Sterling Bancorp (STL) 28 Apr 202020 Q1 Earnings call transcript

Good day, and welcome to the Sterling Bancorp 1Q 2020 Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Jack Kopnisky. Please go ahead, sir.

Good morning, everyone, and welcome to our first quarter 2020 earnings call.

call President; Massiani, Chief and the Officer Chief Credit on Bank and Rob me is our Luis Financial Officer. Joining Rowe, our we presentation. Web referencing our site, will the On you in slides our find are

start COVID-XX. Before we quarter of difficult that those first this review us, and have especially are challenging affected for the that by frontlines crisis, want extremely of performance, these times recognizing we the to by all those been on and

and aggressively proactively our have been on We these focused and clients, times. in supporting communities very colleagues, uncertain

safe priorities secure, to to Our been ensure have clients. providing our service colleagues value-added are and uninterrupted while our

to at were from our information transition home. thirds quickly Given of employees the two the able technology work to pandemic, we platform, roughly well-developed our onset of

colleagues as and open. financial have dictates operating XX% We are reduced have closures our offices changed of and institution. hours protocol the have adjusting safety ensured are are safe across and the maintained access and hours we center Though, with

We time. employees families this to during benefits and communities have support difficult to all and additional their provided adjusted compensation

We as have challenging navigate out proactively and time. they this to support our consumer commercial clients reached them to

we as are mortgage grace consumer as XX-day well For clients, relief waiving period fees. certain providing

or we balances, For approximately we as needed. X% are interest the working In are commercial loan and of clients, portfolio. total, billion $X providing extend to principal of payments relief loan on

Program in with process. paycheck Main the Federal to program, in Lending and intend $XXX for We have necessary working in the SBA's protection funding We are the conjunction the Reserve. the providing support participate Street applications million and through approximately

moderate during our communities, most banks they areas. action hardest I extremely as this clients, on have funding by of and our to low technology and proud am We vulnerable each resources in to providing to and and support colleagues in hit XX schools worked other our communities our that have income providing exhaustively philanthropic are food crisis. markets focused

to of Moving incurred for million shareholders of adjusted common and an quarter, basis, loss this financials share the on adjusted $X $X.XX. we per to available a net loss

day-two economy. X, results impacted severe our increased CECL Our most which on We to by the credit was and more adopted pandemic-driven our the provision, the day-one disruption losses January by $XX made for XXXX, allowance by adjustment million. were elevated

loans. an March, we a to $XXX Given allowance economy losses for in to the losses our total credit bringing for million of our outlook increasingly uncertain the at for beginning the credit end provision quarter, of X.X% added

and of and for scenarios, utilizes as the outlook blend Our not XX% shrink in quarter, XXXX. of our moderate economic base case reflects believe severe We reflecting the will until Moody's by current a allowance levels prior today. annualized of second production to CECL recessions, anticipates of an returning GDP rate

that regulatory the capital of the two-year are for The credit of and are CECL. XX. phase-in disruption provides focusing adopted subsequent impacts we given We the delay three-year on, page relief for on economy regulatory exposures

national hotels flags to primarily a $XXX amount are by and strong in of the New properties area have cash and the Greater value Metro real XX% flows. historic have we loan First, York a operators exposure, to These supported that liquid have commercial long-term estate million. in of

been the in commercial to million $XXX clients we real $XX small hospitality We portfolio. also represents have The of estate outstanding. and have or working XX% real overall a estate of these portfolio, with portfolio restaurants of with million our secured balances X% modify

tenants anchored a There of past and retail Metropolitan book exposure has and majority estate XX%. other loan-to-value drug, by these weighted New of have the our The York to commercial essential real operators $X.X of in are are amount Secondly, in billion. properties and average grocery, essential traditionally had month these malls Retail has our centers regional nature lifestyle and the commercial portfolio coverage. over real strong of this portfolio, service of represents the given estate loan or have X.X% the operating debt in no properties anchors. been

We balances of X% are portfolio. to $XX working or modify the million clients in with

XX% portfolios specialty of to $XX,XXX. finance represents portfolio. in are $XXX of total of total transportation services the ABL modify balance, outstandings our are transportation Third, balances towing and million to businesses $XX $XXX we X.X% the have industry. average such million national loans million The an these working have we localized Of maintain to smaller that equipment loans, and shippers. of to as outstanding exposure in Transportation or this majority

national that finance loan is outstandings, to by and during $XX to equipment, quick and portfolios. our operate primarily have estate $XX and the to ABL low continued real sector loans Fourth, through larger, pandemic. modifying in The secured we and of finally franchisees million exposure equipment and our business very have million oil gas the finance we're service franchise are

grew Turning targeted quarter on shift to first pace revenue over by we asset past this portfolios, reflects our X% slower year relationship-oriented adjusted, growth Recall our for performance is over our the of commoditized into net classes complete. the pre-tax, XXXX. transition of basis, an out pre-provision, quarter, essentially

growth From quarter was loan perspective, sheet for a strong. the balance commercial

portfolio loan commercial portfolio same period on increased year. XX.X% annualized X.X% fourth Our quarter an $XXX XXXX basis. grew of the last from over million or The the

Credit fund risk-adjusted originations are estate loan certain and in targeted adjust returns. currently not our new relationships we hurdles. return spreads commercial allocation, yields asset-based we that capital for only real will finance, loan achieving yield and sectors commercial our lending in accretive As

loan Mainstream estimate commercial environment, Federal the in the Program Reserve range growth. rate what The full-year. selective the net low characteristics to will of for opportunities viability in enhance commercial very historically we should be million $X trade be billion market we $XXX the fund to and for Given return growth middle we We superior borrowers.

deposits lower has subsequent runoff traditionally by given quarter usage rate core deposits, the collections first The tax from municipal annual in in a resulting growth and clients.

to the present, into we mid-March We bank will safe balances also our seen the have channels deposit moved continue match clients in the havens. and over over approximately encouraged flows increased loan to been funds and X% funding growth year-over-year. quarter by of deposit and deposits growth have the X% as estimate Total year. expand the digital the linked increased market course from relationship balances Since We'll have deposits.

and in Given funds this curve, net rate in the yield downward historically interest low shift the quarter. dramatic Fed margin declined the

and significantly. in yields the over to we XX basis to the linked bearing of to as decrease the end the Loan three points XX to date, stabilize by declines to basis total cost costs eight quarters of year margin declined the next as a funding declined asset to short-term to down on basis income decline allow points. basis focuses points nine points. each declined match rates Deposit have quarter basis with throughout points should and XX liabilities taken due to cost our expect Based year interest accretion we yield actions to XX funding decreases. declined the the us in XX This

strong In debt per senior maturing deposit to through issuance addition with note year wholesale our portfolio quarter. in loan of Expense quarter the to purchase and repricing, December. debt the flat pre-funded increasing of Core $X fee by over including by we in that closed $XXX were the fourth fees XX% commissions, basis reduce lease the to quarter points cost turn and and in we in the sub balance operating was of funds XX levels in million million primarily for our quarter we senior June our the essentially linked prior-quarter. income have expect income acquired we

may provide peer to It support added Our best colleagues the is in result our increase most efficiency essential during time, of temporary level which continues in banks. to and a clients be difficult among to costs. this

will superior in continue to making we long-term. on controlling we expenses and However, can to focus the investments ensure efficiency where

by XX estate, in by were $X credits We equipment and similar environment to or and million given loans. this and future. basis offs more substantial, loans credits to in risks of one million levels nonperforming year in declined commercial real $XX NPLs aggressive moving finance. increased substandard ago, the potential the points ABL were Net-charge quarter but Delinquency driven

on and CRE, XX, XX majority our equipment significant finance and portfolios the provided have our represents detail of We loans. criticized and on ABL pages ADC which

given are relationships. exposure, with underwritten individually comfortable of and portfolios collateralization diverse these borrow industry levels We strong

remain ratios leverage ratios was XX% X.XX% holding and were at company X the assets to tangible Tier common and liquidity X.XX% Tangible and Capital equity at strong. the bank.

similar at with have range a of TA at year. were X to and We quarter the losses, throughout X.XX%, the levels will last Tier meaningful loan and for this the TCE Even X leverage to in X.XX%. allowance to targeted minimum company capital of build increase holding

the is X.X have repurchase During although shares, known. the impact share suspend quarter, million temporarily long-term decided our to repurchased until the pandemic of we we

bank Majors, of billion. funding, with core strong wholesale Our FHLB liquidity Reserve and levels low of are borrowings, nearly untapped Federal Liquidity deposit cost funding credit, $X extremely lines

to exposure In committed addition, minimal unsecured credit. lines we of have

summarize and of provide want to for what To points. make quarter following the know XXXX balance thinking the our we today, for the I

are for We profitable. points, XXX return and on On XX%. on a quarter pretax diversified equity basis strong tangible basis the pre-provision and a assets was return was

based portfolios of options we allocate have one have area on that highly We are credit to multiple and ensure capital a dynamics. mix we not concentrated to diverse any that market in

mix which We earnings, have sources continue capital, cycle. robust of levels in diverse liquidity this a of substantial will and

years. ever tangible strong net returns book over dividends through significant generated capital past with earnings nine of value $XXX historically have approximately the We million we after and accreted

our of We the performance. will thoughtful, ensure and strategic high proactive level models meet with adjust to us facing challenges continued actions

in tangible grow XXXX by to digits. single value expect book We high

is significant many one decided we challenges the the would of and basis to market, past leadership pandemic one. allowance time through goes this team has successfully XXX to will Our on. view years why points XX prefer the provide cycles through to upfront the navigate the as the on that It's to a in given been go reasons with over our buffer deal we because we

Finally, I colleagues and amazing our want clients. recognize to

other, very to Our value, to add to our find each provide this colleagues adjusted service quickly ways great and support clients. and challenge have

through most terrific you them. This Our the time for the is partners and will us we when our working have been clients deliver in economy. unknowns in need

challenge, in based us that and we relationship be team has create advisor confident defeat an fighting prospers that comprehensively all will economy this Our in future. find to a am are we enabled and I very hands-on way the thrives a confidant. to collectively model

questions. for open line let's up the Now,

This Instructions] Jefferies. [Operator We take now of Casey our can questions. first from you. comes Thank Haire

is please Your line go ahead. open,

Good morning, guys. thanks. Yes,

morning. Good

given the the finance, were it construction these little you asset-based like were just portfolio? from equipment Maybe lending, aggressive provide sounded little on though. was bit more a you a guys a color just in acquired start were secondarily, off seeing and portfolios? on then Could migration, the amount environment. It credit And what you decent

we what see were Yes, so the let over it through I'll me cycle. credits future, start off, Rob we in moving then given about this turn this. and aggressive on to very One,

So, NPLs, moved whether it's aggressive wouldn't be we substandard moved in cycle, decided we normal and of but what a have through to probably this time, process. in we the half

The secured credits. NPL being other were of would all the I tell you is, side increased credits that on up the ended thing

collateral have lose the much of these them. on anything of The We on We they extremely given is we we're in low. very good all ones through cushion scenario. if to loss don't a just default believe moved go default of going

over this. with to some that, and color Rob, it add to turn So more maybe I'll

Sure.

and we did more of was It's from is most although already in that of highlight reasonable. is been were portfolio. as The And related. a commentary, up that's not transportation lease the There a it constructed. increase, acquired they than was now. in of little terms then bit it construction, the a ADC, that terms up it deal slower In expected, has NPA but really of the lease --

that nonperforming. that’s into was a moved are It Now, it. pretty COVID was want going particular. The of in we and with in million in anybody which dynamics deal, [indiscernible]about that's industry, from we change the them bulk so anything so to $XX particular extrapolate really the diffused why ourselves good deal, though, don't a to of terms that nor

where guide it growth loan growth And side guess sounds Okay, on over the guide, here what of the well like versus kind hurdles, first so in then on yields and -- versus categories your X.XX% quarter -- then hurdles, money to I switching loan hitting hitting there's much great. in of your X.XX%? NIM the yield quarter risk-return those and not so new that's the fourth as categories the origination just the are your and are

out that Yes, Casey, there but like be -- across origination Xs there so identifying target, on new the high selective Xs opportunities our that what are those. it's we're have we of in the think it's front, about - and portfolios, to yields, the trying so to is to you low entirety

it's loan selectively over than are that it’s all whenever in a another XXX the board spread credit that over that. we're to points XXX portfolio across find So, basis growth, portfolios to we're necessarily for from earmarking points opportunities the perspective, one be just growing not going we better particular or basis

So bit pedal we credit credit yields, full the into little essentially maybe spreads on to around doing going little types of We anticipate we discipline yes, will The when that fall and execute focus the step sense that again talking we're off as lowering regardless where deals we industry that, that there. particularly about, well, reason of guide we [ph] asset to profitable to in just spreads, bit and make for many right to want a the activity -- that more the continue sell relationships trap we going is related order a essentially we're to are in to yields, need the have origination continue don't over mindful, a agnostic very get to fact time. are accelerator absolute And be to places the overall of to on class. the that find to respects, and that. maintain would

a one Jack clients -- a also of amount There's are of our component, programs, Street alluded Main eligible going be being various to, them. of to substantial borrowing for of our as borrowing

we over to of those to these the to going forward. offset continue move programs unclear that and envision going But Main particular in to of some originations it's have are how we that year uncertain how work, had is and going as to are we the by exactly some of work. as portion do programs Street to course So, would continue be

how think, that, to So, there's going pipeline and more on of little impact the we able going be those to a to bit shortly, be our of around more get details we'll heads business. are

On – positives there’s the NIM we front, negatives. are the and

portfolios. substantial that concentrated we pretty which $X largely billion floating billion Those was continues $X in asset swap lending, -- are going additional early a in commercial that saw That billion started quarter. and earning felt $X.X quarter. [ph], -- earning pain asset rate our we've part compression driven then obviously about of loan so billion transactions real converge in we funds are that That's to lines lending, that four the traditional LIBOR it as the the in estate are You and have. second quarter. see in warehouse lot of multifamily downward towards to $X.X first of yield to the loans by billion to C&I, first asset-based fed loans some There's to have of the pressures and be $X.X business

across that side. re-price being we do that With that this said the pretty the liability and to the the us meaningfully opportunity -- negative, funding positive given on -- board the also has we've that being also everything

slide XX weighted provided average liabilities see think of the of at X/XX, cost be that when getting basis deck cost to the a exited good deposits the guide on funding relative XX cost weighted in basis about average the spot difference you cost a in of how to there deposits what quarter we and you're the the funding we funding So pickup between a about consider where to quarter of points evolving basis liabilities first reduction. for point funds we and pretty because

to that down. CD and see going And because We're our foremost, to will have book quarter first continue you is re-price going to that to to happen. the over things continue second continue three

basis We of billion on the in in XXX to have and or billion over -- points, cost re-prices dollars that the just yield $X of today CD. between average a the is second CD are term quarter. going to they of XXX depending about where weighted And those re-price the another difference average CD the the weighted

funding advances FHLB FHLB about of had relative average The XXX cost, cost second-half another curves the board, you pickup the the we that There's across the weighted advances FHLB on is points basis FHLB year. billion essentially take about in this second million is the to the average. of that the mature on $XXX today quarter. if rate of mature Second in of

all component the is in starting that And consumer well. deposit rates particularly aggressive month down, down third to as been client in of started we March cut meaningfully have pretty very the cut the we commercial

not are with done that We yet.

the going are continue the the the over You second-half quarter of to and that over year. see to happening course of second

liabilities, of the that closer which a average quarter that basis think of and funds to to points cost XX total XX basis. here and the of we the points, in end average weighted to basis weight year was from quarter first exited basis the funding to XX on points is our -- We targeting that that So going basis XX points. we're down get XX at

to So is about our the what re-pricing as and good stability of we that XX basis year. is points NIM of there that a we move to $XX rest meaningful liabilities, going XX happen is of on will funding some create through think the billion pretty

Luis. Great, thanks.

it the nod bit, level. more, it from sheet a doesn't the, a little there's - it lot sound that there's is so of ratio, say, seem lower like PPP to to Well, doesn't of sort growth one lot balance TCE I like participation? X% X.XX%. coming, Why XX the a down don't Just just erosion -- a

to company today TCE from the on like Based Yes, the essentially two we go to at allowance we're combine at X% X.XX% allowances at. it's stand to company established if running run a you the been that capital where we've not of can last have the years calls, with are we we ratio back hurdles when have ratio. the that we guiding $XXX earning have, of probably you plus really to plenty lowering, to comfortable price, reserving million capital a so tangible capital direct what relative in -- we the

to buyback tangible we decide be where that isn't capital we we kind anything, ratio where a be the when share decreases. capital running clearer, if a running continue about to fact comfortable this we it's or to either we that But the position exit there pretty actually the because because losses. lower common where ratio the of that are perspective So robust becomes would in still than have gross say think a turn relative fact would the TCE about the excess pointing company we to company, we the ratio back get environment today. of the not or the from comfortable we as are per at decreasing It's

want to comfortable because we minimum year. the is in emphasize just not X.XX%; a forecast of lot our miss build same that the it We're X% to in point that that Yes, level will with. for have capital that anything, saying just we're If intending move to the to total. write-ups we're

want on. goes as time So to we capital flexibility create

just to sounded clarify. way. you. that wanted Thank Yes, I

Thank you.

Thanks, Casey.

Thank comes you. Sandler. We to can Alex of It now move Piper next question. Twerdahl our along from

open, is line Your ahead. please go

Good morning, guys.

We Alex. butcher -- your they name didn't didn't too badly, morning, Good right?

Twerdahl.

Yes.

to here. dial me in, minutes took only about one, new to A be I'm so XX happy

Yes.

weight scenario you to seems could going of justify, Is fair that here, scenario, whole thought way the severe as reserving about could you here? a a to guys the crisis. result about potentially that to to much me from guys this tried possible then pain and it frontload put me of as guys you as characterization back that could you as as a you seems It the tried to that that on much -- took reserve

fair there's right. there, there and a as That one think well, everybody so uncertainty as caveat The characterization. being still is -- said we has that is out

forth possible content. as of So and why into very determining them have on as we classification That end confident things not of hit and COVID-related, approach quickly the you so the you grade. kind of you the head that when the we -- have day That's always that been the advantage essentially have think can. we taken were didn't are of like we book cognizant things take going that of we're additional migrate we very this some credit and behind to better it's to go in get of composition you through charge-off environments these always are the business, fact

pretty are portfolios been have ones the that have -- you which going to We that of some know are content. lost

have that our from again incremental environment, forward are is from our now done very because modeling mid that forecast was have based going But assumptions others scenarios that different what say reserving for how those view reserved. a that been to a think going Those of a forecasts most of we are we're do happens which our forecast on off change. fully just we have to in requirements to not we -- and forecasts, that we're we continuing April And slightly I it based were, macro part not have depend there will what use just portfolios data, the earlier on. perspective, -- timing

we little in up-to-date from So bit the a used envision it it and we making we have we again assumptions more little that do essentially do where just all ahead information were a draconian macro. think gotten things because of more were more that believe we bit we and

why I good secured what with back, and reason enough you this One, the other done basis, getting one we we've job a lender. are comfortable have is The done if a not on we're points across. of step that of

that XX% is in So is real within about estate we and margin. and total, C&I coverage One we secured a have debt service loan-to-value was a commercial have two a XX% big of a portfolio portfolio XXX, that's portfolios.

have lines committed unsecured many don't of like credit. we things So

rates. that secured, our the because had of secure are lines on to credit we majority -- them the the amount assets as and based the our credit all of of advance of draws they're minimus So of credit lines on of lines

lending. We don't much have very leverage

we and small three leverage degree shared frankly, a SNICs, virtually so have very some the national four and have we but amount, times no of credit. have deals, We

less of the portfolio. -- we that -- mentioned challenges past. like to a in around comments, So diverse type the table secured I've With although this been have tend bread-and-butter the I as be all system. Not take much our than as it estimated, one, similar and economic to you case says doesn't exactly but experience then this as And can medicine gets the to forward with in you bread-and-butter, but this leveraged deal you around of said, going shocks upfront, us that. it been hopefully better in have

tried to earnings to is and as use this we're benefit through work the thing. about So experience have said, history the see Luis look we've to And this. at able we now all announcing models been

very So are and the you. directive, -- up-to-date we're numbers thank so using very

And loan you just so included of your instead go and then if acquisition. just the think sort many say and X. reserve a that then as characterize would on that knowing being the those were acquired Is about Great. reserve had X.XX% and X.XX% to to of there a on marks marked of kind I today, portfolios of there, way you

Yes, about XXX about closer to points get still to XXX. XX another XXX, to basis

expense And XXXX. And versus helpful. loan it guidance targets, service expense going of that hadn't forward you up really the justifiably very as changed. stacks you Okay, it as I this then about think the think about cut and sort growth for is,

of was kind development business expenses bit However, on business growth and know if in have of loan might chunk that less than in we the the expenses cetera good wheeling to development the were down et into rationalizations, growth more it side come little a I guidance? be loan shouldn't side, a supposed branch

frankly employment We to moral thing Yes, ethical right it's the to at way we've create quarter. full decided the Alex, looked do. because and this that,

cut would personnel. economy quarter and along we turns adjust in around, and this and the the we going fourth costs normally the not our quarter quarter middle models get through expense in the of into quarter, people we third way. this hopefully, pandemic. cut I'm will to So When the

going a assumption think little a to of that by about of the more happened the that people imperative and against in need of one businesses So, put the businesses this reductions bit but like time, and I take be care moral period from. less to to expense nature there's during things your economy, to of we what's have your people folks take they're we of is

how that's we see it. So

in particular those through we're will this So, our particular quarter, in year-to-date thing the doing how We're this just, so view. that's in improve right and view we the year.

that's there's anything current if through. But that the that all of we're on actually been been has going out did positives I anything come any bullish more that many we've providing locations financial need level many how same kind on the have positives and centers return continue and this. of provide how through we're situation the the actually and as you that to of to services one operate to clients value been

entirety migration onto it's the our the from to we to seen, and by continuing we've seen a the use financial footprint. substantial, tools, to traditional folks rationalize going fact financial becoming and as of a using systems of our amount online are, have opportunities that been encouraged substantial seen banking we've we've very actually So, the that where clear online centers

consumer as to, going Jack on, to it's that actually it to hold point up it it's as This we in actually particularly that number shift essentially a locations what be continuing make of substantially what the than bullish if substantially more continuing to and can reduce even rationalize businesses we've time to point. to the, you to been. longer-term, and not to up short bank it's more that us have not we the we that than until to we're of be how going we're decision So, made what we've expenses, putting staff this putting work aggressive we been this been anything, all this alluded but period than efficient on not continue more continue our we're through we're for it's not our to has of proven

actually long-term, this a great opportunity. So, is

Thank my questions. taking you for

you. Thank it. Got

Markets. Capital move next we along our Thank Steven RBC from It's of you, now question. can to Duong

open, Your line please is go ahead.

good Hey, guys. morning

Good Steve. morning,

tests you loss you Good what morning. those? and rates mind so if stress guys do your Have giving us were on internal run recently

instance. so we think we severe have to than board. severe kind Yes, are scenarios we the we scenarios we detail driven stress very really and or maintain out, have substantial stress of run not this buffers run environments, devolve that more in we apply comfortable rates, confident going loss because recessionary rather run severe tests, we recession that provide modeling capitalized and to But necessarily even that we're the DFAS are Steven, and on not across continue but necessarily don't those have OCC scenarios threshold than

having the being of get dividend and trajectory things we you've PPNR ratios fact balance substantial amount being profitability we the very, place to where capital internally of off one very of we the have as capital not big that decrease shut So, or of the have that generated types sheet a create we tangible that if quickly. positive a about payers, growth,

well continue well. at capitalized under we threshold that are levels capital our and run even So, requirements what above we're severe very recessionary internal that confident above that could we're running, scenarios well as to

primarily to rate much PPNR. sense stress curiously of And affected is Generally at just it by just well? is to? And your the a there as peak you're trough that of PPNR these a purely your scenarios delinquencies decline goes is in looking how or when Great. from shock, from

PPNR stress continue period scenarios some that's mute that no steepness is the we you phone in a continue like extent prolonged decreases over the and the by will of if we a get margin to part and of primarily you you for that have mostly get of be of rate environment place amount or the the curve, three a now, mostly for where to place weakness two to be XX% that are a it's it's don't of shocks imagine, continue could any to to on you from, comes steepness or both, you put feel from a going to as that you kind window, it, where in and to you right second, of two biggest biggest do combination a the of curve, model that shock, and the some with so time rate out rate pressure, pressure about where one It's XX%. that have you to we're to kind extend where to we're severe really three-year period like if sorry,

XX% right? that to XX%, is

Correct.

Okay.

That reset. is bigger

is for points clear, to XX% our rate recession business and type to in have lower So, continue to essentially XX revenue we be envision severe a dynamic like about five-year little us. bit That's when you that's points, have but modeling, continue forever the not of pressure pain we're in cause spread of with between as environment we somewhere at be is treasuries we on through scenario, clear continue to which what to that real what are fact scenario we XX so a what in be a basis think kind stress that, scenario do happen, we going would in about that to to an model is or a that of environment the XX-year be of move XX% severe an stress the, our that that lending the to that truly not would generate that. but be would

XX% through and that a rate decent XX% guess, to we've I shock, so and kind that's is of rate already Right, amount a from a gone shock.

That's right.

is baked in that already, of to kind fair say? that So

definitely it baked in rate the is floating on baked no doubt. into, loans, It's

three quarter fact is the part year or that window right. you Now, one points, that the for under not also is two I baked it's example XXX just origination and that's worth basis why that's the yields, XXX, first say in that in new over

of type some margin we it say, that higher but book than of perspective off, would continued might as where we absolute compression rolls from bigger there the were the be have the have business of So same necessarily spread, a of not doesn't existing book the credit yield class could business, asset before. having

that factored that But would that shifts cause NIM easy. essentially to not of could levers to we that some was balance long-term. asset difficult some from that no side So static you liability the that are would into doesn't answer, sheet pull XX% assume move too question No type alleviate a pressure the an compression Steven, that are on mentioned there longer-term to doubt those compositions and there's always we that it's of I that environment there's various to continue perspective. but really XX% so that both that on portfolio not assumes

great, appreciate that. right, All

everything, with luck good Just thanks, guys.

Great, thank you.

Thank you, Stephens our we question. can on next Inc. Please ahead. to move It's Matthew from of go Breese

morning, Hey, guys. good

Matt. Good morning,

were impacted. just to to to it, that you non-aggressive like like not latitude or NPL? reason forbearance been versus the pre-crisis as think I that interpreted Going identifying construction that loans I the talk to occurred aggressive interpretation Rob may use COVID-XX bucket the the loan isn't sounded as the versus here? substandard have you some of for necessarily given I put COVID the can you even mean, And about is has it decide pre-COVID? loan is, forbearance the back you've didn't you were impacted ask that put mentioned, could that that into of you process Why migration, but deterioration the loan

at correct. saying you're and we commercial pre credit are run as information just that. to we're with to those every the forbearance relief. time, the we our with that saying updated and the with get that's if decided everything buckets to fact potentially tax for need our what this and that a those four and credit and to we of Matt a a as individually, decisions some pre making essentially going credit what going versus workout returns that that. because financial sense continue have and them do these doesn't credits. need current the the of We're those at business harder rent getting perspective, the through they that those models business looking the to quickly dynamics with this have this We we're do just viability with to with type the back money them those managed prep for COVID that individual executing be credit credits. impact something quarter. through just agree with we and essentially and of long-term But focus decision or position working the we're for that why not. one make we're will banking were modification will of taken We're teams loan as are line to did the obviously because at reason or and pre-COVID, understanding looking as factor The that's was borrowers. process into we whatever we of updated to we're business. are to becomes a their we We course mean estate, not means credits what that fine essentially migrate that that saying not. getting a work possibly we We're will that projections on be the and can. because we help essentially migrated sound situations true decided saying And everything putting essentially of We're with folks just draw you deals grants, three of looking rolls through multifamily process, collateral position this is a makes than prior we're to doesn't as in credits and we able well. determined it don't defining that to taking but migrate essentially is provide that real are long-term That's whenever work through not on business forbearance -- that food run credits as post, migrating on absolutely post getting to Don't not it are long-term, could getting said, could what updated consider we to and taking We launch our have commercial commercial provide the approach saying credits to from and are, from we underlying versus and the want the going a Do I things pulled identify that same at everybody. our borrowers credit in not

Understood.

Okay.

the your April Moody's to few to of the in from data use provisioning, mid-April provided the much there You economic data? the a as and outcome using the forecast updates, March was banks quarter the in one the difference and of late provision went you were through how

and is a essentially we by forecast of factors right. that Moody's XX%, for Moody's Increased banks through fact challenging new that about a producing that this the and and every one through the scenario use went of all time, went day, period

the April. Moody's forecast subsided on see to you were Those is sand mid-March already somewhat to has a course stake assumptions scenario in was but grade in changing kept to the ground some So, - and been finally the with we that reserves of has where in put model that, decided it's is impact, the worse changes relative to to we Moody's there and getting scenarios of started macro models over and of see started deterioration, decay to level the on some assumptions out started therefore kind say of the of with. already. the continue running the more some subsequent And use. March the a much into end you of line We April in that had and actually scenario going where we're that XXth that the some come with additional kind

most So, as and of could we over manage the ran we go have as wait we'll the COVID, of the them year. purposefully that ran scenarios, course the to information. decided to recovering essentially long as the to impacts multiple we get included scenarios continue updated We we pretty

the there look page at reserve, more one one stood thing the XXX. than which okay. help on just Could is Understood, CRE, bucket, a at me is versus I just the as C&I would reserve out understand opposite. be better seven XXX% portfolio commercial about buckets, the would that think on your you level to reserve C&I And different traditional by is the real I me lower breakdown estate? then it your that was why

in the look loss C&I. content we've at historical So that had

bucket. embedded medallions, which If that C&I out traditional you take in are

borrowers long a and butter, a through we have under banking bread had that do. doesn't is Those our banking. cash there. losses strong And The all input bank commercial and -- for traditional this. of flow stress commercial that not essentially even with that C&I very, get and portfolio zero where of bankers relationships managers tenured had are We history relationship have commercial is dynamics have very the underline we severe that in

so lot little whole bit of before, of And in was Jack a unsecured about talking we have a C&I exposures. what don't

with adventure. substantial of for of It's of base the that a accounts borrowing of being part basis chunk receivable. off on off most borrowing all So, based is driven that

base that's maybe specific you unsecured cash after So has book content loss been, booked has is if the long-term that aside reflected been the throughout, like reason is not is set not, strong and verticals flow medallions, in model. content the where loss the which funding, very, again, that's nature C&I in some very the

of in impacted seen the that one severely mid-March. On where as portfolios numbers CRE that's portfolios assumptions of by the of of you one change, would that. the the we portfolios side, was listen where that forecast have most is that have essentially I to were - the one running the XX% that That's alluded you increase

that So history estate been put XX% the record the has track that with forward. we various estate very, at time or banks very portfolio we changing that macro CRE a scenarios in of always modeling been we is very lenders. in strong The a commercial very felt all that last stuff, legacy has assumptions, vast assumptions performance providence majority a the is decade portfolio real merged of had bank good. history and That have into commercial the and increase as over that under that macroeconomic have as shift acquired throughout of real well in of been good the have as all that

what bit you time? seeing one good. couple the of I Last books accounts know aging weeks on starting for terms you talk Very in look Is deterioration have folks the seeing there or stretch Can at pay of there? And business. of every you're on and me to receivables? not the a you little are about a just receivable just any

first, answer I'll I'll Rob. to So and turn it over

seen from you're see course perspective. substantially. of the we -- aging we an second that -- over is and third the and so are quarter balances that the the that think have seen are those not pretty and to to deterioration what What into I trends going going have we migration decrease quarter

or in an at the of from you finance decrease XX% XX% end the a about So and our well period balances our to both there factory perspective, as as balance perspective of of volume surprisingly, of have turnover the isn't has being you're receivables kind there that of going look if when on. being services and Not produced, an economy are been payroll today, financing average has businesses invoices to down shut factored. to new the provide less goods and

this financials you'll of until point receivable. So have on significant actually that, you hadn't started no we because up to factoring continue until payroll and this we had point, their seen pretty see delinquencies to We requests been collect to yet been substantial. a modification have volume the accounts able has a in aging that decrease see

clients as we though Yes, retailer would than there and them very sharing a our are you we that imagine, have more are where done factoring past closely we the with are working few with names. we very, business watching risk specific in the on accounts in

exposure. watching that But on the factoring side is around we're nonetheless, Our exposure. closely exceedingly is of total exposure $X million it

guys. Thanks, had. I all that's Great, Understood.

Thanks, Matt.

move KBW. along Thank you. to Gilbert [Operator our Instructions] next from We Collyn comes of can question then

line go Your open. Please ahead. is

morning, guys. Good Thanks.

morning, Good Collyn.

did start on reserve you just CECL you baseline Moody's - in right? input, adoption, adoption, could April outlook? that them use and their Moody's the Is so I the your did If

Yes.

right, into just recognize just their have this, baseline more Okay. what know April within outlook guess I I And they but baseline did it economics, that their even you baseline quarter? think that, April in so with to your I I deterioration in March is But The was, more first even was think it within parts the is but it's than I'm so could even see scenarios guys then, to other where even severe what that. their of that, XXth, reserve we and going weaker again, the queue mean, posted than that what April set reflect are. greater quantitative increase their XQ, qualitative in I perhaps to what going than reasonable

What's reasonable another. person reasonable one for not be might for

impossible is something but answer to that So there me question else… that's for an reasonable, what's it

I say, relative Sorry, way on you just at your the to was -- with just to going looked where… based have it guys

that's question. the So a to way better phrase

So, about it. so how that you agree the thinking there, with way I we're

a aspect -- the to that has a addition qualitative has it. it to has aspect. two CECL components quantitative in remember It So, and

see we're -- pretty today be factors. estimating top the potential give put CECL is you Moody's of going risk approach content. using So, portfolios of there on that, to models specific models for where the and the qualitative some to quantitative On -- incremental we how lost a significant factors find kind for loss and the we we it the

reflective Could plus as you the We've models not portfolios. higher to places that how allowance allowance equipment So the what qualitative we're have issues said, potential, to us, factor rates small the is that incremental lost is not loss finance uncertainty out Moody's than coming Moody's the numbers coverage saying what lost what is in -- earmarked to we With the the of substantial this portfolios you're know, there. there that right, content because in -- that to we're asset telling the going Yes, greater to uncertainty is is higher which of with there ratios say what up seeing, the and are the get to we that the with exactly have There's absolutely. front. approach a based Moody's those reason as of is play we loss get balance suggesting, is models lending taken of are which a have that where out. there is on be reserves? and kind it's of coverage lot is the the that that content it's kind the

we've much. So tried ahead that. get We to of very like

just the net the carrying we performing small portfolio business put to I when example, pointed slides, For a of par transactions today the of in and of couple is non-performing small and you this factor balance a out over if XX% value. business

we've get perspective to be reserves, quantitative and we So gotten qualitative lot there but pretty view a to to to not of on a the that say we ahead from a won't more that this, are taking of the got numbers conservative reserve.

modification Okay. but you of deferrals this, requests just I the program. $X.X that And with down you made of increase much I know the if and versus there were the then dollar that in alluded classified, PPP? there terms sort your of where also don't PPP and to know you're break in billion then, in criticized modifications of overlap seeing of that How is the

Yes. in were criticized. With requests modification the that

So let answer me bit differently. it a little

you multifamily. portfolio imagine, in commercial estate the XX% type as So would of is real

percentage $X up larger done billion So the of until the real commercial in month estate/multifamily portfolio. we point that have the of this reside

the So one. first that's

side. C&I on is one the one Second the where it second is behind

some solid they to more their to C&I get is that in reported have time, be vocal and to businesses way will working to for business, back needs some this finance inside have of is been franchise going quick make that to franchise this. going service restaurants. are going amount to those all going but -- are provide are through be portfolio capital that that through pretty this we is Our which to is quite concepts saying and modified footing, be There's of a substantial largely there which also

say loan over bit portfolio modifications XX%. of So let's the two of the components the XX% that have, a little

of today real commercial are franchise, then business. XX% modifications the franchise about So, multifamily, the and loan finance estate,

necessarily modifications pretty of portfolios one are we've the there, of the we've we've The the have financing public our was On have no between but perspective the construction which split modification loan book been point. asset and evenly the equipment lending, criticized requested what apparel had side, at classified split based They're -- no evenly either. from we migrations warehouse financing, had, lending pretty did requests the then not of been this not had modifications the and approved, finance, that ADC on one - had was of factoring side. on rest

us is And helpful. construction the remind That's business? the in of construction the can sort your housing Okay. Thanks. side, book percent what tax just you on just credit of

XX%.

XX?

in essentially those in XX%. essentially affordable income our of Yes programs we the are own low housing XX% are because own longer-term. our we we up the housing ended investing where credit projects, takeout tax

to that taken all that is out project. doesn't risk developer reason, the finish project that running somebody the of comes is running, we're developer So and we're there gets the and in whatever for the perform else the happens

the loan a that investment, So construction equity of of into that different isn't perspective risk. converting there type much into really

close form And but a component percentage just the footprint with on portfolio. area concerned keep of which strong multifamily those or, rest X% of that developers of is in it the with LTVs, not very any is in that majority less of performing, so York, vast than Jersey, and the of tabs very we The how New New -- not book Connecticut construction, represents way shape or are that's book. the where we're

we closely, NPL conservative that not We're monitoring we have but all. at taken we're about we're So construction that the into migrated construction status. on transaction concerned view a from not have aside that book one

Okay.

I but side, that just live impacting first And And is more of you part gives let harshly is to have the classified guide. on do funding going really And to that guess that, the detail then thinking of the the NIM it as core that is kind Okay, you the over saying well. outlook then was I any the could you're What I are if kind feel is non-accrual the me like substandard great. how actually guessing obviously assumption end side, of up coordinator pretty get in drop NIM will kind of you than these you Well, not just asset the NIM quarter or mean to optimistic. going like in I second on loans quarter. two in then guess I sell right? by core control hear speak I'm see, status what saying into start the that question NIM. I that just confidence guide? also, or on mean,

see some portfolio. third so so where credit you're to be is It Yes, that to going continue second see by we largely to you're going that to going continue and the equipment to finance see small to migration are called going near-term, balance quarter. driven

that long-term are we are migrate Those will the again, credits viability that of credits, those not it's is to businesses, going the for decide sustainability not because those in little what doubt in we're than on of that much we relief, greater a business with we modification. right we're are the to now. and in going work because business of component how borrowers are to $XXX say or that provide other pretty but be to of substantially working talking through we are to forbearance portfolio a every loans about a essentially continue looking million bit of these make of at when that when So Matt asked were bucks that individually credits question Breese

already what already on them the an little talking income put and had March. about, were be in vast would out non-accrual So, our today already earning most in a of the which because actually interest impact month we the four of performing yield credits bit impacted credits, which continue majority migration all you're pretty to for non-accrual the see, you quarter reversed. not would to then on credits impact going payments see, that of an to have in go reverse into should that ours. We've that going the was yields which that the see we're are of from has the asset March those part of happened significant We

two confident? think we I there's are reasons. Why

very are I the the of talked still we the think innings that stack early stages of first foremost, repricing we early in about. in and entirety as funding

in The we impact since So financials the and not cost a spot you that have the XX the we quarter as and move between into to continue the points difference we've have between those points double this five weighted to the for where average XX it's quarter. quarter ever is that that seen the here, biggest weighted by and funds relative across average exited we've somewhere XX of we're the that quarter, lower to is funds basis been second this ahead biggest place yet. basis difference had, and cost in between get to lot, to for difference is, that, the the difference using on our of of substantially strategies pricing of board we move

did $X.X the asset first just those where Second of loan The the up of not component is we not the billion ended point in majority quarter. breached on where yields because relative asset hit, of loans no starting of loans. that in provisions quarter the that to rate floating have floating earning vast had was rate side, floor

don't continue have don't loan to going third do will a and those will of start but represent $X.X $X.X We loan I substantial some worth We billion of we continue LIBOR have down on floors reprice, a have chunk of we we that that's and of floors billion. to as hitting call one the to every approximately loans, move those. meaningful floors loan on that

floors get drop impact bigger start to to move continue from of longer-term the impact do of a offset in that loan you the perspective full the to of the LIBOR there's those though LIBOR breach don't second of starting where you quarter, in even So some down.

the which first accretion thinking we're the in on quarter, that fourth pretty is effect and stable be income basis first assets, way you it point XX drop similar the we on asset this the quarter. should the essentially to relative if take between what was earning saw yields in quarter about a to points second earning loans, and is including of as So it about relative in

yields funds unfortunately what the on that you to take of don't rates, have going cost yields that but cost the lower crystal cost XX there's in we you're essentially with of pretty than XX yield asset to confident in place than it some with lower, are and again, where always asset the lower uncertainty point a were where points better second longer-term. earning was basis the ball, starting in where already because of we funds, of continuing that, funds quarter from manage can place much dynamics, a can on to we're and magic a first that get funds, happens cost starting to move we types the be for So are those and first earning earning funds they asset basis in quarter you're second offset points of continue and you in that reductions the

the securities can you called that And book from how security there. I of forward? sort strategy and the you. you you, Thank the helpful. know was of explain just away just then some tell going lastly just guys movement that but for seeing in just That's the it positioning you're okay. book, Okay, your sold tranche

three were and total for assets. move fact strategy four forward. about we in Well, also the the securities that wanted as that's that one of. risk percentage that long-term down those had that amortization of think alluding things or premium the behind the securities the NIM been, get The to NPS that's of talking quarter a we've going million earning calls were the continuing to to we first was balance going past substantial We've help largely to the rid some is I is been to, $XXX sold of

have books were have been had or accelerating, had we waited if had you amount securities have So, time amortizations that those would aptitude accelerated. essentially premium yielded X.X%, prepay, run-off would would not on yielding substantial over to X.X%, the continue to yields of securities a that to would an we they that X.X% because when we and have just and start

percentage running continue at be that assets at XX% we down, quarter. were between earning XX% manage somewhere to to going we XX.X% total, total we're security securities this comfortable So to of the book would

of We end year. XX% the the by to will get

incremental some growth end we target will and components that, of year. hit of by also it portfolio, there of loan the of happen combination some but a do to the through course kind asset the reducing of over we're the the that that that did and do XX% is because to going going specific to be going of we're So earning year,

leave Okay, there. great. it will Thanks, I guys.

Thank you.

FBR. final one of take Riley can we B. from And This Moss you. Steve question. comes Thank

line Your ahead. is open, please go

here. morning. a on you Good right. level of and corporate healthy All the I securities. securities munis just have want Wondering, follow-up to book

Just is current appetite potential your for more misc versus restructuring keeping a moving wondering a from the what conservative?

is bonds a -- So good book to -- is, where concentrated we're reopening, a in, and state kind of a very shape, know, of state-level that it or grade able general in going the amount that portfolio of you finances like they're there kind particularly credit the the be and -- largely obligation we are substantial state -- municipal the already finances through state with high are of weather -- where to and this. as they're have

senior XX% of that are holdings muni about are the perspective our on corporate strong have, So exposures concerned we side. majority institutions financial other subordinated book is debt from we're very, shape. of the composition the the of not that of very and side, the And what of securities on in

-- a what we have today. of mix we you're So perspective the from to changing of restructure not book us the see going

portfolio we not we're the are risk of perspective see to concerned reducing at and reducing more risk components, of reinvestment some -- we to continue the from premium We but versus on going point. amortization reduce are credit this the risk concerned

helpful, rate, appreciate I terms believe And it's I billion the approved. that. then in That's $X.X of were modifications

requests number what's wondering the seen? that of Just you've total

total is that twice level. The about number

essentially on the each approving it's individual underwriting we portfolio. decisions are as of working borrower. And modifications said so our total XX% about taking before. way we And it, through for We're

some that those do it's work take it. time anticipate be of approved. will We through so to going our all And to us way not

have too, understand that people we don't lot a of need asking mods for And mods.

mods. for have there and structured. to other continue are And imagine, of There this It's same why like management number the some the and pay a have would So process. you kind it's that's the you that as through thing. It's the are need, they people to the part thing, sense we'll a in been number. there's of program, in that and are But others. work X% as liquidity great PPP But truly program. apply is the wouldn't financial good

what then terms any or if criticizing migration this just just drove but color. I apologize I the missed the if loans? to of appreciate that classified portfolio, I wondering couple I particular ABL any quarter, this, And in segment there's a of was

I'm really Steve. sorry,

You question? was a bit. cut What out little the

Oh, sorry.

portfolio, in -- ABL just the of loans what of -- the it's wondering I'm terms particular for the couple wondering and criticized classified in that And this any quarter, migration level -- a So criticized classified sorry segment? or if of and

relationships, two was two It loans.

retail same the you that all, in -- have mean, say, I you -- and not but would get were "Yes, but they would it," at trucking. And industry industries not I

Yes.

much. Okay, thank very I you that. appreciate

Thank you, Steve.

further We questions. have no

remarks. point, So call this speakers any the back I'll at concluding additional the to hand for or Thank you.

email a have did we questions. of couple So

Oh I sorry, yes, forgot about that.

want You to read?

I mean PPP. was the one first

question was PPP on kind to Yes, balance expecting the generate loan, are to a those off sheet? come start we of what first so the the if -- was yield what

everybody so yield -- loans balance Yes, it's the are expected just that case, to and so hears in for come on PPP so on it, sheet.

approved. be perspective, funds $XXX So -- been there's balance first and from that between a anticipate to we million have of will all not foremost going requested that be necessarily

balance is average are X% that a our perspective. an assuming book consisting the are that in on million we're purposes X.X% actually of respective from loans of addition with coming fee of a to business, that hits balance assuming we of mix the we're how in So, the of which sheet, $XXX for and modeling yield fee seeing combination processing to

So, over X.X% loans about forgiven X loans, to period XX% X of get of $XXX months that are actually of quarter. we post those million a fourth assuming and

will million that fallen majority So the these the the $XXX the by get forgiven. to end loans the and that of quarter anticipate have $XXX we of of about of third loans million get balance some -- million to $XXX

PPP. on first question? And second question the the that's So

this environment our have in -- and repurchase temporarily buyback. the kind the repurchasing we in of What we interest start in question, Second repurchases suspended have outlook to be would stock? what reinitiate

Yes.

exposures on comes macro environment regarding every going we other reopen get change just to you not generated open where mile temporary. radius based to latest at -- capital obviously ratios one or that continue economy. we mean we to that So types of happen, to needs Midtown the about year is clearly we back we generate bank what the our are are a internally to York and an kind and when or our When of comfortable today, to a think of ratios of what's we substantial and we to regarding that we guidance are those do reasons have running with those essentially of that above forecasting in assumption as understand within that are headline That's we common and the we need loan as levels that Manhattan. say, book the of New XX "Temporary," the news continue how this week do move provided going the greatest of lot going amount to when how the a of we about locally next. City have, think capital XX we have course about are through tangible to From a you equity XX% we

back would essentially see York York State we And as essentially to our more economy. New normalized we how soon to greater to As and clarity reopen therefore, times that's on all because forward factor represent that we get in in to how continue in dotting and can kind New as things of City local be more position Ts for Is a the turning with reserves. and buyback and of going to a crossing modeling start again. move the essentially on We

to at point that guideline back that happen and in to some enable going a or path we envision where we quarter be So, third to we second buying get and going shares. clear get to to clarity, to is greater are will of able establish kind back

our this to And first we up, in prayers close other are affected by fact and in everybody need to support it then importantly, process. each COVID and most with and just thoughts

have think from business been for a in most credit allowance appropriate we losses. standpoint the Secondly, we

structured We in have date been we very have up how to this.

side, on feel So the the is next credit comfortable. very we

not levered things credits. These They We through. the secured we our arms that can are around are have credits credit. and work

the know the we We on as are also year types we the in we and what today have. then are comfortable for NIM progression that comfortable of lastly, on goes the loss stability. scenarios four And PPNR of any

from and be is this and So we as crisis opportunities so. we company, our arms like like and around go feel a are have we we the our forward that and continue and can seen have companies over levers. all period times of in like we the you long the What pull side to effective necessary invent we reinvented this company, will there to do continue to have change time

your So, appreciate and the appreciate support. we call

So, thank you very much.

conference call. you conclude will Thank gentlemen. today's That for ladies participation, and

You now may disconnect.