Sterling Bancorp Reports Third Quarter 2019 Financial Results

Q3 2019 Highlights

  • Net income of $13.9 million, up from $13.4 million in Q2 2019, and down from $15.7 million in Q3 2018
  • Fully diluted EPS of $0.28, up from $0.26 for Q2 2019, and down from $0.30 for Q3 2018
  • Third quarter annualized ROAA of 1.67% and annualized ROATCE of 15.98%
  • Revenue, net of interest expense, of $33.2 million, up from $32.8 million in Q2 2019, and down from $35.0 million in Q3 2018
  • Total loan originations of $282.1 million, down from $356.5 million in Q2 2019 and $419.2 million in Q3 2018
  • Total gross loans, including loans held for investment and loans held for sale of $2.93 billion, down 1% from Q2 2019, and flat from Q3 2018
  • Prior to loan sales, total gross loans increased by 2% from Q2 2019
  • Total deposits of $2.57 billion, up 1% from Q2 2019 and 7% increase from Q3 2018
  • Net interest margin of 3.70%, compared to 3.84% in Q2 2019 and 3.95% in Q3 2018
  • Repurchased approximately 0.4 million shares of common stock at an average price of $9.89 during the quarter

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 third quarter ended September 30, 2019.

For the third quarter 2019, net income totaled $13.9 million, or $0.28 per diluted share, based on 50.4 million weighted average diluted shares outstanding. This compares to second quarter 2019 net income of $13.4 million, or $0.26 per diluted share, based on 51.5 million weighted average diluted shares outstanding. For the third quarter of 2018, net income totaled $15.7 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding.

“Overall, our financial results for the third quarter were in line with our expectations,” said Gary Judd, Chairman and CEO of Sterling Bancorp. “We continue to generate top quartile returns, as our annualized return on average assets was 1.67% and our annualized return on tangible common equity was 15.98%. Our moderately higher EPS for the quarter was driven by higher non-interest income and well-managed expenses.

“During the quarter, net interest margin was negatively impacted by our increased liquidity and lower yields on our loan portfolio. In addition, our loan production was lower during the quarter as we maintained our underwriting and pricing discipline in a very competitive lending market. Despite this pressure, our total loans grew modestly during the quarter, prior to our loan sales.

“We remain optimistic in our outlook as we end the year. We are focused on converting our healthy loan pipeline into closed loans while maintaining solid credit quality and reducing deposit costs. While we will continue to opportunistically utilize loan sales to diversify our revenue going forward, we may significantly reduce these sales in the fourth quarter and retain the majority of our new loan production on our balance sheet. Therefore, we expect to resume our loan growth and achieve net interest margin stability, which should translate into continued strong returns for our shareholders,” Mr. Judd concluded.

Financial Highlights (Unaudited)

Sterling Bancorp, Inc.
Financial Highlights (Unaudited)

At or for the Three Months Ended

(dollars in thousands, except per share data)

September 30,

2019

June 30,

2019

September 30,

2018

Net income

$

13,884

 

$

13,434

 

$

15,741

 

Income per share, diluted

$

0.28

 

$

0.26

 

$

0.30

 

Net interest income

$

30,010

 

$

30,715

 

$

30,798

 

Net interest margin

 

3.70

%

 

3.84

%

 

3.95

%

Non-interest income

$

3,165

 

$

2,068

 

$

4,233

 

Non-interest expense

$

13,426

 

$

13,725

 

$

12,531

 

Loans, net of allowance for loan losses

$

2,904,232

 

$

2,924,813

 

$

2,796,150

 

Total deposits

$

2,571,845

 

$

2,546,660

 

$

2,412,071

 

Nonperforming loans

$

9,974

 

$

6,697

 

$

356

 

Allowance for loan losses to total loans

 

0.72

%

 

0.71

%

 

0.74

%

Allowance for loan losses to nonperforming loans

 

213

%

 

312

%

 

5,833

%

Provision for loan losses

$

251

 

$

180

 

$

423

 

Net recoveries

$

(35

)

$

(40

)

$

(42

)

Return on average assets

 

1.67

%

 

1.64

%

 

1.98

%

Return on average shareholders' equity

 

15.97

%

 

15.54

%

 

20.07

%

Efficiency ratio

 

40.47

%

 

41.87

%

 

35.77

%

Operating Results for the Third Quarter 2019

Revenue

Revenue, net of interest expense, was $33.2 million for the third quarter of 2019, an increase of 1% from the second quarter of 2019. The increase was primarily attributable to a $1.1 million increase in non-interest income, partially offset by a $0.7 million decrease in net interest income.

Revenue, net of interest expense, for the third quarter of 2018 was $35.0 million. The 5% year-over-year decrease was due to a $1.1 million decrease in non-interest income and a $0.8 million decrease in net interest income.

Net Interest Income

Net interest income for the third quarter of 2019 was $30.0 million, a decrease of 2% from $30.7 million for the second quarter of 2019. The decrease in net interest income was primarily attributable to a 14 basis point decrease in the net interest margin, partially offset by a $49.5 million increase in average interest earning assets.

Relative to the third quarter of 2018, net interest income decreased 3% from $30.8 million. The decrease in net interest income from the third quarter of 2018 was primarily driven by a 25 basis point decrease in the net interest margin, partially offset by a $130.5 million increase in average interest earning assets.

Net Interest Margin

Net interest margin for the third quarter of 2019 was 3.70%, down 14 basis points from the net interest margin of 3.84% for the second quarter of 2019. Net interest margin was impacted by a 15 basis point decrease in the average yield on interest earning assets, partially offset by a 2 basis point decrease in the cost of average interest-bearing liabilities.

Relative to the third quarter of 2018, net interest margin decreased from 3.95%, primarily due to a 38 basis point increase in the average cost of interest-bearing liabilities, partially offset by a 7 basis point increase in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the third quarter of 2019 was $3.2 million, an increase from $2.1 million for the second quarter of 2019. The increase was primarily attributable to a lower mortgage servicing rights valuation allowance taken in the third quarter as compared to the prior quarter.

Non-interest income decreased $1.1 million from $4.2 million in the third quarter of 2018, primarily as a result of a $1.1 million decrease in the gain on sale of loans due to fewer residential mortgages sold in the secondary market as compared to the prior year period.

Non-interest Expense

Non-interest expense for the third quarter of 2019 was $13.4 million, a decrease from $13.7 million for the second quarter of 2019. The decrease was primarily attributable to lower FDIC assessments, advertising and marketing expenses, data processing and other expenses, partially offset by higher salaries and employee benefits and professional fees, a portion of which were related to increased regulatory compliance initiatives. The lower FDIC assessments is primarily the result of Small Bank Assessment Credits applied during the third quarter.

Relative to the third quarter of 2018, non-interest expense increased 7% from $12.5 million. The increase was primarily due to an increase in salaries and employee benefits and occupancy and equipment costs required to support new offices and the growth in the Company’s operations, as well as higher professional fees.

The Company’s operating efficiency ratio was 40.5% in the third quarter of 2019, compared with 41.9% in the second quarter of 2019 and 35.8% in the third quarter of 2018.

Income Taxes

The effective tax rate for the third quarter of 2019 was 29%, comparable to the effective tax rate of 29% for both the second quarter of 2019 and the third quarter of 2018.

Loan Portfolio

Total gross loans, which includes those held for investment and held for sale, were $2.93 billion at September 30, 2019, a decrease from $2.95 billion at June 30, 2019. The Company had an $18.6 million decrease in residential mortgage loans held for investment and a $4.3 million decrease in commercial lines of credit, partially offset by a net $2.6 million increase in construction and commercial real estate loans.

During the third quarter of 2019, the Company originated $282.1 million in loans, which included $241.7 million in residential mortgage loans and $40.4 million in construction and commercial real estate loans.

The Company sold $76.1 million in residential mortgage loans during the third quarter, including Agency sales. 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.

Deposits

Total deposits were $2.57 billion at September 30, 2019, compared with $2.55 billion at June 30, 2019. The $25.2 million increase was primarily attributable to a $52.7 million increase in time deposits and a $6.9 million increase in noninterest-bearing deposits, partially offset by a $34.5 million decrease in money market, savings and NOW deposits. Within time deposits, retail deposits increased by $102.7 million to $1.192 billion and brokered CDs decreased by $50.0 million to $25.0 million.

Credit Quality

Nonperforming assets totaled $12.3 million, or 0.37% of total assets, at September 30, 2019, compared with $12.2 million, or 0.37% of total assets, at June 30, 2019. Nonperforming loans at September 30, 2019 totaled $10.0 million, compared with $6.7 million at June 30, 2019. The increase was primarily due to a $3.5 million construction loan which was placed on non-accrual during the quarter. The Company believes that no impairment exists, as there is more than sufficient collateral value supporting this loan.

Recoveries for the third quarter of 2019 were $35,000 and there were no charge-offs during the quarter. The Company recorded a provision for loan losses of $251,000 for the third quarter of 2019.

The allowance for loan losses was 0.72% of total loans and 213% of nonperforming loans at September 30, 2019, compared with 0.71% and 312%, respectively, at June 30, 2019.

Capital

At September 30, 2019, 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

September 30, 2019

Total adjusted capital to risk-weighted assets

 

N/A

 

22.64%

Tier 1 (core) capital to risk-weighted assets

 

N/A

 

18.17%

Common Tier 1 (CET 1)

 

N/A

 

18.17%

Tier 1 (core) capital to adjusted tangible assets

 

N/A

 

10.54%

 

 

 

Well

Capitalized

Sterling Bank Actual at

September 30, 2019

Total adjusted capital to risk-weighted assets

 

10.00%

 

18.47%

Tier 1 (core) capital to risk-weighted assets

 

8.00%

 

17.37%

Common Tier 1 (CET 1)

 

6.50%

 

17.37%

Tier 1 (core) capital to adjusted tangible assets

 

5.00%

 

10.07%

Share Repurchase Program

During the quarter, the Company repurchased approximately 0.4 million shares of common stock at an average price of $9.89 per share. Year-to-date, approximately 2.7 million shares have been repurchased at an average price of $9.64 per share.

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 November 11, 2019 by dialing (877) 344-7529, using conference ID number 10135479.

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 $3 billion and $10 billion in 2018 by S&P Global Market Intelligence for the second year in a row (in 2017 the asset range was $1 billion to $10 billion). For additional information, please visit the Company’s website at http://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)

September 30,

2019

June 30,

2019

%

change

December 31,

2018

%

change

September 30,

2018

%

change

Assets
Cash and due from banks

$

146,246

$

80,416

82%

$

52,526

 

178%

$

48,879

 

199%

Interest-bearing deposits with other banks

 

1,100

 

1,100

0%

 

1,100

 

0%

 

-

 

N/M

Investment securities

 

153,306

 

153,449

0%

 

148,896

 

3%

 

142,749

 

7%

Mortgage loans held for sale

 

837

 

500

67%

 

1,248

 

(33)%

 

113,805

 

(99)%

Loans, net of allowance for loan losses of $21,204, $20,918, $21,850 and $20,765

 

2,904,232

 

2,924,813

(1)%

 

2,895,953

 

0%

 

2,796,150

 

4%

Accrued interest receivable

 

13,861

 

13,842

0%

 

13,529

 

2%

 

13,087

 

6%

Mortgage servicing rights, net

 

9,910

 

9,772

1%

 

10,633

 

(7)%

 

9,411

 

5%

Leasehold improvements and equipment, net

 

9,386

 

9,675

(3)%

 

9,489

 

(1)%

 

9,040

 

4%

Operating lease right-of-use assets

 

19,662

 

20,454

(4)%

 

-

 

N/M

 

-

 

N/M

Federal Home Loan Bank stock, at cost

 

22,950

 

22,950

0%

 

22,950

 

0%

 

22,950

 

0%

Cash surrender value of bank-owned life insurance

 

31,761

 

31,606

0%

 

31,302

 

1%

 

31,146

 

2%

Deferred tax asset, net

 

6,681

 

6,440

4%

 

6,122

 

9%

 

7,002

 

(5)%

Other assets

 

2,298

 

4,115

(44)%

 

3,026

 

(24)%

 

2,744

 

(16)%

Total assets

$

3,322,230

$

3,279,132

1%

$

3,196,774

 

4%

$

3,196,963

 

4%

 
Liabilities
Noninterest-bearing deposits

$

77,335

$

70,406

10%

$

76,815

 

1%

$

79,432

 

(3)%

Interest-bearing deposits

 

2,494,510

 

2,476,254

1%

 

2,375,870

 

5%

 

2,332,639

 

7%

Total deposits

 

2,571,845

 

2,546,660

1%

 

2,452,685

 

5%

 

2,412,071

 

7%

Federal Home Loan Bank borrowings

 

229,000

 

240,000

(5)%

 

293,000

 

(22)%

 

335,000

 

(32)%

Subordinated notes, net

 

65,140

 

65,102

0%

 

65,029

 

0%

 

64,993

 

0%

Operating lease liabilities

 

20,804

 

21,480

(3)%

 

-

 

N/M

 

-

 

N/M

Accrued expenses and other liabilities

 

84,064

 

63,837

32%

 

51,003

 

65%

 

65,456

 

28%

Total liabilities

 

2,970,853

 

2,937,079

1%

 

2,861,717

 

4%

 

2,877,520

 

3%

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

 

-

 

-

-

 

-

 

-

 

-

 

-

Common stock, no par value, authorized 500,000,000 shares; issued and outstanding 50,424,940 shares at September 30, 2019, 50,846,521 shares at June 30, 2019, and 53,012,283 shares at December 31, 2018 and September 30, 2018

 

85,515

 

89,683

(5)%

 

111,238

 

(23)%

 

111,238

 

(23)%

Additional paid-in capital

 

13,138

 

12,992

1%

 

12,713

 

3%

 

12,604

 

4%

Retained earnings

 

252,571

 

239,190

6%

 

211,115

 

20%

 

195,649

 

29%

Accumulated other comprehensive income (loss)

 

153

 

188

(19)%

 

(9

)

N/M

 

(48

)

N/M

Total shareholders’ equity

 

351,377

 

342,053

3%

 

335,057

 

5%

 

319,443

 

10%

Total liabilities and shareholders’ equity

$

3,322,230

$

3,279,132

1%

$

3,196,774

 

4%

$

3,196,963

 

4%

 
N/M- not meaningful
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)

Three Months Ended

 

Nine Months Ended

September 30,

 

June 30,

 

%

 

September 30,

 

%

 

September 30,

 

September 30,

 

%

(dollars in thousands, except per share amounts)

2019

 

2019

 

change

 

2018

 

change

 

2019

 

2018

 

change

Interest income:
Interest and fees on loans

$

42,351

 

$

43,301

 

(2)%

$

40,772

4%

$

127,374

 

$

115,752

10%

Interest and dividends on investment securities and restricted stock

 

1,252

 

 

1,272

 

(2)%

 

958

31%

 

3,751

 

 

2,619

43%

Other interest

 

608

 

 

216

 

181%

 

166

266%

 

1,060

 

 

399

166%

Total interest income

 

44,211

 

 

44,789

 

(1)%

 

41,896

6%

 

132,185

 

 

118,770

11%

Interest expense:
Interest on deposits

 

12,249

 

 

11,524

 

6%

 

8,628

42%

 

34,429

 

 

22,396

54%

Interest on Federal Home Loan Bank borrowings

 

777

 

 

1,375

 

(43)%

 

1,297

(40)%

 

3,207

 

 

3,464

(7)%

Interest on subordinated notes

 

1,175

 

 

1,175

 

0%

 

1,173

0%

 

3,524

 

 

3,516

0%

Total interest expense

 

14,201

 

 

14,074

 

1%

 

11,098

28%

 

41,160

 

 

29,376

40%

Net interest income

 

30,010

 

 

30,715

 

(2)%

 

30,798

(3)%

 

91,025

 

 

89,394

2%

Provision (recovery) for loan losses

 

251

 

 

180

 

39%

 

423

(41)%

 

(583

)

 

2,184

(127)%

Net interest income after provision (recovery) for loan losses

 

29,759

 

 

30,535

 

(3)%

 

30,375

(2)%

 

91,608

 

 

87,210

5%

Non-interest income:
Service charges and fees

 

111

 

 

112

 

(1)%

 

100

11%

 

327

 

 

266

23%

Investment management and advisory fees

 

477

 

 

425

 

12%

 

445

7%

 

1,242

 

 

1,568

(21)%

Gain on sale of loans

 

1,877

 

 

2,002

 

(6)%

 

3,005

(38)%

 

6,359

 

 

12,107

(47)%

Net servicing income (loss)

 

240

 

 

(1,002

)

124%

 

291

(18)%

 

(437

)

 

1,001

(144)%

Other income

 

460

 

 

531

 

(13)%

 

392

17%

 

1,570

 

 

1,081

45%

Total non-interest income

 

3,165

 

 

2,068

 

53%

 

4,233

(25)%

 

9,061

 

 

16,023

(43)%

Non-interest expense:
Salaries and employee benefits

 

7,545

 

 

7,381

 

2%

 

6,973

8%

 

22,193

 

 

20,851

6%

Occupancy and equipment

 

2,126

 

 

2,170

 

(2)%

 

1,760

21%

 

6,533

 

 

4,916

33%

Professional fees

 

1,389

 

 

1,104

 

26%

 

898

55%

 

3,455

 

 

2,344

47%

Advertising and marketing

 

269

 

 

406

 

(34)%

 

470

(43)%

 

1,114

 

 

1,170

(5)%

FDIC assessments

 

(5

)

 

190

 

(103)%

 

186

(103)%

 

440

 

 

1,203

(63)%

Data processing

 

271

 

 

303

 

(11)%

 

311

(13)%

 

882

 

 

894

(1)%

Other

 

1,831

 

 

2,171

 

(16)%

 

1,933

(5)%

 

5,656

 

 

5,277

7%

Total non-interest expense

 

13,426

 

 

13,725

 

(2)%

 

12,531

7%

 

40,273

 

 

36,655

10%

Income before income taxes

 

19,498

 

 

18,878

 

3%

 

22,077

(12)%

 

60,396

 

 

66,578

(9)%

Income tax expense

 

5,614

 

 

5,444

 

3%

 

6,336

(11)%

 

17,395

 

 

19,106

(9)%

Net income

$

13,884

 

$

13,434

 

3%

$

15,741

(12)%

$

43,001

 

$

47,472

(9)%

Income per share:
Basic

$

0.28

 

$

0.26

 

$

0.30

$

0.84

 

$

0.90

Diluted

$

0.28

 

$

0.26

 

$

0.30

$

0.83

 

$

0.90

Weighted average common shares outstanding:
Basic

 

50,428,108

 

 

51,510,951

 

 

52,963,308

 

51,490,046

 

 

52,963,308

Diluted

 

50,441,572

 

 

51,520,944

 

 

52,966,593

 

51,500,657

 

 

52,965,089

Sterling Bancorp, Inc.
Selected Financial Data (Unaudited)

As of and for the Three Months Ended

September 30,

 

June 30,

 

September 30,

Performance Ratios:

2019

 

2019

 

2018

Return on average assets

1.67%

1.64%

1.98%

Return on average shareholders' equity

15.97%

15.54%

20.07%

Return on average tangible common equity

15.98%

15.55%

20.11%

Yield on earning assets

5.45%

5.60%

5.38%

Cost of average interest-bearing liabilities

2.00%

2.02%

1.62%

Net interest spread

3.45%

3.58%

3.76%

Net interest margin

3.70%

3.84%

3.95%

Efficiency ratio (1)

40.47%

41.87%

35.77%

 
(1) 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

September 30, 2019

 

June 30, 2019

 

September 30, 2018

(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)

$

2,971,369

$

42,351

5.70%

$

2,994,142

$

43,301

5.78%

$

2,923,584

$

40,772

5.58%

Securities, includes restricted stock

 

177,646

 

1,252

2.82%

 

174,823

 

1,272

2.91%

 

165,636

 

958

2.31%

Other interest earning assets

 

98,281

 

608

2.47%

 

28,794

 

216

3.00%

 

27,604

 

166

2.41%

Total interest earning assets

$

3,247,296

$

44,211

5.45%

$

3,197,759

$

44,789

5.60%

$

3,116,824

$

41,896

5.38%

Interest-bearing liabilities
Money Market, Savings, NOW

$

1,300,786

$

4,458

1.36%

$

1,356,200

$

4,961

1.47%

$

1,539,304

$

5,181

1.34%

Time deposits

 

1,217,234

 

7,791

2.54%

 

1,044,388

 

6,563

2.52%

 

796,197

 

3,447

1.72%

Total interest-bearing deposits

 

2,518,020

 

12,249

1.93%

 

2,400,588

 

11,524

1.93%

 

2,335,501

 

8,628

1.47%

FHLB borrowings

 

229,897

 

777

1.32%

 

323,583

 

1,375

1.68%

 

324,795

 

1,297

1.56%

Subordinated debt

 

65,116

 

1,175

7.22%

 

65,079

 

1,175

7.22%

 

64,970

 

1,173

7.22%

Total borrowings

 

295,013

 

1,952

2.59%

 

388,662

 

2,550

2.60%

 

389,765

 

2,470

2.48%

Total interest-bearing liabilities

$

2,813,033

 

14,201

2.00%

$

2,789,250

 

14,074

2.02%

$

2,725,266

 

11,098

1.62%

Net interest income and spread (2)

$

30,010

3.45%

$

30,715

3.58%

$

30,798

3.76%

Net interest margin (2)

3.70%

3.84%

3.95%

 
(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.
 

Nine Months Ended

September 30, 2019

 

September 30, 2018

(dollars in thousands)

Average

Balance

 

Interest

 

Average

Yield/

Rate

 

Average

Balance

 

Interest

 

Average

Yield/

Rate

Interest earning assets
Loans (1)

$

2,969,364

$

127,374

5.72%

$

2,829,749

$

115,752

5.45%

Securities, includes restricted stock

 

174,223

 

3,751

2.87%

 

155,586

 

2,619

2.24%

Other interest earning assets

 

52,773

 

1,060

2.68%

 

25,599

 

399

2.08%

Total interest earning assets

$

3,196,360

$

132,185

5.51%

$

3,010,934

$

118,770

5.26%

Interest-bearing liabilities
Money Market, Savings, NOW

$

1,376,403

$

14,797

1.44%

$

1,526,935

$

13,783

1.21%

Time deposits

 

1,062,617

 

19,632

2.47%

 

739,626

 

8,613

1.56%

Total interest-bearing deposits

 

2,439,020

 

34,429

1.89%

 

2,266,561

 

22,396

1.32%

FHLB borrowings

 

273,874

 

3,207

1.54%

 

312,140

 

3,464

1.46%

Subordinated debt

 

65,080

 

3,524

7.22%

 

64,935

 

3,516

7.22%

Total borrowings

 

338,954

 

6,731

2.62%

 

377,075

 

6,980

2.44%

Total interest-bearing liabilities

$

2,777,974

 

41,160

1.98%

$

2,643,636

 

29,376

1.49%

Net interest income and spread (2)

$

91,025

3.53%

$

89,394

3.77%

Net interest margin (2)

3.80%

3.96%

 
(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.
Sterling Bancorp, Inc.
Loan Composition (Unaudited)
(dollars in thousands)

September 30,

2019

 

June 30,

2019

 

%

change

 

December 31,

2018

 

%

change

 

September 30,

2018

 

%

change

Residential real estate

$

2,505,274

 

$

2,523,883

 

(1)%

$

2,452,441

 

2%

$

2,341,989

 

7%

Commercial real estate

 

224,570

 

 

220,388

 

2%

 

250,955

 

(11)%

 

252,782

 

(11)%

Construction

 

171,051

 

 

172,656

 

(1)%

 

176,605

 

(3)%

 

177,734

 

(4)%

Commercial lines of credit

 

24,512

 

 

28,774

 

(15)%

 

37,776

 

(35)%

 

44,375

 

(45)%

Other consumer

 

29

 

 

30

 

(3)%

 

26

 

12%

 

35

 

(17)%

Total loans held for investment

 

2,925,436

 

 

2,945,731

 

(1)%

 

2,917,803

 

0%

 

2,816,915

 

4%

Less: allowance for loan losses

 

(21,204

)

 

(20,918

)

1%

 

(21,850

)

(3)%

 

(20,765

)

2%

Loans, net

$

2,904,232

 

$

2,924,813

 

(1)%

$

2,895,953

 

0%

$

2,796,150

 

4%

 
Mortgage loans held for sale

$

837

 

$

500

 

67%

$

1,248

 

(33)%

$

113,805

 

(99)%

Total gross loans

$

2,926,273

 

$

2,946,231

 

(1)%

$

2,919,051

 

0%

$

2,930,720

 

0%

Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)

Three Months Ended

(dollars in thousands)

September 30,

2019

 

June 30,

2019

 

December 31,

2018

 

September 30,

2018

Balance at beginning of period

$

20,918

$

20,698

$

20,765

$

20,300

Provision for loan losses

 

251

 

180

 

1,045

 

423

Charge offs

 

-

 

-

 

-

 

-

Recoveries

 

35

 

40

 

40

 

42

Balance at end of period

$

21,204

$

20,918

$

21,850

$

20,765

Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
(dollars in thousands)

September 30,

2019

 

June 30,

2019

 

%

change

 

December 31,

2018

 

%

change

 

September 30,

2018

 

%

change

Noninterest bearing deposits

$

77,335

$

70,406

10%

$

76,815

1%

$

79,432

(3)%

Money Market, Savings and NOW

 

1,277,518

 

1,312,010

(3)%

 

1,481,591

(14)%

 

1,537,202

(17)%

Time deposits

 

1,216,992

 

1,164,244

5%

 

894,279

36%

 

795,437

53%

Total deposits

$

2,571,845

$

2,546,660

1%

$

2,452,685

5%

$

2,412,071

7%

Sterling Bancorp, Inc.
Capital and Credit Quality Ratios (Unaudited)

As of and for the Three Months Ended

(dollars in thousands)

September 30,

2019

June 30,

2019

December 31,

2018

September 30,

2018

Capital Ratios
Regulatory and Other Capital Ratios— Consolidated:
Total adjusted capital to risk-weighted assets

 

22.64%

 

21.91%

 

21.98%

 

21.00%

Tier 1 (core) capital to risk-weighted assets

 

18.17%

 

17.51%

 

17.45%

 

16.55%

Common Tier 1 (CET 1)

 

18.17%

 

17.51%

 

17.45%

 

16.55%

Tier 1 (core) capital to adjusted tangible assets

 

10.54%

 

10.40%

 

10.42%

 

10.04%

 
Regulatory and Other Capital Ratios—Bank:
Total adjusted capital to risk-weighted assets

 

18.47%

 

17.72%

 

16.94%

 

15.99%

Tier 1 (core) capital to risk-weighted assets

 

17.37%

 

16.64%

 

15.80%

 

14.91%

Common Tier 1 (CET 1)

 

17.37%

 

16.64%

 

15.80%

 

14.91%

Tier 1 (core) capital to adjusted tangible assets

 

10.07%

 

9.88%

 

9.44%

 

9.04%

 
Credit Quality Data
Nonperforming loans (1)

$

9,974

$

6,697

$

4,500

$

356

Nonperforming loans to total loans

 

0.34%

 

0.23%

 

0.15%

 

0.01%

Nonperforming assets (2)

$

12,345

$

12,190

$

10,157

$

6,035

Nonperforming assets to total assets

 

0.37%

 

0.37%

 

0.32%

 

0.19%

Allowance for loan losses to total loans

 

0.72%

 

0.71%

 

0.75%

 

0.74%

Allowance for loan losses to nonperforming loans

 

213%

 

312%

 

486%

 

5,833%

Net recoveries to average loans

 

(0.00)%

 

(0.00)%

 

(0.00)%

 

(0.00)%

 
(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 September 30, 2019 and 2018, and June 30, 2019.

Sterling Bancorp, Inc.
GAAP to Non-GAAP Reconciliations

As of and for the Three Months Ended

 

As of and for the Nine Months Ended

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

(dollars in thousands)

2019

 

2019

 

2018

 

2019

 

2018

Net Income

$

13,884

 

$

13,434

 

$

15,741

 

$

43,001

 

$

47,472

 

Average shareholders' equity

 

347,810

 

 

345,806

 

 

313,697

 

 

344,640

 

 

299,370

 

Adjustment
Customer-related intangible

 

(188

)

 

(300

)

 

(638

)

 

(299

)

 

(749

)

Average tangible common equity

$

347,622

 

$

345,506

 

$

313,059

 

$

344,341

 

$

298,621

 

Return on average tangible common equity*

 

15.98

%

 

15.55

%

 

20.11

%

 

16.65

%

 

21.20

%

 
*Annualized

 

Contacts

Financial Profiles, Inc.
Larry Clark
310-622-8223
Kristen Papke
310-622-8225
SBT@finprofiles.com

Contacts

Financial Profiles, Inc.
Larry Clark
310-622-8223
Kristen Papke
310-622-8225
SBT@finprofiles.com