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Sterling Bancorp Reports First Quarter 2019 Financial Results

SOUTHFIELD, Mich.--(BUSINESS WIRE)--

Q1 2019 Highlights

  • Net income of $15.7 million, consistent with Q1 2018, and down 2% from Q4 2018
  • Fully diluted EPS of $0.30, consistent with both Q1 2018 and Q4 2018
  • First quarter annualized ROAA of 1.94% and annualized ROATCE of 18.46%
  • Revenue, net of interest expense, of $34.1 million, comparable to Q1 2018, and down 7% from Q4 2018
  • Total loan originations of $304.9 million, down from $408.0 million in Q1 2018 and $332.7 million in Q4 2018
  • Total gross loans, including loans held for investment and loans held for sale, of $2.94 billion, a 5% increase from Q1 2018, and a 4% annualized increase from Q4 2018
  • Total deposits of $2.44 billion, a 6% increase from Q1 2018, and a 1% decrease from Q4 2018
  • Net interest margin of 3.86%, compared to 3.96% in Q1 2018 and 3.90% in Q4 2018
  • Repurchased approximately 1.2 million shares of common stock at an average price of $9.52 during the quarter
  • Named as the top performing community bank in the United States with total assets between $3 billion and $10 billion for the second year in a row by S&P Global Market Intelligence

Sterling Bancorp, Inc. (SBT) (the “Company”), the holding company of Sterling Bank and Trust, F.S.B. (the “Bank”), today reported unaudited financial results for its first quarter ended March 31, 2019.

For the first quarter 2019, net income totaled $15.7 million, or $0.30 per diluted share, based on 52.6 million weighted average diluted shares outstanding. This compares to fourth quarter 2018 net income of $16.0 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding. For the first quarter of 2018, net income totaled $15.7 million, or $0.30 per diluted share, based on 53.0 million weighted average diluted shares outstanding.

“We are pleased with our start to 2019, once again generating top quartile annualized returns on average assets and tangible common equity of 1.94% and 18.46%, respectively,” said Gary Judd, Chairman and CEO of Sterling Bancorp. “Our strong and consistent earnings are being driven by disciplined balance sheet management, well controlled expenses and excellent credit quality. Our strategic focus on strong customer relationships and our suite of niche loan products have contributed to our superior level of financial performance and earned us recognition as the top performing community bank in the United States in 2018 for the second year in a row, as recognized by S&P Global Market Intelligence.

“During the quarter, we experienced higher construction loan production and we continue to have a healthy pipeline of commercial and construction loans. Residential mortgage loan originations decreased both year-over-year and from the fourth quarter of 2018. Our customers remain cautious due to the uncertainty surrounding trade tensions with China and the outlook for moderating home price appreciation in our markets. However, as we continue to build our lending staff, we expect to see improved residential loan originations and also diversify our revenue by growing the commercial lending portfolio throughout 2019.”

Financial Highlights (Unaudited)

   
At or for the Three Months Ended

(dollars in thousands, except per share data)

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Net income $ 15,683 $ 15,996 $ 15,749
Income per share, diluted $ 0.30 $ 0.30 $ 0.30

Net interest income (1)

$ 30,300 $ 30,706 $ 28,739

Net interest margin (1)

3.86% 3.90% 3.96%
Non-interest income (1) $ 3,828 $ 6,014 $ 5,493
Non-interest expense $ 13,122 $ 13,681 $ 11,503
Loans, net of allowance for loan losses $ 2,923,576 $ 2,895,953 $ 2,580,560
Total deposits $ 2,436,567 $ 2,452,685 $ 2,291,165
Nonperforming loans $ 7,337 $ 4,500 $ 5,115
Allowance for loan losses to total loans 0.70% 0.75% 0.74%
Allowance for loan losses to nonperforming loans 282% 486% 374%
Provision (recovery) for loan losses $ (1,014) $ 1,045 $ 641
Net charge offs (recoveries) $ 138 $ (40) $ (34)
Return on average assets 1.94% 1.99% 2.13%
Return on average shareholders' equity 18.44% 19.36% 22.17%
Efficiency ratio 38.45% 37.26% 33.60%
 
(1) In the second quarter of 2018, the Company corrected the classification of commitment fees, net of direct loan origination costs, earned on construction loans and other lines of credit to interest income which were previously reported within non-interest income. As a result, the three months ended March 31, 2018 has been adjusted from the amounts previously reported to correct the classification error. The amount of the adjustment was a decrease to non-interest income and an increase to interest income of $544 and an increase to net interest margin of 7 basis points for the three months ended March 31, 2018. There was no change to the reported net income or income per share, basic and diluted, as previously reported as a result of this immaterial correction.

Operating Results for the First Quarter 2019

Revenue

Revenue, net of interest expense, was $34.1 million for the first quarter of 2019, a decrease of 7% from the fourth quarter of 2018. The decrease was primarily attributable to a reduction of over 50% in loan sale volumes.

Revenue, net of interest expense, for the first quarter of 2018 was $34.2 million, comparable to the first quarter of 2019. The $1.6 million year-over-year increase in net interest income was offset by a $1.7 million decrease in non-interest income.

Net Interest Income

Net interest income for the first quarter of 2019 was $30.3 million, a decrease of 1% from $30.7 million for the fourth quarter of 2018. The slight decline in net interest income from the fourth quarter was attributable to a 4 basis point decrease in the net interest margin and a $6.0 million decrease in average interest earning assets.

Relative to the first quarter of 2018, net interest income increased 5% from $28.7 million. The increase in net interest income from the first quarter of 2018 was primarily driven by a $243.6 million increase in average interest earning assets, partially offset by a 10 basis point decrease in the net interest margin.

Net Interest Margin

Net interest margin for the first quarter of 2019 was 3.86%, down 4 basis points from the net interest margin of 3.90% for the fourth quarter of 2018. Net interest margin was impacted by a 13 basis point increase in the average cost of interest-bearing liabilities, partially offset by a 3 basis point increase in the average yield on interest earning assets.

Relative to the first quarter of 2018, net interest margin decreased from 3.96%, primarily due to a 55 basis point increase in the average cost of interest-bearing liabilities, partially offset by a 34 basis point increase in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the first quarter of 2019 was $3.8 million, a decrease from $6.0 million for the fourth quarter of 2018. The decrease was primarily the result of a $2.1 million decrease in the gain on sale of loans due to fewer residential mortgages sold in the secondary market as compared to the prior period.

Non-interest income decreased $1.7 million from $5.5 million in the first quarter of 2018, primarily as a result of a $1.5 million decrease in the gain on sale of loans due to fewer residential mortgages sold in the secondary market as compared to the prior year period.

Non-interest Expense

Non-interest expense for the first quarter of 2019 was $13.1 million, a decrease from $13.7 million for the fourth quarter of 2018. The decrease was primarily attributable to lower salaries and employee benefits, occupancy and equipment costs and other expenses, including travel and loan origination expenses. The lower salaries and employee benefits was due, in part, to normal seasonal patterns between quarters as year-end service awards are recorded in the fourth quarter. In addition, we had lower commissions and other accruals due to the lower loan originations. All were partially offset by higher salary expense and payroll taxes.

Relative to the first quarter of 2018, non-interest expense increased 14% from $11.5 million. The increase was primarily due to an increase in salaries and employee benefits and occupancy and equipment costs required to support new offices and the growth in the Company’s operations.

The Company’s operating efficiency ratio remained strong at 38.5% in the first quarter of 2019, compared with 37.3% in the fourth quarter of 2018 and 33.6% in the first quarter of 2018.

Income Taxes

The effective tax rate for the first quarter of 2019 was 29%, up from 27% for the fourth quarter of 2018, and comparable to an effective tax rate of 29% for the first quarter of 2018.

Loan Portfolio

Total gross loans, which includes those held for investment and held for sale, were $2.94 billion at March 31, 2019, an increase of 1% from $2.92 billion at December 31, 2018. The Company had a $41.6 million increase in residential mortgage loans held for investment, partially offset by a $14.3 million decrease in construction and commercial real estate loans, a $1.1 million decrease in residential mortgage loans held for sale and a $0.9 million decrease in commercial and industrial loans. As the Company continues to utilize loan sales to support balance sheet and liquidity strategies, the amount of residential mortgage loans held for sale may vary from quarter to quarter.

During the first quarter of 2019, the Company originated $304.9 million in loans, which included $257.6 million in residential mortgage loans and $47.3 million in construction loans.

Deposits

Total deposits were $2.44 billion at March 31, 2019, compared with $2.45 billion at December 31, 2018. The slight decrease was attributable to a $49.9 million decrease in money market, savings and NOW deposits and a $6.3 million decrease in non-interest bearing demand deposits, partially offset by a $40.0 million increase in time deposits. Within time deposits, retail deposits increased by $73.8 million to $934.3 million and brokered CDs decreased by $33.8 million, to a zero balance at quarter-end.

Credit Quality

Nonperforming assets totaled $14.2 million, or 0.44% of total assets, at March 31, 2019, compared with $10.2 million, or 0.32% of total assets, at December 31, 2018. The increase was primarily due to a $2.0 million construction loan and a $0.8 million residential real estate loan being placed on non-accrual and a $1.0 million construction loan added to troubled debt restructurings. The Company believes that no impairment exists, as there is more than sufficient collateral value supporting these loans.

Net charge-offs for the first quarter of 2019 were $138,000, consisting of $176,000 of gross charge-offs and $38,000 of recoveries. The Company recorded a negative provision of $1.0 million for the first quarter of 2019 due to an elongated period of very low credit losses that resulted in a reduction in the allowance for loan losses reserve as of March 31, 2019.

The allowance for loan losses was 0.70% of total loans and 282% of nonperforming loans at March 31, 2019, compared with 0.75% and 486%, respectively, at December 31, 2018.

Capital

At March 31, 2019, the Bank exceeded all regulatory capital requirements under Basel III and was considered to be a “well-capitalized” financial institution, as summarized in the following tables:

 
 

Well

Capitalized

 

Company Actual at

March 31, 2019

Total adjusted capital to risk-weighted assets N/A 21.64%
Tier 1 (core) capital to risk-weighted assets N/A 17.27%
Tier 1 (core) capital to adjusted tangible assets N/A 10.49%
Common Tier 1 (CET 1) N/A 17.27%
 

Well

Capitalized

Sterling Bank Actual at

March 31, 2019

Total adjusted capital to risk-weighted assets 10.00% 17.12%
Tier 1 (core) capital to risk-weighted assets 8.00% 16.07%
Tier 1 (core) capital to adjusted tangible assets 5.00% 9.76%
Common Tier 1 (CET 1) 6.50% 16.07%

Share Repurchase Program

During the quarter, the Company repurchased approximately 1.2 million shares of common stock at an average price of $9.52 per share.

Conference Call and Webcast

Management will host a conference call today at 5:00 p.m. Eastern Time to discuss the Company's financial results. The conference call number for U.S. participants is (833) 535-2201 and the conference call number for participants outside the U.S. is (412) 902-6744. Additionally, interested parties can listen to a live webcast of the call in the "Investor Relations" section of the Company's website at www.sterlingbank.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

A replay of the conference call may be accessed through May 13, 2019 by dialing (877) 344-7529, using conference ID number 10130109.

About Sterling Bancorp, Inc.

Sterling Bancorp, Inc. is a unitary thrift holding company. Its wholly owned subsidiary, Sterling Bank and Trust, F.S.B., has primary branch operations in San Francisco and Los Angeles, California, New York City and Bellevue, Washington. Sterling offers a broad range of loan products to the residential and commercial markets, as well as retail and business banking services. Sterling also has an operations center and a branch in Southfield, Michigan. Sterling was named as the top performing community bank in the United States with total assets between $3 billion and $10 billion in 2018 by S&P Global Market Intelligence for the second year in a row (in 2017 the asset range was $1 billion to $10 billion). For additional information, please visit the Company’s website at http://www.sterlingbank.com.

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with accounting principles generally accepted in the United States (“GAAP”). These non-GAAP financial measures include “Average Tangible Common Equity,” and “Return on Average Tangible Common Equity,” each of which are common metrics in the banking industry. Our management uses these non-GAAP financial measures to assess the Company’s capital strength and business performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. For further information see “Return on Average Tangible Common Equity Reconciliations (non-GAAP)” in the Financial Data section that follows.

Forward-Looking Statements

Readers should note that in addition to the historical information contained herein, this press release includes "forward-looking statements," within the meaning of the federal securities laws, including but not limited to statements about the Company’s expected loan production, operating expenses and future earnings levels. These statements are subject to many risks and uncertainties, including changes in interest rates and other general economic, business and political conditions, including changes in the financial markets; changes in business plans as circumstances warrant; and other risks detailed from time to time in filings made by the Company with the Securities and Exchange Commission. Readers should note that the forward-looking statements included in this press release are not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "will," "propose," "may," "plan," "seek," "expect," "intend," "estimate," "anticipate," "believe" or "continue," or similar terminology. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Sterling Bancorp, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands)  

March 31,

2019

 

December 31,

2018

 

%

change

 

March 31,

2018

 

%

change

Assets
Cash and due from banks $ 58,030 $ 52,526 10% $ 37,541 55%
Interest-bearing deposits with other banks 1,100 1,100 0% - N/M
Investment securities 151,049 148,896 1% 124,956 21%
Mortgage loans held for sale 165 1,248 (87)% 200,467 (100)%

Loans, net of allowance for loan losses of $20,698, $21,850, and $19,132

2,923,576 2,895,953 1% 2,580,560 13%
Accrued interest receivable 13,746 13,529 2% 11,936 15%

Mortgage servicing rights, net

10,755 10,633 1% 7,780 38%
Leasehold improvements and equipment, net 9,680 9,489 2% 7,705 26%
Federal Home Loan Bank stock, at cost 22,950 22,950 0% 22,950 0%
Cash surrender value of bank-owned life insurance 31,454 31,302 0% 30,837 2%
Operating lease right-of-use assets 21,398 - N/M - N/M
Deferred tax asset, net 5,938 6,122 (3)% 7,234 (18)%
Other assets   2,351   3,026   (22)%   2,366   (1)%
Total assets $ 3,252,192 $ 3,196,774   2% $ 3,034,332   7%
 
Liabilities
Noninterest-bearing deposits $ 70,527 $ 76,815 (8)% $ 75,062 (6)%
Interest-bearing deposits   2,366,040   2,375,870   (0)%   2,216,103   7%
Total deposits 2,436,567 2,452,685 (1)% 2,291,165 6%
Federal Home Loan Bank borrowings 333,051 293,000 14% 342,937 (3)%
Subordinated notes, net 65,065 65,029 0% 64,923 0%
Operating lease liabilities 22,331 - N/M - N/M
Accrued expenses and other liabilities   56,276   51,003   10%   46,795   20%
Total liabilities 2,913,290 2,861,717 2% 2,745,820 6%
 
Shareholders’ Equity

Preferred stock, authorized 10,000,000 shares; no shares issued and outstanding

- - - - -

Common stock, voting, no par value, authorized 500,000,000 shares at March 31, 2019, December 31, 2018 and March 31, 2018; issued and outstanding 51,870,853 shares at March 31, 2019, 53,012,283 shares at December 31, 2018, and 53,002,963 shares at March 31, 2018

99,694 111,238 (10)% 111,238 (10)%
Additional paid-in capital 12,839 12,713 1% 12,425 3%
Retained earnings 226,272 211,115 7% 164,984 37%
Accumulated other comprehensive income (loss)   97   (9 ) N/M   (135 ) N/M
Total shareholders’ equity   338,902   335,057   1%   288,512   17%
Total liabilities and shareholders’ equity $ 3,252,192 $ 3,196,774   2% $ 3,034,332   7%
N/M- not meaningful
 
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
  Three Months Ended
(dollars in thousands, except per share amounts)

March 31,

2019

 

December 31,

2018

 

%

change

 

March 31,

2018

 

%

change

Interest income:

Interest and fees on loans (1)

$ 41,722 $ 41,747 (0)% $ 36,400 15%
Interest and dividends on investment securities and restricted stock 1,227 1,060 16% 819 50%
Other interest   236     194 22%   114 107%

Total interest income (1)

43,185 43,001 0% 37,333 16%
Interest expense:
Interest on deposits 10,656 9,635 11% 6,589 62%
Interest on Federal Home Loan Bank borrowings 1,055 1,487 (29)% 833 27%
Interest on subordinated notes   1,174     1,173 0%   1,172 0%
Total interest expense   12,885     12,295 5%   8,594 50%
Net interest income (1) 30,300 30,706 (1)% 28,739 5%
Provision (recovery) for loan losses   (1,014 )   1,045 (197)%   641 (258)%
Net interest income after provision for loan losses (1) 31,314 29,661 6% 28,098 11%
Non-interest income:

Service charges and fees (1)

104 113 (8)% 74 41%
Investment management and advisory fees 340 467 (27)% 623 (45)%
Gain on sale of loans 2,480 4,566 (46)% 4,006 (38)%
Other income   904     868 4%   790 14%

Total non-interest income (1)

  3,828     6,014 (36)%   5,493 (30)%
Non-interest expense:
Salaries and employee benefits 7,267 7,587 (4)% 6,649 9%
Occupancy and equipment 2,237 2,334 (4)% 1,546 45%
Professional fees 962 774 24% 622 55%
Advertising and marketing 439 470 (7)% 349 26%
FDIC assessments 255 244 5% 543 (53)%
Data processing 308 329 (6)% 288 7%
Other   1,654     1,943 (15)%   1,506 10%
Total non-interest expense   13,122     13,681 (4)%   11,503 14%
Income before income taxes 22,020 21,994 0% 22,088 (0)%
Income tax expense   6,337     5,998 6%   6,339 (0)%
Net income $ 15,683   $ 15,996 (2)% $ 15,749 (0)%
Income per share, basic and diluted $ 0.30   $ 0.30 $ 0.30
Weighted average common shares outstanding:
Basic 52,554,446 52,963,308 52,963,308
Diluted 52,562,820 52,967,004 52,963,308
 
(1) In the second quarter of 2018, the Company corrected the classification of commitment fees, net of direct loan origination costs, earned on construction loans and other lines of credit to commercial customers in its condensed consolidated statements of income to the financial statement caption, interest and fees on loans, which were previously reported in service charges and fees. As a result, the three months ended March 31, 2018 has been adjusted from the amounts previously reported to correct the classification error. The amount of the adjustment was a decrease to service charges and fees, and increase to interest and fees on loans of $544 for the three months ended March 31, 2018. There was no change to the reported net income or income per share, basic and diluted, as previously reported as a result of this immaterial correction.
 
Sterling Bancorp, Inc.
Selected Financial Data (Unaudited)
  As of and for the Three Months Ended
Performance Ratios:

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Return on average assets 1.94% 1.99% 2.13%
Return on average shareholders' equity 18.44% 19.36% 22.17%
Return on average tangible common equity 18.46% 19.39% 22.24%

Yield on earning assets (1)

5.49% 5.46% 5.15%
Cost of average interest-bearing liabilities 1.91% 1.78% 1.36%

Net interest spread (1)

3.58% 3.68% 3.79%

Net interest margin (1)

3.86% 3.90% 3.96%
Efficiency ratio (2) 38.45% 37.26% 33.60%
 
(1) Refer to footnote to Condensed Consolidated Statements of Income table.
(2) Efficiency Ratio is computed as the ratio of non-interest expense divided by the sum of net interest income and non-interest income.
 
Sterling Bancorp, Inc.
Yield Analysis and Net Interest Income (Unaudited)
  Three Months Ended
March 31, 2019   December 31, 2018   March 31, 2018
(dollars in thousands)

Average

Balance

  Interest  

Average

Yield/

Rate

Average

Balance

  Interest  

Average

Yield/

Rate

Average

Balance

  Interest  

Average

Yield/

Rate

 
Interest earning assets
Loans (1),(3) $ 2,942,261 $ 41,722 5.67%

$

2,957,092

$ 41,747 5.65%

$

2,733,759

$ 36,400 5.33%
Securities, includes restricted stock 170,117 1,227 2.89% 161,362 1,060 2.63% 141,616 819 2.31%
Other interest earning assets   31,293   236 3.02%   31,207   194 2.49%   24,663   114 1.85%

Total interest earning assets (3)

$ 3,143,671 $ 43,185 5.49% $ 3,149,661 $ 43,001 5.46%

$

2,900,038

$ 37,333 5.15%
Interest-bearing liabilities
Money Market, Savings, NOW $ 1,474,129 $ 5,378 1.48% $ 1,507,209 $ 5,495 1.45%

$

1,525,436

$ 4,135 1.10%
Time deposits   922,996   5,278 2.32%   833,202   4,140 1.97%   705,824   2,454 1.41%
Total interest-bearing deposits 2,397,125 10,656 1.80% 2,340,411 9,635 1.63% 2,231,260 6,589 1.20%
FHLB borrowings 268,566 1,055 1.57% 338,462 1,487 1.72% 259,056 833 1.29%
Subordinated debt   65,043   1,174 7.22%   65,006   1,173 7.22%   64,901   1,172 7.22%
Total borrowings   333,609 2,229 2.67%   403,468 2,660 2.58%   323,957 2,005 2.48%
Total interest-bearing liabilities   2,730,734   12,885 1.91%   2,743,879   12,295 1.78%   2,555,217   8,594 1.36%

Net interest income and spread (2),(3)

$ 30,300 3.58% $ 30,706 3.68% $ 28,739 3.79%
Net interest margin (2),(3) 3.86% 3.90% 3.96%
 
(1) Nonaccrual loans are included in the respective average loan balances. Income, if any, on such loans is recognized on a cash basis.
(2) Interest income does not include taxable equivalent adjustments.
(3) Refer to footnote to Condensed Consolidated Statements of Income table.
 
Sterling Bancorp, Inc.
Loan Composition (Unaudited)
(dollars in thousands)  

March 31,

2019

 

December 31,

2018

 

%

change

 

March 31,

2018

 

%

change

Construction $ 172,398 $ 176,605 (2)% $ 179,846 (4)%
Residential real estate, mortgage 2,494,030 2,452,441 2% 2,134,447 17%
Commercial real estate, mortgage 240,896 250,955 (4)% 239,204 1%
Commercial and industrial loans, lines of credit 36,916 37,776 (2)% 46,166 (20)%
Other consumer loans   34     26   31%   29   17%
Total loans held for investment 2,944,274 2,917,803 1% 2,599,692 13%
Less: allowance for loan losses   (20,698 )   (21,850 ) (5)%   (19,132 ) 8%
Loans, net $ 2,923,576   $ 2,895,953   1% $ 2,580,560   13%
 
Mortgage loans held for sale $ 165   $ 1,248   (87)% $ 200,467   (100)%
Total gross loans $ 2,944,439   $ 2,919,051   1% $ 2,800,159   5%
 
Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)
  Three Months Ended
(dollars in thousands)

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Balance at beginning of period $ 21,850 $ 20,765 $ 18,457
Provision (recovery) for loan losses (1,014 ) 1,045 641
Charge offs (176 ) - -
Recoveries   38     40   34
Balance at end of period $ 20,698   $ 21,850 $ 19,132
 
Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
(dollars in thousands)  

March 31,

2019

 

December 31,

2018

 

%

change

 

March 31,

2018

 

%

change

Noninterest bearing demand deposits $ 70,527 $ 76,815 (8)% $ 75,062 (6)%
Money Market, Savings and NOW 1,431,715 1,481,591 (3)% 1,615,990 (11)%
Time deposits   934,325   894,279 4%   600,113 56%
Total deposits $ 2,436,567 $ 2,452,685 (1)% $ 2,291,165 6%
 
Sterling Bancorp, Inc.
Capital and Credit Quality Ratios (Unaudited)
  As of and for the Three Months Ended
(dollars in thousands)

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Capital Ratios
Regulatory and Other Capital Ratios— Consolidated:
Total adjusted capital to risk-weighted assets 21.64% 21.98% 20.38%
Tier 1 (core) capital to risk-weighted assets 17.27% 17.45% 15.77%
Common Tier 1 (CET 1) 17.27% 17.45% 15.77%
Tier 1 (core) capital to adjusted tangible assets 10.49% 10.42% 9.73%
 
Regulatory and Other Capital Ratios—Bank:
Total adjusted capital to risk-weighted assets 17.12% 16.94% 15.07%
Tier 1 (core) capital to risk-weighted assets 16.07% 15.80% 14.02%
Common Tier 1 (CET 1) 16.07% 15.80% 14.02%
Tier 1 (core) capital to adjusted tangible assets 9.76% 9.44% 8.65%
 
Credit Quality Data
Nonperforming loans (1) $ 7,337 $ 4,500 $ 5,115
Nonperforming loans to total loans 0.25% 0.15% 0.20%
Nonperforming assets (2) $ 14,155 $ 10,157 $ 8,082
Nonperforming assets to total assets 0.44% 0.32% 0.27%
Allowance for loan losses to total loans 0.70% 0.75% 0.74%
Allowance for loan losses to nonperforming loans 282% 486% 374%
Net charge offs (recoveries) to average loans 0.00% (0.00)% (0.00)%
 

(1) Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing interest.

(2) Nonperforming assets include nonperforming loans and loans modified under troubled debt restructurings and other repossessed assets.

Return on Average Tangible Common Equity Reconciliations (non-GAAP)

Average tangible common equity and return on average tangible common equity are non-GAAP disclosures. Sterling’s management uses these non-GAAP financial measures to assess the Company’s capital strength and business performance. Average tangible common equity excludes the effect of intangible assets. This non-GAAP financial measure should not be considered a substitute for those comparable measures that are similarly titled that are determined in accordance with U.S. GAAP that may be used by other companies. The following is a reconciliation of average tangible common equity to the average shareholders’ equity, its most comparable GAAP measure, as well as a calculation of return on average tangible common equity as of March 31, 2019 and 2018, and December 31, 2018.

GAAP to Non-GAAP Reconciliations
  As of and for the Three Months Ended
(dollars in thousands)  

March 31,

2019

 

December 31,

2018

 

March 31,

2018

Net Income $ 15,683   $ 15,996 $ 15,749
Average shareholders' equity 340,221 330,443 284,100
Adjustment
Customer-related intangible   (413 )   (525 )   (863 )
Average tangible common equity $ 339,808   $ 329,918   $ 283,237  
Return on average tangible common equity* 18.46 % 19.39 % 22.24 %
 
*Annualized

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