Sterling Bancorp ( STL)

Q3 2011 Earnings Conference Call

October 20, 2011 10:00 AM ET


Ed Nebb – IR

John Millman – President and CEO

John Tietjen – EVP and CFO


Lana Chang – BMO Capital Markets

Damon Delmonte – KBW

Dave Peppard – Janney

Aaron Bran – Stifel Nicolaus



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

And I would now like to turn the conference over to your host Mr. Ed Nebb, Investor Relations for Sterling Bancorp. Please go ahead.

Ed Nebb

Thank you, Ruth and good morning everyone. Our news release announcing Sterling’s third quarter 2011 results was issued today prior to the market open. We hope you’ve had the opportunity to review it. The release is available on 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 position or results, dividends, plans and objectives 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 fourth quarter 2011 and beyond will depend on the company’s future results of operations, financial condition and other relevant factors. And 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.

This morning we will have introductory remarks from Mr. John Millman, President of Sterling Bancorp; and Mr. John Tietjen, Chief Financial Officer. After which, we’ll be happy to open up the call for your questions.

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

John Millman

Thank you, Ed and good morning everyone. Welcome to our conference call for the third quarter ended September 30, 2011. In the third quarter, we continued the strong financial and operational performance that is distinguished Sterling throughout 2011. This was our best quarter of the year in terms of earnings and was also noteworthy for double digit growth in loans, deposits and total assets.

Let me highlight some of our key accomplishments for the 2011 third quarter. Our earnings performance has trended in a positive direction as compared to both the 2011 second quarter and a year ago third quarter. Net income available to common shareholders was $4.4 million a sequential increase of 74% from the 2011 second quarter. This growth was driven by higher revenues and unchanged provision for loan losses and the elimination of dividends and accretion no preferred shares related to the TARP Capital Purchase Program. Our recent earnings performance also represents a substantial improvement over the third quarter of 2010 on our decision to accelerate the resolution of certain non-accrual loans resulted in a net loss for that period.

Unlike some banking institutions our earnings growth was not dependent on recapturing loan loss reserves. Our allowance at September 30, 2011 was $19.5 million or about $1.4 million higher than a year ago. We have continued to grow our business and expand our share of the market once again setting records for loans, deposits and total assets. Total loans in the portfolio were up 13% to nearly $1.5 billion, which is an increase of $167 million from a year ago. Loan demand has been strong in our traditional C&I category and we have also seen accelerated volumes in the mortgage warehouse lending product that we introduced last year.

Total deposits were up 24% to over $2 billion. Deposit growth is clearly linked to loan growth since as you may recall we generating prior deposit relationship from our borrowing customers. Total assets grew more than 15% to approach $2.7 billion. Asset quality has continued to improve net charge offs were $2 million for the third quarter, the lowest level since the 2008 fourth quarter. The ratio of non-accrual loans to total loans decreased to 0.38% from 0.47% a year ago. Non-performing assets were 0.28% of total assets to September 30, 2011 down from 0.30% a year ago.

The allowance for loan losses as a percentage of non-accrual loans was 347% at September 30, 2011 up from 290% a year ago.

At the end of the third quarter our Tier I risk-based capital ratio was 12.14%. Total risk-based capital was 13.18% and the Tier I leverage ratio was 9.08%. Our tangible common equity ratio was 7.43% at September 30, 2011. We recognize the concerns of resurface about the state of the economy that said I like to highlight the factors that reinforce our confidence, Sterling’s ability to continue delivering strong growth and solid financial performance for the balance of this year.

We are continuing to experience vigorous loan demand with the growth driven primarily by improved market share and demand through new products. The region that centers on the New York Metropolitan areas home to more than 500,000 small to mid size businesses, which represent our sweet spot in terms of customer relationships. And this has been a resilient market, the tristate region according to the U.S. Bureau of Labor Statistics actually gained over 90,000 jobs in the six months from March to August 2011 while both office and industrial vacancies declined.

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