UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 30, 2018
STERLING BANCORP, INC.
(Exact name of registrant as specified in its charter)
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Michigan |
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001-38290 |
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38-3163775 |
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(State or other jurisdiction of incorporation) |
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(Commission File No.) |
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(IRS Employer Identification No.) |
One Towne Square, Suite 1900
Southfield, Michigan 48076
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (248) 355-2400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Item 2.02. Results of Operations and Financial Condition.
On April 30, 2018, the Registrant issued a press release announcing its results of operations for its first quarter ended March 31, 2018 and provided a related investor presentation. The press release and the investor presentation are attached as Exhibit No. 99.1 and Exhibit 99.2, respectively, and are incorporated herein by reference.
This information in this Current Report on Form 8-K and the accompanying Exhibit 99.1 and Exhibit 99.2 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, unless expressly incorporated by reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished herewith:
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EXHIBIT |
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NUMBER |
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EXHIBIT DESCRIPTION |
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99.1 |
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Press Release of Sterling Bancorp, Inc. dated April 30, 2018 |
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99.2 |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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STERLING BANCORP, INC. | |
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Dated: April 30, 2018 |
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By: |
/s/ THOMAS LOPP |
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Thomas Lopp |
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President, Chief Operations Officer and Chief Financial Officer |
Sterling Bancorp Reports First Quarter 2018 Financial Results
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, Michigan, April 30, 2018 — Sterling Bancorp, Inc. (NASDAQ: SBT), the holding company of Sterling Bank and 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 $0.23 per diluted share, based on 45.3 million weighted average diluted shares outstanding.
“We are very pleased with our strong start to 2018, as we delivered excellent growth in our revenue streams combined with well controlled expenses,” said Gary Judd, Chairman and CEO of Sterling Bancorp. “As a result, we generated a 30% year-over-year increase in earnings per share and continued to deliver the superior level of returns that made us the top performing community bank in the United States in 2017, as recognized by SNL/S&P Global Market Intelligence.
“We continue to see strong demand for residential mortgage loans in our target markets, and we increased the volume of loans sold into the secondary market as part of our balance sheet management strategy. Given our healthy loan pipeline, we expect to continue to strategically utilize loan sales to mitigate pressure on our net interest margin going forward, which we believe will enable us to continue to generate profitable growth for our shareholders,” said Mr. Judd.
Financial Highlights (Unaudited)
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At or for the Three Months Ended |
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(Dollars in thousands, except per share data) |
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3/31/2018 |
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12/31/2017 |
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3/31/2017 |
| |||
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Net income |
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$ |
15,749 |
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$ |
6,531 |
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$ |
10,416 |
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Diluted earnings per share |
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$ |
0.30 |
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$ |
0.13 |
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$ |
0.23 |
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Net interest income before provision for loan losses |
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$ |
28,195 |
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$ |
26,915 |
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$ |
21,871 |
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Net interest margin |
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3.89 |
% |
3.97 |
% |
4.07 |
% | |||
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Noninterest income |
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$ |
6,037 |
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$ |
2,826 |
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$ |
5,586 |
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Noninterest expense |
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$ |
11,503 |
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$ |
11,943 |
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$ |
9,092 |
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Loans held for investment, net |
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$ |
2,580,560 |
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$ |
2,594,357 |
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$ |
2,003,019 |
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Deposits |
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$ |
2,291,165 |
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$ |
2,245,110 |
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$ |
1,722,148 |
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Nonperforming loans |
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$ |
5,115 |
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$ |
783 |
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$ |
640 |
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Allowance for loan losses to total loans |
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0.74 |
% |
0.71 |
% |
0.77 |
% | |||
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Allowance for loan losses to non-performing loans |
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374 |
% |
2,357 |
% |
2,432 |
% | |||
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Provision for loan losses |
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$ |
641 |
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$ |
600 |
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$ |
600 |
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Net charge offs (recoveries) |
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$ |
(34 |
) |
$ |
(668 |
) |
$ |
(145 |
) |
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ROA |
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2.13 |
% |
0.94 |
% |
1.89 |
% | |||
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ROE |
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22.17 |
% |
11.46 |
% |
24.80 |
% | |||
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Efficiency ratio |
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33.6 |
% |
40.2 |
% |
33.1 |
% | |||
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 our 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 our 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:
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Well |
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Company Actual at |
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Capitalized |
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March 31, 2018 |
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Total adjusted capital to risk-weighted assets |
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N/A |
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20.38 |
% |
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Tier 1 (core) capital to risk-weighted assets |
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N/A |
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15.77 |
% |
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Tier 1 (core) capital to adjusted tangible assets |
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N/A |
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9.73 |
% |
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Common Tier 1 (CET 1) |
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N/A |
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15.77 |
% |
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Well |
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Sterling Bank Actual at |
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Capitalized |
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March 31, 2018 |
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Total adjusted capital to risk-weighted assets |
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10.00 |
% |
15.07 |
% |
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Tier 1 (core) capital to risk-weighted assets |
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8.00 |
% |
14.02 |
% |
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Tier 1 (core) capital to adjusted tangible assets |
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5.00 |
% |
8.65 |
% |
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Common Tier 1 (CET 1) |
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6.50 |
% |
14.02 |
% |
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. 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 “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.
Contacts:
Financial Profiles, Inc.
Allyson Pooley
310-622-8230
Larry Clark
310-622-8223
SBT@finprofiles.com
Sterling Bancorp, Inc.
Consolidated Balance Sheets
Unaudited (dollars in thousands)
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3/31/2018 |
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12/31/2017 |
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% change |
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3/31/2017 |
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% change |
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Assets |
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Cash and due from banks |
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$ |
37,541 |
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$ |
40,147 |
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(6 |
)% |
$ |
30,598 |
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23 |
% |
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Investment securities |
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124,956 |
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126,848 |
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(1 |
)% |
87,121 |
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43 |
% | |||
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Federal Home Loan Bank stock, at cost |
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22,950 |
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22,950 |
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0 |
% |
18,360 |
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25 |
% | |||
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Mortgage loans held for sale |
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200,467 |
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112,866 |
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78 |
% |
1,468 |
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N/M |
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Loans, net of allowance for loan losses of $19,132, $18,457 and $15,567 |
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2,580,560 |
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2,594,357 |
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(1 |
)% |
2,003,019 |
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29 |
% | |||
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Accrued interest receivable |
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11,936 |
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11,493 |
|
4 |
% |
8,430 |
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42 |
% | |||
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Mortgage servicing rights, net |
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7,780 |
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6,496 |
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20 |
% |
5,424 |
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43 |
% | |||
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Leasehold improvements and equipment, net |
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7,705 |
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7,043 |
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9 |
% |
6,246 |
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23 |
% | |||
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Cash surrender value of bank-owned life insurance |
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30,837 |
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30,680 |
|
1 |
% |
30,194 |
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2 |
% | |||
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Deferred tax asset, net |
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7,234 |
|
6,847 |
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6 |
% |
9,189 |
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(21 |
)% | |||
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Other assets |
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2,366 |
|
2,231 |
|
6 |
% |
2,126 |
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11 |
% | |||
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Total assets |
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$ |
3,034,332 |
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$ |
2,961,958 |
|
2 |
% |
$ |
2,202,175 |
|
38 |
% |
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|
|
|
|
|
|
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| |||
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Liabilities |
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|
|
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|
|
|
|
|
|
| |||
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Noninterest-bearing deposits |
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$ |
75,062 |
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$ |
73,682 |
|
2 |
% |
$ |
60,436 |
|
24 |
% |
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Interest-bearing deposits |
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2,216,103 |
|
2,171,428 |
|
2 |
% |
1,661,712 |
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33 |
% | |||
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Total deposits |
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2,291,165 |
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2,245,110 |
|
2 |
% |
1,722,148 |
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33 |
% | |||
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Federal Home Loan Bank borrowings |
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342,937 |
|
338,000 |
|
1 |
% |
222,115 |
|
54 |
% | |||
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Subordinated notes, net |
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64,923 |
|
64,889 |
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0 |
% |
49,371 |
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32 |
% | |||
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Accrued expenses and other liabilities |
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46,795 |
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40,661 |
|
15 |
% |
37,431 |
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25 |
% | |||
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Total liabilities |
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2,745,820 |
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2,688,660 |
|
2 |
% |
2,031,065 |
|
35 |
% | |||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
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Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
| |||
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Preferred stock, authorized 10,000,000 shares; no shares issued and outstanding |
|
— |
|
— |
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N/M |
|
— |
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N/M |
| |||
|
Common stock, voting, authorized 500,000,000 shares at March 31, 2018 and December 31, 2017 and 490,000,000 at March 31, 2017, issued and outstanding 53,002,963, 52,963,308 and 45,271,000 shares at March 31, 2018, December 31, 2017 and March 31,2017, respectively. |
|
111,238 |
|
111,238 |
|
0 |
% |
22,863 |
|
387 |
% | |||
|
Common stock, non-voting, no par value, authorized 10,000,000 shares, issued and outstanding 5,072,000 shares at March 31, 2017. |
|
— |
|
— |
|
— |
|
2,885 |
|
— |
| |||
|
Additional paid-in capital |
|
12,425 |
|
12,416 |
|
0 |
% |
15,336 |
|
(19 |
)% | |||
|
Retained earnings |
|
164,984 |
|
149,816 |
|
10 |
% |
130,095 |
|
27 |
% | |||
|
Accumulated other comprehensive loss |
|
(135 |
) |
(172 |
) |
N/M |
|
(69 |
) |
N/M |
| |||
|
Total shareholders’ equity |
|
288,512 |
|
273,298 |
|
6 |
% |
171,110 |
|
69 |
% | |||
|
Total liabilities and shareholders’ equity |
|
$ |
3,034,332 |
|
$ |
2,961,958 |
|
2 |
% |
$ |
2,202,175 |
|
38 |
% |
N/M- not meaningful
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Income
Unaudited (dollars in thousands, except per share amounts)
|
|
|
Three Months Ended |
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|
|
|
3/31/2018 |
|
12/31/2017 |
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% change |
|
3/31/2017 |
|
% change |
| |||
|
Interest Income: |
|
|
|
|
|
|
|
|
|
|
| |||
|
Interest and fees on loans |
|
$ |
35,856 |
|
$ |
34,095 |
|
5 |
% |
$ |
26,759 |
|
34 |
% |
|
Interest and dividends on investment securities |
|
819 |
|
588 |
|
39 |
% |
365 |
|
124 |
% | |||
|
Other interest |
|
114 |
|
54 |
|
110 |
% |
19 |
|
500 |
% | |||
|
Total interest income |
|
36,789 |
|
34,737 |
|
6 |
% |
27,143 |
|
36 |
% | |||
|
Interest Expense: |
|
|
|
|
|
|
|
|
|
|
| |||
|
Interest on deposits |
|
6,589 |
|
5,884 |
|
12 |
% |
3,534 |
|
86 |
% | |||
|
Interest on Federal Home Loan Bank borrowings |
|
833 |
|
751 |
|
11 |
% |
830 |
|
0 |
% | |||
|
Interest on subordinated notes and other |
|
1,172 |
|
1,187 |
|
(1 |
)% |
908 |
|
29 |
% | |||
|
Total interest expense |
|
8,594 |
|
7,822 |
|
10 |
% |
5,272 |
|
63 |
% | |||
|
Net interest income |
|
28,195 |
|
26,915 |
|
5 |
% |
21,871 |
|
29 |
% | |||
|
Provision for loan losses |
|
641 |
|
600 |
|
7 |
% |
600 |
|
7 |
% | |||
|
Net interest income after provision for loan losses |
|
27,554 |
|
26,315 |
|
5 |
% |
21,271 |
|
30 |
% | |||
|
Non-interest income |
|
|
|
|
|
|
|
|
|
|
| |||
|
Service charges and fees |
|
618 |
|
629 |
|
(2 |
)% |
409 |
|
51 |
% | |||
|
Investment management and advisory fees |
|
623 |
|
603 |
|
3 |
% |
552 |
|
13 |
% | |||
|
Net gain on sale of loans |
|
4,006 |
|
868 |
|
362 |
% |
4,052 |
|
(1 |
)% | |||
|
Other income |
|
790 |
|
726 |
|
9 |
% |
573 |
|
38 |
% | |||
|
Total non-interest income |
|
6,037 |
|
2,826 |
|
114 |
% |
5,586 |
|
8 |
% | |||
|
Non-interest expense |
|
|
|
|
|
|
|
|
|
|
| |||
|
Salaries and employee benefits |
|
6,649 |
|
6,880 |
|
(3 |
)% |
5,410 |
|
23 |
% | |||
|
Occupancy and equipment |
|
1,546 |
|
1,632 |
|
(5 |
)% |
1,389 |
|
11 |
% | |||
|
Professional fees |
|
622 |
|
665 |
|
(7 |
)% |
369 |
|
69 |
% | |||
|
Advertising and marketing |
|
349 |
|
370 |
|
(6 |
)% |
192 |
|
82 |
% | |||
|
FDIC assessments |
|
543 |
|
455 |
|
19 |
% |
242 |
|
124 |
% | |||
|
Data processing |
|
288 |
|
292 |
|
(1 |
)% |
207 |
|
39 |
% | |||
|
Other |
|
1,506 |
|
1,649 |
|
(9 |
)% |
1,283 |
|
17 |
% | |||
|
Total non-interest expense |
|
11,503 |
|
11,943 |
|
(4 |
)% |
9,092 |
|
27 |
% | |||
|
Income before income taxes |
|
22,088 |
|
17,198 |
|
28 |
% |
17,765 |
|
24 |
% | |||
|
Income tax expense |
|
6,339 |
|
10,667 |
|
(41 |
)% |
7,349 |
|
(14 |
)% | |||
|
Net income |
|
$ |
15,749 |
|
$ |
6,531 |
|
141 |
% |
$ |
10,416 |
|
51 |
% |
|
Income per share, basic and diluted |
|
$ |
0.30 |
|
$ |
0.13 |
|
|
|
$ |
0.23 |
|
|
|
|
Weighted average common shares outstanding, basic and diluted |
|
52,963,308 |
|
49,033,542 |
|
|
|
45,271,000 |
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
| |||
N/M - not meaningful
Sterling Bancorp, Inc.
Select Financial Data
Unaudited (dollars in thousands)
|
|
|
As of and for the Three Months Ended |
| ||||
|
|
|
3/31/2018 |
|
12/31/2017 |
|
3/31/2017 |
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
Return on average assets |
|
2.13 |
% |
0.94 |
% |
1.89 |
% |
|
Return on average shareholders’ equity |
|
22.17 |
% |
11.46 |
% |
24.80 |
% |
|
Return on average tangible common equity |
|
22.24 |
% |
11.50 |
% |
25.00 |
% |
|
Yield on earning assets |
|
5.07 |
% |
5.12 |
% |
5.05 |
% |
|
Cost of average interest-bearing liabilities |
|
1.36 |
% |
1.28 |
% |
1.10 |
% |
|
Net interest spread |
|
3.71 |
% |
3.84 |
% |
3.95 |
% |
|
Net interest margin |
|
3.89 |
% |
3.97 |
% |
4.07 |
% |
|
Efficiency ratio(1) |
|
33.6 |
% |
40.2 |
% |
33.1 |
% |
(1) Efficiency Ratio is computed as the ratio of non-interest expense divided by the sum of net interest margin and non-interest income.
Sterling Bancorp, Inc.
Yield Analysis and Net Interest Income
Unaudited (dollars in thousands)
|
|
|
For the Three Months Ended |
| ||||||||||||||||||||||
|
|
|
3/31/2018 |
|
12/31/2017 |
|
3/31/2017 |
| ||||||||||||||||||
|
|
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
|
|
|
|
Average |
| ||||||
|
|
|
Average |
|
|
|
Yield/ |
|
Average |
|
|
|
Yield/ |
|
Average |
|
|
|
Yield/ |
| ||||||
|
|
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
|
Balance |
|
Interest |
|
Rate |
| ||||||
|
Interest earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Loans (1) |
|
$ |
2,733,759 |
|
$ |
35,856 |
|
5.25 |
% |
$ |
2,563,319 |
|
$ |
34,095 |
|
5.32 |
% |
$ |
2,044,732 |
|
$ |
26,759 |
|
5.23 |
% |
|
Securities, includes restricted stock |
|
141,616 |
|
819 |
|
2.31 |
% |
132,869 |
|
588 |
|
1.77 |
% |
97,329 |
|
365 |
|
1.50 |
% | ||||||
|
Other interest earning assets |
|
24,663 |
|
114 |
|
1.85 |
% |
18,597 |
|
54 |
|
1.17 |
% |
9,574 |
|
19 |
|
0.79 |
% | ||||||
|
Total interest earning assets |
|
$ |
2,900,038 |
|
$ |
36,789 |
|
5.07 |
% |
$ |
2,714,785 |
|
$ |
34,737 |
|
5.12 |
% |
$ |
2,151,635 |
|
$ |
27,143 |
|
5.05 |
% |
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
Money Market, Savings and NOW |
|
$ |
1,525,436 |
|
$ |
4,135 |
|
1.10 |
% |
$ |
1,457,137 |
|
$ |
3,653 |
|
0.99 |
% |
$ |
1,200,209 |
|
$ |
2,459 |
|
0.83 |
% |
|
Time deposits |
|
705,824 |
|
2,454 |
|
1.41 |
% |
662,822 |
|
2,231 |
|
1.34 |
% |
422,972 |
|
1,075 |
|
1.03 |
% | ||||||
|
Total interest-bearing deposits |
|
2,231,260 |
|
6,589 |
|
1.20 |
% |
2,119,959 |
|
5,884 |
|
1.10 |
% |
1,623,181 |
|
3,534 |
|
0.88 |
% | ||||||
|
FHLB borrowings |
|
259,056 |
|
833 |
|
1.29 |
% |
244,263 |
|
751 |
|
1.20 |
% |
273,622 |
|
830 |
|
1.21 |
% | ||||||
|
Subordinated debt |
|
64,901 |
|
1,172 |
|
7.22 |
% |
64,871 |
|
1,187 |
|
7.32 |
% |
49,349 |
|
908 |
|
7.36 |
% | ||||||
|
Total borrowings |
|
323,957 |
|
2,005 |
|
2.48 |
% |
309,134 |
|
1,938 |
|
2.45 |
% |
322,972 |
|
1,738 |
|
2.15 |
% | ||||||
|
Total interest-bearing liabilities |
|
$ |
2,555,217 |
|
8,594 |
|
1.36 |
% |
$ |
2,429,093 |
|
7,822 |
|
1.28 |
% |
$ |
1,946,152 |
|
5,272 |
|
1.10 |
% | |||
|
Net interest income and spread (2) |
|
|
|
$ |
28,195 |
|
3.71 |
% |
|
|
$ |
26,915 |
|
3.84 |
% |
|
|
$ |
21,871 |
|
3.95 |
% | |||
|
Net interest margin |
|
|
|
|
|
3.89 |
% |
|
|
|
|
3.97 |
% |
|
|
|
|
4.07 |
% | ||||||
(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)
|
|
|
3/31/2018 |
|
12/31/2017 |
|
% Change |
|
3/31/2017 |
|
% Change |
| |||
|
Construction |
|
$ |
179,846 |
|
$ |
192,319 |
|
(6 |
)% |
$ |
159,874 |
|
12 |
% |
|
Residential real estate, mortgage |
|
2,134,447 |
|
2,132,641 |
|
0 |
% |
1,615,075 |
|
32 |
% | |||
|
Commercial real estate, mortgage |
|
239,204 |
|
247,076 |
|
(3 |
)% |
206,870 |
|
16 |
% | |||
|
Commercial and industrial loans, lines of credit |
|
46,166 |
|
40,749 |
|
13 |
% |
36,710 |
|
26 |
% | |||
|
Other consumer loans |
|
29 |
|
29 |
|
1 |
% |
57 |
|
(49 |
)% | |||
|
Total loans held for investment |
|
2,599,692 |
|
2,612,814 |
|
(1 |
)% |
2,018,586 |
|
29 |
% | |||
|
Less: allowance for loan losses |
|
(19,132 |
) |
(18,457 |
) |
4 |
% |
(15,567 |
) |
23 |
% | |||
|
Loans, net |
|
$ |
2,580,560 |
|
$ |
2,594,357 |
|
(1 |
)% |
$ |
2,003,019 |
|
29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
Mortgage loans held for sale |
|
$ |
200,467 |
|
$ |
112,866 |
|
78 |
% |
$ |
1,468 |
|
N/M |
|
|
Total gross loans |
|
$ |
2,800,159 |
|
$ |
2,725,680 |
|
3 |
% |
$ |
2,020,054 |
|
39 |
% |
Sterling Bancorp, Inc
Deposit Composition
Unaudited (dollars in thousands)
|
|
|
3/31/2018 |
|
12/31/2017 |
|
% change |
|
3/31/2017 |
|
% change |
| |||
|
Noninterest bearing demand deposits |
|
75,062 |
|
$ |
73,682 |
|
2 |
% |
$ |
60,436 |
|
24 |
% | |
|
Money Market, Savings and NOW deposits |
|
1,536,481 |
|
1,507,956 |
|
2 |
% |
1,267,914 |
|
21 |
% | |||
|
Time deposits |
|
679,622 |
|
663,472 |
|
2 |
% |
393,798 |
|
73 |
% | |||
|
Total deposits |
|
$ |
2,291,165 |
|
$ |
2,245,110 |
|
2 |
% |
$ |
1,722,148 |
|
33 |
% |
Sterling Bancorp, Inc.
Capital and Credit Quality Ratios
Unaudited (dollars in thousands)
|
|
|
As of and for the Three Months Ended |
| |||||||
|
|
|
3/31/2018 |
|
12/31/2017 |
|
3/31/2017 |
| |||
|
Capital Ratios |
|
|
|
|
|
|
| |||
|
Regulatory and Other Capital Ratios— |
|
|
|
|
|
|
| |||
|
Consolidated: |
|
|
|
|
|
|
| |||
|
Tier 1 (core) capital to risk-weighted assets |
|
15.77 |
% |
15.53 |
% |
12.66 |
% | |||
|
Tier 1 (core) capital to adjusted tangible assets |
|
9.73 |
% |
9.83 |
% |
7.71 |
% | |||
|
Common Tier 1 (CET 1) |
|
15.77 |
% |
15.53 |
% |
12.66 |
% | |||
|
Total adjusted capital to risk-weighted assets |
|
20.38 |
% |
20.28 |
% |
17.49 |
% | |||
|
|
|
|
|
|
|
|
| |||
|
Regulatory and Other Capital Ratios—Bank: |
|
|
|
|
|
|
| |||
|
Tier 1 (core) capital to risk-weighted assets |
|
14.02 |
% |
13.71 |
% |
15.00 |
% | |||
|
Tier 1 (core) capital to adjusted tangible assets |
|
8.65 |
% |
8.68 |
% |
9.14 |
% | |||
|
Common Tier 1 (CET 1) |
|
14.02 |
% |
13.71 |
% |
15.00 |
% | |||
|
Total capital to risk-weighted assets |
|
15.07 |
% |
14.76 |
% |
16.16 |
% | |||
|
|
|
|
|
|
|
|
| |||
|
Credit Quality Data |
|
|
|
|
|
|
| |||
|
Nonperforming loans (1) |
|
$ |
5,115 |
|
$ |
783 |
|
$ |
640 |
|
|
Nonperforming loans to total loans |
|
0.20 |
% |
0.03 |
% |
0.03 |
% | |||
|
Nonperforming assets (2) |
|
$ |
8,082 |
|
$ |
3,777 |
|
$ |
3,703 |
|
|
Nonperforming assets to total assets |
|
0.27 |
% |
0.13 |
% |
0.17 |
% | |||
|
Allowance for loan losses to total loans |
|
0.74 |
% |
0.71 |
% |
0.77 |
% | |||
|
Allowance for loan losses to nonperforming loans |
|
374 |
% |
2,357 |
% |
2,432 |
% | |||
|
Net charge offs to average loans |
|
(0.00 |
)% |
(0.03 |
)% |
(0.01 |
)% | |||
(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.
Sterling Bancorp, Inc.
Allowance for Loan Losses
Unaudited (dollars in thousands)
|
|
|
Three Months Ended |
| |||||||
|
|
|
3/31/2018 |
|
12/31/2017 |
|
3/31/2017 |
| |||
|
Allowance for loan losses |
|
|
|
|
|
|
| |||
|
Balance at beginning of period |
|
$ |
18,457 |
|
$ |
17,189 |
|
$ |
14,822 |
|
|
Provision for loan losses |
|
641 |
|
600 |
|
600 |
| |||
|
Charge offs |
|
— |
|
(19 |
) |
— |
| |||
|
Recoveries |
|
34 |
|
687 |
|
145 |
| |||
|
Balance at end of period |
|
$ |
19,132 |
|
$ |
18,457 |
|
$ |
15,567 |
|
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.
|
|
|
As of and for the Three Months Ended |
| |||||||
|
|
|
3/31/2018 |
|
12/31/2017 |
|
3/31/2017 |
| |||
|
|
|
|
|
|
|
|
| |||
|
Net Income |
|
$ |
15,749 |
|
$ |
6,531 |
|
$ |
10,416 |
|
|
Average shareholders’ equity |
|
284,100 |
|
228,037 |
|
167,967 |
| |||
|
Adjustments |
|
|
|
|
|
|
| |||
|
Customer-related intangible |
|
(863 |
) |
(975 |
) |
(1,294 |
) | |||
|
Average tangible common equity |
|
$ |
283,237 |
|
$ |
227,062 |
|
$ |
166,673 |
|
|
Return on average tangible common equity* |
|
22.24 |
% |
11.50 |
% |
25.00 |
% | |||
*Annualized
Forward-Looking Statements This presentation and other communications by Sterling Bancorp, Inc. (“Sterling”) include certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended regarding Sterling’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. Those statements are not guarantees of future results or performance and are subject to certain known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: potential delays or other problems implementing our growth, expansion and other growth strategies including delays in identifying sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices; availability and access to capital; possible downgrades in Sterling’s credit ratings or outlook which could increase the costs or availability of funding from capital markets; the ability to attract new or retain existing deposits or to retain or grow loans; the ability to generate future revenue growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term interest rates; competitive factors and pricing pressures, including their effect on our net interest margin; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers, collateral values, the value of investment securities and asset recovery values; changes in legal, financial and/or regulatory requirements; recently enacted and potential legislation and regulatory actions and the costs and expenses to comply with new and/or existing legislation and regulatory actions; changes in U.S. government monetary and fiscal policy; the ability to keep pace with technological changes, including changes regarding maintaining cybersecurity; the impact of failure in, or breach of, our operational or security systems or infrastructure, or those of third parties with whom we do business, including as a result of cyber-attacks or an increase in the incidence or severity of fraud, illegal payments, security breaches or other illegal acts impacting Sterling or its customers; adoption of new accounting standards or changes in existing standards; and adverse results (including costs, fines, reputational harm and/or other negative effects) from current or future litigation, regulatory examinations or other legal and/or regulatory actions or rulings as well as other factors identified in this presentation or as detailed from time to time in our public filings, including those factors included in the disclosures under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2018 and future periodic reports. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those projected in, or implied by such forward-looking statements. Sterling disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise. 2
3 Pristine Credit Quality Focused Suite of Residential & Commercial Products Profitable & Efficient Business Model Experienced Leadership Team In-Branch Relationship Deposits and Loans Desirable Branch Network in High-Growth Markets Investment Highlights
Key Markets 4 Desirable Branch Network in High-Growth Markets San Francisco Bay Area (20 Branches) Southfield, MI (1 Operational Branch) SF Bay Area Markets San Francisco (13) Burlingame (1) Daly City (1) San Mateo (1) San Rafael (1) Cupertino (1) Fremont (1) Oakland (1) LA / Orange County Markets Alhambra (1) Arcadia (1) Irvine (1) Rowland Heights (1) Chino Hills (1) Seattle, WA (1 LPO) Los Angeles / Orange County (5 Branches) New York, NY (2 Branches)
Strategic Overview 5 Note: 1: Peers consists of exchange-traded banks and thrifts with $1Bn - $5Bn in assets as of March 31, 2018, mean metrics pictured. Source: SEC Filings, U.S. Census data as of June 30, 2017 Business Model Unique Credit Consistent Performance Relationship spread lender, not a mortgage bank Branches in excellent, growth markets. Sterling primary markets are growing 18% faster than the national average (US Census) Focus on customers who value service and relationships Focus on efficiency and credit quality with industry leading metrics Niche client culture mix that typically make large down payments and carry large deposit balances Niche TIC lending product in distinct markets Efficient branch footprint Strong, growing profitability. ROAA of 2.13% vs. peers of 1.14% ¹ Net credit recoveries of 0bps to avg. loans Strong growth in quality markets. Sterling primary markets have avg. household incomes 57% higher than national average (US Census) Low LTV products. 62% avg. in residential products Deep customer knowledge, almost all of the borrowers maintain a deposit account Strong credit culture Nonperforming loans are 20bps of total loans Low transaction volumes
First Quarter Financial Summary Total portfolio loans of $2.59 billion, a 31% year-over-year increase Originations of $408 million, a 59% year-over-year increase Total deposits of $2.29 billion, a 33% year-over-year increase Net income of $15.7 million, or $0.30 diluted EPS Named as the top performing community bank in the United States with total assets between $1 billion and $10 billion by SNL/S&P Global Market Intelligence Opened new branch in Chino Hills, CA in April 2018 6 Continued Growth Financial Highlights
First Quarter Financial Summary 7 Demonstrated Growth Total Net Loans ($ Million) Net Income ($ Million) 41% CAGR (Annualized) 29% CAGR
Strong Core Returns 8 Consistent Profitability and Growth Drive High Returns Note: 1: Peers consists of exchange-traded banks and thrifts with $1Bn - $5Bn in assets as of March 31, 2018, mean metrics pictured Source: SEC Filings, S&P Global Market Intelligence ROAA ROATCE (Annualized) (Annualized)
Expense Management Focus 9 Noninterest Expense Performance Versus Peers Note: 1: Peers consists of exchange-traded banks and thrifts with $1Bn - $5Bn in assets as of March 31, 2018, mean metrics pictured Source: SEC Filings, S&P Global Market Intelligence Efficiency Ratio Noninterest Expense / Average Assets (Annualized)
Strong Growth in Key Revenue Components 10 Consistent Revenue Stream Composition on a High Growth Balance Sheet Revenue Stream Analysis ($ Million) First Quarter Highlights $15.5 million net interest income growth driven by strong originations and balance sheet growth Growth Opportunities Continued secondary market demand for loan sales Acquisition of Quantum Capital to establish platform for investment management and private banking Accelerated growth in Los Angeles and new markets including NY and Seattle] Expansion of current residential and commercial teams in all operating markets Total (Annualized)
Loan Portfolio Composition 11 Sterling’s Portfolio is Comprised of Low LTV, Short Reset, Lower Balance Loans Note: Financial data as of March 31, 2018 unless noted Loan Composition as of March 31, 2018 Loan Composition Over Time ($ Million) 62% Average LTV in residential products 48% of loan portfolio reprices in the next 12 months 90 Days+ delinquencies of 20bps Rated as a servicer by DBRS and Fitch Sterling loans also used as collateral in securitizations Yield on Loans 31% CAGR
Stable Deposit Funding 12 Sterling Has A Sizable Core Deposit Base Deposit Composition as of March 31, 2018 Almost all of our borrowers maintain a deposit account Average residential lending customer maintains a $16k checking account Average deposits per branch of $88 million Note: Financial data as of March 31, 2018 unless noted Cost of Deposits Deposit Composition Over Time ($ Million) 27% CAGR
Credit Performance 13 Sterling Bancorp Maintains Pristine Credit Quality Nonaccrual Loans / Total Loans Non-Performing Assets / Total Assets Allowance for Loan Losses / Total Loans Net Charge-Offs / Average Loans
Interest Rate Risk Analysis 14 Interest Rate Risk Mitigated by ARM Loans and Repricing Structures Note: 1: Over 98% of loans repricing in next 12 months will adjust annually thereafter Weighted-Average Reset (months) Repricing Matrix ¹ Strategically decreased WAReset of loans WAReset may be influenced through loan sales Average coupon rates of Advantage Loans will increase through attrition and new production Investment portfolio average duration 0.63 years Increasing deposit price competition traditionally lags market rates, but will put downward pressure on NIM Weighted average margin of 12Mo LIBOR plus 4.00% on $1.9B of residential loans Held for Investment loans predominantly all ARM loans
15 Solid Capital Ratios Sterling Bancorp, Inc.
Experienced Leadership Team Executive management with an average tenure at Sterling of 18 years Desirable Branch Network in High-Growth Markets Branch network with a stronghold in the San Francisco Bay Area (Largest branch network of any community bank in the city of San Francisco) Focused growth in Los Angeles and Orange County New branching footholds in New York City and Seattle Pristine Credit Quality Over 5 years of net recoveries versus peer charge-offs Non-performing loans / loans of 20bps Non-performing assets / total assets of 27bps Focused Suite of Residential & Commercial Products Average LTV of 62% in residential products 29% Net loan CAGR since 2013 with a net interest margin of 3.89% in the first quarter of 2018 Began bulk loan sales in 2015 to manage balance sheet, liquidity, and interest rate risk In-Branch Relationship Deposits and Loans Strong customer loyalty, almost all borrowers maintain a deposit account Average residential lending checking relationship maintains a $16k deposit balance Profitable & Efficient Business Model History of strong performance delivering 2.13% ROAA and 22.2% ROATCE in the first quarter of 2018 Ranked #1 overall in SNL Financial’s “Top Performing Community Banks” of 2017 16 Investment Highlights
Appendix
Experienced Leadership Team 18 Sterling Bancorp, Inc. Gary Judd Chairman of the Board Chief Executive Officer Mr. Judd has over 40 years of experience in the banking industry and has led Sterling since August 2008. His prior experience includes service as a director, president and chief executive officer for WestStar Bank and its parent company, Vail Banks, Inc. as well as Vectra Bank and its parent company Vectra Banking Corporation. Prior to those positions, he served in numerous positions with Citibank. Mr. Judd’s extensive expertise over many credit cycles has provided an experienced hand at the top throughout his tenure with the Company. Tom Lopp President Chief Operating Officer Chief Financial Officer Joined the Company as a Divisional Controller in 1997. Appointed President in December 2016, has served as Chief Operating Officer since September 2009, as Chief Financial Officer since 2002, and led the expansion into Southern California in 2015. Mr. Lopp’s deep understanding of the Company, his long experience with Sterling’s financial reporting responsibilities and the risks inherent in the banking business, has helped to effectively manage the risks attendant to growth. Michael Montemayor President of Retail & Commercial Banking Chief Lending Officer Joined as a Residential Lender in 1992. Mr. Montemayor worked his way through the Company as a Regional Branch Manager, Commercial Loan Officer, Construction Loan Officer, and then Managing Director of Commercial Lending followed by his appointment as Chief Lending Officer in 2006, and has led retail banking since 2013. His broad experience in all aspects of the lending business and his long-term service as Chief Lender has helped to provide continuity and consistency in to the business model and lending practices.
Non-GAAP Reconciliations 19 Return on Average Tangible Common Equity (ROATCE)
Earnings Release Detail 20 Balance Sheet N/M – not meaningful Sterling Bancorp, Inc. Consolidated Balance Sheets Unaudited
Earnings Release Detail 21 Income Statement Sterling Bancorp, Inc. Consolidated Financial Summary Unaudited
Earnings Release Detail 22 Performance Ratios Note: 1: Efficiency Ratio is computed as the ratio of non-interest expense divided by the sum of net interest margin and non-interest income. Sterling Bancorp, Inc. Performance Ratios
Earnings Release Detail 23 Capital and Credit Quality Note: 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. Sterling Bancorp, Inc. Capital and Credit Quality Ratios
Earnings Release Detail 24 Allowance for Loan Losses Sterling Bancorp, Inc. Allowance for Loan Losses
Earnings Release Detail 25 Loan and Deposit Composition Sterling Bancorp, Inc. Loan Composition Sterling Bancorp, Inc. Deposit Composition
Earnings Release Detail 26 Quarterly Yield Analysis Note: 1: Interest income does not include taxable equivalent adjustments. Sterling Bancorp, Inc. Yield Analysis
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