Text extracted via OCR from the original document. May contain errors from the scanning process.
income segment) have not changed despite the headlines surrounding a softening
in the multifamily space.
* Hiring bankers, even as team hiring on pause: On the hiring front, management
noted that although it does not expect to hire teams heading into year-end, it is
continuing to hire individual bankers (recently hired 4 to 5 lenders). Hiring will be
focused on C&l and specialty finance lenders. Management does not expect to hire
additional CRE lenders.
= Easing in regulatory environment could provide some relief on expense growth:
With regard to the potential for some easing of regulatory burden on the banks
{important here as SBNY approaches the $50bn asset threshold) under the
incoming Trump administration management noted that it could see some
abatement in expense growth associated with compliance costs. However,
management is running the business based on the current regulatory framework
and will look for more tangible signs before it makes any changes to investment
decision, especially as it relates to the compliance infrastructure.
= Lending rates reflecting the steepening in the yield curve: SBNY noted that it
had raised rates on its 5-year fixed by 0.125% to 3.5%- 3.625% and 7-year fixed up
by 0.25% to 4.0%-4.125% following the steepening in the yield curve over the last
week. We note that this was echoed by SBNY’s NY rival NYCB which also noted
increasing rates on lending products in the aftermath of the move higher in interest
rates. We believe higher rates associated with new loans and better reinvestment
opportunities in the securities portfolio should serve as a tailwind to the margin
even as funding costs will likely trend higher, especially as the Fed raises interest
rates by 25bp in December.
= Regulatory scrutiny on multifamily lending manageable: With regard to the
heightened regulatory concerns surrounding CRE multifamily lending (multifamily is
50% of SBNY’s loan book), management noted that it has implemented a new loan
system likely coming on line in 3Q17 which should allow the bank to analyze the
loan portfolio at a more granular level. Management is also underwriting fewer
interest only multifamily loans in response to the regulatory concerns. Although, it
noted that it was not losing any significant business due to this as competitors had
also pulled back and borrower ability (in most instances) to service a non-interest
only loan.
BankofAmerica <2”
26 2016 Future of Financials Conference | 17 November 2016 Merrill Lynch
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