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Sterling Bancorp (



Q4 2010 Earnings Conference Call

January 27, 2011 11:00 AM ET


Edward Nebb – IR Advisor

John Millman – President

John Tietjen – EVP and CFO


Damon Delmonte – Keefe, Bruyette & Woods

Dave Peppard – Janney

Travis Lan – Stifel Nicolaus & Company, Inc.

Lana Chan – BMO Capital Markets

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Ladies and gentlemen, thank you for standing by, and welcome to the Sterling Bancorp 2010 Fourth Quarter Conference Call. (Operator Instructions) And as a reminder, this conference is being recorded.

At this point, I would now like to turn the meeting over to Ed Nebb, Investor Relations Advisor. Please go ahead.

Edward Nebb

Thank you, David, and good morning, everyone. Thanks for joining us.

Our news release announcing Sterling’s Fourth Quarter and Full Year 2010 results was issued today prior to the market open, and we hope you’ve had an opportunity to review it. The release is also posted to the company’s website at

Before turning to the discussion of financial results, let me remind you that any comments made today about future financial results or other future events are forward-looking statements under the Securities Exchange Act of 1934. Actual results may differ substantially from such forward-looking statements.

The amounts of any dividends in 2011 and beyond will depend on the company’s future results of operations, financial condition, and other relevant factors. A discussion of the factors that could cause actual results to vary is contained in Sterling’s annual and quarterly reports as filed with the SEC.

We will have introductory remarks from Mr. John Millman, President of Sterling Bancorp; and Mr. John Tietjen, Chief Financial Officer. After their remarks, we’ll open up the call to take your questions.

And so without further ado, I’d like to turn the call over to John Millman.

John Millman

Thank you, Ed, and good morning, everyone. Welcome to our conference call for the fourth quarter and year ended December 31st, 2010.

Sterling’s performance for 2010 shows that we have weathered the challenges of the economic downturn extremely well. More importantly, we have transformed those challenges and opportunities for profitable growth and enhanced shareholder value. We are significantly more profitable.

Net income available to common shareholders was $3.5 million for the 2010 fourth quarter, an increase of 76% over the prior year. Our earning per diluted share in the quarter was $0.13. The composition of our earnings is more diverse and broad-based. A greater component of our earnings is coming from non-interest income as we have grown the generating products such as accounts receivable management factoring trade finance and payroll funding.

Credit quality has improved sharply and continues to trend in a positive direction. The level of non-accrual loans is returning to previous session levels. Net charge offs in the fourth quarter were less than half what they were a year ago. And the ratio of allowance to non-accruals is significantly higher than last year.

Our balance sheet is stronger than ever. Shareholder’s equity reached $223 million at yearend, up from $162 million a year earlier, largely due to the successful equity offering in March. Our tangible common equity ratio of 6.81%, up from 4.59%, the strong equity base provides growth capital for the future.

We have strengthened our franchise in the highly attractive New York Metropolitan area marketplace. Throughout the recession, while other financial institutions were distracted or constrained, we maintained our traditional high touch customer service and won a significant number of new relationships as well. The business is on a solid path for growth.

Total loans and portfolio were up nearly 10% from last year. Total deposits increased 10.5% compared to last year, and our 33% ratio of non-interest earning demand deposits to total deposits is one of the highest in the industry. Total assets reached nearly $2.4 billion, an all-time high at the end of 2010.

I would like to focus your attention in particular on the solid improvement in our credit quality. As you know, we made a decision in the 2010 third quarter to accelerate the resolution of certain non-accruals, primarily in the area of lease financing. Given the uncertain pace of economic recovery, we felt it was important to reduce our exposure to credit issues and our potential impact on future earnings. The resulting positive effect on asset quality was immediately evident in our credit trends in the 2010 fourth quarter.

Net charge-offs were $2.9 million in the 2010 fourth quarter, down from $7 million a year ago. The provision for loan losses was $3 million in the 2010 fourth quarter, down from $8 million in the same period of 2009.

Non-accruals ended the year at $6.6 million, a reduction of 63% from $18 million a year ago, essentially marketing a return to pre-recession levels. The ratio of non-accrual loans to total loans improved to 0.49% at December 31st, 2010 from 1.46% a year earlier.

Non-performing assets were $6.8 million or 0.29% of total assets at year end, down from $19.4 million or 0.89% at December 31st, 2009.

The allowance for loan losses as a percent of non-accrual loans increased to 274.5% at December 31st, 2010 from 110.5% a year earlier.

To sum up, we believe that Sterling is very well-positioned for growth and profitability. Our New York Metropolitan marketplace is recovering from the economic downturn and we are seeing solid demand from the existing customers and new relationships.

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