Sterling Bancorp (SBT) Q2 Earnings call transcript Jul 24, 2024
AInvestWednesday, Jul 24, 2024 8:42 pm ET
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In the second quarter of 2024, Sterling Bancorp, a leading banking institution, held its earnings call, providing insights into its financial performance and strategic outlook. Here are the key takeaways from the call.

Financial Performance and Strategic Outlook

According to Thomas O'Brien, Chairman, CEO, and President of Sterling Bancorp, the second quarter was marked by steady performance, with the company operating at a breakeven level. O'Brien highlighted the end of the last wholesale funding, bringing an end to various forms of wholesale funding that peaked at over $1 billion a few years ago. This move signals a shift towards core deposit funding for the bank, aligning with the industry trend.

Legal and Compliance Costs

During the call, Ross Haberman, an analyst from Rlh Investments, inquired about the legal and compliance costs, specifically the $2.1 million of professional fees for the quarter. Karen Knott, the Chief Financial Officer and Treasurer, clarified that around $1.3 million was related to legal fees, with the remaining $800,000 attributed to other professional services. Haberman also asked about the future of these costs, with Knott estimating that they may average around $1.8 million per quarter through the next couple of quarters.

Market Outlook and Margin

O'Brien discussed the potential impact of lower interest rates on the bank's margin, noting that the cost of liquidity remains high. While there is growth in commercial real estate and residential mortgage paydowns, Sterling Bancorp has no plans to originate residential loans. The bank will continue to focus on commercial opportunities while maintaining a cautious approach to protect its balance sheet and book value.

Regulatory Environment and Future Prospects

O'Brien also addressed the formal end of investigations, which he believes will remove clouds of uncertainty and help improve operational efficiency. He expressed optimism about the general direction of Sterling and the industry, especially with the potential for a rate cut in the third quarter and the reduction of speculation regarding interest rate movements.

Asset Quality and Delinquencies

O'Brien and Knott reassured investors about the bank's asset quality, reporting virtually no delinquencies in the commercial portfolio and only a few residential loans in foreclosure. They emphasized that the bank's equity built up over the years, along with market improvements, has helped mitigate potential losses.

In conclusion, Sterling Bancorp's second quarter earnings call revealed a company in a steady financial position, focusing on core deposit funding, and bracing for potential improvements in the regulatory environment and market conditions. The bank's cautious approach to lending and asset quality management highlights its commitment to maintaining financial health and preparing for future growth opportunities.

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