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Sterling Bancorp execs highlight future growth strategy

Sterling Bancorpexecutives highlighted their strategy for the company's future growth during a first-quarterearnings call.

The Montebello, N.Y.-based company noted five strategic actionsit took during the quarter, including the sale of its wealth management assets to Midland States Bancorp Inc., a capital raise of $110 million to support prospective mergersand acquisitions, the purchaseof the asset base loan business of NewStar Business Credit LLC, the repayment of$220 million in FHLB borrowings,and branch consolidations.

The executives expect that these actions will be fully phasedin by the end of fourth quarter, resulting in an annual run rate increase of 5 centsto 6 cents in its EPS, beginning 2017.

The executives sold the trust business, acquired in connectionwith the Hudson Valley Holding Corp.deal, as they believethat it was not scalable or part of the company's strategy moving forward.

The company closed four financial centers during the quarterand plans to close five more locations by the end of second quarter, bringing itstotal network to 43 branches by June 30.

Additionally, the executives plan to continue investing in personnel,business and risk management infrastructure as the company is now above 10 billionin assets.

Jack Kopnisky, president and CEO, said that the company is confidentin its ability to generate a core return on average assets of 120 basis points orabove, a core return on average tangible equity of 14% or higher, an efficiencyratio in the mid- to high 40% range, and strong earnings growth by the end of 2016.The company plans to accomplish these targets by delivering commercial loan growthin the mid-teens through acquired and organic growth.

Discussing the impact of a slowing economic environment, Kopniskysaid that even though Sterling is much more conservative regarding loan-to-values,debt service coverages and covenant structures, there are more aggressive competitorsthat price loans at returns that the company is not comfortable with. However, "oneof the great things about this company is we have lots of levers to pull: we havethe different product lines that we have on the [commercial and industrial] andthe commercial real estate side and we have external opportunities to acquire portfolios,"Kopnisky added.

The company reported first-quarter net income of $23.8 million,or 18 cents per diluted share, compared to net income of $16.8 million, or 19 centsper diluted share, for the first quarter of 2015.