [10][11] Market Data and Key Metrics Changes - The company is facing a challenging economic environment with rising interest rates, which could impact future performance and liquidity [10][30] - The management expressed concerns about the balance sheet shrinking due to higher mortgage rates and the overall economic slowdown [30] Company Strategy and Development Direction - The company is focused on satisfying the requirements of ongoing investigations, which is critical for future strategic decisions [12][14] - Management is optimistic about concluding investigations by the end of the year, which will provide clarity for future operations [15][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the difficulties posed by ongoing investigations and the associated costs, but expressed confidence in meeting regulatory requirements [12][13] - The company is preparing for potential increases in professional fees and legal expenses as investigations continue [27][41] Other Important Information - The company surrendered approximately $25 million worth of insurance policies, which had tax implications and affected various expense lines [18][19] - The remaining mortgage repurchase liability allowance is just under $2 million, with expectations of further repurchases in the upcoming quarters [48] Q&A Session Summary Question: What is the core run rate for expenses excluding professional fees? - Management indicated a core run rate of around $15 million excluding professional fees [26] Question: What are the remaining concerns regarding asset quality? - Management noted that significant progress has been made in derisking the balance sheet, with plans for further sales of nonperforming loans once investigations are resolved [42][45] Question: What is the status of the mortgage repurchase liability allowance? - The remaining allowance is just under $2 million, with expectations of a pullback in the third or fourth quarter [48] Question: What is the outlook for professional fees once investigations conclude? - Management estimated that normalized professional fees could be around $300,000 to $750,000 per quarter in a typical situation [37][41] Question: Has the company adopted CECL, and what is the outlook? - Management confirmed that they are on track for CECL adoption in Q1 2023, with no expected shocks to the financials [56][58]