Sterling Bancorp's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Sterling Bancorp ( STL)

Q4 2011 Earnings Call

January 31, 2012 10:00 am ET

Executives

Ed Nebb - Comm-Counsellors, LLC - IR

John Millman - President

John Tietjen - EVP & CFO

Analysts

Mark Fitzgibbon - Sandler O'Neill

Damon Delmonte - KBW

Dave Peppard - Janney

Collyn Gilbert - Stifel Nicolaus

Presentation

Operator

Thank you for standing by and welcome to the Sterling Bancorp 2011 fourth 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 like to turn the conference over to Mr. Ed Nebb, Investor Relations Advisor. Please go ahead, sir.

Ed Nebb

Certainly Calvin, thank you. Good morning everyone. Thanks for joining us. Our news release announcing Sterling’s full-year and fourth quarter 2011 results was issued today prior to the market opened and we hope you’ve had an opportunity to review it. The release has also been 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 position or results, dividends, plans, objectives and 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 amount of any dividends for the fourth quarter 2011 and beyond will depend on the company’s future results, 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.

Today we’ll have the introductory remarks from Mr. John Millman, President of Sterling Bancorp; and Mr. John Tietjen, Chief Financial Officer. And after their remarks, we’ll be happy to open up the call to your questions. And so without further ado, I’ll turn the call over to John Millman.

John Millman

Thank you and good morning everyone. Welcome to our conference for the 2011 full-year and fourth quarter. Sterling’s business performed well and delivered solid results in 2011. We experienced robust loan demand throughout the year. Our double-digit loan growth in both the full year and the fourth quarter was a key factor driving the increase in net interest income at higher fee income from accounts receivable management and related activities. As a result of our attention to expenses, the increase in non-interest expense was 3% compared to the previous year.

These factors contributed to the risk in net interest income for the year while 2011 results also included certain items specific to the fourth quarter which John Tietjen will detail shortly. The strength of our business was the basis of our growing profitability. Let me highlight some of our specific accomplishments for 2011.

Full-year net income available to common shareholders was $15.5 million or 3.5 times to 2010 amount. Return on average assets increased to 0.07% for 2011 from 0.31% a year earlier. Return on average equity rose to 7.83% for 2011 from 3.30% in 2010 on a higher equity base due to our public offering and earnings retention.

Total loans in portfolio were up 12% to nearly $1.5 billion at 2011 yearend, which is an increase of $159 million from a year ago. Loan demand has been strong in our traditional C&I category and we have also seen an accelerated volume in the mortgage warehouse lending product that we introduced last year. The loan pipeline remained robust heading into 2012. Total deposits were up 14% to nearly $2 billion at yearend while total assets increased to nearly $2.5 billion rising 6%. Non-interest bearing demand deposits increased to 34% to $766 million.

Our credit metrics remained very sound. Net charge-offs were $10.2 million for the full year, down from $29.6 million in 2010. The allowance from loan losses as a percentage of non-accrual loans was 315% at December 31st, 2011, up from 275% a year ago. Non-performing assets were 0.33% of total assets at December 31st, 2011 compared to 0.29% a year ago. At the end of the fourth quarter, our Tier 1 risk-based capital ratio was 12.61%, total risk-based capital was 13.71% and Tier I leverage ratio was 9.20.

Our tangible common equity ratio was 8.01% at December 31st, 2011. We strengthened our capital base with a public equity offering in March, 2011 as well as our retention of earnings. As a result, we were able to fully redeem the TARP preferred shares and warrants while continuing to have a solid capital foundation to respond to growth opportunities.

Sterling’s performance in the past year benefited from our unique business model and focused growth strategies. And we believe these strengths will continue to drive profitable growth in the future. We have remained committed to providing financial solutions for our customers including many small to mid-sized businesses, their owners and employees.

This segment has consistently been Sterling’s target market for decades. As a result of this commitment, we have continued to build new customer relationships and expand our existing client accounts. Our growth, including double-digit increases in loans and deposits has benefited from our strong resilient market, which is primarily the New York Metropolitan Area and beyond.

While we have seen some increase in competition for our target market, the type of customers that we traditionally serve, should continue to be engines of economic growth and opportunity.

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