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Sterling Bancorp Announces Filing of Form 10-K for the Year Ended December 31, 2019 and Updated 2019 Financial Results

·11 mins read

Reports 2019 Net Income of $29.2 Million

Sterling Bancorp, Inc. (NASDAQ: SBT) (the "Company"), the holding company of Sterling Bank and Trust, F.S.B. (the "Bank"), today announced that the audit of its consolidated financial statements for the year ended December 31, 2019 has been completed and the Company has filed its 2019 Annual Report on Form 10-K (the "2019 Form 10-K") with the Securities and Exchange Commission. As previously reported, the Company was unable to timely file the 2019 Form 10-K and its Quarterly Reports on Form 10-Q for the first and second quarters of 2020 as a result of (i) additional review and procedures, including on the part of the Company’s independent auditors, relating to the circumstances that led to the previously-reported suspension and permanent discontinuation of the Advantage Loan Program, and (ii) an internal review relating to the permanently discontinued Advantage Loan Program, which has been led by outside legal counsel under the direction of a special committee of independent directors. The Company expects to file its Quarterly Reports on Form 10-Q for the first and second quarters of 2020 within the next few weeks.

The Company previously announced its fourth quarter and full year 2019 unaudited financial results in a press release issued on January 29, 2020. In connection with the completion of the audit of its consolidated financial statements, the Company revised its consolidated statements of income for the year ended December 31, 2019 to reflect the establishment of a loan repurchase liability of $7.8 million and a contingent loss liability of $25.0 million as of December 31, 2019. The loan repurchase liability relates primarily to the sale of loans originated under the Advantage Loan Program and the contingent loss liability relates to previously-disclosed litigation and investigations stemming from the Advantage Loan program. The Company originally had established these liabilities as of March 31, 2020, as announced in the Company’s first quarter financial highlights press release issued on June 1, 2020.

Set forth below are revised year end 2019 financial highlights. The Company’s revised consolidated balance sheets for the years ended December 31, 2019 and 2018 and consolidated statements of income for the years ended December 31, 2019, 2018 and 2017, as filed with the 2019 Form 10-K, are included at the end of this press release.

Year End 2019 Financial Highlights

  • Net income of $29.2 million

  • Net income per diluted share of $0.57

  • Non-interest expense of $87.7 million, reflecting the establishment of a loan repurchase liability of $7.8 million and a contingent loss liability of $25.0 million as of December 31, 2019, as well as $6.0 million of professional fees and other expenses incurred in connection with the previously disclosed issues related to the Bank’s residential lending practices

  • Return on average assets of 0.89%

  • Return on average shareholders’ equity of 8.41%

  • Net interest margin of 3.78%

  • Non-performing loans of $14.8 million

  • Allowance for loan losses to non-performing loans of 147%

  • Shareholders’ equity of $332.6 million

Thomas M. O’Brien, Chairman, President and Chief Executive Officer of the Company, stated, "We are pleased to have achieved this filing milestone for the Company along the road to addressing the various challenges facing the Company in 2020. We expect to have our Quarterly Reports on Form 10-Q for the first two quarters of 2020 filed very soon. We are currently on schedule to file our 2020 third quarter Form 10-Q within the SEC required time frame, and expect to release our third quarter earnings shortly before then. We will continue to work hard to bring the Company into full regulatory compliance and achieve sustainable profitable operations as quickly as possible."

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 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 includes "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. These statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe," "continue," "predict," "project," "potential," "could," "would," "should" or similar terminology, including references to assumptions. Forward-looking statements are based on various assumptions and analyses made by us in light of our management's experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond our control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control; increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment; changes in deposit flows, loan demand or collateral values; changes in accounting principles, policies or guidelines; changes in general economic, business and political conditions, either nationally or locally in some or all areas in which we do business, or conditions in the real estate, securities or financial markets or the banking industry; legislative or regulatory changes; supervision and examination by the OCC and the Board of Governors of the Federal Reserve System; our ability to successfully implement technological changes; our ability to successfully consummate new business initiatives; litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, including litigation and investigations relating to our residential lending practices and the Advantage Loan Program; the outcomes of such litigation and investigations, including the risk of civil or criminal enforcement action, regulatory restrictions on the Bank’s activities, financial penalties or judgments, other adverse consequences, and any resulting effects on the Company’s business, financial condition, and/or results of operations; losses from such litigation and investigations that may be materially higher than expected and that may materially exceed our contingency reserves; repurchase requests related to the sale of loans originated under the Advantage Loan Program may be materially higher than expected and result in repurchase obligations that may materially exceed our loan repurchase reserves; our ability to comply with Nasdaq’s continued listing requirements and the possibility that our shares will be delisted if such requirements are not satisfied; our ability to implement enhanced risk management policies, procedures and controls commensurate with shifts in our business strategies and regulatory expectations; the occurrence of natural and other disasters, pandemics, terrorist activities, significant political events, cyberattacks, security breaches or system failures that affect us or our counterparties or service providers, including the COVID-19 pandemic and the regulatory and governmental actions implemented in response to COVID-19; and 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 October 6, 2020, subsequent periodic reports and future periodic reports. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those projected in, or implied by, such forward-looking statements. 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, revise, or correct any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, the receipt of new information, or otherwise.

Sterling Bancorp, Inc.

Consolidated Balance Sheets

(dollars in thousands)

December 31,

2019

2018

Assets

Cash and due from banks

$

77,819

$

52,526

Interest-bearing time deposits with other banks

1,025

1,100

Investment securities

152,544

148,896

Mortgage loans held for sale

1,337

1,248

Loans, net of allowance for loan losses of $21,730 and $21,850

2,891,530

2,895,953

Accrued interest receivable

13,718

13,529

Mortgage servicing rights, net

9,765

10,633

Leasehold improvements and equipment, net

9,198

9,489

Operating lease right-of-use assets

18,715

Federal Home Loan Bank stock, at cost

22,950

22,950

Cash surrender value of bank-owned life insurance

31,917

31,302

Deferred tax asset, net

12,095

6,122

Other assets

2,271

3,026

Total assets

$

3,244,884

$

3,196,774

Liabilities and Shareholders' Equity

Liabilities:

Noninterest-bearing deposits

$

77,563

$

76,815

Interest-bearing deposits

2,417,877

2,375,870

Total deposits

2,495,440

2,452,685

Federal Home Loan Bank borrowings

229,000

293,000

Subordinated notes, net

65,179

65,029

Operating lease liabilities

19,868

Accrued expenses and other liabilities

102,783

51,003

Total liabilities

2,912,270

2,861,717

Commitments and Contingencies (Note 19)

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 and 53,012,283 shares at December 31, 2019 and 2018, respectively

80,889

111,238

Additional paid-in capital

13,210

12,713

Retained earnings

238,319

211,115

Accumulated other comprehensive income (loss)

196

(9

)

Total shareholders' equity

332,614

335,057

Total liabilities and shareholders' equity

$

3,244,884

$

3,196,774

Sterling Bancorp, Inc.

Consolidated Statements of Income

(dollars in thousands, except per share amounts)

Year Ended December 31,

2019

2018

2017

Interest income

Interest and fees on loans

$

168,955

$

157,499

$

122,789

Interest and dividends on investment securities and restricted stock

4,976

3,679

1,890

Other interest

1,438

593

157

Total interest income

175,369

161,771

124,836

Interest expense

Interest on deposits

45,693

32,031

17,570

Interest on Federal Home Loan Bank borrowings

3,991

4,951

3,795

Interest on subordinated notes

4,701

4,689

4,070

Total interest expense

54,385

41,671

25,435

Net interest income

120,984

120,100

99,401

Provision (recovery) for loan losses

(133

)

3,229

2,700

Net interest income after provision (recovery) for loan losses

121,117

116,871

96,701

Non-interest income

Service charges and fees

444

379

253

Investment management and advisory fees

1,577

2,035

2,338

Gain on sale of investment securities

6

86

119

Gain (loss) on sale of mortgage loans held for sale

396

240

(381

)

Gain on sale of portfolio loans

5,970

16,433

10,062

Unrealized gains (losses) on equity securities

114

(87

)

Net servicing income

238

1,381

407

Income on cash surrender value of bank-owned life insurance

1,275

1,193

1,175

Other

1,427

377

535

Total non-interest income

11,447

22,037

14,508

Non-interest expense

Salaries and employee benefits

29,503

28,438

23,778

Occupancy and equipment

8,988

7,250

5,986

Professional fees

5,984

3,118

1,673

Advertising and marketing

1,364

1,640

1,025

FDIC assessments

436

1,447

1,296

Data processing

1,233

1,223

1,059

Provision for mortgage repurchase liability

7,823

Provision for contingent losses

25,000

Other

7,342

7,220

5,944

Total non-interest expense

87,673

50,336

40,761

Income before income taxes

44,891

88,572

70,448

Income tax expense

15,643

25,104

32,471

Net income

$

29,248

$

63,468

$

37,977

Income per share, basic and diluted

$

0.57

$

1.20

$

0.82

Weighted average common shares outstanding:

Basic

51,115,986

52,963,308

46,219,367

Diluted

51,127,879

52,965,567

46,219,367

View source version on businesswire.com: https://www.businesswire.com/news/home/20201006006112/en/

Contacts

Financial Profiles, Inc.
Larry Clark
310-622-8223

Matthew Keating
310-622-2230
SBT@finprofiles.com