Sterling Bancorp, Inc.

Good morning, everyone. Thank you for joining us today to discuss Sterling Bancorp's financial results for the second quarter, ended June 30th, 2024. Joining us today from Sterling's management team are Tom O'Brien, Chairman, CEO, and President, and Karen Knott, Chief Financial Officer and Treasurer. Tom will discuss the second quarter results, and then we'll open the call to your questions. 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 and the banking industry generally that involves risks and uncertainties. For a complete discussion of forward-looking statements and factors that could cause actual results to differ from those two statements, the company encourages all participants to refer to its SEC filings, especially those on Forms 8K, 10Q, in the press release issued in conjunction with this conference call, which applies to any forward-looking statements made on this call. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement, but not substitute, for the directly comparable GAAP measures. The press release available on our website contains the financial and other quantitative information to be discussed today, as well as reconciliation of the GAAP and non-GAAP measures. At this time, I'd like to turn the floor over to Tom O'Brien. Tom?

Okay, thank you, and good morning, everyone. Welcome to our second quarter earnings call. So, I'll start basically by saying the second quarter was The continuation of what we have seen in recent quarters, we are operating essentially at a break-even level, plus or minus a few pennies each quarter. Our capital and liquidity continue to remain strong. Notable during this quarter was the final maturity of our last wholesale funding. The $50 million home loan bank advance was called during the quarter. And that brings to an end what were various forms of wholesale funding that we had on the balance sheet here some years ago, including, you know, brokered listing deposits, these kind of advances, and some above-market CDs that peaked at over a billion dollars a few years ago. So now we essentially are looking at core deposit funding, in the bank with nothing wholesale and nothing out of the ordinary course of what you expect to see in a bank deposit portfolio. Expenses are finally peaking and trending in the right direction. The result basically of some cost cutting that we did in the beginning of the year and then additionally the reduction in fees and expenses related to all the different investigations that have been going on here since 2019. As we noted in the press release, it appears that we are done with all of the investigations and the costs related thereto since the Department of Justice notified us during the quarter that their investigation is now closed. The time invested and the money spent by the company over the last four years to complete these investigations has been painful, as you all know. Unfortunately in our system of justice, The price paid for the activities of individuals is all too often visited upon the companies. And we have paid dearly. But more importantly, we continue to focus our efforts on the strategy that we have outlined over the last several quarters. Our strategies and objectives remain the same. you know, looked at a variety of alternatives. We continue to do that and try to find ways to position the bank to be able to grow and prosper in the periods ahead. I think, you know, we've kind of outlined the various strategies that we would consider, and these calls are public filings. or press releases. These tend to be probably a little bit chaotic given the nature of the market over the last year, but there does appear to be, as I noted in the press release, some continued thawing in the market and some greater regulatory certainty as to what you know, the future holds for the industry. I think, you know, the formal end of these investigations and as an additional matter helps remove clouds of uncertainty that surrounded the company in addition to the cost and the time efficiencies that, you know, should help us going forward. I think the general direction of both Sterling and the industry probably will be helped. Assuming there's one rate cut this year, maybe as we get into September, there seems to be momentum in that direction. But whether it's that meaningful or not in the scheme of things, I think it does help put an end to the speculation as to know will rates you know stay at this elevated level where they go higher or will they you know drift a little bit lower so you know I think the momentum towards lower obviously would be helpful in terms of our margin the and again as I noted in the in the press release you know the cost of liquidity is relatively high You know, loan opportunities, you know, we've seen some growth in commercial real estate. And, you know, the residential continues to pay down pretty aggressively. And I suspect that will continue on, you know, kind of a similar path month to month and quarter to quarter. We are not originating any residential loans and have no plans to do so. And we will... you know, continue to look at commercial opportunities as they come along. But again, it's a market for us in particular to be cautious in and to be mindful of what our charge is here and, you know, continue to state, you know, protect the book value and the integrity of the balance sheet and put us in a position to take advantage of opportunities that, you know, that may present themselves over the coming months and quarters. So, again, I don't think too much different in the quarters ahead in terms of financial performance. I think credit conditions stay pretty mild for us. Reserve levels continue to be very healthy. The industry in general is, you know, continues to see weakness in office and in some overbuilding areas in multifamily. And then, of course, in the metro New York area with the regulated multifamily is experiencing and probably will continue to experience a considerable degree of pressure as the values there have just been hammered. So with that, probably easiest if I take some questions and see what's on everybody's mind. So operator.

Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then one. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. Which are your questions? You may press star and two. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Ross Haberman from RLH Investments. Please go ahead with your question.