Q1 2018 Summary

• Net income of $15.7 million, a 51% increase from Q1 2017
• Fully diluted EPS of $0.30, a 30% increase from Q1 2017
• Total loan originations of $408 million, a 59% increase from Q1 2017
• Total gross loans, including loans held for investment and loans held for sale, of $2.80 billion, a 39% increase from Q1 2017
• Total deposits of $2.29 billion, a 33% increase from Q1 2017
• Net interest margin of 3.89%
• Named as the top performing community bank in the United States for 2017 with total assets between $1 billion and $10 billion by SNL/S&P Global Market Intelligence

SOUTHFIELD, Mich.--(BUSINESS WIRE)--Apr. 30, 2018-- Sterling Bancorp, Inc. (NASDAQ: SBT), the holding company of Sterling Bankand Trust, F.S.B., today reported unaudited financial results for its first quarter ended March 31, 2018.

For the three months ended March 31, 2018, net income totaled $15.7 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding. This compares to fourth quarter 2017 net income of $6.5 million, or $0.13 per diluted share, based on 49.0 million weighted average diluted shares outstanding. For the first quarter of 2017, net income totaled $10.4 million, or $0.23 per diluted share, based on 45.3 million weighted average diluted shares outstanding.

“We are very pleased with our strong start to 2018, as we delivered excellent growth in our revenue streams combined with well controlled expenses,” said Gary Judd, Chairman and CEO of Sterling Bancorp. “As a result, we generated a 30% year-over-year increase in earnings per share and continued to deliver the superior level of returns that made us the top performing community bank in the United States in 2017, as recognized by SNL/S&P Global Market Intelligence.

“We continue to see strong demand for residential mortgage loans in our target markets, and we increased the volume of loans sold into the secondary market as part of our balance sheet management strategy. Given our healthy loan pipeline, we expect to continue to strategically utilize loan sales to mitigate pressure on our net interest margin going forward, which we believe will enable us to continue to generate profitable growth for our shareholders,” said Mr. Judd.

Financial Highlights (Unaudited)

Operating Results for the First Quarter 2018

Net Interest Income

Net interest income for the first quarter of 2018 was $28.2 million, an increase of 4.8% from $26.9 million for the fourth quarter of 2017. The increase in net interest income from the fourth quarter was primarily attributable to a $185 million increase in average interest earning assets, partially offset by the effects of an 8 basis point decrease in the net interest margin.

Relative to the first quarter of 2017, net interest income increased 28.9% from $21.9 million. The increase in net interest income from the first quarter of 2017 was primarily attributable to a $748 million increase in average interest earning assets, partially offset by the effects of an 18 basis point decrease in the net interest margin.

Net Interest Margin

Net interest margin for the first quarter of 2018 was 3.89%, compared to 3.97% for the fourth quarter of 2017. The decrease in net interest margin was primarily attributable to a 5 basis point decrease in the average yield on interest earning assets and a 10 basis point increase in the average cost of interest-bearing deposits.

Relative to the first quarter of 2017, the net interest margin decreased from 4.07%, primarily due to a 32 basis point increase in the average cost of interest-bearing deposits, partially offset by a 2 basis point increase in the average yield on interest earning assets.

Noninterest Income

Noninterest income for the first quarter of 2018 was $6.0 million, an increase from $2.8 million for the fourth quarter of 2017. The increase was primarily the result of a $3.1 million increase in the gain on sale of loans due to an increase in the amount of residential mortgages sold in the secondary market compared to the prior period.

Noninterest income increased from $5.6 million in the first quarter of 2017, primarily as a result of a $0.2 million increase in service charges and fees and a $0.2 million increase in other income.

Noninterest Expense

Noninterest expense for the first quarter of 2018 was $11.5 million, compared with $11.9 million for the fourth quarter of 2017. The decrease was primarily attributable to lower salary expense, as well as $0.2 million of expenses incurred during the fourth quarter of 2017 related to the Company’s initial public offering.

Relative to the first quarter of 2017, noninterest expense increased from $9.1 million. The increase was primarily due to an increase in personnel expenses and occupancy and equipment costs required to support the growth in the Company’s operations.

The Company’s operating efficiency ratio was 33.6% in the first quarter of 2018, compared with 40.2% in the fourth quarter of 2017 and 33.1% in the first quarter of 2017.

Income Taxes

The effective tax rate for the three months ended March 31, 2018 was 29%, compared with 62% and 41% for the three months ended December 31, 2017 and March 31, 2017, respectively. The decrease in the effective tax rate in the first quarter of 2018 as compared to first quarter of 2017 was attributable to the reduction in the federal corporate tax rate that was effective January 1, 2018. The effective tax rate for the fourth quarter of 2017 includes the effect of the re-measurement of the Company’s net deferred tax assets.

The Company continues to expect that its effective tax rate for 2018 will be in the range of 28% to 30%. The actual annual effective tax rate will vary depending upon the mix of the Company’s taxable income by state.

Loan Portfolio

Total loans, which includes those held for investment and held for sale, were $2.80 billion at March 31, 2018, compared with $2.73 billion at December 31, 2017. Contributing to the increase were an $88 million increase in residential real estate loans and a $6 million increase in commercial and industrial loans, partially offset by a $20 million decrease in the commercial real estate and construction loan portfolio, which decrease was driven by loan payoffs.

During the first quarter of 2018, the Company originated $408 million in loans, which included $349 million in residential mortgage loans, $5 million in commercial real estate loans, $44 million in construction loans and $10 million in commercial and industrial loans.

Deposits

Total deposits were $2.29 billion at March 31, 2018, compared with $2.25 billion at December 31, 2017. The increase was primarily attributable to a $123 million increase in retail deposits, partially offset by a $77 million decrease in brokered deposits.

Credit Quality

Nonperforming assets totaled $8.1 million, or 0.27% of total assets, at March 31, 2018, compared with $3.8 million, or 0.13% of total assets, at December 31, 2017. The increase was primarily due to a large residential real estate loan being placed on non-accrual. The Company believes that no impairment exists, as there is more than sufficient collateral value supporting the loan.

Net recoveries for the first quarter of 2018 were $34,000 and there were no charge offs during the quarter.

With the lack of charge offs and no specific reserves required for the large loan placed on non-accrual, the Company recorded a provision for loan losses of $641,000 for the first quarter of 2018, comparable with the provision for loan losses in the first quarter of 2017.

The Company’s allowance for loan losses was 0.74% of total loans and 374% of nonperforming loans at March 31, 2018, compared with 0.71% and 2,357%, respectively, at December 31, 2017.

Capital

At March 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:

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 (877) 270-2148 and the conference call number for participants outside the U.S. is (412) 902-6510. The conference ID number for both conference call numbers is 10118833. 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 May 14, 2018 by dialing (877) 344-7529, using conference ID number 10118833.

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 and New York City, and a loan production office in Seattle, 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. In March 2018, 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. 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 “Reconciliation of Non-GAAP Financial Measures” 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 meeting 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.

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

Average tangible common equity and return on average common equity are non-GAAP disclosure. 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 March 31, 2018 and 2017, and December 31, 2017.

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Source: Sterling Bancorp, Inc.

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