Sterling Bancorp Reports Fourth Quarter and Full Year 2018 Financial Results

Board of Directors Approves New Stock Repurchase Program

Q4 2018 Highlights

  • Net income of $16.0 million, up 145% from Q4 2017, and 2% from Q3 2018
  • Fully diluted EPS of $0.30, up 131% from Q4 2017, and unchanged from Q3 2018
  • Fourth quarter ROAA of 1.99% and ROATCE of 19.39%, and full year 2018 ROAA of 2.04% and ROATCE of 20.71%.
  • Revenue, net of interest expense, was $36.7 million, up 23% from Q4 2017, and 5% from Q3 2018
  • Total loan originations of $332.7 million, down from $520.6 million in Q4 2017 and $419.2 million in Q3 2018
  • Total gross loans, including loans held for investment and loans held for sale, of $2.92 billion, a 7% increase from Q4 2017, and unchanged from Q3 2018
  • Total deposits of $2.45 billion, a 9% increase from Q4 2017, and a 7% annualized increase from Q3 2018
  • Net interest margin of 3.90%, compared to 4.05% in Q4 2017 and 3.95% in Q3 2018
  • Board of Directors approves a stock repurchase program of up to $50 million

SOUTHFIELD, Mich.--()--Sterling Bancorp, Inc. (NASDAQ: SBT) (the “Company”), the holding company of Sterling Bank and Trust, F.S.B. (the “Bank”), today reported unaudited financial results for its fourth quarter and full year ended December 31, 2018.

For the fourth quarter 2018, net income totaled $16.0 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding. This compares to third quarter 2018 net income of $15.7 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding. For the fourth quarter of 2017, net income totaled $6.5 million, or $0.13 per diluted share, based on 49.0 million weighted average diluted shares outstanding.

“We are very pleased with our financial performance for our first full year as a public company as we reported record earnings, which translated into a 46% increase in earnings per share, a return on average assets of 2.04%, and a return on tangible common equity of 20.71%,” said Gary Judd, Chairman and CEO. “Our earnings growth was driven by increases in loans, disciplined expense control and low credit costs. And while the headwinds of four interest rate increases over the course of 2018 resulted in higher deposit costs, which pressured our net interest margin, we were able to hold the decline to less than 20 basis points due to increased yields in our variable rate loan portfolios.”

Mr. Judd continued, “During the latter half of 2018, the market environment began to change with respect to the general housing market, as well as with the Chinese economy, particularly as it relates to trade tensions between China and the U.S. These changes have created uncertainty with some of our customers, and as a result, we experienced lower loan production in the fourth quarter and continue to experience headwinds. However, looking to 2019, we remain optimistic. We are adapting to these changes and continue to make the necessary investments to ensure the long-term growth potential for our business.

“During 2018, we expanded our presence in the greater Seattle and New York markets, and now operate in four of the most attractive markets in the U.S. based on household income, wealth and employment rates. We expect to continue gaining share in these markets as we add client facing professionals and will continue our focus on expanding commercial lending, which we believe will translate into high single- to low double-digit annual growth for both loans and deposits.”

 
Financial Highlights (Unaudited)
  At or for the Three Months Ended
(dollars in thousands, except per share data)

December 31,
2018

 

September 30,
2018

 

December 31,
2017

Net income $ 15,996 $ 15,741 $ 6,531
Income per share, diluted $ 0.30 $ 0.30 $ 0.13

Net interest income (1)

$ 30,706 $ 30,798 $ 27,493

Net interest margin (1)

3.90 % 3.95 % 4.05 %

Non-interest income (1)

$ 6,014 $ 4,233 $ 2,248
Non-interest expense $ 13,681 $ 12,531 $ 11,943
Loans, net of allowance for loan losses $ 2,895,953 $ 2,796,150 $ 2,594,357
Total deposits $ 2,452,685 $ 2,412,071 $ 2,245,110
Nonperforming loans $ 4,500 $ 356 $ 783
Allowance for loan losses to total loans 0.75 % 0.74 % 0.71 %
Allowance for loan losses to nonperforming loans 486 % 5,833 % 2,357 %
Provision for loan losses $ 1,045 $ 423 $ 600
Net recoveries $ (40 ) $ (42 ) $ (668 )
Return on average assets 1.99 % 1.98 % 0.94 %
Return on average shareholders' equity 19.36 % 20.07 % 11.46 %
Efficiency ratio 37.3 % 35.8 % 40.2 %

_________________________________

(1) In the second quarter of 2018, the Company corrected the classification of commitment fees, net of direct loan origination costs, earned on construction loans and other lines of credit to interest income which were previously reported within non-interest income. As a result, the three months ended December 31, 2017 has been adjusted from the amounts previously reported to correct the classification error. The amount of the adjustment was a decrease to non-interest income and an increase to interest income of $578 and an increase to net interest margin of 8 basis points for the three months ended December 31, 2017. There was no change to the reported net income or income per share, basic and diluted, as previously reported as a result of this immaterial correction.

 
 

Operating Results for the Fourth Quarter 2018

Revenue

Revenue, net of interest expense, was $36.7 million for the fourth quarter of 2018, an increase of 5% from the third quarter of 2018. The increase was attributable to a $1.8 million increase in non-interest income.

Revenue, net of interest expense, increased 23% from $29.7 million compared to the fourth quarter of 2017. The increase was attributable to a $3.8 million increase in non-interest income, as well as a $3.2 million increase in net interest income.

Net Interest Income

Net interest income for the fourth quarter of 2018 was $30.7 million, as compared to $30.8 million for the third quarter of 2018. The slight decline in net interest income from the third quarter was attributable to a 5 basis point decrease in the net interest margin, partially offset by a $32.8 million increase in average interest earning assets.

Relative to the fourth quarter of 2017, net interest income increased 12% from $27.5 million. The increase in net interest income from the fourth quarter of 2017 was primarily driven by a $434.9 million increase in average interest earning assets, partially offset by a 15 basis point decrease in the net interest margin.

Net Interest Margin

Net interest margin for the fourth quarter of 2018 was 3.90%, down 5 basis points from the net interest margin of 3.95% for the third quarter of 2018. Net interest margin was impacted by a 16 basis point increase in the average cost of interest-bearing liabilities, partially offset by an 8 basis point increase in the average yield on interest earning assets.

Relative to the fourth quarter of 2017, the net interest margin decreased from 4.05%, primarily due to a 50 basis point increase in the average cost of interest-bearing liabilities, partially offset by a 26 basis point increase in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the fourth quarter of 2018 was $6.0 million, an increase from $4.2 million for the third quarter of 2018. The increase was primarily the result of a $1.6 million increase in the gain on sale of loans due to the amount of residential mortgages sold in the secondary market as compared to the prior period.

Non-interest income increased $3.8 million from $2.2 million in the fourth quarter of 2017, primarily as a result of a $3.7 million increase in the gain on sale of loans due to the amount of residential mortgages sold in the secondary market as compared to the prior year period.

Non-interest Expense

Non-interest expense for the fourth quarter of 2018 was $13.7 million, an increase from $12.5 million for the third quarter of 2018. The increase was primarily attributable to salary expense and occupancy and equipment costs required to support new offices and the growth in the Company’s operations.

Relative to the fourth quarter of 2017, non-interest expense increased 15% from $11.9 million. The increase was primarily due to an increase in salary expense and occupancy and equipment costs required to support new offices and the growth in the Company’s operations.

The Company’s operating efficiency ratio remained strong at 37.3% in the fourth quarter of 2018, compared with 35.8% in the third quarter of 2018 and 40.2% in the fourth quarter of 2017.

Income Taxes

The effective tax rate for the three months ended December 31, 2018 was 27%, down from 29% for the quarter ended September 30, 2018, and compared to an effective tax rate of 62% for the three months ended December 31, 2017. The decrease in the effective tax rate in the fourth quarter of 2018 as compared to the fourth quarter of 2017 was attributable to the Tax Cuts and Job Act (H.R. 1) which among other provisions reduced the U.S. corporate tax rate, effective January 1, 2018 and resulted in additional tax expense of $3.3 million during the fourth quarter of 2017 to reflect the decline in the value of the Company’s deferred tax assets.

Loan Portfolio

Total gross loans, which includes those held for investment and held for sale, were $2.92 billion at December 31, 2018, relatively flat compared with $2.93 billion at September 30, 2018. The Company had a $112.6 million decrease in residential mortgage loans held for sale, a $3.0 million decrease in construction and commercial real estate loans and a $6.6 million decrease in commercial and industrial loans, partially offset by a $110.5 million increase in residential mortgage loans held for investment. As the Company continues to utilize loan sales to support balance sheet and liquidity strategies, the amount of residential mortgage loans held for sale may vary from quarter to quarter.

During the fourth quarter of 2018, the Company originated $332.7 million in loans, which included $303.3 million in residential mortgage loans, $19.1 million in construction loans, $9.7 million in commercial real estate loans and $0.6 million in commercial and industrial loans.

Deposits

Total deposits were $2.45 billion at December 31, 2018, compared with $2.41 billion at September 30, 2018. The increase was attributable to a $98.8 million increase in time deposits, partially offset by a $55.6 million decrease in money market, savings and NOW deposits and a $2.6 million decrease in non-interest bearing demand deposits.

Credit Quality

Nonperforming assets totaled $10.2 million, or 0.32% of total assets, at December 31, 2018, compared with $6.0 million, or 0.19% of total assets, at September 30, 2018. The increase was primarily due to two large residential real estate loans being placed on non-accrual. The Company believes that no impairment exists, as there is more than sufficient collateral value supporting the loans.

Recoveries for the fourth quarter of 2018 were $40,000 and there were no charge offs during the quarter.

The Company recorded a provision for loan losses of $1.0 million for the fourth quarter of 2018, compared to $0.4 million for the third quarter of 2018. The larger provision was primarily attributable to the growth in total loans held for investment during the quarter.

The allowance for loan losses was 0.75% of total loans and 486% of nonperforming loans at December 31, 2018, compared with 0.74% and 5,833%, respectively, at September 30, 2018.

Capital

At December 31, 2018, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a "well-capitalized" financial institution, as summarized in the following tables:

   
Well

Capitalized

Company Actual at

December 31, 2018

Total adjusted capital to risk-weighted assets N/A 21.98 %
Tier 1 (core) capital to risk-weighted assets N/A 17.45 %
Tier 1 (core) capital to adjusted tangible assets N/A 10.42 %
Common Tier 1 (CET 1) N/A 17.45 %
 
Well

Capitalized

Sterling Bank Actual at

December 31, 2018

Total adjusted capital to risk-weighted assets 10 % 16.94 %
Tier 1 (core) capital to risk-weighted assets 8 % 15.80 %
Tier 1 (core) capital to adjusted tangible assets 5 % 9.44 %
Common Tier 1 (CET 1) 7 % 15.80 %
 
 

Share Repurchase Program

Sterling Bancorp’s Board of Directors approved the repurchase of up to $50.0 million of common stock. The stock repurchase program permits the Company to acquire shares of its common stock from time to time in the open market or in privately negotiated transactions at prices management considers to be attractive and in the best interest of the Company and its shareholders. The stock repurchase program does not obligate the Company to repurchase shares of its common stock, and there is no assurance that it will do so. Any repurchases are subject to compliance with applicable laws and regulations. Repurchases will be conducted in consideration of general market and economic conditions, as well as the financial and regulatory condition of the Company and the Bank and funded with cash on hand. The stock repurchase program may be modified, suspended or discontinued at any time at the discretion of the Board.

Conference Call and Webcast

Management will host a conference call today at 5:00 p.m. Eastern Time to discuss the Company's financial results. The conference call number for U.S. participants is (833) 535-2201 and the conference call number for participants outside the U.S. is (412) 902-6744. Additionally, interested parties can listen to a live webcast of the call in the "Investor Relations" section of the Company's website at www.sterlingbank.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

A replay of the conference call may be accessed through February 11, 2019 by dialing (877) 344-7529, using conference ID number 10127799.

About Sterling Bancorp, Inc.

Sterling Bancorp, Inc. is a unitary thrift holding company. Its wholly owned subsidiary, Sterling Bank and Trust, F.S.B., has primary branch operations in San Francisco and Los Angeles, California, New York City and Bellevue, Washington. Sterling offers a broad range of loan products to the residential and commercial markets, as well as retail and business banking services. Sterling also has an operations center and a branch in Southfield, Michigan. Sterling was named as the top performing community bank in the United States with total assets between $1 billion and $10 billion in 2017 by SNL/S&P Global Market Intelligence. For additional information, please visit the Company’s website at www.sterlingbank.com.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures include “Average Tangible Common Equity,” and “Return on Average Tangible Common Equity,” each of which are common metrics in the banking industry. Our management uses these non-GAAP financial measures to assess the Company’s capital strength and business performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore this presentation may not be comparable to other similarly titled measures as presented by other companies. For further information see “Return on Average Tangible Common Equity Reconciliations (non-GAAP)” in the Financial Data section that follows.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements," within the meaning of the federal securities laws, including but not limited to statements about the Company’s expected loan production, operating expenses and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe" or "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

         

Sterling Bancorp, Inc.

Condensed Consolidated Balance Sheets (Unaudited)                    
(dollars in thousands)

December 31,
2018

September 30,
2018

%
change

December 31,
2017

%
change

Assets
Cash and due from banks $ 53,626 $ 48,879 10 % $ 40,147 34 %
Interest-bearing deposits with other banks 1,100 - N/M - N/M
Investment securities 148,896 142,749 4 % 126,848 17 %
Mortgage loans held for sale 1,248 113,805 (99 )% 112,866 (99 )%

Loans, net of allowance for loan losses of $21,850, $20,765 and $18,457

2,895,953 2,796,150 4 % 2,594,357 12 %
Accrued interest receivable 13,529 13,087 3 % 11,493 18 %
Mortgage servicing rights, net 10,633 9,411 13 % 6,496 64 %
Leasehold improvements and equipment, net 9,489 9,040 5 % 7,043 35 %
Federal Home Loan Bank stock, at cost 22,950 22,950 0 % 22,950 0 %
Cash surrender value of bank-owned life insurance 31,302 31,146 1 % 30,680 2 %
Deferred tax asset, net 6,122 7,002 (13 )% 6,847 (11 )%
Other assets   3,026     2,744   10 %   2,231   36 %
Total assets $ 3,196,774   $ 3,196,963   (0 )% $ 2,961,958   8 %
 
Liabilities
Noninterest-bearing deposits $ 76,815 $ 79,432 (3 )% $ 73,682 4 %
Interest-bearing deposits   2,375,870     2,332,639   2 %   2,171,428   9 %
Total deposits 2,452,685 2,412,071 2 % 2,245,110 9 %
Federal Home Loan Bank borrowings 293,000 335,000 (13 )% 338,000 (13 )%
Subordinated notes, net 65,029 64,993 0 % 64,889 0 %
Accrued expenses and other liabilities   51,003     65,456   (22 )%   40,661   25 %
Total liabilities 2,861,717 2,877,520 (1 )% 2,688,660 6 %
 
Shareholders’ Equity

Preferred stock, authorized 10,000,000 shares; no shares issued and outstanding

- - - - -

Common stock, voting, no par value, authorized 500,000,000 shares at December 31, 2018, September 30, 2018 and December 31, 2017; issued and outstanding 53,012,283 shares at December 31, 2018 and September 30, 2018, and 52,963,308 shares at December 31, 2017

111,238 111,238 0 % 111,238 (0 )%
Additional paid-in capital 12,713 12,604 1 % 12,416 2 %
Retained earnings 211,115 195,649 8 % 149,816 41 %
Accumulated other comprehensive loss   (9 )   (48 ) N/M     (172 ) N/M  
Total shareholders’ equity   335,057     319,443   5 %   273,298   23 %
Total liabilities and shareholders’ equity $ 3,196,774   $ 3,196,963   (0 )% $ 2,961,958   8 %
N/M- not meaningful
 
 
Sterling Bancorp, Inc.                
Condensed Consolidated Statements of Income (Unaudited)                            
Three Months Ended Year Ended
December 31, September 30, % December 31, % December 31, December 31, %
(dollars in thousands, except per share amounts)   2018   2018 change   2017 change   2018   2017 change
Interest income:
Interest and fees on loans (1) $ 41,747 $ 40,772 2 % $ 34,673 20 % $ 157,499 $ 122,789 28 %
Interest and dividends on investment securities 1,060 958 11 % 588 80 % 3,679 1,890 95 %
Other interest   194   166 17 %   54 259 %   593   157 278 %
Total interest income (1) 43,001 41,896 3 % 35,315 22 % 161,771 124,836 30 %
Interest expense:
Interest on deposits 9,635 8,628 12 % 5,884 64 % 32,031 17,570 82 %
Interest on Federal Home Loan Bank borrowings 1,487 1,297 15 % 751 98 % 4,951 3,795 30 %
Interest on subordinated notes and other   1,173   1,173 0 %   1,187 (1 )%   4,689   4,070 15 %
Total interest expense   12,295   11,098 11 %   7,822 57 %   41,671   25,435 64 %
Net interest income (1) 30,706 30,798 (0 )% 27,493 12 % 120,100 99,401 21 %
Provision for loan losses   1,045   423 147 %   600 74 %   3,229   2,700 20 %
Net interest income after provision for loan losses (1) 29,661 30,375 (2 )% 26,893 10 % 116,871 96,701 21 %
Non-interest income:
Service charges and fees (1) 113 100 13 % 51 122 % 379 253 50 %
Investment management and advisory fees 467 445 5 % 603 (23 )% 2,035 2,338 (13 )%
Net gain on sale of loans 4,566 3,005 52 % 868 426 % 16,673 9,681 72 %
Other income   868   683 27 %   726 20 %   2,950   2,236 32 %
Total non-interest income (1)   6,014   4,233 42 %   2,248 168 %   22,037   14,508 52 %
Non-interest expense:
Salaries and employee benefits 7,587 6,973 9 % 6,880 10 % 28,438 23,778 20 %
Occupancy and equipment 2,334 1,760 33 % 1,632 43 % 7,250 5,986 21 %
Professional fees 774 898 (14 )% 665 16 % 3,118 1,673 86 %
Advertising and marketing 470 470 0 % 370 27 % 1,640 1,025 60 %
FDIC assessments 244 186 31 % 455 (46 )% 1,447 1,296 12 %
Data processing 329 311 6 % 292 13 % 1,223 1,059 15 %
Other   1,943   1,933 1 %   1,649 18 %   7,220   5,944 21 %
Total non-interest expense   13,681   12,531 9 %   11,943 15 %   50,336   40,761 23 %
Income before income taxes 21,994 22,077 (0 )% 17,198 28 % 88,572 70,448 26 %
Income tax expense   5,998   6,336 (5 )%   10,667 (44 )%   25,104   32,471 (23 )%
Net income $ 15,996 $ 15,741 2 % $ 6,531 145 % $ 63,468 $ 37,977 67 %
Income per share, basic and diluted $ 0.30 $ 0.30 $ 0.13 $ 1.20 $ 0.82
Weighted average common shares outstanding:
Basic 52,963,308 52,963,308 49,033,542 52,963,308 46,219,367
Diluted 52,967,004 52,966,593 49,033,542 52,965,567 46,219,367
(1) In the second quarter of 2018, the Company corrected the classification of commitment fees, net of direct loan origination costs, earned on construction loans and other lines of credit to commercial customers in its condensed consolidated statements of income to the financial statement caption, interest and fees on loans, which were previously reported in service charges and fees. As a result, the three and twelve months ended December 31, 2017 have been adjusted from the amounts previously reported to correct the classification error. The amount of the adjustment was a decrease to service charges and fees, and increase to interest and fees on loans of $578 and $2,088 for the three and twelve months ended December 31, 2017, respectively. There was no change to the reported net income or income per share, basic and diluted, as previously reported as a result of this immaterial correction.
 
 
Sterling Bancorp, Inc.
Selected Financial Data (Unaudited)
  As of and for the Three Months Ended   As of and for the Year Ended
December 31,   September 30,   December 31, December 31,   December 31,
Performance Ratios: 2018 2018 2017 2018 2017
Return on average assets 1.99 % 1.98 % 0.94 % 2.04 % 1.54 %
Return on average shareholders' equity 19.36 % 20.07 % 11.46 % 20.66 % 20.25 %
Return on average tangible common equity 19.39 % 20.11 % 11.50 % 20.71 % 20.41 %
Yield on earning assets (1) 5.46 % 5.38 % 5.20 % 5.31 % 5.19 %
Cost of average interest-bearing liabilities 1.78 % 1.62 % 1.28 % 1.56 % 1.18 %
Net interest spread (1) 3.68 % 3.76 % 3.92 % 3.75 % 4.01 %
Net interest margin (1) 3.90 % 3.95 % 4.05 % 3.94 % 4.13 %
Efficiency ratio (2) 37.3 % 35.8 % 40.2 % 35.4 % 35.8 %

_________________________________

(1)   Refer to footnote to Condensed Consolidated Statements of Income table.
(2) Efficiency Ratio is computed as the ratio of non-interest expense divided by the sum of net interest income and non-interest income.
 
 
Sterling Bancorp, Inc.
Yield Analysis and Net Interest Income (Unaudited)
  Three Months Ended
December 31, 2018   September 30, 2018   December 31, 2017
(dollars in thousands)

Average
Balance

  Interest  

Average
Yield/
Rate

Average
Balance

  Interest  

Average
Yield/
Rate

Average
Balance

  Interest  

Average
Yield/
Rate

 
Interest earning assets
Loans (1,3) $ 2,957,092 $ 41,747 5.65 % $ 2,923,584 $ 40,772 5.58 % $ 2,563,319 $ 34,673 5.41 %
Securities, includes restricted stock 161,362 1,060 2.63 % 165,636 958 2.31 % 132,869 588 1.77 %
Other interest earning assets   31,207   194 2.49 %   27,604   166 2.41 %   18,597   54 1.17 %
Total interest earning assets (3) $ 3,149,661 $ 43,001 5.46 % $ 3,116,824 $ 41,896 5.38 % $ 2,714,785 $ 35,315 5.20 %
Interest-bearing liabilities
Money Market, Savings, NOW $ 1,507,209 $ 5,495 1.45 % $ 1,539,304 $ 5,181 1.34 % $ 1,457,137 $ 3,653 0.99 %
Time deposits   833,202   4,140 1.97 %   796,197   3,447 1.72 %   662,822   2,231 1.34 %
Total interest-bearing deposits 2,340,411 9,635 1.63 % 2,335,501 8,628 1.47 % 2,119,959 5,884 1.10 %
FHLB borrowings 338,462 1,487 1.72 % 324,795 1,297 1.56 % 244,263 751 1.20 %
Subordinated debt   65,006   1,173 7.22 %   64,970   1,173 7.22 %   64,871   1,187 7.32 %
Total borrowings   403,468 2,660 2.58 %   389,765 2,470 2.48 %   309,134 1,938 2.45 %
Total interest-bearing liabilities $ 2,743,879   12,295 1.78 % $ 2,725,266   11,098 1.62 % $ 2,429,093   7,822 1.28 %
Net interest income and spread (2,3) $ 30,706 3.68 % $ 30,798 3.76 % $ 27,493 3.92 %
Net interest margin (2,3) 3.90 % 3.95 % 4.05 %

_________________________________

(1)   Nonaccrual loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis.
(2) Interest income does not include taxable equivalent adjustments.
(3) Refer to footnote to Condensed Consolidated Statements of Income table.
 
 
     
  Year Ended
December 31, 2018   December 31, 2017
(dollars in thousands)

Average
Balance

  Interest  

Average
Yield/
Rate

Average
Balance

  Interest  

Average
Yield/
Rate

 
Interest earning assets

Loans (1,3)

$ 2,861,847 $ 157,499 5.50 % $ 2,276,282 $ 122,789 5.39 %
Securities, includes restricted stock 157,042 3,679 2.34 % 113,847 1,890 1.66 %
Other interest earning assets   27,012   593 2.20 %   14,300   157 1.10 %

Total interest earning assets (3)

$ 3,045,901 $ 161,771 5.31 % $ 2,404,429 $ 124,836 5.19 %
Interest-bearing liabilities
Money Market, Savings, NOW $ 1,521,963 $ 19,278 1.27 % $ 1,333,043 $ 11,985 0.90 %
Time deposits   763,212   12,753 1.67 %   476,303   5,585 1.17 %
Total interest-bearing deposits 2,285,175 32,031 1.40 % 1,809,346 17,570 0.97 %
FHLB borrowings 318,774 4,951 1.55 % 299,719 3,795 1.27 %
Subordinated debt   64,953   4,689 7.22 %   55,315   4,070 7.36 %
Total borrowings   383,727 9,640 2.51 %   355,034   7,865 2.22 %
Total interest-bearing liabilities $ 2,668,902   41,671 1.56 % $ 2,164,380   25,435 1.18 %

Net interest income and spread (2,3)

$ 120,100 3.75 % $ 99,401 4.01 %
Net interest margin (2,3) 3.94 % 4.13 %

_________________________________

(1)   Nonaccrual loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis.
(2) Interest income does not include taxable equivalent adjustments.
(3) Refer to footnote to Condensed Consolidated Statements of Income table.
 
 
Sterling Bancorp, Inc.
Loan Composition (Unaudited)
(dollars in thousands)  

December 31,
2018

 

September 30,
2018

 

%
change

 

December 31,
2017

 

%
change

Construction $ 176,605 $ 177,734 (1 )% $ 192,319 (8 )%
Residential real estate, mortgage 2,452,441 2,341,989 5 % 2,132,641 15 %
Commercial real estate, mortgage 250,955 252,782 (1 )% 247,076 2 %
Commercial and industrial loans, lines of credit 37,776 44,375 (15 )% 40,749 (7 )%
Other consumer loans   26     35   (26 )%   29   (10 )%
Total loans held for investment 2,917,803 2,816,915 4 % 2,612,814 12 %
Less: allowance for loan losses   (21,850 )   (20,765 ) 5 %   (18,457 ) 18 %
Loans, net $ 2,895,953   $ 2,796,150   4 % $ 2,594,357   12 %
 
Mortgage loans held for sale $ 1,248   $ 113,805   (99 )% $ 112,866   (99 )%
Total gross loans $ 2,919,051   $ 2,930,720   (0 )% $ 2,725,680   7 %
 
 
Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)
  Three Months Ended   Year Ended
(dollars in thousands)

December 31,
2018

 

September 30,
2018

 

December 31,
2017

December 31,
2018

 

December 31,
2017

Balance at beginning of period $ 20,765 $ 20,300 $ 17,189 $ 18,457 $ 14,822
Provision for loan losses 1,045 423 600 3,229 2,700
Charge offs - - (19 ) (4 ) (19 )
Recoveries   40   42   687     168     954  
Balance at end of period $ 21,850 $ 20,765 $ 18,457   $ 21,850   $ 18,457  
 
 
Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
(dollars in thousands)  

December 31,
2018

 

September 30,
2018

 

%
change

 

December 31,
2017

 

%
change

Noninterest bearing demand deposits $ 76,815 $ 79,432 (3 )% $ 73,682 4 %
Money Market, Savings and NOW 1,481,591 1,537,202 (4 )% 1,507,956 (2 )%
Time deposits   894,279   795,437 12 %   663,472 35 %
Total deposits $ 2,452,685 $ 2,412,071 2 % $ 2,245,110 9 %
 
 
Sterling Bancorp, Inc.
Capital and Credit Quality Ratios (Unaudited)
  As of and for the Three Months Ended
(dollars in thousands) December 31,

2018

  September 30,

2018

  December 31,

2017

Capital Ratios
Regulatory and Other Capital Ratios— Consolidated:
Total adjusted capital to risk-weighted assets 21.98 % 21.00 % 20.28 %
Tier 1 (core) capital to risk-weighted assets 17.45 % 16.55 % 15.53 %
Common Tier 1 (CET 1) 17.45 % 16.55 % 15.53 %
Tier 1 (core) capital to adjusted tangible assets 10.42 % 10.04 % 9.83 %
 
Regulatory and Other Capital Ratios—Bank:
Total adjusted capital to risk-weighted assets 16.94 % 15.99 % 14.76 %
Tier 1 (core) capital to risk-weighted assets 15.80 % 14.91 % 13.71 %
Common Tier 1 (CET 1) 15.80 % 14.91 % 13.71 %
Tier 1 (core) capital to adjusted tangible assets 9.44 % 9.04 % 8.68 %
 
Credit Quality Data

Nonperforming loans (1)

$ 4,500 $ 356 $ 783
Nonperforming loans to total loans 0.15 % 0.01 % 0.03 %

Nonperforming assets (2)

$ 10,157 $ 6,035 $ 3,777
Nonperforming assets to total assets 0.32 % 0.19 % 0.13 %
Allowance for loan losses to total loans 0.75 % 0.74 % 0.71 %
Allowance for loan losses to nonperforming loans 486 % 5,833 % 2,357 %
Net recoveries to average loans (0.00 )% (0.00 )% (0.03 )%

_________________________________

(1)

  Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.
(2) Nonperforming assets include nonperforming loans and loans modified under troubled debt restructurings and other repossessed assets.
 
 

Return on Average Tangible Common Equity Reconciliations (non-GAAP)

Average tangible common equity and return on average tangible common equity are non-GAAP disclosures. Sterling’s management uses these non-GAAP financial measures to assess the Company’s capital strength and business performance. Average tangible common equity excludes the effect of intangible assets. This non-GAAP financial measure should not be considered a substitute for those comparable measures that are similarly titled that are determined in accordance with U.S. GAAP that may be used by other companies. The following is a reconciliation of average tangible common equity to the average shareholders’ equity, its most comparable GAAP measure, as well as a calculation of return on average tangible common equity as of December 31, 2018 and 2017, and September 30, 2018.

 
Sterling Bancorp, Inc.
GAAP to Non-GAAP Reconciliations
  As of and for the Three Months Ended As of and for the Year Ended

December 31,

September 30,

December 31,

December 31,

 

December 31,

(dollars in thousands) 2018 2018 2017 2018 2017
Net Income $ 15,996 $ 15,741 $ 6,531 $ 63,468 $ 37,977
Average shareholders' equity 330,443 313,697 228,037 307,202 187,542
Adjustment
Customer-related intangible   (525 )   (638 )   (975 )   (693 )   (1,499 )
Average tangible common equity $ 329,918   $ 313,059   $ 227,062   $ 306,509   $ 186,043  
Return on average tangible common equity 19.39 % * 20.11 % * 11.50 % * 20.71 % 20.41 %

_________________________________

*Annualized

Contacts

Financial Profiles, Inc.
Allyson Pooley
310-622-8230
Larry Clark
310-622-8223
SBT@finprofiles.com

Contacts

Financial Profiles, Inc.
Allyson Pooley
310-622-8230
Larry Clark
310-622-8223
SBT@finprofiles.com