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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): January 29, 2020

 

 

 

STERLING BANCORP, INC.

(Exact name of registrant as specified in its charter)  

 

 
         
Michigan   001-38290   38-3163775

(State or other jurisdiction

of incorporation)  

   (Commission
 File No.) 		  (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:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each
class		 Trading
Symbol(s)		 Name of each exchange on which
registered
Common Stock SBT Nasdaq Capital Market

 

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 2.02Results of Operations and Financial Condition.

 

On January 29, 2020, Sterling Bancorp, Inc. issued a press release announcing its results of operations for the quarter and year ended December 31, 2019.  The press release is attached as Exhibit No. 99 and is incorporated herein by reference.  This report and the exhibit are furnished to, and not filed with, the Commission.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)           Exhibits

 

The following exhibits are furnished herewith:

 

EXHIBIT
NUMBER		   EXHIBIT DESCRIPTION
99   Press Release of Sterling Bancorp, Inc. dated January 29, 2020

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Sterling Bancorp, Inc.
   
    By: /s/ Steve Huber
    Steve Huber
    Chief Financial Officer

 

 

Date: January 29, 2020

 

 

 

Exhibit 99

 

 

 

Sterling Bancorp Reports Fourth Quarter and Full Year 2019 Financial Results

 

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, Michigan, January 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 benefitted 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.

 

 1 

 

 

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.

 

 2 

 

 

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 a mortgage servicing rights valuation allowance recovery taken in the fourth quarter as compared to the prior year fourth quarter’s expense 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.

 

 3 

 

 

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.

 

 4 

 

 

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.

 

 5 

 

 

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.

 

Contacts:

Financial Profiles, Inc.

Larry Clark

310-622-8223

Matthew Keating

310-622-2230

SBT@finprofiles.com

 

 6 

 

 

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 

 

7

 

 

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      

 

8

 

 

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.

 

9

 

 

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. 

 

10

 

 

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%

 

11

 

 

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. 

 

12

 

 

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

 

13