Sterling Bancorp (STL)

Q2 2012 Earnings Call

July 24, 2012 10:00 am ET


Ed Nebb - IR, Comm-Counsellors, LLC

John Millman - President

John Tietjen - EVP & CFO


Mark Fitzgibbon - Sandler O'Neill

Timor Brizola - KBW

Collyn Gilbert - Stifel Nicolaus

Rick Weiss - Janney



Ladies and gentlemen, thank you for standing by. Welcome to the Sterling Bancorp 2012 second quarter conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ed Nebb. Please go ahead.

Ed Nebb

Thank you very much, [Chad Gray]. Good morning everyone and thank you for joining us here at the Sterling Bancorp’s second quarter 2012 conference call. Our results were issued today prior to the market open and we hope you had an opportunity to review the release. The release has also been posted to the company’s website at

Before we turn to the discussion of the company’s financial results, let me remind you that any comments made today about future financial position or results, dividends, plans objectives or other events are forward-looking statements under the Securities Exchange Act of 1934. Actual results may differ substantially from forward-looking statements.

The amounts of any dividends for the third quarter of 2012 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 you will have some introductory remarks from John Millman, President of Sterling Bancorp and John Tietjen, Chief Financial Officer and after their remarks we will open up the call to your questions.

And so without further ado, I would turn the call over to John Millman.

John Millman

Thank you Ed and good morning everyone. Welcome to our conference call for the 2012 second quarter.

Today, we are reporting exceptionally strong operating and financial performance for the second quarter and first half of this year. Our strategy is to position Sterling for profitable growth and increasing shareholder value have produced very positive results. We have demonstrated continued and expanding core earning power driven by a robust loan volume and improving net interest margin of balanced revenue mix, well controlled expenses and solid asset quality metrics.

Let me highlight some of the positive factors that drove our solid performance during the quarter. We continue to deliver double digit loan growth with the portfolio increasing by 15% to approach$1.6 billion. Because we are headquartered in New York City and serve the Metropolitan area and beyond, we operate in one of the most attractive and dynamic regions in the country and we have benefited from positive economic trends in our market.

In addition, since Sterling offers a portfolio of financial products, we have been able to take advantage of a range of growth opportunities to serve the needs of small and midsized businesses. I will have more to say of our performance in the current lending environment in a few minutes, but first let me cover a few specific highlights of our second quarter performance.

Total deposits exceeded $2 billion. The real growth story here has been in the non-interest bearing demand deposits which increased 30% to $786 million. The high ratio of demand deposits which is approaching 40% contributes further to our extremely favorable cost advance which is among the lowest of our bank peers. We are experiencing an improving net interest margin even though we remain in a persistently low interest rate environment.

The NIM for the 2012 second quarter was up 14 basis points from the same period of 2011 to 4.04%. The improvement was largely due to our continuing strategy of shifting the asset mix from investments into loans driving higher yields as well as a growing cost effective demand deposit base and our ongoing control of deposit costs.

Sterling’s earnings power has also benefited from our balance of revenue mix, which includes a significant level of non-income generated by a range of financial products and services. The fact that our non-interest income is nearly 30% of total revenues helps to balance out the effect on loan yields from the low interest rate environment.

At the same time, we have maintained firm control on non-interest expenses, which were up $388,000 or less than 2% this quarter, versus an increase of about $1.4 million or 4% in total revenues.

Our credit metrics have continued to improve from an already solid base. Net charge-offs fell to $1.7 billion or 0.43% of loans for the 2012 second quarter, which is the lowest level of net charge-offs since the third quarter of 2008.

Non-performing assets at June 30, 2012 were just 0.28% of total assets. The allowance for loan losses as a percentage of non-accrual loans was 377% at June 30, 2012. The level of allowance to total portfolio of loans was 1.35% at the end of the 2012 second quarter, essentially even with the year ago. These factors led to impressive earnings growth for the 2012 second quarter.

Net income available to common shareholders was almost double the year-ago level at $4.9 million. Earnings per share also doubled versus a year ago to $0.16 for the 2012 second quarter. Our return on average tangible equity for the 2012 second quarter approached 10% which compares very favorably to our bank peer group.

Read the rest of this transcript for free on