Sterling Bancorp Reports Fourth Quarter and Full Year 2019 Financial Results

January 29, 2020

Q4 2019 Highlights

Net income of $14.0 million, up 0.5% from Q3 2019, and down 13% from Q4 2018
Fully diluted EPS of $0.28, unchanged from Q3 2019 and down 7% from Q4 2018
Fourth quarter ROAA of 1.70% and ROATCE of 15.62%, and full year 2019 ROAA of 1.74% and ROATCE of 16.38%.
Revenue, net of interest expense, was $32.3 million, down 3% from Q3 2019, and 12% from Q4 2018
Total loan originations of $281.7 million, consistent with Q3 2019 and down from $332.7 million in Q4 2018
Total gross loans, including loans held for investment and loans held for sale, of $2.91 billion, down slightly from Q3 2019 and Q4 2018
Total deposits of $2.50 billion, a 3% decrease from Q3 2019, and a 2% increase from Q4 2018
Net interest margin of 3.74%, compared to 3.70% in Q3 2019 and 3.90% in Q4 2018
Repurchased approximately 0.5 million shares of common stock at an average price of $9.93 during the quarter

SOUTHFIELD, Mich.--(BUSINESS WIRE)--Jan. 29, 2020-- 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, 2019.

For the fourth quarter 2019, net income totaled $14.0 million, or $0.28 per diluted share, based on 50.0 million weighted average diluted shares outstanding. This compares to third quarter 2019 net income of $13.9 million, or $0.28 per diluted share, based on 50.4 million weighted average diluted shares outstanding. For the fourth quarter of 2018, net income totaled $16.0 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding.

“Overall, our financial results for the fourth quarter were in line with our expectations,” said Tom Lopp, Chairman, CEO and President of Sterling Bancorp. “Our EPS for the quarter was consistent with the third quarter despite lower revenue and higher operating expenses as we benefited from a lower income tax rate. We continue to generate strong returns, as our annualized return on average assets was 1.70% and our annualized return on average tangible common equity was 15.62%.

“During the quarter, net interest margin improved, primarily due to lower deposit costs more than offsetting the decline in the yield on our interest earning assets. Our loan production was lower during the quarter primarily due to lower residential mortgage production, which was partially offset by higher commercial real estate and construction loan production. As a result, our total loans declined slightly during the quarter.

“As we previously announced, on December 9, 2019, we suspended our Advantage Loan program in connection with an ongoing internal review of the program’s documentation procedures. As a result of this action, we expect our near-term total loan production to be below historical levels and adversely impact our portfolio loan growth rates. Our operating expense levels are also expected to be elevated as we invest in our compliance infrastructure. We intend to offset a portion of our reduced loan volume by continuing to work on initiatives to diversify our overall loan production, including expanding our commercial lending and tenant-in-common lending efforts. In addition, we will continue to develop new residential loan products that we believe will meet the needs of our customers, as well as have a broader appeal in our served markets. We are committed to making the necessary investments in order to realize the bank’s long-term growth potential,” concluded Mr. Lopp.

Financial Highlights (Unaudited)
	At or for the Three Months Ended
(dollars in thousands, except per share data)	December 31, 2019			September 30, 2019			December 31, 2018
Net income	$	13,950		$	13,884		$	15,996
Income per share, diluted	$	0.28		$	0.28		$	0.30
Net interest income	$	29,959		$	30,010		$	30,706
Net interest margin		3.74	%		3.70	%		3.90	%
Non-interest income	$	2,386		$	3,165		$	6,014
Non-interest expense	$	14,577		$	13,426		$	13,681
Loans, net of allowance for loan losses	$	2,891,530		$	2,904,232		$	2,895,953
Total deposits	$	2,495,440		$	2,571,845		$	2,452,685
Nonperforming loans	$	10,953		$	9,974		$	4,500
Allowance for loan losses to total loans		0.75	%		0.72	%		0.75	%
Allowance for loan losses to nonperforming loans		198	%		213	%		486	%
Provision for loan losses	$	450		$	251		$	1,045
Net recoveries	$	(76	)	$	(35	)	$	(40	)
Return on average assets		1.70	%		1.67	%		1.99	%
Return on average shareholders' equity		15.61	%		15.97	%		19.36	%
Efficiency ratio		45.07	%		40.47	%		37.26	%

Operating Results for the Fourth Quarter 2019

Revenue

Revenue, net of interest expense, was $32.3 million for the fourth quarter of 2019, a decrease of 3% from the third quarter of 2019. The decline was attributable to a $0.8 million decrease in non-interest income.

Revenue, net of interest expense, for the fourth quarter of 2018 was $36.7 million. The 12% year-over-year decrease was due to a $3.6 million decrease in non-interest income and a $0.7 million decrease in net interest income.

Net Interest Income

Net interest income for the fourth quarter of 2019 was $30.0 million, consistent with the third quarter of 2019. Average interest earning assets declined by $40.6 million, but the impact was offset by a 4 basis point increase in the net interest margin.

Relative to the fourth quarter of 2018, net interest income decreased 2% from $30.7 million. The decline in net interest income from the fourth quarter of 2018 was primarily attributable to a 16 basis point decrease in the net interest margin, partially offset by a $57.0 million increase in average interest earning assets.

Net Interest Margin

Net interest margin for the fourth quarter of 2019 was 3.74%, up 4 basis points from the net interest margin of 3.70% for the third quarter of 2019. Net interest margin was positively impacted by a 10 basis point decrease in the average cost of interest-bearing liabilities, partially offset by a 6 basis point decrease in the average yield on interest earning assets.

Relative to the fourth quarter of 2018, net interest margin decreased from 3.90%, primarily due to a 12 basis point increase in the average cost of interest-bearing liabilities and a 7 basis point decrease in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the fourth quarter of 2019 was $2.4 million, a decrease from $3.2 million for the third quarter of 2019. The decline was primarily the result of a $1.9 million decrease in the gain on sale of loans due to less residential mortgages sold in the secondary market as compared to the prior quarter, as well as a loss on the sale of a CRA qualifying loan pool that was both purchased and sold in the fourth quarter. This decrease was partially offset by a $0.8 million increase in other income as a result of a final distribution payment on an equity investment (without a readily determinable fair value) in excess of its remaining book value and a mortgage servicing rights valuation allowance recovery taken in the fourth quarter as compared to the prior quarter’s expense.

Non-interest income decreased $3.6 million from $6.0 million in the fourth quarter of 2018, primarily as a result of a $4.6 million decrease in the gain on sale of loans due to less residential mortgages sold in the secondary market as compared to the prior year period, as well as the loss on the sale of a CRA qualifying loan pool that was both purchased and sold in the fourth quarter. This was partially offset by a $0.3 million increase in net servicing income due primarily to an improved mortgage servicing rights valuation allowance taken in the fourth quarter as compared to the prior year fourth quarter and the $0.8 million increase in other income discussed above.

Non-interest Expense

Non-interest expense for the fourth quarter of 2019 was $14.6 million, an increase from $13.4 million for the third quarter of 2019. The increase was primarily attributable to higher professional fees, a substantial portion of which related to increased spending on regulatory compliance and internal review initiatives, as well as higher occupancy and equipment expenses. Partially offsetting these increases were lower salaries and employee benefits and other expenses. In addition, we again did not incur any FDIC assessments due to Small Bank Assessment Credits applied during the quarter.

Relative to the fourth quarter of 2018, non-interest expense increased 7% from $13.7 million. The increase was primarily due to higher professional fees, a substantial portion of which related to increased spending on regulatory compliance and internal review initiatives, as well as higher occupancy and equipment expenses. Partially offsetting these increases were lower salaries and employee benefits, advertising and marketing expenses, FDIC assessments and other expenses.

The Company’s operating efficiency ratio was 45.1% in the fourth quarter of 2019, compared with 40.5% in the third quarter of 2019 and 37.3% in the fourth quarter of 2018.

Income Taxes

The effective tax rate for the fourth quarter of 2019 was 19%, down from 29% for the third quarter of 2019 and from 27% for the fourth quarter of 2018. The lower tax rate in the fourth quarter of 2019 was due primarily to changes in state tax estimates for 2019.

Loan Portfolio

Total gross loans, which includes those held for investment and held for sale, were $2.91 billion at December 31, 2019, down slightly from September 30, 2019. The Company had a $28.4 million decrease in residential mortgage loans held for investment, a $22.8 million increase in construction and commercial real estate loans and a $6.6 million decrease in commercial lines of credit. The decline in residential loans held for investment was primarily due to lower production combined with a modest increase in payoffs. The lower production of residential loans was partially due to the Company’s decision to suspend its Advantage Loan program, which occurred in early December.

During the fourth quarter of 2019, the Company originated $281.7 million in loans, which included $200.6 million in residential mortgage loans, $58.8 million in construction loans, $20.8 million in commercial real estate loans and $1.5 million in commercial lines of credit.

The Company sold $51.4 million in residential mortgage loans during the fourth quarter, including $25.7 million of Agency loans and a $25.7 million CRA qualifying loan pool that was both purchased and sold in the quarter, down from $76.1 million of loans sold in the third quarter. In the near-term, the Company will likely undertake minimal loan sales and rather retain the majority of its new loan production on its balance sheet.

Deposits

Total deposits were $2.50 billion at December 31, 2019, compared with $2.57 billion at September 30, 2019. The $76.4 million decrease was primarily attributable to a $62.9 million decrease in time deposits and a $13.7 million decrease in money market, savings and NOW deposits. Brokered CDs were unchanged at $25.0 million.

Credit Quality

Nonperforming assets totaled $13.3 million, or 0.41% of total assets, at December 31, 2019, compared with $12.3 million, or 0.37% of total assets, at September 30, 2019. The increase was primarily due to a $4.4 million increase in residential nonperforming loans, offset in part by the full payoff of a $3.5 million construction loan that was previously classified as nonperforming.

Recoveries for the fourth quarter of 2019 were $76,000 and there were no charge offs during the quarter.

The Company recorded a provision for loan losses of $0.5 million for the fourth quarter of 2019, compared to $0.3 million for the third quarter of 2019. The larger provision was primarily attributable to increases in required reserves on commercial real estate and construction loans.

The allowance for loan losses was 0.75% of total loans and 198% of nonperforming loans at December 31, 2019, compared with 0.72% and 213%, respectively, at September 30, 2019.

Capital

At December 31, 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 December 31, 2019
Total adjusted capital to risk-weighted assets		N/A			22.98	%
Tier 1 (core) capital to risk-weighted assets		N/A			18.51	%
Common Tier 1 (CET 1)		N/A			18.51	%
Tier 1 (core) capital to adjusted tangible assets		N/A			10.96	%

	Well Capitalized			Sterling Bank Actual at December 31, 2019
Total adjusted capital to risk-weighted assets		10.00	%		18.90	%
Tier 1 (core) capital to risk-weighted assets		8.00	%		17.78	%
Common Tier 1 (CET 1)		6.50	%		17.78	%
Tier 1 (core) capital to adjusted tangible assets		5.00	%		10.52	%

Share Repurchase Program

During the quarter, the Company repurchased approximately 0.5 million shares of common stock at an average price of $9.93 per share. For the year, approximately 3.1 million shares have been repurchased at an average price of $9.68 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 February 12, 2020 by dialing (877) 344-7529, using conference ID number 10138163.

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 the effects of the suspension of our Advantage Loan program, our ability to comply with regulatory agreements, increased scrutiny of regulatory agencies, recent departures of loan producers, 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, 2019		September 30, 2019		% change		December 31, 2018			% change
Assets
Cash and due from banks	$	77,819	$	146,246	(47	)%	$	52,526		48	%
Interest-bearing time deposits with other banks		1,025		1,100	(7	)%		1,100		(7	)%
Investment securities		152,544		153,306	0	%		148,896		2	%
Mortgage loans held for sale		1,337		837	60	%		1,248		7	%
Loans, net of allowance for loan losses of $21,730, $21,204 and $21,850		2,891,530		2,904,232	0	%		2,895,953		0	%
Accrued interest receivable		13,718		13,861	(1	)%		13,529		1	%
Mortgage servicing rights, net		9,765		9,910	(1	)%		10,633		(8	)%
Leasehold improvements and equipment, net		9,198		9,386	(2	)%		9,489		(3	)%
Operating lease right-of-use assets		18,715		19,662	(5	)%		-		N/M
Federal Home Loan Bank stock, at cost		22,950		22,950	0	%		22,950		0	%
Cash surrender value of bank-owned life insurance		31,917		31,761	0	%		31,302		2	%
Deferred tax asset, net		7,044		6,681	5	%		6,122		15	%
Other assets		2,202		2,298	(4	)%		3,026		(27	)%
Total assets	$	3,239,764	$	3,322,230	(2	)%	$	3,196,774		1	%

Liabilities
Noninterest-bearing deposits	$	77,563	$	77,335	0	%	$	76,815		1	%
Interest-bearing deposits		2,417,877		2,494,510	(3	)%		2,375,870		2	%
Total deposits		2,495,440		2,571,845	(3	)%		2,452,685		2	%
Federal Home Loan Bank borrowings		229,000		229,000	0	%		293,000		(22	)%
Subordinated notes, net		65,179		65,140	0	%		65,029		0	%
Operating lease liabilities		19,868		20,804	(4	)%		-		N/M
Accrued expenses and other liabilities		69,960		84,064	(17	)%		51,003		37	%
Total liabilities		2,879,447		2,970,853	(3	)%		2,861,717		1	%

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 49,944,473 shares at December 31, 2019, 50,424,940 shares at September 30, 2019, and 53,012,283 shares at December 31, 2018		80,889		85,515	(5	)%		111,238		(27	)%
Additional paid-in capital		13,210		13,138	1	%		12,713		4	%
Retained earnings		266,022		252,571	5	%		211,115		26	%
Accumulated other comprehensive income (loss)		196		153	28	%		(9	)	N/M
Total shareholders’ equity		360,317		351,377	3	%		335,057		8	%
Total liabilities and shareholders’ equity	$	3,239,764	$	3,322,230	(2	)%	$	3,196,774		1	%

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)		2019			2019		change			2018	change			2019			2018	change
Interest income:
Interest and fees on loans	$	41,581		$	42,351		(2	)%	$	41,747	0	%	$	168,955		$	157,499	7	%
Interest and dividends on investment securities and restricted stock		1,225			1,252		(2	)%		1,060	16	%		4,976			3,679	35	%
Other interest		378			608		(38	)%		194	95	%		1,438			593	142	%
Total interest income		43,184			44,211		(2	)%		43,001	0	%		175,369			161,771	8	%
Interest expense:
Interest on deposits		11,264			12,249		(8	)%		9,635	17	%		45,693			32,031	43	%
Interest on Federal Home Loan Bank borrowings		784			777		1	%		1,487	(47	)%		3,991			4,951	(19	)%
Interest on subordinated notes		1,177			1,175		0	%		1,173	0	%		4,701			4,689	0	%
Total interest expense		13,225			14,201		(7	)%		12,295	8	%		54,385			41,671	31	%
Net interest income		29,959			30,010		0	%		30,706	(2	)%		120,984			120,100	1	%
Provision (recovery) for loan losses		450			251		79	%		1,045	(57	)%		(133	)		3,229	(104	)%
Net interest income after provision (recovery) for loan losses		29,509			29,759		(1	)%		29,661	(1	)%		121,117			116,871	4	%
Non-interest income:
Service charges and fees		117			111		5	%		113	4	%		444			379	17	%
Investment management and advisory fees		335			477		(30	)%		467	(28	)%		1,577			2,035	(23	)%
Gain on sale of loans		7			1,877		(100	)%		4,566	(100	)%		6,366			16,673	(62	)%
Net servicing income		675			240		181	%		380	78	%		238			1,381	(83	)%
Other income		1,252			460		172	%		488	157	%		2,822			1,569	80	%
Total non-interest income		2,386			3,165		(25	)%		6,014	(60	)%		11,447			22,037	(48	)%
Non-interest expense:
Salaries and employee benefits		7,310			7,545		(3	)%		7,587	(4	)%		29,503			28,438	4	%
Occupancy and equipment		2,455			2,126		15	%		2,334	5	%		8,988			7,250	24	%
Professional fees		2,529			1,389		82	%		774	227	%		5,984			3,118	92	%
Advertising and marketing		250			269		(7	)%		470	(47	)%		1,364			1,640	(17	)%
FDIC assessments		(4	)		(5	)	20	%		244	(102	)%		436			1,447	(70	)%
Data processing		351			271		30	%		329	7	%		1,233			1,223	1	%
Other		1,686			1,831		(8	)%		1,943	(13	)%		7,342			7,220	2	%
Total non-interest expense		14,577			13,426		9	%		13,681	7	%		54,850			50,336	9	%
Income before income taxes		17,318			19,498		(11	)%		21,994	(21	)%		77,714			88,572	(12	)%
Income tax expense		3,368			5,614		(40	)%		5,998	(44	)%		20,763			25,104	(17	)%
Net income	$	13,950		$	13,884		0	%	$	15,996	(13	)%	$	56,951		$	63,468	(10	)%
Income per share, basic and diluted	$	0.28		$	0.28				$	0.30			$	1.11		$	1.20
Weighted average common shares outstanding:
Basic		50,006,001			50,428,108					52,963,308				51,115,986			52,963,308
Diluted		50,023,608			50,441,572					52,967,004				51,128,345			52,965,567

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:		2019		2019		2018		2019		2018
Return on average assets		1.70	%	1.67	%	1.99	%	1.74	%	2.04	%
Return on average shareholders' equity		15.61	%	15.97	%	19.36	%	16.37	%	20.66	%
Return on average tangible common equity		15.62	%	15.98	%	19.39	%	16.38	%	20.71	%
Yield on earning assets		5.39	%	5.45	%	5.46	%	5.48	%	5.31	%
Cost of average interest-bearing liabilities		1.90	%	2.00	%	1.78	%	1.96	%	1.56	%
Net interest spread		3.49	%	3.45	%	3.68	%	3.52	%	3.75	%
Net interest margin		3.74	%	3.70	%	3.90	%	3.78	%	3.94	%
Efficiency ratio ⁽¹⁾		45.07	%	40.47	%	37.26	%	41.42	%	35.41	%

(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
	December 31, 2019						September 30, 2019						December 31, 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⁾	$	2,938,052	$	41,581	5.66	%	$	2,971,369	$	42,351	5.70	%	$	2,957,092	$	41,747	5.65	%
Securities, includes restricted stock		189,336		1,225	2.59	%		177,646		1,252	2.82	%		161,362		1,060	2.63	%
Other interest earning assets		79,310		378	1.91	%		98,281		608	2.47	%		31,207		194	2.49	%
Total interest earning assets	$	3,206,698	$	43,184	5.39	%	$	3,247,296	$	44,211	5.45	%	$	3,149,661	$	43,001	5.46	%
Interest-bearing liabilities
Money Market, Savings, NOW	$	1,271,702	$	3,682	1.15	%	$	1,300,786	$	4,458	1.36	%	$	1,507,209	$	5,495	1.45	%
Time deposits		1,190,740		7,582	2.53	%		1,217,234		7,791	2.54	%		833,202		4,140	1.97	%
Total interest-bearing deposits		2,462,442		11,264	1.81	%		2,518,020		12,249	1.93	%		2,340,411		9,635	1.63	%
FHLB borrowings		230,492		784	1.33	%		229,897		777	1.32	%		338,462		1,487	1.72	%
Subordinated debt		65,157		1,177	7.23	%		65,116		1,175	7.22	%		65,006		1,173	7.22	%
Total borrowings		295,649		1,961	2.60	%		295,013		1,952	2.59	%		403,468		2,660	2.58	%
Total interest-bearing liabilities	$	2,758,091		13,225	1.90	%	$	2,813,033		14,201	2.00	%	$	2,743,879		12,295	1.78	%
Net interest income and spread⁽²⁾			$	29,959	3.49	%			$	30,010	3.45	%			$	30,706	3.68	%
Net interest margin ⁽²⁾					3.74	%					3.70	%					3.90	%

(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.

	Year Ended
	December 31, 2019						December 31, 2018
(dollars in thousands)	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate
Interest earning assets
Loans ⁽¹⁾	$	2,961,472	$	168,955	5.71	%	$	2,861,847	$	157,499	5.50	%
Securities, includes restricted stock		178,032		4,976	2.80	%		157,042		3,679	2.34	%
Other interest earning assets		59,462		1,438	2.42	%		27,012		593	2.20	%
Total interest earning assets	$	3,198,966	$	175,369	5.48	%	$	3,045,901	$	161,771	5.31	%
Interest-bearing liabilities
Money Market, Savings, NOW	$	1,350,013	$	18,479	1.37	%	$	1,521,963	$	19,278	1.27	%
Time deposits		1,094,911		27,214	2.49	%		763,212		12,753	1.67	%
Total interest-bearing deposits		2,444,924		45,693	1.87	%		2,285,175		32,031	1.40	%
FHLB borrowings		262,939		3,991	1.52	%		318,774		4,951	1.55	%
Subordinated debt		65,099		4,701	7.22	%		64,953		4,689	7.22	%
Total borrowings		328,038		8,692	2.65	%		383,727		9,640	2.51	%
Total interest-bearing liabilities	$	2,772,962		54,385	1.96	%	$	2,668,902		41,671	1.56	%
Net interest income and spread ⁽²⁾			$	120,984	3.52	%			$	120,100	3.75	%
Net interest margin ⁽²⁾					3.78	%					3.94	%

(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)	December 31, 2019			September 30, 2019			% change		December 31, 2018			% change
Residential real estate	$	2,476,866		$	2,505,274		(1	)%	$	2,452,441		1	%
Commercial real estate		240,081			224,570		7	%		250,955		(4	)%
Construction		178,376			171,051		4	%		176,605		1	%
Commercial lines of credit		17,903			24,512		(27	)%		37,776		(53	)%
Other consumer		34			29		17	%		26		31	%
Total loans held for investment		2,913,260			2,925,436		0	%		2,917,803		0	%
Less: allowance for loan losses		(21,730	)		(21,204	)	2	%		(21,850	)	(1	)%
Loans, net	$	2,891,530		$	2,904,232		0	%	$	2,895,953		0	%

Mortgage loans held for sale	$	1,337		$	837		60	%	$	1,248		7	%
Total gross loans	$	2,914,597		$	2,926,273		0	%	$	2,919,051		0	%

Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)
	Three Months Ended						Year Ended
(dollars in thousands)	December 31, 2019		September 30, 2019		December 31, 2018		December 31, 2019			December 31, 2018
Balance at beginning of period	$	21,204	$	20,918	$	20,765	$	21,850		$	18,457
Provision (recovery) for loan losses		450		251		1,045		(133	)		3,229
Charge offs		-		-		-		(176	)		(4	)
Recoveries		76		35		40		189			168
Balance at end of period	$	21,730	$	21,204	$	21,850	$	21,730		$	21,850

Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
(dollars in thousands)	December 31, 2019		September 30, 2019		% change		December 31, 2018		% change
Noninterest bearing demand deposits	$	77,563	$	77,335	0	%	$	76,815	1	%
Money Market, Savings and NOW		1,263,801		1,277,518	(1	)%		1,481,591	(15	)%
Time deposits		1,154,076		1,216,992	(5	)%		894,279	29	%
Total deposits	$	2,495,440	$	2,571,845	(3	)%	$	2,452,685	2	%

Sterling Bancorp, Inc.
Capital and Credit Quality Ratios (Unaudited)
	As of and for the Three Months Ended
(dollars in thousands)	December 31, 2019			September 30, 2019			December 31, 2018
Capital Ratios
Regulatory and Other Capital Ratios— Consolidated:
Total adjusted capital to risk-weighted assets		22.98	%		22.64	%		21.98	%
Tier 1 (core) capital to risk-weighted assets		18.51	%		18.17	%		17.45	%
Common Tier 1 (CET 1)		18.51	%		18.17	%		17.45	%
Tier 1 (core) capital to adjusted tangible assets		10.96	%		10.54	%		10.42	%

Regulatory and Other Capital Ratios—Bank:
Total adjusted capital to risk-weighted assets		18.90	%		18.47	%		16.94	%
Tier 1 (core) capital to risk-weighted assets		17.78	%		17.37	%		15.80	%
Common Tier 1 (CET 1)		17.78	%		17.37	%		15.80	%
Tier 1 (core) capital to adjusted tangible assets		10.52	%		10.07	%		9.44	%

Credit Quality Data
Nonperforming loans⁽¹⁾	$	10,953		$	9,974		$	4,500
Nonperforming loans to total loans		0.38	%		0.34	%		0.15	%
Nonperforming assets⁽²⁾	$	13,308		$	12,345		$	10,157
Nonperforming assets to total assets		0.41	%		0.37	%		0.32	%
Allowance for loan losses to total loans		0.75	%		0.72	%		0.75	%
Allowance for loan losses to nonperforming loans		198	%		213	%		486	%
Net recoveries to average loans		(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 December 31, 2019 and 2018, and September 30, 2019.

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)		2019				2019				2018				2019			2018
Net Income	$	13,950			$	13,884			$	15,996			$	56,951		$	63,468
Average shareholders' equity		357,370				347,810				330,443				347,849			307,202
Adjustment
Customer-related intangible		(75	)			(188	)			(525	)			(243	)		(693	)
Average tangible common equity	$	357,295			$	347,622			$	329,918			$	347,606		$	306,509
Return on average tangible common equity		15.62	%	*		15.98	%	*		19.39	%	*		16.38	%		20.71	%

*Annualized

View source version on businesswire.com: https://www.businesswire.com/news/home/20200129005736/en/

Source: Sterling Bancorp, Inc.

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

Sterling Bank offers a broad range of financial services including personal banking, small business lending, mortgages, credit cards, auto financing and investment advice.

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Sterling Bancorp Reports Fourth Quarter and Full Year 2019 Financial Results