Sterling Bancorp(US:SBT)2021-02-01 21:50Financial Data and Key Metrics Changes - The company reported a loan loss provision of $27.6 million, increasing the allowance to approximately 2.9% of total loans, reflecting concerns about the credit risk profile in various components of the legacy bank loan portfolio [8][9] - Nonperforming loans remain high, with approximately $23 million to $24 million worth of loans moved into held for sale, resulting in a write-down [9][41] - The company expects legal and professional fees to decrease by about one-third in 2021 compared to 2020, although this reduction may not be significant in the first half of the year [14][15] Business Line Data and Key Metrics Changes - The company continues to focus on construction loans and residential loans, with a significant portion of loan originations coming from these areas [23] - The company has a significant amount of time deposits maturing, with expectations to reprice these deposits, which could lead to a reduction in deposit costs [18][19] Market Data and Key Metrics Changes - The liquidity position of the company continues to grow, which is seen as a drag on margins, but is expected to decrease once mortgage repurchases conclude [21] - The current spot rate for deposits is just under 1%, with expectations for further decreases as time deposits reprice [18] Company Strategy and Development Direction - The company is focused on remedial compliance and technology work, with a significant amount of progress made in 2020, but acknowledges that there is still much work to be done [7][10] - The company is prioritizing fixing existing issues before developing new loan products, as outlined in a formal agreement with regulators [49] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the credit quality in the community bank space, indicating that there may be significant challenges throughout 2021 [26] - The company is taking a thorough approach to risk rating and identifying loans, with a focus on addressing problematic loans [27] Other Important Information - The company announced the resignation of a long-time director and the appointment of a new board member, pending regulatory approvals [10] Q&A Session Summary Question: Guidance on professional fees post-settlement - Management expects legal and professional fees to trend down in the second half of 2021, with a potential reduction of about one-third compared to 2020 [14][15] Question: Impact of liquidity on margins - Management confirmed that liquidity is a drag on margins and aims to reduce the balance sheet size while funding repurchase loans [21] Question: Credit quality concerns - Management acknowledged ongoing concerns with credit quality, particularly in the commercial construction portfolio, and indicated that there will be a reckoning in 2021 [26][27] Question: Write-downs on held-for-sale loans - The company wrote down approximately $3.5 million on loans classified as held for sale, with a total value of about $24 million [41][42] Question: Future loan focus - Management stated that the current focus is on addressing existing issues before exploring new loan products [49]