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Sterling Bancorp Reports Third Quarter 2023 Financial Results

Sterling Bancorp, Inc. (NASDAQ: SBT) (“Sterling” or the “Company”), the holding company of Sterling Bank and Trust, F.S.B. (the “Bank”), today reported its unaudited financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights

  • Net income of $0.3 million, or $0.01 per diluted share
  • Net interest margin of 2.62%
  • Recorded provision for (recovery of) credit losses of $(1.9) million; ratio of allowance for credit losses to total loans of 2.42%
  • Nonperforming assets of $6.2 million, 0.25% of total assets
  • Total gross loans of $1.4 billion
  • Total deposits of $2.0 billion
  • Non-interest expense of $17.7 million
  • Shareholders’ equity of $316.1 million
  • Company’s consolidated and Bank’s leverage ratio of 13.41% and 12.93%, respectively
  • Completed redemption of all subordinated notes with an aggregate outstanding principal balance of $65.0 million

The Company reported net income of $0.3 million, or $0.01 per diluted share, for the quarter ended September 30, 2023, compared to net income of $2.5 million, or $0.05 per diluted share, for the quarter ended June 30, 2023. The decrease in our net income for the quarter ended September 30, 2023 is primarily attributable to a decrease in our recovery of credit losses, the absence of any gains on the sale of loans during the quarter, and an increase in our professional fees. As previously disclosed, we have engaged both a consulting firm and an investment bank to help us develop a comprehensive range of viable strategic options available to us. The new plan will be prepared in light of our election to be a “covered savings association” under applicable law, which became effective this quarter and generally allows us to operate as a commercial bank without the constraints applicable to a thrift institution. We expect these engagements may, among other alternatives, consider the build-out of our presence in California and the relocation of certain operational and executive oversight functions. In that scenario, we expect that repositioning the Bank in this fashion will take significant time and expense.

Thomas M. O’Brien, Chairman, President, and Chief Executive Officer commented:

“Sterling’s third quarter reflects the lingering impacts from the long running government investigations. We continue to bear expenses from certain indemnified individuals who are responding to government inquiries. In this quarter, those expenses were approximately $1.7 million. While we anticipate receiving insurance reimbursements for certain prior invoices, our directors and officers insurance was ultimately exhausted during this quarter, and we do not expect any future defense costs to be covered by insurance.

Margins remain tight, and we anticipate that continued upward pressure on interest rates and deposit prices will not likely improve in the near-term. I believe the most prudent course of action for us, at this time, remains protecting our strengths, namely: strong capital, strong liquidity and solid credit quality. There continues to be some ominous signs in certain real estate sectors and geographies. We believe that we have positioned Sterling well to confront those challenges should conditions deteriorate. Nonetheless, the capital markets remain very cautious with many smaller and regional banks trading at discounts to tangible book value.”

Balance Sheet

Total Assets – Total assets were $2.4 billion at September 30, 2023, reflecting a decrease of $85.3 million, or 3%, from $2.5 billion at June 30, 2023.

Cash and due from banks decreased $91.8 million, or 14%, to $563.6 million at September 30, 2023 compared to $655.4 million at June 30, 2023. In the third quarter of 2023, we made cash payments of $66.8 million to redeem the subordinated notes including accrued interest and $27.2 million as restitution for the benefit of non-insider victim shareholders pursuant to the Company’s Plea Agreement with the United States Department of Justice (the “DOJ”). The Plea Agreement was approved by the United States District Court for the Eastern District of Michigan in the third quarter of 2023, which resolution releases the Company, as well as the Bank, from further prosecution for securities fraud and underlying mortgage fraud in the Advantage Loan Program.

Debt securities, all of which are available for sale, which we consider part of our liquid assets, were $398.3 million at September 30, 2023 compared to $334.5 million at June 30, 2023, an increase of $63.8 million, or 19%. During the third quarter of 2023, the Bank purchased $9.0 million of capital stock of the Federal Reserve Bank of Chicago in connection with becoming a member of the Federal Reserve System.

Total gross loans held for investment of $1.4 billion at September 30, 2023 declined $68.7 million, or 5%, from $1.5 billion at June 30, 2023.

Total Deposits – Total deposits were $2.0 billion at September 30, 2023, virtually unchanged from June 30, 2023. Money market, savings and NOW deposits were $1.1 billion, an increase of $112.3 million, or 11%, from June 30, 2023. Time deposits were $872.1 million, a decrease of $109.2 million, or 11%, compared to $981.3 million at June 30, 2023. Noninterest-bearing deposits were $40.8 million and $44.8 million at September 30, 2023 and June 30, 2023, respectively. Total estimated uninsured deposits to total deposits were 21.4%, 24.2%, and 20.8% at September 30, 2023, June 30, 2023, and December 31, 2022, respectively. Our current strategy is to continue to offer market interest rates on our deposit products to maintain our existing customer base and our liquidity position.

Capital Total shareholders’ equity was $316.1 million at September 30, 2023 compared to $317.7 million at June 30, 2023. The decrease in shareholders’ equity is primarily attributable to a $(2.7) million increase in the unrealized loss on our investment securities portfolio included in accumulated other comprehensive loss, partially offset by $0.8 million of stock-based compensation expense and $0.3 million of net income in the present quarter.

The Company and the Bank elected to opt into the Community Bank Leverage Ratio framework, effective January 1, 2023. As such, each of the Company and the Bank is required to maintain a Tier 1 leverage ratio of greater than 9.0% to be considered to have satisfied the minimum regulatory capital requirements as well as the capital ratio requirements to be considered “well capitalized” under applicable prompt corrective action requirements. At September 30, 2023, the Company’s consolidated and the Bank’s leverage ratio were 13.41% and 12.93%, respectively.

Asset Quality and Recovery of Credit Losses – A recovery of credit losses of $(1.9) million was recorded for the third quarter of 2023 compared to a recovery of credit losses of $(2.9) million for the second quarter of 2023. The recovery of credit losses during the third quarter reflects the decline in our loan portfolio over the period. In addition, we moderated the severe economic forecast component of our economic outlook. The allowance for credit losses was $34.3 million at September 30, 2023, or 2.42% of total loans held for investment, compared to $36.2 million, or 2.43% of total loans held for investment, at June 30, 2023.

Recoveries during the third and second quarter of 2023 were $(1) thousand and $(402) thousand, respectively, with no charge offs in either quarter.

Nonperforming assets at September 30, 2023 totaled $6.2 million, or 0.25% of total assets, compared to $2.1 million, or 0.08% of total assets, at June 30, 2023 due to an increase of $3.0 million in nonaccrual residential real estate loans and a $1.1 million matured construction loan, which was extended subsequent to September 30, 2023.

Results of Operations

Net Interest Income and Net Interest Margin – Net interest income for the third quarter of 2023 was $16.0 million compared to $16.2 million for the second quarter of 2023. The decrease in net interest income during the third quarter of 2023 compared to the prior quarter was primarily due to an increase in interest expense on our average balance of interest-bearing deposits since the average rate paid during the third quarter of 2023 increased 50 basis points as deposits continued to reprice upward in the prevailing high interest rate environment. The impact of the increased rates on deposits was partially offset by a decrease in interest expense on the subordinated notes of $1.5 million due to the redemption of the notes early in the third quarter of 2023. Interest income earned on our average balance of interest-bearing assets increased 24 basis points during the third quarter of 2023 from the prior quarter.

The net interest margin of 2.62% for the third quarter of 2023 decreased slightly from the net interest margin of 2.64% for the second quarter of 2023.

Non-Interest Income – Non-interest income for the third quarter of 2023 decreased by $1.5 million compared to the second quarter of 2023, primarily due to the $1.7 million gain on the sale of all loans held for sale in the second quarter of 2023, consisting primarily of nonperforming and chronically delinquent residential real estate loans and the $0.2 million gain on the extinguishment of the subordinated notes in the third quarter of 2023.

Non-Interest Expense – Non-interest expense of $17.7 million for the third quarter of 2023 reflected an increase of $0.4 million, or 2%, compared to the second quarter of 2023. Professional fees were $0.7 million higher in the third quarter of 2023 compared to the prior quarter, which was primarily due to ongoing government investigations against selected individuals and our decision to cover defense costs with respect to these individuals. We were recently informed that our directors and officers insurance for these matters was exhausted based on invoices submitted prior to and during the third quarter of 2023. Therefore any future costs will not be reimbursed by our insurance carriers. We expect to receive our final insurance reimbursement payment in the fourth quarter of 2023. The increase in professional fees was partially offset by a decrease in salaries and employee benefits of $0.5 million in the third quarter of 2023 as compared to the prior quarter reflecting revisions in compensation programs, including the restructuring of our chief executive officer’s compensation that took effect during the third quarter of 2023, as well as continued staff reductions in various support functions.

Income Tax Expense – For the three months ended September 30, 2023, the Company recorded income tax expense of $0.3 million, or an effective tax rate of 49.2%, and an effective tax rate of 36.8% for the nine months ended September 30, 2023. For the three months ended June 30, 2023, the Company recorded an income tax expense of $1.1 million, or an effective rate of 30.6%. Our effective tax rate in 2023 varies from the statutory tax rate primarily due to the impact of non-deductible compensation.

Mr. O’Brien said, “The uncertainty that continues to cloud the economy, coupled with the recent tragedies in Israel and the ensuing escalation of armed conflict in the Middle East along with the continuing conflict in Ukraine, will likely cause volatility in commodity prices, especially oil, and further strain fiscal and monetary policy in the U.S. and among its allies. We believe the level of regional armed conflicts along with flashpoints in other high tension geographies are a cause for very serious concern. The risk of contagion appears to be very high. Taken together these conditions will likely exert further pressures in many capital market sectors. At some point, I believe the markets stabilize around whatever the new normal might be and activity returns. In the coming quarters, I expect to see credit weakness in many office backed mortgage bonds and, in selected markets, growing instability in multi-family loans. While never immune, those conditions are not expected to have noticeable impact on Sterling since we disposed of many higher risk commercial and residential product in prior periods.”

Conference Call and Webcast

Management will host a conference call on Wednesday, October 25, 2023 at 11:00 a.m. Eastern Time to discuss the Company’s unaudited financial results for the quarter ended September 30, 2023. The conference call number for U.S. participants is (833) 535-2201 and the conference call number for participants outside the United States is (412) 902-6744. Additionally, interested parties can listen to a live webcast of the call in the “Investor Relations” section of the Company’s website at www.sterlingbank.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

A replay of the conference call may be accessed through November 1, 2023 by U.S callers dialing (877) 344-7529 and international callers dialing (412) 317-0088, using conference ID number 1707057.

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. Sterling offers a range of loan products as well as retail and business banking services. Sterling also has an operations center and a branch in Southfield, Michigan. For additional information, please visit the Company’s website at http://www.sterlingbank.com.

Forward-Looking Statements

This Press Release contains certain statements that are, or may be deemed to be, “forward-looking statements” regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance, including any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “believe,” “expect,” “continue,” “will,” “seek,” “estimate,” “intend,” “plan,” “anticipate,” “appear” and “would,” or the negative versions of those words or other comparable words or phrases of a future or forward-looking nature, though the absence of these words does not mean a statement is not forward-looking. All statements other than statements of historical facts, including but not limited to statements regarding, the economy and financial markets, government investigations, credit quality, the regulatory scheme governing our industry, competition in our industry, interest rates, our liquidity, our business and our governance, are forward-looking statements. We have based the forward-looking statements in this Press Release primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. These forward-looking statements are not historical facts, and they are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. There can be no assurance that future developments will be those that have been anticipated. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. The risks, uncertainties and other factors detailed from time to time in our public filings, including those included in the disclosures under the headings “Cautionary Note Regarding Forward-Looking Statements” in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2023 and “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2023, subsequent periodic reports and future periodic reports, could affect future results and events, causing those results and events to differ materially from those views expressed or implied in the Company’s forward-looking statements. These risks are not exhaustive. Other sections of this Press Release and our filings with the Securities and Exchange Commission include additional factors that could adversely impact our business and financial performance. Moreover, we operate in very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Press Release. 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. Accordingly, you should not place undue reliance on any such forward-looking statements. The Company disclaims any obligation to update, revise, or correct any forward-looking statements based on the occurrence of future events, the receipt of new information or otherwise.

Sterling Bancorp, Inc.
Consolidated Financial Highlights (Unaudited)
 
At and for the Three Months Ended
September 30, June 30, September 30,
(dollars in thousands, except per share data)

 

2023

 

 

2023

 

 

2022

 

Net income

$

314

 

$

2,539

 

$

1,176

 

Income per share, diluted

$

0.01

 

$

0.05

 

$

0.02

 

Net interest income

$

15,994

 

$

16,184

 

$

19,539

 

Net interest margin

 

2.62

%

 

2.64

%

 

3.19

%

Non-interest income

$

384

 

$

1,911

 

$

(357

)

Non-interest expense

$

17,702

 

$

17,341

 

$

21,621

 

Loans, net of allowance for credit losses

$

1,382,860

 

$

1,449,709

 

$

1,636,266

 

Total deposits

$

2,040,658

 

$

2,041,491

 

$

1,951,014

 

Asset Quality
Nonperforming loans

$

6,182

 

$

2,095

 

$

35,879

 

Allowance for credit losses to total loans

 

2.42

%

 

2.43

%

 

2.70

%

Allowance for credit losses to nonaccrual loans

 

681

%

 

1753

%

 

127

%

Nonaccrual loans to total loans outstanding

 

0.36

%

 

0.14

%

 

2.13

%

Net charge offs (recoveries) to average loans outstanding during the period

 

0.00

%

 

(0.03

)%

 

0.12

%

Recovery of credit losses

$

(1,942

)

$

(2,902

)

$

(4,357

)

Net charge offs (recoveries)

$

(1

)

$

(402

)

$

2,047

 

Performance Ratios
Return on average assets

 

0.05

%

 

0.41

%

 

0.19

%

Return on average shareholders' equity

 

0.39

%

 

3.24

%

 

1.39

%

Efficiency ratio (1)

 

108.08

%

 

95.83

%

 

112.72

%

Yield on average interest-earning assets

 

5.39

%

 

5.15

%

 

4.06

%

Cost of average interest-bearing liabilities

 

3.24

%

 

2.99

%

 

1.05

%

Net interest spread

 

2.15

%

 

2.16

%

 

3.01

%

Capital Ratios(2)(3)
Regulatory and Other Capital Ratios — Consolidated:
Tier 1 (core) capital to average total assets (leverage ratio)

 

13.41

%

 

13.44

%

 

14.09

%

Regulatory and Other Capital Ratios — Bank:
Tier 1 (core) capital to average total assets (leverage ratio)

 

12.93

%

 

12.91

%

 

15.88

%

 
(1) Efficiency ratio is computed as the ratio of non-interest expense divided by the sum of net interest income and non-interest income.
(2) September 30, 2023 capital ratios are estimated.
(3) Effective January 1, 2023, the Company and Bank elected to opt into the community bank leverage ratio framework.
Sterling Bancorp, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
 
September 30, June 30, % December 31, % September 30, %
(dollars in thousands)

 

2023

 

 

2023

 

change

 

2022

 

change

 

2022

 

change
Assets
Cash and due from banks

$

563,622

 

$

655,391

 

(14

)%

$

379,798

 

48

%

$

352,404

 

60

%

Interest-bearing time deposits with other banks

 

1,174

 

 

934

 

26

%

 

934

 

26

%

 

1,183

 

(1

)%

Debt securities available for sale

 

398,302

 

 

334,508

 

19

%

 

343,558

 

16

%

 

348,587

 

14

%

Equity securities

 

4,505

 

 

4,640

 

(3

)%

 

4,642

 

(3

)%

 

4,632

 

(3

)%

Loans held for sale

 

 

 

 

N/M

 

 

7,725

 

(100

)%

 

8,833

 

(100

)%

Loans, net of allowance for credit losses of $34,267, $36,153, $45,464 and $45,362

 

1,382,860

 

 

1,449,709

 

(5

)%

 

1,613,385

 

(14

)%

 

1,636,266

 

(15

)%

Accrued interest receivable

 

8,854

 

 

7,489

 

18

%

 

7,829

 

13

%

 

7,061

 

25

%

Mortgage servicing rights, net

 

1,631

 

 

1,658

 

(2

)%

 

1,794

 

(9

)%

 

1,842

 

(11

)%

Leasehold improvements and equipment, net

 

5,583

 

 

5,850

 

(5

)%

 

6,301

 

(11

)%

 

6,585

 

(15

)%

Operating lease right-of-use assets

 

12,197

 

 

13,025

 

(6

)%

 

14,800

 

(18

)%

 

15,467

 

(21

)%

Federal Home Loan Bank stock, at cost

 

18,923

 

 

20,288

 

(7

)%

 

20,288

 

(7

)%

 

20,288

 

(7

)%

Federal Reserve Bank stock, at cost

 

9,001

 

 

 

N/M

 

 

 

N/M

 

 

 

N/M

 

Company-owned life insurance

 

8,658

 

 

8,605

 

1

%

 

8,501

 

2

%

 

8,448

 

2

%

Deferred tax asset, net

 

22,475

 

 

18,538

 

21

%

 

23,704

 

(5

)%

 

23,907

 

(6

)%

Other assets

 

8,888

 

 

11,375

 

(22

)%

 

11,476

 

(23

)%

 

12,401

 

(28

)%

Total assets

$

2,446,673

 

$

2,532,010

 

(3

)%

$

2,444,735

 

0

%

$

2,447,904

 

(0

)%

 
Liabilities
Noninterest-bearing deposits

$

40,780

 

$

44,799

 

(9

)%

$

53,041

 

(23

)%

$

70,063

 

(42

)%

Interest-bearing deposits

 

1,999,878

 

 

1,996,692

 

0

%

 

1,900,996

 

5

%

 

1,880,951

 

6

%

Total deposits

 

2,040,658

 

 

2,041,491

 

(0

)%

 

1,954,037

 

4

%

 

1,951,014

 

5

%

Federal Home Loan Bank borrowings

 

50,000

 

 

50,000

 

0

%

 

50,000

 

0

%

 

50,000

 

0

%

Subordinated notes, net

 

 

 

65,234

 

(100

)%

 

65,271

 

(100

)%

 

65,290

 

(100

)%

Operating lease liabilities

 

13,317

 

 

14,176

 

(6

)%

 

15,990

 

(17

)%

 

16,664

 

(20

)%

Accrued expenses and other liabilities

 

26,595

 

 

43,433

 

(39

)%

 

46,810

 

(43

)%

 

35,335

 

(25

)%

Total liabilities

 

2,130,570

 

 

2,214,334

 

(4

)%

 

2,132,108

 

(0

)%

 

2,118,303

 

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; shares issued and outstanding 52,072,631 at September 30, 2023, 52,081,886 at June 30, 2023, 50,795,871 at December 31, 2022 and 50,800,012 at September 30, 2022

 

84,323

 

 

84,323

 

0

%

 

83,295

 

1

%

 

83,295

 

1

%

Additional paid-in capital

 

15,882

 

 

15,098

 

5

%

 

14,808

 

7

%

 

14,560

 

9

%

Retained earnings

 

236,901

 

 

236,587

 

0

%

 

234,049

 

1

%

 

252,482

 

(6

)%

Accumulated other comprehensive loss

 

(21,003

)

 

(18,332

)

(15

)%

 

(19,525

)

(8

)%

 

(20,736

)

(1

)%

Total shareholders’ equity

 

316,103

 

 

317,676

 

(0

)%

 

312,627

 

1

%

 

329,601

 

(4

)%

Total liabilities and shareholders’ equity

$

2,446,673

 

$

2,532,010

 

(3

)%

$

2,444,735

 

0

%

$

2,447,904

 

(0

)%

 
N/M - Not Meaningful
 
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
 
Three Months Ended Nine Months Ended
(dollars in thousands, except per share amounts)

September 30,

2023

June 30,

2023

%

change

September 30,

2022

%

change

September 30,

2023

September 30,

2022

%

change

Interest income
Interest and fees on loans

$

21,663

 

$

21,892

 

(1

)%

$

20,975

 

3

%

$

65,715

 

$

65,589

 

0

%

Interest and dividends on investment securities and restricted stock

 

3,134

 

 

2,666

 

18

%

 

1,945

 

61

%

 

8,256

 

 

4,133

 

100

%

Interest on interest-bearing cash deposits

 

8,081

 

 

7,002

 

15

%

 

1,925

 

N/M

 

 

19,890

 

 

2,931

 

N/M

 

Total interest income

 

32,878

 

 

31,560

 

4

%

 

24,845

 

32

%

 

93,861

 

 

72,653

 

29

%

Interest expense
Interest on deposits

 

16,391

 

 

13,337

 

23

%

 

3,724

 

N/M

 

 

39,537

 

 

8,070

 

N/M

 

Interest on Federal Home Loan Bank borrowings

 

250

 

 

248

 

1

%

 

253

 

(1

)%

 

743

 

 

919

 

(19

)%

Interest on subordinated notes

 

243

 

 

1,791

 

(86

)%

 

1,329

 

(82

)%

 

3,727

 

 

3,383

 

10

%

Total interest expense

 

16,884

 

 

15,376

 

10

%

 

5,306

 

N/M

 

 

44,007

 

 

12,372

 

N/M

 

Net interest income

 

15,994

 

 

16,184

 

(1

)%

 

19,539

 

(18

)%

 

49,854

 

 

60,281

 

(17

)%

Recovery of credit losses

 

(1,942

)

 

(2,902

)

33

%

 

(4,357

)

55

%

 

(4,170

)

 

(9,755

)

57

%

Net interest income after recovery of credit losses

 

17,936

 

 

19,086

 

(6

)%

 

23,896

 

(25

)%

 

54,024

 

 

70,036

 

(23

)%

Non-interest income
Service charges and fees

 

97

 

 

78

 

24

%

 

124

 

(22

)%

 

269

 

 

351

 

(23

)%

Loss on sale of investment securities

 

 

 

 

N/M

 

 

 

N/M

 

 

(2

)

 

 

N/M

 

Gain on sale of loans held for sale

 

 

 

1,720

 

(100

)%

 

 

N/M

 

 

1,695

 

 

200

 

N/M

 

Unrealized loss on equity securities

 

(137

)

 

(71

)

(93

)%

 

(184

)

26

%

 

(137

)

 

(590

)

77

%

Net servicing income (loss)

 

107

 

 

102

 

5

%

 

(384

)

N/M

 

 

268

 

 

(118

)

N/M

 

Income earned on company-owned life insurance

 

83

 

 

81

 

2

%

 

87

 

(5

)%

 

244

 

 

670

 

(64

)%

Other

 

234

 

 

1

 

N/M

 

 

 

N/M

 

 

236

 

 

586

 

(60

)%

Total non-interest income

 

384

 

 

1,911

 

(80

)%

 

(357

)

N/M

 

 

2,573

 

 

1,099

 

N/M

 

Non-interest expense
Salaries and employee benefits

 

8,753

 

 

9,274

 

(6

)%

 

9,336

 

(6

)%

 

27,437

 

 

24,522

 

12

%

Occupancy and equipment

 

2,110

 

 

2,051

 

3

%

 

2,112

 

(0

)%

 

6,273

 

 

6,441

 

(3

)%

Professional fees

 

4,242

 

 

3,521

 

20

%

 

5,756

 

(26

)%

 

10,984

 

 

17,979

 

(39

)%

FDIC insurance

 

274

 

 

263

 

4

%

 

316

 

(13

)%

 

794

 

 

1,031

 

(23

)%

Data processing

 

745

 

 

754

 

(1

)%

 

725

 

3

%

 

2,237

 

 

2,292

 

(2

)%

Net provision for (recovery of) mortgage repurchase liability

 

(80

)

 

(59

)

(36

)%

 

(145

)

45

%

 

(19

)

 

(670

)

97

%

Other

 

1,658

 

 

1,537

 

8

%

 

3,521

 

(53

)%

 

5,174

 

 

8,943

 

(42

)%

Total non-interest expense

 

17,702

 

 

17,341

 

2

%

 

21,621

 

(18

)%

 

52,880

 

 

60,538

 

(13

)%

Income before income taxes

 

618

 

 

3,656

 

(83

)%

 

1,918

 

(68

)%

 

3,717

 

 

10,597

 

(65

)%

Income tax expense

 

304

 

 

1,117

 

(73

)%

 

742

 

(59

)%

 

1,367

 

 

6,358

 

(78

)%

Net income

$

314

 

$

2,539

 

(88

)%

$

1,176

 

(73

)%

$

2,350

 

$

4,239

 

(45

)%

 
Income per share, basic and diluted

$

0.01

 

$

0.05

 

$

0.02

 

$

0.05

 

$

0.08

 

Weighted average common shares outstanding:
Basic

 

50,699,967

 

 

50,672,461

 

 

50,400,412

 

 

50,606,566

 

 

50,326,951

 

Diluted

 

51,069,683

 

 

50,778,213

 

 

50,572,931

 

 

50,749,879

 

 

50,523,076

 

 
N/M - Not Meaningful
 
Sterling Bancorp, Inc.            
Yield Analysis and Net Interest Income (Unaudited)
             
Three Months Ended
September 30, 2023 June 30, 2023 September 30, 2022
(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)            
Residential real estate and other consumer

$

1,174,075

 

$

17,546

 

5.98

%

$

1,277,408

 

$

18,250

 

5.71

%

$

1,457,171

 

$

17,310

 

4.75

%

Commercial real estate

 

228,939

 

 

2,953

 

5.16

%

 

224,836

 

 

2,787

 

4.96

%

 

214,453

 

 

2,458

 

4.58

%

Construction

 

29,337

 

 

786

 

10.72

%

 

31,819

 

 

820

 

10.31

%

 

52,843

 

 

1,190

 

9.01

%

Commercial and industrial

 

17,796

 

 

378

 

8.50

%

 

2,255

 

 

35

 

6.21

%

 

1,404

 

 

17

 

4.84

%

Total loans

 

1,450,147

 

 

21,663

 

5.98

%

 

1,536,318

 

 

21,892

 

5.70

%

 

1,725,871

 

 

20,975

 

4.86

%

Securities, includes restricted stock(2)

 

400,838

 

 

3,134

 

3.13

%

 

375,094

 

 

2,666

 

2.84

%

 

394,503

 

 

1,945

 

1.97

%

Other interest-earning assets

 

589,267

 

 

8,081

 

5.49

%

 

541,887

 

 

7,002

 

5.17

%

 

328,177

 

 

1,925

 

2.35

%

Total interest-earning assets

 

2,440,252

 

 

32,878

 

5.39

%

 

2,453,299

 

 

31,560

 

5.15

%

 

2,448,551

 

 

24,845

 

4.06

%

Noninterest-earning assets            
Cash and due from banks

 

4,780

   

 

4,233

   

 

4,083

   
Other assets

 

29,535

   

 

27,645

   

 

20,238

   
Total assets

$

2,474,567

   

$

2,485,177

   

$

2,472,872

   
Interest-bearing liabilities            
Money market, savings and NOW

$

1,099,070

 

$

8,930

 

3.22

%

$

980,359

 

$

6,270

 

2.57

%

$

1,184,601

 

$

2,053

 

0.69

%

Time deposits

 

907,466

 

 

7,461

 

3.26

%

 

969,938

 

 

7,067

 

2.92

%

 

711,184

 

 

1,671

 

0.93

%

Total interest-bearing deposits

 

2,006,536

 

 

16,391

 

3.24

%

 

1,950,297

 

 

13,337

 

2.74

%

 

1,895,785

 

 

3,724

 

0.78

%

FHLB borrowings

 

50,000

 

 

250

 

1.96

%

 

50,000

 

 

248

 

1.96

%

 

50,380

 

 

253

 

1.97

%

Subordinated notes, net

 

9,218

 

 

243

 

10.32

%

 

65,245

 

 

1,791

 

10.86

%

 

65,301

 

 

1,329

 

7.96

%

Total borrowings

 

59,218

 

 

493

 

3.26

%

 

115,245

 

 

2,039

 

7.00

%

 

115,681

 

 

1,582

 

5.35

%

Total interest-bearing liabilities

 

2,065,754

 

 

16,884

 

3.24

%

 

2,065,542

 

 

15,376

 

2.99

%

 

2,011,466

 

 

5,306

 

1.05

%

Noninterest-bearing liabilities            
Demand deposits

 

42,355

   

 

44,005

   

 

74,550

   
Other liabilities

 

48,640

   

 

61,487

   

 

50,476

   
Shareholders' equity

 

317,818

   

 

314,143

   

 

336,380

   
Total liabilities and shareholders' equity

$

2,474,567

   

$

2,485,177

   

$

2,472,872

   
Net interest income and spread(2)  

$

15,994

 

2.15

%

 

$

16,184

 

2.16

%

 

$

19,539

 

3.01

%

Net interest margin(2)    

2.62

%

   

2.64

%

   

3.19

%

             
(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 equivalence adjustments.
             
Nine Months Ended    
September 30, 2023 September 30, 2022    
(dollars in thousands) Average

Balance
  Interest   Average

Yield/Rate
Average

Balance
  Interest   Average

Yield/Rate
   
Interest-earning assets            
Loans(1)            
Residential real estate and other consumer

$

1,272,056

 

$

54,310

 

5.69

%

$

1,556,569

 

$

52,898

 

4.53

%

   
Commercial real estate

 

225,919

 

 

8,336

 

4.92

%

 

227,524

 

 

8,441

 

4.95

%

   
Construction

 

34,153

 

 

2,640

 

10.31

%

 

70,027

 

 

4,222

 

8.04

%

   
Commercial and industrial

 

7,204

 

 

429

 

7.94

%

 

707

 

 

28

 

5.28

%

   
Total loans

 

1,539,332

 

 

65,715

 

5.69

%

 

1,854,827

 

 

65,589

 

4.71

%

   
Securities, includes restricted stock(2)

 

380,886

 

 

8,256

 

2.89

%

 

380,485

 

 

4,133

 

1.45

%

   
Other interest-earning assets

 

514,957

 

 

19,890

 

5.15

%

 

395,400

 

 

2,931

 

0.99

%

   
Total interest-earning assets

 

2,435,175

 

 

93,861

 

5.14

%

 

2,630,712

 

 

72,653

 

3.68

%

   
Noninterest-earning assets            
Cash and due from banks

 

4,497

   

 

3,848

       
Other assets

 

28,085

   

 

35,269

       
Total assets

$

2,467,757

   

$

2,669,829

       
Interest-bearing liabilities            
Money market, savings and NOW

$

1,027,336

 

$

19,814

 

2.58

%

$

1,260,953

 

$

3,516

 

0.37

%

   
Time deposits

 

926,122

 

 

19,723

 

2.85

%

 

777,110

 

 

4,554

 

0.78

%

   
Total interest-bearing deposits

 

1,953,458

 

 

39,537

 

2.71

%

 

2,038,063

 

 

8,070

 

0.53

%

   
FHLB borrowings

 

50,000

 

 

743

 

1.99

%

 

103,242

 

 

919

 

1.19

%

   
Subordinated notes, net

 

46,370

 

 

3,727

 

10.60

%

 

65,319

 

 

3,383

 

6.83

%

   
Total borrowings

 

96,370

 

 

4,470

 

6.12

%

 

168,561

 

 

4,302

 

3.37

%

   
Total interest-bearing liabilities

 

2,049,828

 

 

44,007

 

2.87

%

 

2,206,624

 

 

12,372

 

0.75

%

   
Noninterest-bearing liabilities            
Demand deposits

 

45,519

   

 

70,427

       
Other liabilities

 

57,426

   

 

51,314

       
Shareholders' equity

 

314,983

   

 

341,464

       
Total liabilities and shareholders' equity

$

2,467,756

   

$

2,669,829

       
Net interest income and spread(2)  

$

49,854

 

2.27

%

 

$

60,281

 

2.93

%

   
Net interest margin(2)    

2.73

%

   

3.06

%

   
             
(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 equivalence adjustments.
Sterling Bancorp, Inc.
Loan Composition (Unaudited)
 
September 30, June 30, % December 31, % September 30, %
(dollars in thousands)

 

2023

 

 

2023

 

change

 

2022

 

change

 

2022

 

change
Residential real estate

$

1,139,205

 

$

1,214,439

 

 

(6

)%

$

1,391,276

 

 

(18

)%

$

1,430,472

 

 

(20

)%

Commercial real estate

 

237,812

 

 

221,658

 

 

7

%

 

221,669

 

 

7

%

 

199,446

 

 

19

%

Construction

 

22,292

 

 

31,978

 

 

(30

)%

 

44,503

 

 

(50

)%

 

50,320

 

 

(56

)%

Commercial and industrial

 

17,809

 

 

17,772

 

 

0

%

 

1,396

 

 

N/M

 

 

1,389

 

 

N/M

 

Other consumer

 

9

 

 

15

 

 

(40

)%

 

5

 

 

80

%

 

1

 

 

N/M

 

Total loans held for investment

 

1,417,127

 

 

1,485,862

 

 

(5

)%

 

1,658,849

 

 

(15

)%

 

1,681,628

 

 

(16

)%

Less: allowance for credit losses

 

(34,267

)

 

(36,153

)

 

(5

)%

 

(45,464

)

 

(25

)%

 

(45,362

)

 

24

%

Loans, net

$

1,382,860

 

$

1,449,709

 

 

(5

)%

$

1,613,385

 

 

(14

)%

$

1,636,266

 

 

(15

)%

 
Loans held for sale

$

-

 

$

-

 

 

N/M

 

$

7,725

 

 

(100

)%

$

8,833

 

 

(100

)%

Total gross loans

$

1,417,127

 

$

1,485,862

 

 

(5

)%

$

1,666,574

 

 

(15

)%

$

1,690,461

 

 

(16

)%

 
N/M - Not Meaningful
 
 
 
Sterling Bancorp, Inc.
Allowance for Credit Losses (Unaudited)
 
Three Months Ended
September 30, June 30, March 31, December 31, September 30,
(dollars in thousands)

 

2023

 

 

2023

 

 

2023

 

 

2022

 

 

2022

 

Balance at beginning of period

$

36,153

 

$

38,565

 

$

45,464

 

$

45,362

 

$

51,766

 

Adjustment to adopt ASU 2016-13

 

 

 

 

 

(1,651

)

 

 

 

 

Adjustment to adopt ASU 2022-02

 

 

 

 

 

380

 

 

 

 

 

Balance after adoption

$

36,153

 

$

38,565

 

$

44,193

 

$

45,362

 

$

51,766

 

Provision for (recovery of) credit losses

 

(1,887

)

 

(2,814

)

 

784

 

 

(179

)

 

(4,357

)

Charge offs

 

 

 

 

 

(6,478

)

 

 

 

(4,064

)

Recoveries

 

1

 

 

402

 

 

66

 

 

281

 

 

2,017

 

Balance at end of period

$

34,267

 

$

36,153

 

$

38,565

 

$

45,464

 

$

45,362

 

 
 
 
Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
 
September 30, June 30, % December 31, % September 30, %
(dollars in thousands)

 

2023

 

 

2023

 

change

 

2022

 

change

 

2022

 

change
Noninterest-bearing deposits

$

40,780

 

$

44,799

 

 

(9

)%

$

53,041

 

 

(23

)%

$

70,063

 

 

(42

)%

Money Market, Savings and NOW

 

1,127,735

 

 

1,015,394

 

 

11

%

 

1,039,263

 

 

9

%

 

1,123,375

 

 

0

%

Time deposits

 

872,143

 

 

981,298

 

 

(11

)%

 

861,733

 

 

1

%

 

757,576

 

 

15

%

Total deposits

$

2,040,658

 

$

2,041,491

 

 

(0

)%

$

1,954,037

 

 

4

%

$

1,951,014

 

 

5

%

 
Sterling Bancorp, Inc.
Credit Quality Data (Unaudited)
 
At and for the Three Months Ended
September 30, June 30, December 31, September 30,
(dollars in thousands)

 

2023

 

 

2023

 

 

2022

 

 

2022

 

Nonaccrual loans(1)(2)
Residential real estate

$

5,035

 

$

2,062

 

$

33,690

 

$

35,843

 

Loans past due 90 days or more and still accruing interest

 

1,147

 

 

33

 

 

35

 

 

36

 

Nonperforming loans

 

6,182

 

 

2,095

 

 

33,725

 

 

35,879

 

Other troubled debt restructurings(3)

 

 

 

 

 

2,637

 

 

2,643

 

Nonaccrual loans held for sale

 

 

 

 

 

1,942

 

 

3,657

 

Nonperforming assets

$

6,182

 

$

2,095

 

$

38,304

 

$

42,179

 

Total loans (1)

$

1,417,127

 

$

1,485,862

 

$

1,658,849

 

$

1,681,628

 

Total assets

$

2,446,673

 

$

2,532,010

 

$

2,444,735

 

$

2,447,904

 

Nonaccrual loans to total loans outstanding (2)

 

0.36

%

 

0.14

%

 

2.03

%

 

2.13

%

Nonperforming assets to total assets

 

0.25

%

 

0.08

%

 

1.57

%

 

1.72

%

Allowance for credit losses to total loans

 

2.42

%

 

2.43

%

 

2.74

%

 

2.70

%

Allowance for credit losses to nonaccrual loans

 

681

%

 

1753

%

 

135

%

 

127

%

Net charge offs (recoveries) to average loans outstanding during the period

 

0.00

%

 

(0.03

)%

 

(0.02

)%

 

0.12

%

 
(1) Loans are classified as held for investment and are presented before the allowance for credit losses.
(2) Total nonaccrual loans exclude nonaccrual loans held for sale. If nonaccrual loans held for sale are included, the ratio of total nonaccrual loans to total gross loans would be 0.36%, 0.14%, 2.14%, and 2.34% at September 30, 2023, June 30, 2023, December 31, 2022 and September 30, 2022, respectively.
(3) Other troubled debt restructurings at December 31, 2022 and September 30, 2022 exclude those loans presented above as nonaccrual or past due 90 days or more and still accruing interest. Effective January 1, 2023, loan modifications involving borrowers experiencing financial difficulty are evaluated under the new credit loss model. There were no such loan modifications during the three months ended September 30, 2023 and June 30, 2023.
 

 

Contacts

Investor Contact:

Sterling Bancorp, Inc.

Karen Knott

Executive Vice President and Chief Financial Officer

(248) 359-6624

kzaborney@sterlingbank.com

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