Sterling Bancorp ( STL)

Q2 2011 Earnings Call

July 26, 2011 10:00 am ET


Ed Nebb - IR Advisor

John Millman - President and CEO

John Tietjen - EVP and CFO


Mark Fitzgibbon - Sandler O'Neil

Damon Delmonte - KBW

Frank Barkocy - Mendon Capital

Rick Weiss - Janney Montgomery Scott

Aaron Bran - Stifel Nicolaus & Co.



Ladies and gentlemen, thank you for standing by, and welcome to the Sterling Bancorp’s 2011 Second Quarter Conference Call. At this time, all the participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. (Operator Instructions). And also as a reminder, today’s teleconference call is being recorded.

At this time, I’ll turn the conference call over to your host Investor Relations Advisor, Mr. Ed Nebb. Please go ahead, sir.

Ed Nebb

Thank you Tony, and good morning, everyone. Thanks for joining us. The news release announcing Sterling’s second quarter 2011 results was issued today prior to the market open. We hope you’ve had an opportunity to review it. The release is also posted to the company’s website

Before turning to the discussion of our 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 the 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 filed with the SEC.

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

And with that, I’d like to turn the call over to Mr. Millman.

John Millman

Thank you, Ed, and good morning, everyone. Welcome to our conference call for the second quarter ended June 30 th, 2011. Strong business growth and solid asset quality were the two main themes for Sterling in the 2011 second quarter. Our performance clearly shows that we are gaining share in a resilient dynamic market leading to expanded business with existing clients and a significant number of new customer relationships. These market share gains are reflected in double-digit growth in loans, deposits and total assets.

At the same time, we are experiencing strong asset quality metrics. Net charge-offs were $2.5 million for the second quarter, half the level of the year ago period. Our allowance for loan losses covered non-accruals by 323% as of June 30 th, 2011. Now let me review some of the specific highlights of the 2011 second quarter.

Net income was $3.9 million, an increase of 32% from the year ago quarter. This represents a continuation of the strong, positive momentum we demonstrated in the first quarter of this year. As you know, we fully redeemed the TARP preferred shares and warrants in the second quarter. This action was reflected in net income available to common shareholders, as we incurred accelerated accretion of $1.2 million or about $0.04 per share. Including the accelerated accretion, net income available to common shareholders was $2.5 million for the 2011 second quarter, an increase of 8% from the prior year . It is important to note that we had a sharply higher average share count this quarter with shares outstanding up $4.7 million or 18% due to our successful March 2011 common share offering.

Including our previous common share offering in 2010, we have raised over $100 million in additional equity in the past 15 months and significantly to our already strong capital foundation. With the effect of the higher share count being partially offset by earnings growth, earnings per diluted share were basically stable with the year ago period, $0.08 for the second quarter 2011 versus $0.09 for 2010.

We experienced strong asset growth across our business and set new record highs for loans, deposits and total assets. Total loans in portfolio were up over 10% to $1.4 billion. Total deposits rose 22% to $2 billion and total assets were up 13% to approximately $2.6 billion. Again, these were all historic highs for our company.

The growth in our business shows that we are continuing to gain market share as we expand our existing client relationships and add new customers who have been underserved by competitors. Asset quality also has continued to be quite strong. Net charge-offs were $2.5 million for the second quarter, half the level of $5 million a year ago. Non-accrual loans were $5.7 million at June 30 th, 2011 down from $18.7 million a year earlier. The ratio of non-accrual loans to total loans improved to 0.41% from 1.46% a year earlier.

Non-performing assets were 0.30% of total assets of June 30 th, 2011, down from 0.85% a year ago. The allowance for loan losses as a percentage of non-accrual loans was 323% at June 30 th, 2011 compared to 110% last year. There are a number of key factors that give us confidence in Sterling’s ability to continue delivering strong growth and solid financial performance for the balance of the year.

Sterling is uniquely positioned as a business bank in an attractive market place that is centered in New York, the New York Metro area and beyond, which is home to hundreds of thousands of small to mid size businesses. While a number of lending institutions seem to have rediscovered the middle market, we continue to differentiate ourselves by providing unique custom-tailored solutions. Our C&I lending sweet spot as the client whose credit needs are between $3 million and $10 million. Due to our broad range of products, including our strength and asset-based finance, we can offer custom-tailored financial solutions to clients, while also broadening and diversifying our income sources.

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