Sterling Bancorp, Inc.

Good day, and welcome to the Sterling Bancorp, Inc. Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Stephen Huber, Chief Finance Officer and Treasurer. Please go ahead, sir.

Thank you, Chad, and good afternoon, everyone. Thanks for joining us today to discuss Sterling Bancorp's financial results for the fourth quarter and year ended December 31st, 2020. Joining us today from Sterling's management team are Tom O'Brien, Chairman, President, and CEO, and myself, Stephen Huber, Chief Financial Officer and Treasurer. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of Sterling Bancorp that involve risks and uncertainties. Further information is contained within the press release, which we encourage you to review. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains financial and other quantitative information to be discussed today, as well as a reconciliation of GAAP to non-GAAP measures. At this time, I'd like to turn the call over to Tom O'Brien. Tom?

Thanks, Steve, and good afternoon, everyone. Thanks for joining us. Sterling had, as you probably know, two press releases today. The first one was about the pending settlement of the class action lawsuit. And that went out first thing this morning, but we're very pleased to announce that. As you can probably imagine, those things are a distraction. They consume an awful lot of time. And of course, they are expensive. So as noted in the press release, the resolution is subject to approval of the court, but we're optimistic that that will all, you know, come through accordingly and without too much delay, although it certainly takes a couple of months to get through this entire process. But anyhow, we're very pleased about that and the resulting outcome is that the press release also notes the cost of the settlement is borne by the banks insurers and And so as a consequence, we had set up some reserves earlier in 2020, and 10 million of those were released in the fourth quarter. The second release, of course, was our kind of normal fourth quarter and full year 2020 financial results. And I think they're pretty self-explanatory. you know, the, uh, quarter remained noisy. I apologize for that, but, um, you know, still a lot to do here at the bank, but, um, underlying all of the, uh, noise in the quarter, I think you'll probably see, uh, you know, a fair amount of progress being made. Um, we still have, you know, a fair amount of remedial compliance and, uh, technology work ahead of us in 2021, but the, um, You know, the groundwork that we've done so far in 2020 has certainly, you know, paid some benefits. And, you know, we just don't underestimate the work to be done. But as I said, you know, progress is meaningful and measurable at this point. You know, we're pleased with that. You know, financially, you know, margins under pressure primarily due to, you know, the level of liquidity we have on the balance sheet. coupled with the very low interest rates. Expenses, even though they were down in the quarter, if you take account for the $10 million recovery, but expenses are still running high with legal and consulting work being done in the fourth quarter. We're optimistic that as the class action comes to full resolution and the costs that with that disappear, that as we get into the second half of 2021, the OpEx line will start to find its way lower. I guess the most noticeable thing in the quarter is the loan loss provision. We made a provision of $27.6 million, increasing the allowance to just about 2.9% of total loans. And as I've mentioned on the previous few calls, the allowance reflects our concern with you know, the credit risk profile in, uh, in various different components of the legacy bank loan portfolio. Um, you know, of concern are the SRO loans in the San Francisco area. And, uh, of course, you know, to some extent the advantage loans and, um, and the bank's construction loans. Um, those, you know, remain our, um, our focus and, you know, reflect some degree of, uh, concern as to how they will work out. So we just thought, frankly, it was more prudent to get as much of this done as circumstance would allow in the fourth quarter and also give us the flexibility going forward in 2021 to move as aggressively as circumstances permit. Non-performing loans remain stubbornly high There are some TDRs in there which help out. And, of course, as you probably read in the press release, we moved about $23, $24 million worth of loans into health for sale and took a write-down on those. Our goal is to liquidate those loans either late this quarter or the very early part of Q2. And then on the governance side, we... accepted the resignation of Barry Allen, who had been a longtime director of Sterling, longtime chairman of the audit committee, and I think Barry had a total of 22 years on the board, so we were sorry to see him leave, but understand his desire to have some time for himself. And with that, we did announce, subject to some regulatory approvals, the appointment of Tracy Diedrich, to the board, and Tracy will join us as soon as we receive the non-objections from our regulator. And, you know, all of that is our efforts moving forward in terms of providing the, you know, the governance level that the company and the bank need and the oversight that we in management require. So, you know, we're pleased to announce that. And with that, it's probably going to be most beneficial if I just take some questions here, operator. So maybe open it up and we'll just see what's on everybody's mind.