Sterling Bancorp Reports Second Quarter 2022 Financial Results

Sterling Bancorp, Inc. 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 second quarter ended June 30, 2022.

Second Quarter 2022 Highlights

  • Net loss of $(2.2) million, or $(0.04) per diluted share
  • Net interest margin of 2.95%
  • Non-interest expense of $19.5 million
  • Provision (recovery) for loan losses of $(1.1) million; ratio of allowance for loan losses to total loans held for investment of 2.91%
  • Shareholders’ equity of $335.3 million
  • Bank capital ratios continue to be in excess of minimum ratios required to be considered “well-capitalized” with a leverage ratio of 14.44%, a total risk-based capital ratio of 24.93% and a common equity tier one ratio of 23.65%
  • The Company’s consolidated leverage ratio of 12.91%, total risk-based capital ratio of 24.70% and common equity tier one ratio of 21.06% continue to exceed minimum regulatory capital requirements
  • Total deposits of $2.0 billion
  • Total gross loans of $1.8 billion
  • Advantage Loan Program loans with unpaid principal balances of $30.4 million repurchased during the quarter
  • Surrender of a large split-dollar life program and certain older BOLI policies for former executives and a controlling shareholder and reversal of associated liabilities
  • New outsourced platform implemented for residential loan originations, minimizing the fixed costs of the residential lending business

The Company reported a net loss of $(2.2) million, or $(0.04) per diluted share, for the quarter ended June 30, 2022, compared to net income of $5.3 million, or $0.10 per diluted share, for the quarter ended March 31, 2022.

During the second quarter, we outsourced our residential lending to Promontory MortgagePath (“MortgagePath”), which provides community banks with an outsourced residential lending service for mortgage loan production. The transition was fully implemented and launched at the end of May 2022. MortgagePath employs staff primarily dedicated to the origination of Sterling’s loan products, which are underwritten pursuant to Sterling’s lending policies. Sterling maintains the final credit decision. In connection with the transition, during the second quarter, we incurred severance costs of approximately $0.4 million relating to a reduction of 35 full-time equivalent positions in our in-house mortgage origination area that had annual compensation and employee benefits of approximately $3.7 million. The costs with MortgagePath will be primarily volume driven but the Bank will pay a modest fee should volume not reach production hurdles.

“The MortgagePath program allows us to continue an active participation in the residential loan market without the fixed costs of a full-time staff. Our residential lending product is now introduced to our customers through an online Sterling channel and integrated into MortgagePath’s fully compliant system,” said Thomas M. O’Brien, Chairman, President and Chief Executive Officer.

Balance Sheet

Total Assets – Total assets of $2.5 billion as of June 30, 2022 reflected a decrease of $305.3 million, or 11%, from $2.8 billion at March 31, 2022.

Cash and due from banks decreased $201.6 million, or 41%, to $285.2 million at June 30, 2022 compared to $486.7 million at March 31, 2022. Investment securities, which we consider part of our liquid assets, increased $17.9 million, or 5%, to $382.3 million at June 30, 2022 compared to $364.4 million at March 31, 2022.

Total gross loans held for investment of $1.8 billion at June 30, 2022 reflected a decline of $96.5 million, or 5%, from $1.9 billion at March 31, 2022 as loan payoffs have exceeded originations and loan repurchases during the second quarter. During the second quarter, we generated a modest amount of applications for residential mortgage loans through MortgagePath, which are in various stages of the origination process, but none of which have closed.

Cash surrender value of a large split-dollar life program and bank-owned life insurance (BOLI) policies decreased $24.8 million, or 75%, to $8.4 million during the quarter as certain policies related to a controlling shareholder and several former executives were surrendered.

Total Deposits – Total deposits of $2.0 billion at June 30, 2022 reflected a decrease of $195.9 million, or 9%, from March 31, 2022. This decrease is largely made up of time deposits which decreased $146.2 million, or 18%, compared to March 31, 2022 as management has used our excess liquidity to allow higher cost time deposits to run off. Money market, savings and NOW deposits of $1.3 billion reflected a decrease of $67.2 million, or 5%, from March 31, 2022. Noninterest-bearing deposits were $82.4 million at June 30, 2022 compared to $64.9 million at March 31, 2022.

Borrowings – Federal Home Loan Bank Borrowings decreased $100 million, or 67%, to $50 million at June 30, 2022 compared to $150 million at March 31, 2022, as the Company repaid $100 million in callable borrowings which were called by the Federal Home Loan Bank during the second quarter.

Capital Total shareholders’ equity was $335.3 million as of June 30, 2022 compared to $341.4 million at March 31, 2022. The decline in shareholders’ equity is primarily due to an increase in accumulated other comprehensive loss of $5.1 million due to increased unrealized losses on our investment securities portfolio, as well as the net loss of $2.2 million during the quarter. These unrealized losses on our investment portfolio are primarily attributable to changes in market value due to the current rising interest rate environment and are not realized in our consolidated statement of operations since the Bank has both the intent and ability to hold these investment securities until maturity or the price recovers.

The Bank exceeded all regulatory capital requirements required to be considered “well-capitalized” as of June 30, 2022, and the Company exceeded all applicable minimum regulatory capital requirements as of such date, as summarized in the following tables:

Bank Capital To Be Well
Capitalized
Bank Actual
at June 30, 2022
Total adjusted capital to risk-weighted assets

10.00%

24.93%

Tier 1 (core) capital to risk-weighted assets

8.00%

23.65%

Common Equity Tier 1 (CET1)

6.50%

23.65%

Tier 1 (core) capital to adjusted tangible assets (leverage ratio)

5.00%

14.44%

Company Capital Minimum
Requirements
Company Actual
at June 30, 2022
Total adjusted capital to risk-weighted assets

8.00%

24.70%

Tier 1 (core) capital to risk-weighted assets

6.00%

21.06%

Common Equity Tier 1 (CET1)

4.50%

21.06%

Tier 1 (core) capital to adjusted tangible assets (leverage ratio)

4.00%

12.91%

Asset Quality and Provision (Recovery) for Loan Losses – A recovery for loan losses of $1.1 million was recorded for the second quarter of 2022 compared to a recovery of $4.3 million for the first quarter of 2022. The allowance for loan losses at June 30, 2022 was $51.8 million, or 2.91% of total loans held for investment, compared to $52.5 million, or 2.80% of total loans held for investment, at March 31, 2022.

Net recoveries during the second quarter of 2022 were $0.4 million compared to net recoveries of $0.2 million in the first quarter of 2022.

Nonperforming assets at June 30, 2022 totaled $55.0 million, or 2.20% of total assets, compared to $54.1 million, or 1.93% of total assets, at March 31, 2022. Nonperforming assets at June 30, 2022 included $48.4 million of nonperforming loans held for investment, $4.0 million of nonaccrual loans held for sale and $2.6 million of troubled debt restructurings. Nonperforming assets at March 31, 2022 included $44.2 million of nonperforming loans held for investment, $7.2 million of nonaccrual loans held for sale and $2.7 million of troubled debt restructurings. The increase in nonperforming loans during the second quarter of 2022 is due to an increase of $4.3 million in residential mortgage loans delinquent 90 days or more. Gross loans held for investment delinquent 30 days or more decreased during the second quarter of 2022 to $72.4 million, or 4.07% of gross loans, from $74.1 million, or 3.95% of gross loans, at March 31, 2022.

“The concerns expressed in the past over commercial asset quality have largely been controlled at this point. Through diligent management of troubled credits and the recent successful sale of the SRO loans, commercial credit concerns have been greatly diminished. We will continue to review the remaining weaker commercial credits for potential sale or other exit opportunities. On the residential side, the delinquent loans are mostly from our former Advantage Loan Program. Of those, approximately $18.2 million are paying but have not cured to the point where they would return to accrual status. The remaining delinquent loans are in various states of foreclosure where we anticipate that the low LTVs at origination will continue to shield the Bank from meaningful loss,” said O’Brien.

Results of Operations

Net Interest Income and Net Interest Margin – Net interest income for the second quarter of 2022 was $19.5 million compared to $21.3 million for the first quarter of 2022 and $23.6 million for the second quarter of 2021. The decline in net interest income was due primarily to a decline in the average balance of our loan portfolio of $165.0 million, or 8%, from $2.0 billion in the first quarter of 2022 to $1.8 billion in the second quarter of 2022. The overall decline in interest income on interest earning assets was partially offset by a decrease in interest expense since our average interest-bearing deposits decreased $123.8 million in the second quarter of 2022 from $2.2 billion in the first quarter of 2022. Additionally, total average interest-bearing liabilities decreased in the second quarter of 2022 due to our repayment of borrowings of $100.0 million with the FHLB in the quarter.

The net interest margin of 2.95% for the second quarter of 2022 decreased compared to 3.03% for the first quarter of 2022 and increased compared to 2.70% for the second quarter of 2021. The decline in our net interest margin in the second quarter of 2022 reflects a decrease in the average yield on interest earning assets of 8 basis points while the average cost of interest-bearing liabilities stayed consistent. The decrease in the average yield on interest earning assets related to approximately $1.5 million in interest collected from nonperforming commercial real estate loans and construction loans in the first quarter of 2022 which contributed 21 basis points to the first quarter’s net interest margin.

Non-Interest Income – Non-interest income for the second quarter of 2022 was $45 thousand, a $1.4 million decrease from the immediately prior quarter. The decrease is partially attributable to the net servicing loss incurred during the quarter with the write-off of $0.4 million in mortgage servicing rights on the Advantage Loan Program loans repurchased during the second quarter. Additionally, the first quarter included a recovery on mortgage servicing rights valuation of $0.4 million compared to $0.1 million recovery in the second quarter, as well as a gain on the sale of commercial real estate loans totaling $0.2 million and the related recoveries on commercial real estate loans that paid in full prior to the sale of $0.3 million that were not present in the second quarter.

Non-Interest Expense – Non-interest expense of $19.5 million for the second quarter of 2022 was comparable in total with the first quarter of 2022. The second quarter of 2022 included a reduction in salaries and employee benefits of $4.0 million primarily related to the reversal of associated liabilities upon surrender of a large split-dollar life program and a few smaller BOLI policies. Salary and employee benefits expense also reflects both $0.4 million in separation costs related to the reduction in our mortgage origination staff as well as approximately one month of savings due to the staff reduction. Included in other expenses is $1.3 million in additional taxes related to the surrender of the split-dollar life program and BOLI policies, as well as $0.7 million loss to record the fair value discount on the $30.4 million of Advantage Loan Program loans repurchased. Non-interest expense also reflects an increase in professional fees, primarily direct and third-party legal expenses related to the government investigations.

Income Tax Expense – Income tax expense increased to $3.3 million for the second quarter of 2022 compared to $2.3 million in the prior quarter on income before income taxes of $1.1 million and $7.5 million, respectively. This increase is largely related to the surrender of certain split-dollar and BOLI policies which resulted in the life-to-date increase in the cash surrender value of the policies of $13.1 million being treated as taxable income that was previously nontaxable.

Mr. O’Brien commented, “There is some noise around the insurance surrenders, however, the net impact is fairly insignificant. In these cases, the board determined that the reasons the policies were originally undertaken as many as 20 years ago were no longer appropriate for Sterling. Also, in the quarter we experienced some increase in legal costs as the settlement process with the various government agencies gained momentum. Furthermore, we did experience some costs related to advancement for legal expenses for certain indemnified parties.

We have achieved some major milestones with respect to the various investigations. I believe that the Bank has now implemented all of the requirements to comply with the formal agreement with the OCC. This was a major undertaking by the board and management and is critical to our ability to close out the government investigations. I am hopeful we can resolve the government investigations this calendar year, however the timing is in the hands of the government agencies.

The damage done by the Advantage Loan Program is significant and its consequences are painful for all stakeholders. Notwithstanding all of the above and in my opinion, the success we have had in addressing the myriad of major issues at Sterling over the past 24 months is nothing short of remarkable. It is a testament to the total commitment of our board of directors and the management team to address these legacy problems forthrightly and proactively.”

Conference Call and Webcast

Management will host a conference call on Monday, August 15, 2022 at 11:00 a.m. Eastern Time to discuss the Company’s unaudited financial results for the quarter ended June 30, 2022. 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 August 22, 2022 by dialing (877) 344-7529, using conference ID number 2717819.

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 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. 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” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the Company’s plans, expectations, thoughts, beliefs, estimates, goals and outlook for the future that are intended to be covered by the protections provided under the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “attribute,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “goal,” “target,” “outlook,” “aim,” “would” and “annualized,” or the negative versions of those words or other comparable words or phrases of a future or forward-looking nature. 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. 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” and “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2022, 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. 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
(dollars in thousands, except per share data) June 30,
2022
March 31,
2022
June 30,
2021
Net income (loss)

$

(2,197

)

$

5,260

 

$

3,452

 

Income (loss) per share, diluted

$

(0.04

)

$

0.10

 

$

0.07

 

Net interest income

$

19,470

 

$

21,272

 

$

23,598

 

Net interest margin

 

2.95

%

 

3.03

%

 

2.70

%

Non-interest income

$

45

 

$

1,411

 

$

(269

)

Non-interest expense

$

19,494

 

$

19,423

 

$

19,944

 

Loans, net of allowance for loan losses

$

1,726,366

 

$

1,822,186

 

$

2,287,857

 

Total deposits(1)

$

2,004,247

 

$

2,200,172

 

$

2,628,872

 

Asset Quality
Nonperforming loans

$

48,385

 

$

44,229

 

$

74,810

 

Allowance for loan losses to total loans

 

2.91

%

 

2.80

%

 

3.00

%

Allowance for loan losses to nonaccrual loans

 

107

%

 

119

%

 

95

%

Nonaccrual loans to total loans outstanding

 

2.72

%

 

2.36

%

 

3.17

%

Net recoveries during the period to average loans outstanding during the period

 

(0.02

)%

 

(0.01

)%

 

(0.03

)%

Provision (recovery) for loan losses

$

(1,109

)

$

(4,289

)

$

(1,806

)

Net recoveries

$

(420

)

$

(196

)

$

(604

)

Performance Ratios
Return on average assets

 

(0.33

)%

 

0.74

%

 

0.39

%

Return on average shareholders’ equity

 

(2.57

)%

 

6.08

%

 

4.22

%

Efficiency ratio (2)

 

99.89

%

 

85.63

%

 

85.49

%

Yield on average interest-earning assets

 

3.47

%

 

3.55

%

 

3.51

%

Cost of average interest-bearing liabilities

 

0.62

%

 

0.62

%

 

0.92

%

Net interest spread

 

2.85

%

 

2.93

%

 

2.59

%

Capital Ratios (3)
Regulatory and Other Capital Ratios— Consolidated:
Total adjusted capital to risk-weighted assets

 

24.70

%

 

23.21

%

 

17.71

%

Tier 1 (core) capital to risk-weighted assets

 

21.06

%

 

19.72

%

 

14.16

%

Common Equity Tier 1 (CET1)

 

21.06

%

 

19.72

%

 

14.16

%

Tier 1 (core) capital to adjusted tangible assets (leverage ratio)

 

12.91

%

 

12.23

%

 

9.16

%

Regulatory and Other Capital Ratios—Bank:
Total adjusted capital to risk-weighted assets

 

24.93

%

 

23.29

%

 

17.59

%

Tier 1 (core) capital to risk-weighted assets

 

23.65

%

 

22.02

%

 

16.32

%

Common Equity Tier 1 (CET1)

 

23.65

%

 

22.02

%

 

16.32

%

Tier 1 (core) capital to adjusted tangible assets (leverage ratio)

 

14.44

%

 

13.65

%

 

10.53

%

(1) Refer to note to the condensed consolidated balance sheets.
(2) Efficiency Ratio is computed as the ratio of non-interest expense divided by the sum of net interest income and non- interest income.
(3) In order to provide a comparable trend analysis for the Bank’s and the Company’s risk based capital ratios applying the 100% risk weight to Advantage Loan Program loans, the table above presents the regulatory capital ratios applying the 100% risk weight at June 30, 2021.
Sterling Bancorp, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands) June 30,
2022
March 31,
2022
%
change
December 31,
2021
%
change
June 30,
2021
%
change
Assets
Cash and due from banks

$

285,165

 

$

486,743

 

(41

)%

$

411,676

 

(31

)%

$

774,478

(63

)%

Interest-bearing time deposits with other banks

 

1,183

 

 

1,183

 

0

%

 

1,183

 

0

%

 

805

47

%

Investment securities

 

382,309

 

 

364,361

 

5

%

 

313,879

 

22

%

 

195,974

95

%

Loans held for sale

 

8,964

 

 

12,230

 

(27

)%

 

64,987

 

(86

)%

 

15,107

(41

)%

Loans, net of allowance for loan losses of $51,766, $52,455, $56,548 and $70,669

 

1,726,366

 

 

1,822,186

 

(5

)%

 

1,956,266

 

(12

)%

 

2,287,857

(25

)%

Accrued interest receivable

 

6,721

 

 

6,655

 

1

%

 

7,696

 

(13

)%

 

9,660

(30

)%

Mortgage servicing rights, net

 

2,453

 

 

2,888

 

(15

)%

 

2,722

 

(10

)%

 

3,232

(24

)%

Leasehold improvements and equipment, net

 

6,848

 

 

7,144

 

(4

)%

 

7,421

 

(8

)%

 

9,423

(27

)%

Operating lease right-of-use assets

 

16,332

 

 

17,210

 

(5

)%

 

18,184

 

(10

)%

 

19,817

(18

)%

Federal Home Loan Bank stock, at cost

 

20,288

 

 

20,288

 

0

%

 

22,950

 

(12

)%

 

22,950

(12

)%

Cash surrender value of bank-owned life insurance

 

8,396

 

 

33,163

 

(75

)%

 

33,033

 

(75

)%

 

32,766

(74

)%

Deferred tax asset, net

 

22,028

 

 

20,865

 

6

%

 

21,426

 

3

%

 

23,749

(7

)%

Other assets

 

16,767

 

 

14,213

 

18

%

 

15,407

 

9

%

 

21,634

(22

)%

Total assets

$

2,503,820

 

$

2,809,129

 

(11

)%

$

2,876,830

 

(13

)%

$

3,417,452

(27

)%

Liabilities
Noninterest-bearing deposits(1)

$

82,387

 

$

64,944

 

27

%

$

63,760

 

29

%

$

58,230

41

%

Interest-bearing deposits(2)

 

1,921,860

 

 

2,135,228

 

(10

)%

 

2,197,975

 

(13

)%

 

2,497,259

(23

)%

Deposits held for sale(3)

 

 

 

 

 

 

 

 

 

73,383

(100

)%

Total deposits

 

2,004,247

 

 

2,200,172

 

(9

)%

 

2,261,735

 

(11

)%

 

2,628,872

(24

)%

Federal Home Loan Bank borrowings

 

50,000

 

 

150,000

 

(67

)%

 

150,000

 

(67

)%

 

318,000

(84

)%

Subordinated notes, net

 

65,308

 

 

65,326

 

(0

)%

 

65,343

 

(0

)%

 

65,377

(0

)%

Operating lease liabilities

 

17,540

 

 

18,421

 

(5

)%

 

19,400

 

(10

)%

 

21,085

(17

)%

Accrued expenses and other liabilities(1)(2)

 

31,393

 

 

33,804

 

(7

)%

 

36,725

 

(15

)%

 

57,076

(45

)%

Total liabilities

 

2,168,488

 

 

2,467,723

 

(12

)%

 

2,533,203

 

(14

)%

 

3,090,410

(30

)%

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 50,818,212 shares at June 30, 2022, 50,496,833 shares at March 31, 2022, 50,460,932 shares at December 31, 2021 and 50,475,181 shares at June 30, 2021

 

83,295

 

 

82,157

 

1

%

 

82,157

 

1

%

 

82,157

1

%

Additional paid-in capital

 

14,313

 

 

14,186

 

1

%

 

14,124

 

1

%

 

13,796

4

%

Retained earnings

 

251,306

 

 

253,503

 

(1

)%

 

248,243

 

1

%

 

230,630

9

%

Accumulated other comprehensive income (loss)

 

(13,582

)

 

(8,440

)

(61

)%

 

(897

)

N/M

 

 

459

N/M

 

Total shareholders’ equity

 

335,332

 

 

341,406

 

(2

)%

 

343,627

 

(2

)%

 

327,042

3

%

Total liabilities and shareholders’ equity

$

2,503,820

 

$

2,809,129

 

(11

)%

$

2,876,830

 

(13

)%

$

3,417,452

(27

)%

N/M – Not Meaningful
(1) (2) Certain prior period amounts have been reclassified to conform with the current period presentation. The Company has (1) reclassified custodial escrow balances maintained with serviced loans of $2,509 from accrued expenses and other liabilities to non-interest bearing deposits and (2) reclassified accrued interest on outstanding time deposits of $16,061 from accrued expenses and other liabilities to interest-bearing deposits in the condensed consolidated balance sheet at June 30, 2021.
(3) Deposits held for sale were transferred on the sale of the Bellevue, Washington Branch on July 23, 2021.
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
 
Three Months Ended Six Months Ended
(dollars in thousands, except per share amounts) June 30,
2022
March 31,
2022
%
change
June 30,
2021
%
change
June 30,
2022
June 30,
2021
%
change
Interest income
Interest and fees on loans

$

20,746

 

$

23,868

 

(13

)%

$

30,074

 

(31

)%

$

44,614

 

$

61,368

 

(27

)%

Interest and dividends on investment securities and restricted stock

 

1,353

 

 

835

 

62

%

 

385

 

N/M

 

 

2,188

 

 

775

 

N/M

 

Other interest

 

791

 

 

215

 

N/M

 

 

227

 

N/M

 

 

1,006

 

 

490

 

N/M

 

Total interest income

 

22,890

 

 

24,918

 

(8

)%

 

30,686

 

(25

)%

 

47,808

 

 

62,633

 

(24

)%

Interest expense
Interest on deposits

 

2,016

 

 

2,330

 

(13

)%

 

5,236

 

(61

)%

 

4,346

 

 

11,938

 

(64

)%

Interest on Federal Home Loan Bank borrowings

 

314

 

 

352

 

(11

)%

 

847

 

(63

)%

 

666

 

 

1,685

 

(60

)%

Interest on subordinated notes

 

1,090

 

 

964

 

13

%

 

1,005

 

8

%

 

2,054

 

 

2,185

 

(6

)%

Total interest expense

 

3,420

 

 

3,646

 

(6

)%

 

7,088

 

(52

)%

 

7,066

 

 

15,808

 

(55

)%

Net interest income

 

19,470

 

 

21,272

 

(8

)%

 

23,598

 

(17

)%

 

40,742

 

 

46,825

 

(13

)%

Provision (recovery) for loan losses

 

(1,109

)

 

(4,289

)

74

%

 

(1,806

)

39

%

 

(5,398

)

 

(2,543

)

N/M

 

Net interest income after provision (recovery) for loan losses

 

20,579

 

 

25,561

 

(19

)%

 

25,404

 

(19

)%

 

46,140

 

 

49,368

 

(7

)%

Non-interest income
Service charges and fees

 

105

 

 

122

 

(14

)%

 

144

 

(27

)%

 

227

 

 

303

 

(25

)%

Gain on sale of mortgage loans held for sale

 

3

 

 

197

 

(98

)%

 

70

 

(96

)%

 

200

 

 

468

 

(57

)%

Unrealized gain (losses) on equity securities

 

(170

)

 

(236

)

28

%

 

15

 

N/M

 

 

(406

)

 

(75

)

N/M

 

Net servicing income (loss)

 

(177

)

 

443

 

N/M

 

 

(908

)

81

%

 

266

 

 

(1,338

)

N/M

 

Income on cash surrender value of bank-owned life insurance

 

255

 

 

328

 

(22

)%

 

322

 

(21

)%

 

583

 

 

635

 

(8

)%

Other

 

29

 

 

557

 

(95

)%

 

88

 

(67

)%

 

586

 

 

191

 

N/M

 

Total non-interest income

 

45

 

 

1,411

 

(97

)%

 

(269

)

N/M

 

 

1,456

 

 

184

 

N/M

 

Non-interest expense
Salaries and employee benefits

 

5,569

 

 

9,617

 

(42

)%

 

8,678

 

(36

)%

 

15,186

 

 

16,526

 

(8

)%

Occupancy and equipment

 

2,187

 

 

2,142

 

2

%

 

2,249

 

(3

)%

 

4,329

 

 

4,445

 

(3

)%

Professional fees

 

7,066

 

 

5,157

 

37

%

 

5,721

 

24

%

 

12,223

 

 

14,476

 

(16

)%

FDIC assessments

 

346

 

 

369

 

(6

)%

 

500

 

(31

)%

 

715

 

 

1,219

 

(41

)%

Data processing

 

762

 

 

805

 

(5

)%

 

440

 

73

%

 

1,567

 

 

786

 

99

%

Net recovery of mortgage repurchase liability

 

(312

)

 

(213

)

(46

)%

 

(512

)

39

%

 

(525

)

 

(665

)

21

%

Other

 

3,876

 

 

1,546

 

N/M

 

 

2,868

 

35

%

 

5,422

 

 

4,491

 

21

%

Total non-interest expense

 

19,494

 

 

19,423

 

0

%

 

19,944

 

(2

)%

 

38,917

 

 

41,278

 

(6

)%

Income before income taxes

 

1,130

 

 

7,549

 

(85

)%

 

5,191

 

(78

)%

 

8,679

 

 

8,274

 

5

%

Income tax expense

 

3,327

 

 

2,289

 

45

%

 

1,739

 

91

%

 

5,616

 

 

2,497

 

N/M

 

Net income (loss)

$

(2,197

)

$

5,260

 

N/M

 

$

3,452

 

N/M

 

$

3,063

 

$

5,777

 

(47

)%

 
Income (loss) per share, basic and diluted

$

(0.04

)

$

0.10

 

$

0.07

 

$

0.06

 

$

0.12

 

Weighted average common shares outstanding:
Basic

 

50,386,856

 

 

50,191,288

 

 

50,009,053

 

 

50,289,612

 

 

49,930,563

 

Diluted

 

50,386,856

 

 

50,406,123

 

 

50,060,775

 

 

50,496,487

 

 

49,987,253

 

N/M – Not Meaningful
Sterling Bancorp, Inc.
Yield Analysis and Net Interest Income (Unaudited)
       
Three Months Ended
June 30,
2022
March 31,
2022
June 30, 2021
(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

$

1,554,077

 

$

17,310

4.46

%

$

1,660,692

 

$

18,278

4.40

%

$

1,960,561

 

$

23,794

4.85

%

Commercial real estate

 

221,435

 

 

2,547

4.60

%

 

247,044

 

 

3,436

5.56

%

 

258,310

 

 

3,444

5.33

%

Construction

 

62,354

 

 

883

5.66

%

 

95,123

 

 

2,149

9.04

%

 

171,921

 

 

2,788

6.49

%

Commercial lines of credit

 

355

 

 

6

6.76

%

 

350

 

 

5

5.71

%

 

2,292

 

 

48

8.38

%

Total loans

 

1,838,221

 

 

20,746

4.51

%

 

2,003,209

 

 

23,868

4.77

%

 

2,393,084

 

 

30,074

5.03

%

Securities, includes restricted stock(2)

 

396,315

 

 

1,353

1.37

%

 

350,150

 

 

835

0.95

%

 

270,809

 

 

385

0.57

%

Other interest-earning assets

 

406,740

 

 

791

0.78

%

 

452,651

 

 

215

0.19

%

 

837,866

 

 

227

0.11

%

Total interest-earning assets

 

2,641,276

 

 

22,890

3.47

%

 

2,806,010

 

 

24,918

3.55

%

 

3,501,759

 

 

30,686

3.51

%

Noninterest-earning assets      
Cash and due from banks

 

3,811

 

 

4,016

 

 

7,373

 
Other assets

 

46,390

 

 

43,322

 

 

42,921

 
Total assets

$

2,691,477

 

$

2,853,348

 

$

3,552,053

 
Interest-bearing liabilities      
Money market, savings and NOW

$

1,288,796

 

$

756

0.24

%

$

1,310,848

 

$

707

0.22

%

$

1,344,949

 

$

807

0.24

%

Time deposits(3)

 

760,017

 

 

1,260

0.66

%

 

861,785

 

 

1,623

0.76

%

 

1,364,906

 

 

4,429

1.30

%

Total interest-bearing deposits

 

2,048,813

 

 

2,016

0.39

%

 

2,172,633

 

 

2,330

0.43

%

 

2,709,855

 

 

5,236

0.78

%

FHLB borrowings

 

110,440

 

 

314

1.12

%

 

150,000

 

 

352

0.94

%

 

318,000

 

 

847

1.05

%

Subordinated notes, net

 

65,319

 

 

1,090

6.60

%

 

65,337

 

 

964

5.90

%

 

65,385

 

 

1,005

6.15

%

Total borrowings

 

175,759

 

 

1,404

3.16

%

 

215,337

 

 

1,316

2.44

%

 

383,385

 

 

1,852

1.91

%

Total interest-bearing liabilities

 

2,224,572

 

 

3,420

0.62

%

 

2,387,970

 

 

3,646

0.62

%

 

3,093,240

 

 

7,088

0.92

%

Noninterest-bearing liabilities      
Demand deposits(4)

 

72,496

 

 

64,119

 

 

63,122

 
Other liabilities(3)(4)

 

52,075

 

 

55,479

 

 

68,524

 
Shareholders’ equity

 

342,334

 

 

345,780

 

 

327,167

 
Total liabilities and shareholders’ equity

$

2,691,477

 

$

2,853,348

 

$

3,552,053

 
Net interest income and spread(2)  

$

19,470

2.85

%

 

$

21,272

2.93

%

 

$

23,598

2.59

%

Net interest margin(2)  

2.95

%

 

3.03

%

 

2.70

%

       
(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.
(3) (4) Certain prior period amounts have been reclassified to conform with the current period presentation. The Company has (3) reclassified accrued interest on outstanding time deposits from other liabilities to interest-bearing deposits and (4) reclassified custodial escrow balances maintained with serviced loans from other liabilities to noninterest-bearing deposits in the average consolidated balance sheet at June 30, 2021.
Six Months Ended
June 30, 2022 June 30, 2021
(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

$

1,607,090

 

$

35,588

4.43

%

$

1,983,211

 

$

48,390

4.88

%

Commercial real estate

 

234,169

 

 

5,983

5.11

%

 

257,465

 

 

6,627

5.15

%

Construction

 

78,762

 

 

3,032

7.70

%

 

185,201

 

 

6,200

6.70

%

Commercial lines of credit

 

352

 

 

11

6.25

%

 

3,980

 

 

151

7.54

%

Total loans

 

1,920,373

 

 

44,614

4.65

%

 

2,429,857

 

 

61,368

5.05

%

Securities, includes restricted stock(2)

 

373,360

 

 

2,188

1.17

%

 

291,772

 

 

775

0.53

%

Other interest-earning assets

 

429,569

 

 

1,006

0.47

%

 

923,854

 

 

490

0.11

%

Total interest-earning assets

 

2,723,302

 

 

47,808

3.51

%

 

3,645,483

 

 

62,633

3.44

%

Noninterest-earning assets    
Cash and due from banks

 

3,728

 

 

6,935

 
Other assets

 

45,918

 

 

42,945

 
Total assets

$

2,772,948

 

$

3,695,363

 
Interest-bearing liabilities    
Money market, savings and NOW

$

1,299,761

 

$

1,463

0.23

%

$

1,363,566

 

$

1,742

0.26

%

Time deposits(3)

 

810,620

 

 

2,883

0.72

%

 

1,489,734

 

 

10,196

1.38

%

Total interest-bearing deposits

 

2,110,381

 

 

4,346

0.42

%

 

2,853,300

 

 

11,938

0.84

%

FHLB borrowings

 

130,111

 

 

666

1.03

%

 

318,006

 

 

1,685

1.05

%

Subordinated notes, net

 

65,328

 

 

2,054

6.25

%

 

65,372

 

 

2,185

6.68

%

Total borrowings

 

195,439

 

 

2,720

2.77

%

 

383,378

 

 

3,870

2.01

%

Total interest-bearing liabilities

 

2,305,820

 

 

7,066

0.62

%

 

3,236,678

 

 

15,808

0.99

%

Noninterest-bearing liabilities    
Demand deposits(4)

 

68,331

 

 

64,916

 
Other liabilities(3)(4)

 

54,752

 

 

68,826

 
Shareholders’ equity

 

344,045

 

 

324,943

 
Total liabilities and shareholders’ equity

$

2,772,948

 

$

3,695,363

 
Net interest income and spread(2)  

$

40,742

2.89

%

 

$

46,825

2.45

%

Net interest margin(2)  

2.99

%

 

2.57

%

   
(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.
(3) (4) Certain prior period amounts have been reclassified to conform with the current period presentation. The Company has (3) reclassified accrued interest on outstanding time deposits from other liabilities to interest-bearing deposits and (4) reclassified custodial escrow balances maintained with serviced loans from other liabilities to noninterest-bearing deposits in the average consolidated balance sheet at June 30, 2021.
Sterling Bancorp, Inc.
Loan Composition (Unaudited)
 
(dollars in thousands) June 30,
2022
March 31,
2022
%
change
December 31,
2021
%
change
June 30,
2021
%
change
Residential real estate

$

1,506,852

 

$

1,580,759

 

(5

)%

$

1,704,231

 

 

(12

)%

$

1,948,892

 

 

(23

)%

Commercial real estate

 

214,494

 

 

219,767

 

(2

)%

 

201,240

 

 

7

%

 

263,278

 

 

(19

)%

Construction

 

55,150

 

 

73,778

 

(25

)%

 

106,759

 

 

(48

)%

 

144,385

 

 

(62

)%

Commercial lines of credit

 

1,418

 

 

334

 

N/M

 

 

363

 

 

N/M

 

 

1,971

 

 

(28

)%

Other consumer

 

218

 

 

3

 

N/M

 

 

221

 

 

(1

)%

 

 

 

N/M

 

Total loans held for investment

 

1,778,132

 

 

1,874,641

 

(5

)%

 

2,012,814

 

 

(12

)%

 

2,358,526

 

 

(25

)%

Less: allowance for loan losses

 

(51,766

)

 

(52,455

)

(1

)%

 

(56,548

)

 

(8

)%

 

(70,669

)

 

(27

)%

Loans, net

$

1,726,366

 

$

1,822,186

 

(5

)%

$

1,956,266

 

 

(12

)%

$

2,287,857

 

 

(25

)%

 
Loans held for sale

$

8,964

 

$

12,230

 

(27

)%

$

64,987

 

 

(86

)%

$

15,107

 

 

(41

)%

Total gross loans

$

1,787,096

 

$

1,886,871

 

(5

)%

$

2,077,801

 

 

(14

)%

$

2,373,633

 

 

(25

)%

 
N/M – Not Meaningful
 
 
Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)
 
Three Months Ended
(dollars in thousands) June 30,
2022
March 31,
2022
June 30,
2021
Balance at beginning of period

$

52,455

 

$

56,548

 

$

71,871

 

Provision (recovery) for loan losses

 

(1,109

)

 

(4,289

)

 

(1,806

)

Charge offs

 

(197

)

 

 

 

 

Recoveries

 

617

 

 

196

 

 

604

 

Balance at end of period

$

51,766

 

$

52,455

 

$

70,669

 

 
 
Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
 
(dollars in thousands) June 30,
2022
March 31,
2022
%
change
December 31,
2021
%
change
June 30,
2021
%
change
Noninterest-bearing deposits(1)

$

82,387

 

$

64,944

 

27

%

$

63,760

 

 

29

%

$

58,230

 

 

41

%

Money Market, Savings and NOW

 

1,252,279

 

 

1,319,444

 

(5

)%

 

1,306,155

 

 

(4

)%

 

1,309,981

 

 

(4

)%

Time deposits(2)

 

669,581

 

 

815,784

 

(18

)%

 

891,820

 

 

(25

)%

 

1,187,278

 

 

(44

)%

Deposits held for sale(3)

 

 

 

 

 

 

 

 

 

 

73,383

 

 

(100

)%

Total deposits

$

2,004,247

 

$

2,200,172

 

(9

)%

$

2,261,735

 

 

(11

)%

$

2,628,872

 

 

(24

)%

 
(1) The Company has included custodial escrow balances maintained with serviced loans of $2,509 in noninterest-bearing deposits at June 30, 2021 to conform to the June 30, 2022, March 31, 2022 and December 31, 2021 presentation.
(2) The Company has included accrued interest on outstanding time deposits of $16,061 in interest-bearing deposits at June 30, 2021 to conform to the June 30, 2022, March 31, 2022 and December 31, 2021 presentation.
(3) Deposits held for sale were transferred on the sale of the Bellevue, Washington Branch on July 23, 2021.
Sterling Bancorp, Inc.
Credit Quality Data (Unaudited)
 
At and for the Three Months Ended
(dollars in thousands) June 30,
2022
March 31,
2022
December 31,
2021
June 30,
2021
Nonaccrual loans(1):
Residential real estate

$

42,567

 

$

38,300

 

$

45,675

 

$

27,871

 

Commercial real estate

 

 

 

 

 

4,441

 

 

19,092

 

Construction

 

5,781

 

 

5,891

 

 

12,499

 

 

27,803

 

Total nonaccrual loans(2)

 

48,348

 

 

44,191

 

 

62,615

 

 

74,766

 

Loans past due 90 days or more and still accruing interest

 

37

 

 

38

 

 

39

 

 

44

 

Nonperforming loans

 

48,385

 

 

44,229

 

 

62,654

 

 

74,810

 

Other troubled debt restructurings(3)

 

2,646

 

 

2,662

 

 

2,664

 

 

2,940

 

Nonaccrual loans held for sale

 

3,999

 

 

7,249

 

 

18,026

 

 

14,867

 

Nonperforming assets

$

55,030

 

$

54,140

 

$

83,344

 

$

92,617

 

Total loans (1)

$

1,778,132

 

$

1,874,641

 

$

2,012,814

 

$

2,358,526

 

Total assets

$

2,503,820

 

$

2,809,129

 

$

2,876,830

 

$

3,417,452

 

Nonaccrual loans to total loans outstanding (2)

 

2.72

%

 

2.36

%

 

3.11

%

 

3.17

%

Nonperforming assets to total assets

 

2.20

%

 

1.93

%

 

2.90

%

 

2.71

%

Allowance for loan losses to total loans

 

2.91

%

 

2.80

%

 

2.81

%

 

3.00

%

Allowance for loan losses to nonaccrual loans

 

107

%

 

119

%

 

90

%

 

95

%

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

 

(0.02

)%

 

(0.01

)%

 

0.35

%

 

(0.03

)%

 
(1) Loans are classified as held for investment and are presented before the allowance for loan losses.
(2) Total nonaccrual loans exclude nonaccrual loans held for sale but include troubled debt restructurings on nonaccrual status. If nonaccrual loans held for sale are included, the ratio of total nonaccrual loans to total gross loans would be 2.93%, 2.73%, 3.88% and 3.78% at June 30, 2022, March 31, 2022, December 31, 2021, and June 30, 2021, respectively.
(3) Other troubled debt restructurings exclude those loans presented above as nonaccrual or past due 90 days or more and still accruing interest.

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