Sterling Bancorp, Inc.

Good morning, everyone, and thank you for joining us today to discuss Sterling Bancorp's financial results for the first quarter, March 31st of 2021. Joining us today from Sterling's management team are Tom O'Brien, Chairman and CEO and President, and Steve Huber, Chief Financial Officer and Treasurer. Tom will discuss the first quarter's results, and then we'll open the call to discuss questions. Before we begin, I'd like to remind everyone that this conference contains four looking statements with respect to the future performance and financial conditions of Starling Bancorp that involve risk and uncertainties. Various factors could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements. These two factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during this call. management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly compared GAAP measures. The press release available on the website contains the financial and quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. At this time, I would like to turn the call over to Tom O'Brien. Tom, please go ahead.

Tom O' Great. Thank you and good morning, everyone. Sterling released its first quarter of 2021 financial results today. And just the highlights, we reported $0.05 per share of net income. Generally, the margin continues to be pressured. It was $2.45, and predominantly due to the ultra-low interest rates we're all experiencing and then the additional liquidity we keep on the balance sheet. Almost half of our reported expenses in the quarter were related to the multiple reviews and investigations that have been going on at the bank since long before I joined, but certainly during my tenure. Credit remained essentially flat in the quarter. The numbers didn't change too, too much. We're still, you know, dealing with the... the factors that I outlined in the press release. On the capital levels, I'd note the bank-only capital levels continue to be pretty healthy. But just keep in mind that the holding company, we do have $65 million worth of debt, which is now callable and losing its capital treatment over the next five years until its maturity. So you know, at some point we need to begin to consider additional liquidity at the holding company. Um, since we are precluded at this time, uh, from dividend up from the bank and, um, obviously there are, you know, holding company costs that need to be considered. So that's something that'll get our attention, um, our focused attention in the next, uh, quarter or so. Um, Going back to credit, as I continue to note, the concern from my perspective remains centered in the commercial real estate and the construction portfolios. We continue to manage these portfolios very aggressively to try to get down to the proper risk rating and understanding what the exposures are, quality of the guarantors, the quality of the property or the project. And we've made an awful lot of progress in that. To some extent, the past due loans are inflated because we've had loans that come up for maturity, but we basically have to, on the commercial and construction side, we basically have to re-underwrite each and every one of them. and reappraise them. And that just takes a long time. So there are several in that category that have gone past maturity by 90 days. And we list those as non-accrual and an abundance of caution and conservatism. But understanding that's, as I said earlier, that's where I think the risk is for the bank too. On the positive side, we did announce, as I'm sure you saw, the securities class action settlement has been submitted to and I think at this point approved by the courts, and it should begin to wind down to absolute closure in the next two or so months. Other matters, including the look back required under our formal agreement with the OCC, are nearing completion, and that's been an expensive proposition for the bank and the company also. Notwithstanding that, there are still a lot of moving parts, but we are working diligently to get past as much and as expeditiously as possible. Keep in mind, though, that the OCC and DOJ investigations are basically out of our control. we have and continue to cooperate fully with all of those. And as you probably noticed, the Justice Department has begun to take action against certain individuals and we anticipate that effort will continue. But as I said, both that and the OCC item are out of our control and we hear about it pretty much at the same time that you do. So with that, probably always best to take questions and see what's on everybody's mind. So, operator, if you'd open the line up for any questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Ben Gerlinger with Hubdy Group. Please go ahead.