Market Overview

Sterling Bancorp Reports Second Quarter 2018 Financial Results

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Q2 2018 Summary

  • Net income of $16.0 million, a 79% increase from Q2 2017, and a
    1.5% increase from Q1 2018
  • Fully diluted EPS of $0.30, a 50% increase from Q2 2017, and
    equivalent to Q1 2018
  • Annualized ROAA of 2.08% and annualized ROATCE of 21.36%
  • Revenue, net of interest expense, was $36.2 million, a 44% increase
    from Q2 2017, and a 6% increase from Q1 2018
  • Total loan originations of $434 million, a 3% increase from Q2
    2017, and a 6% increase from Q1 2018
  • Total gross loans, including loans held for investment and loans
    held for sale, of $2.86 billion, a 29% increase from Q2 2017, and an
    8% annualized increase from Q1 2018
  • Total deposits of $2.34 billion, a 30% increase from Q2 2017, and a
    9% annualized increase from Q1 2018
  • Net interest margin of 3.96%

Sterling Bancorp, Inc. (NASDAQ:SBT) (the "Company"), the holding
company of Sterling Bank and Trust, F.S.B. (the "Bank"), today reported
unaudited financial results for its second quarter ended June 30, 2018.

For the three months ended June 30, 2018, net income totaled $16.0
million, or $0.30 per diluted share, based on 53.0 million weighted
average diluted shares outstanding. This compares to first quarter 2018
net income of $15.7 million, or $0.30 per diluted share, based on 53.0
million weighted average diluted shares outstanding. For the second
quarter of 2017, net income totaled $8.9 million, or $0.20 per diluted
share, based on 45.3 million weighted average diluted shares outstanding.

"We executed well in the second quarter, generating a 50% year-over-year
increase in earnings per share, a return on average assets of 2.08%, and
a return on tangible equity of 21.3%," said Gary Judd, Chairman and CEO
of Sterling Bancorp. "Our strong performance was driven by continued
balance sheet growth, disciplined expense control and excellent credit
quality. We continue to see strong demand for our suite of niche loan
products, which resulted in $434 million of loan production in the
second quarter, an increase of 6% compared to the prior quarter. Our
pipeline remains strong in our principal markets in Northern California,
Southern California and New York City, and we believe the expansion of
our presence in the greater Seattle market during the second half of the
year will provide another catalyst for driving future growth in loans,
deposits and earnings."

Financial Highlights (Unaudited)            
  At or for the Three Months Ended
(dollars in thousands, except per share data) June 30,

2018

  March 31,

2018

  June 30,

2017

Net income $   15,982 $   15,749 $   8,938
Diluted earnings per share $ 0.30 $ 0.30 $ 0.20
Net interest income before provision for loan losses (1) $ 29,857 $ 28,739 $ 23,533
Net interest margin (1) 3.96 % 3.96 % 4.24 %
Non-interest income (1) $ 6,297 $ 5,493 $ 1,530
Non-interest expense $ 12,621 $ 11,503 $ 9,391
Loans held for investment, net $ 2,816,156 $ 2,580,560 $ 2,205,530
Deposits $ 2,340,605 $ 2,291,165 $ 1,796,324
Nonperforming loans $ 641 $ 5,115 $ 665
Allowance for loan losses to total loans 0.72 % 0.74 % 0.73 %
Allowance for loan losses to non-performing loans 3167 % 374 % 2443 %
Provision for loan losses $ 1,120 $ 641 $ 600
Net charge offs (recoveries) $ (48 ) $ (34 ) $ (79 )
Return on average assets 2.08 % 2.13 % 1.57 %
Return on average shareholders' equity 21.31 % 22.17 % 20.72 %
Efficiency ratio 34.9 % 33.6 % 37.5 %

(1) In the second quarter of 2018, the Company changed the
classification of commitment fees earned on construction loans and other
lines of credit to interest income which were previously reported within
non-interest income. As a result, prior periods herein have been
adjusted from the amounts previously reported to correct the
classification error. The amount of the adjustment was a decrease to
non-interest income of $502, $862 and $544 and an increase to interest
income and net interest margin for the three and six months ended June
30, 2017, and the three months ended March 31, 2018, respectively. 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 Second Quarter 2018

Revenue

Revenue, net of interest expense, was $36.2 million for the second
quarter of 2018, an increase of 5.6% from the first quarter of 2018. The
increase in revenue was driven by a $1.2 million increase in net
interest income and a $0.8 million increase in non-interest income.

Relative to the second quarter of 2017, revenue, net of interest
expense, increased 44.3% from $25.1 million. The increase in revenue
from the second quarter of 2017 was attributable to a $6.3 million
increase in net interest income and a $4.8 million increase in
non-interest income.

Net Interest Income

Net interest income for the second quarter of 2018 was $29.9 million, an
increase of 3.9% from $28.7 million for the first quarter of 2018. The
increase in net interest income from the first quarter was primarily
attributable to a $114 million increase in average interest earning
assets.

Relative to the second quarter of 2017, net interest income increased
26.9% from $23.5 million. The increase in net interest income from the
second quarter of 2017 was primarily driven by a $791 million increase
in average interest earning assets, partially offset by the effect of a
28 basis point decrease in the net interest margin.

Net Interest Margin

Net interest margin for the second quarter of 2018 was 3.96%, unchanged
from the net interest margin of 3.96% for the first quarter of 2018. Net
interest margin was positively impacted by a 10 basis point increase in
the average yield on interest earning assets, offset by an 11 basis
point increase in the average cost of interest-bearing liabilities.

Relative to the second quarter of 2017, the net interest margin
decreased from 4.24%, primarily due to a 36 basis point increase in the
average cost of interest-bearing liabilities, partially offset by a 1
basis point increase in the average yield on interest earning assets.

Non-interest Income

Non-interest income for the second quarter of 2018 was $6.3 million, an
increase of 14.6% from $5.5 million for the first quarter of 2018. The
increase was primarily the result of a $1.1 million increase in the gain
on sale of loans due to an increase in the amount of residential
mortgages sold in the secondary market compared to the prior period.

Non-interest income increased $4.8 million from $1.5 million in the
second quarter of 2017, primarily as a result of a $4.7 million increase
in the gain on sale of loans due to an increase in the amount of
residential mortgages sold in the secondary market compared to the prior
period.

Non-interest Expense

Non-interest expense for the second quarter of 2018 was $12.6 million,
an increase of 9.7% from $11.5 million for the first quarter of 2018.
The increase was primarily attributable to higher salaries and employee
benefits, professional fees and a full quarter impact of recently opened
branches.

Relative to the second quarter of 2017, non-interest expense increased
from $9.4 million. The increase was primarily due to an increase in
personnel expenses and occupancy and equipment costs required to support
the growth in the Company's operations, as well as higher professional
fees.

The Company's operating efficiency ratio remained strong at 34.9% in the
second quarter of 2018, compared with 33.6% in the first quarter of 2018
and 37.5% in the second quarter of 2017.

Income Taxes

The effective tax rate for both the three months ended June 30, 2018 and
March 31, 2018 was 29%, compared with 41% for the three months ended
June 30, 2017. The decrease in the effective tax rate in the second
quarter of 2018 as compared to second quarter of 2017 was attributable
to the reduction in the federal corporate tax rate that was effective
January 1, 2018.

The Company continues to expect that its effective tax rate for 2018
will be in the range of 28% to 30%. The actual annual effective tax rate
will vary depending upon the mix of its taxable income by state.

Loan Portfolio

Total loans, which includes those held for investment and held for sale,
were $2.86 billion at June 30, 2018, compared with $2.80 billion at
March 31, 2018. Contributing to the increase were a $55 million increase
in residential real estate loans and a $4 million increase in commercial
real estate and construction loans.

During the second quarter of 2018, the Company originated $434 million
in loans, which included $367 million in residential mortgage loans, $20
million in commercial real estate loans, $39 million in construction
loans and $8 million in commercial and industrial loans.

Deposits

Total deposits were $2.34 billion at June 30, 2018, compared with $2.29
billion at March 31, 2018. The increase was primarily attributable to a
$66 million increase in retail deposits, partially offset by a $17
million decrease in brokered deposits.

Credit Quality

Nonperforming assets totaled $3.6 million, or 0.12% of total assets, at
June 30, 2018, compared with $8.1 million, or 0.27% of total assets, at
March 31, 2018. The decrease was primarily due to a large residential
real estate loan being upgraded to performing status. The loan was fully
repaid in July of 2018 with no loss to the Bank.

Recoveries for the second quarter of 2018 were $52,000 and charge-offs
were $4,000 during the quarter, resulting in net recoveries to average
loans of 0.00%.

The Company recorded a provision for loan losses of $1.1 million for the
second quarter of 2018, which was primarily attributable to the growth
in total loans held for investment during the quarter.

The allowance for loan losses was 0.72% of total loans and 3,167% of
nonperforming loans at June 30, 2018, compared with 0.74% and 374%,
respectively, at March 31, 2018.

Capital

At June 30, 2018, 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
June 30, 2018
Total adjusted capital to risk-weighted assets N/A 20.77 %
Tier 1 (core) capital to risk-weighted assets N/A 16.21 %
Tier 1 (core) capital to adjusted tangible assets N/A 9.88 %
Common Tier 1 (CET 1) N/A 16.21 %
 
Well
Capitalized
Sterling Bank Actual at
June 30, 2018
Total adjusted capital to risk-weighted assets 10.00 % 15.60 %
Tier 1 (core) capital to risk-weighted assets 8.00 % 14.52 %
Tier 1 (core) capital to adjusted tangible assets 5.00 % 8.84 %
Common Tier 1 (CET 1) 6.50 % 14.52 %
 

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 (877) 270-2148 and the conference call number
for participants outside the U.S. is (412) 902-6510. 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 13, 2018
by dialing (877) 344-7529, using conference ID number 10121959.

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, and a loan production office in Seattle, 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. In March
2018, Sterling was named as the top performing community bank in the
United States with total assets between $1 billion and $10 billion in
2017 by SNL/S&P Global Market Intelligence. For additional information,
please visit the Company's website at 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) June 30,

2018

March 31,

2018

%

change

December 31,

2017

%

change

June 30,

2017

%

change

 
Assets
Cash and due from banks $ 36,820 $ 37,541 (2 )% $ 40,147 (8 )% $ 25,974 42 %
Investment securities 142,648 124,956 14 % 126,848 12 % 102,501 39 %
Mortgage loans held for sale 21,641 200,467 (89 )% 112,866 (81 )% 579 N/M
Loans, net of allowance for loan losses of $20,300, $19,132, $18,457
and $16,246
2,816,156 2,580,560 9 % 2,594,357 9 % 2,205,530 28 %
Accrued interest receivable 12,396 11,936 4 % 11,493 8 % 9,170 35 %
Mortgage servicing rights, net 9,295 7,780 19 % 6,496 43 % 5,179 79 %
Leasehold improvements and equipment, net 8,413 7,705 9 % 7,043 19 % 6,863 23 %
Federal Home Loan Bank stock, at cost 22,950 22,950 0 % 22,950 0 % 18,360 25 %
Cash surrender value of bank-owned life insurance 30,991 30,837 0 % 30,680 1 % 30,357 2 %
Deferred tax asset, net 5,905 7,234 (18 )% 6,847 (14 )% 9,795 (40 )%
Other assets   4,124     2,366   74 %   2,231   85 %   3,741   10 %
Total assets $ 3,111,339   $ 3,034,332   3 % $ 2,961,958   5 % $ 2,418,049   29 %
 
Liabilities
Noninterest-bearing deposits

$

73,791 $ 75,062 (2 )% $ 73,682 0 % $ 66,455 11 %
Interest-bearing deposits   2,266,814     2,216,103   2 %   2,171,428   4 %   1,729,869   31 %
Total deposits 2,340,605 2,291,165 2 % 2,245,110 4 % 1,796,324 30 %
Federal Home Loan Bank borrowings 350,000 342,937 2 % 338,000 4 % 359,312 (3 )%
Subordinated notes, net 64,958 64,923 0 % 64,889 0 % 49,404 31 %
Accrued expenses and other liabilities   51,666     46,795   10 %   40,661   27 %   38,600   34 %
Total liabilities 2,807,229 2,745,820 2 % 2,688,660 4 % 2,243,640 25 %
 
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
June 30, 2018, March 31, 2018 and December 31, 2017, and 490,000,000
at June 30, 2017; issued and outstanding 53,002,963 shares at June
30, 2018 and March 31, 2018, 52,963,308 shares at December 31, 2017,
and 40,199,000 shares at June 30,2017
111,238 111,238 (0 )% 111,238 (0 )% 22,863 387 %
Common stock, non-voting, no par value, authorized 10,000,000
shares, issued and outstanding 5,072,000 shares at June 30, 2017
- - N/M - N/M 2,885 N/M
Additional paid-in capital 12,501 12,425 1 % 12,416 1 % 12,416 1 %
Retained earnings 180,438 164,984 9 % 149,816 20 % 136,371 32 %
Accumulated other comprehensive loss   (67 )   (135 ) N/M     (172 ) N/M     (126 ) N/M  
Total shareholders' equity   304,110     288,512   5 %   273,298   11 %   174,409   74 %
Total liabilities and shareholders' equity $ 3,111,339   $ 3,034,332   3 % $ 2,961,958   5 % $ 2,418,049   29 %
N/M- not meaningful
 
Sterling Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
           
Three Months Ended Six Months Ended
(dollars in thousands, except per share amounts) June 30,

2018

March 31,

2018

%

change

June 30,

2017

%

change

June 30,

2018

June 30,

2017

%

change

 
Interest income:
Interest and fees on loans (1) $ 38,580 $ 36,400 6 % $ 28,624 35 % $ 74,980 $ 55,743 35 %
Interest and dividends on investment securities 842 819 3 % 435 94 % 1,661 800 108 %
Other interest   119

 

114 4 %   29 310 %   233   48 385 %
Total interest income (1) 39,541 37,333 6 % 29,088 36 % 76,874 56,591 36 %
Interest expense:
Interest on deposits 7,179 6,589 9 % 3,777 90 % 13,768 7,311 88 %
Interest on Federal Home Loan Bank borrowings 1,334 833 60 % 870 53 % 2,167 1,700 27 %
Interest on subordinated notes and other   1,171   1,172 (0 )%   908 29 %   2,343   1,816 29 %
Total interest expense   9,684   8,594 13 %   5,555 74 %   18,278   10,827 69 %
Net interest income (1) 29,857 28,739 4 % 23,533 27 % 58,596 45,764 28 %
Provision for loan losses   1,120   641 75 %   600 87 %   1,761   1,200 47 %
Net interest income after provision for loan losses (1) 28,737 28,098 2 % 22,933 25 % 56,835 44,564 28 %
Non-interest income:
Service charges and fees (1) 92 74 24 % 88 5 % 166 137 21 %
Investment management and advisory fees 500 623 (20 )% 589 (15 )% 1,123 1,141 (2 )%
Net gain on sale of loans 5,096 4,006 27 % 384 1227 % 9,102 4,436 105 %
Other income   609   790 (23 )%   469 30 %   1,399   1,042 34 %
Total non-interest income (1)   6,297   5,493 15 %   1,530 312 %   11,790   6,756 75 %
Non-interest expense:
Salaries and employee benefits 7,229 6,649 9 % 5,277 37 % 13,878 10,687 30 %
Occupancy and equipment 1,610 1,546 4 % 1,416 14 % 3,156 2,805 13 %
Professional fees 824 622 32 % 295 179 % 1,446 664 118 %
Advertising and marketing 351 349 1 % 230 53 % 700 422 66 %
FDIC assessments 474 543 (13 )% 264 80 % 1,017 506 101 %
Data processing 295 288 2 % 279 6 % 583 486 20 %
Other   1,838   1,506 22 %   1,630 13 %   3,344   2,913 15 %
Total non-interest expense   12,621   11,503 10 %   9,391 34 %   24,124   18,483 31 %
Income before income taxes 22,413 22,088 1 % 15,072 49 % 44,501 32,837 36 %
Income tax expense   6,431   6,339 1 %   6,134 5 %   12,770   13,483 (5 )%
Net income $ 15,982 $ 15,749 1.5 % $ 8,938 79 % $ 31,731 $ 19,354 64 %
Income per share, basic and diluted $ 0.30 $ 0.30 $ 0.20 $ 0.60 $ 0.43
Weighted average common shares outstanding:
Basic 52,963,308 52,963,308 45,271,000 52,963,308 45,271,000
Diluted 52,965,365 52,963,308 45,271,000 52,965,133 45,271,000

(1) In the second quarter of 2018, the Company changed the
classification of commitment fees 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, prior period financial statements included herein
have 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
$502, $862 and $544 for the three and six months ended June 30, 2017,
and three months ended March 31, 2018, respectively. 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.
Select Financial Data (Unaudited)
  As of and for the Three Months Ended   As of and for the Six Months Ended
Performance Ratios: June 30,

2018

  March 31,

2018

  June 30,

2017

  June 30,

2018

  June 30,

2017

Return on average assets 2.08 % 2.13 % 1.57 % 2.10 % 1.73 %
Return on average shareholders' equity 21.31 % 22.17 % 20.72 % 21.73 % 22.70 %
Return on average tangible common equity 21.36 % 22.24 % 20.86 % 21.79 % 22.86 %
Yield on earning assets (1) 5.25 % 5.15 % 5.24 % 5.20 % 5.17 %
Cost of average interest-bearing liabilities 1.47 % 1.36 % 1.11 % 1.42 % 1.11 %
Net interest spread (1) 3.78 % 3.79 % 4.13 % 3.78 % 4.06 %
Net interest margin (1) 3.96 % 3.96 % 4.24 % 3.96 % 4.18 %
Efficiency ratio (2) 34.91 % 33.60 % 37.47 % 34.27 % 35.19 %

(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)
  For the Three Months Ended
June 30, 2018   March 31, 2018   June 30, 2017
(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) $ 2,829,819 $ 38,580 5.45% $ 2,733,759 $ 36,400 5.33% $ 2,102,446 $ 28,624 5.45%
Securities, includes restricted stock 159,243 842 2.12% 141,616 819 2.31% 108,373 435 1.61%
Other interest earning assets 24,496 119 1.94% 24,663 114 1.85% 11,673 29 0.99%
Total interest earning assets (3) $ 3,013,558 $ 39,541 5.25% $ 2,900,038 $ 37,333 5.15% $ 2,222,492 $ 29,088 5.24%
Interest-bearing liabilities
Money Market, Savings, NOW $ 1,515,912 $ 4,468 1.18% $ 1,525,436 $ 4,135 1.10% $ 1,304,358 $ 2,764 0.85%
Time deposits 715,863 2,711 1.52% 705,824 2,454 1.41% 383,908 1,013 1.06%
Total interest-bearing deposits 2,231,775 7,179 1.29% 2,231,260 6,589 1.20% 1,688,266 3,777 0.90%
FHLB borrowings 351,846 1,334 1.50% 259,056 833 1.29% 267,276 870 1.29%
Subordinated debt 64,935 1,171 7.21% 64,901 1,172 7.22% 49,383 908 7.35%
Total borrowings 416,781 2,505 2.38% 323,957 2,005 2.48% 316,659 1,778 2.22%
Total interest-bearing liabilities $ 2,648,556 9,684 1.47% $ 2,555,217 8,594 1.36% $ 2,004,925 5,555 1.11%
Net interest income and spread (2,3) $ 29,857 3.78% $ 28,739 3.79% $ 23,533 4.13%
Net interest margin (2,3) 3.96% 3.96% 4.24%
 
For the Six Months Ended
June 30, 2018   June 30, 2017
(dollars in thousands)

Average
Balance

  Interest   Average

Yield/

Rate

 

Average
Balance

  Interest   Average

Yield/

Rate

       
Interest earning assets
Loans (1,3) $ 2,782,055 $ 74,980 5.39 % $ 2,073,748 $ 55,743 5.38 %
Securities, includes restricted stock 150,478 1,661 2.21 % 102,882 800 1.56 %
Other interest earning assets   24,579   233 1.90 %   10,629   48 0.90 %
Total interest earning assets (3) $ 2,957,112 $ 76,874 5.20 % $ 2,187,259 $ 56,591 5.17 %
Interest-bearing liabilities
Money Market, Savings, NOW $ 1,520,648 $ 8,602 1.14 % $ 1,252,328 $ 5,223 0.84 %
Time deposits   710,872   5,166 1.47 %   403,332   2,088 1.04 %
Total interest-bearing deposits 2,231,520 13,768 1.24 % 1,655,660 7,311 0.89 %
FHLB borrowings 305,707 2,167 1.41 % 270,431 1,700 1.25 %
Subordinated debt   64,918   2,343 7.22 %   49,366   1,816 7.36 %
Total borrowings   370,625 4,510 2.42 %   319,797 3,516 2.19 %
Total interest-bearing liabilities $ 2,602,145   18,278 1.42 % $ 1,975,457   10,827 1.11 %
Net interest income and spread (2,3) $ 58,596 3.78 % $ 45,764 4.06 %
Net interest margin (2,3) 3.96 % 4.18 %
     

(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) June 30,

2018

  March 31,

2018

  %

change

    December 31,

2017

  %

change

    June 30,

2017

  %

change

 
Construction $ 172,262   $ 179,846   -4 %   $ 192,319   -10 %   $ 187,572   -8 %
Residential real estate, mortgage 2,367,876 2,134,447 11 % 2,132,641 11 % 1,773,734 33 %
Commercial real estate, mortgage 250,465 239,204 5 % 247,076 1 % 220,134 14 %
Commercial and industrial loans, lines of credit 45,821 46,166 -1 % 40,749 12 % 40,274 14 %
Other consumer loans   32     29   9 %   29   10 %   62   -49 %
Total loans held for investment 2,836,456 2,599,692 9 % 2,612,814 9 % 2,221,776 28 %
Less: allowance for loan losses   (20,300 )   (19,132 ) 6 %   (18,457 ) 10 %   (16,246 ) 25 %
Loans, net $ 2,816,156   $ 2,580,560   9 % $ 2,594,357   9 % $ 2,205,530   28 %
 
Mortgage loans held for sale $ 21,641   $ 200,467   -89 % $ 112,866   -81 % $ 579   N/M  
Total gross loans $ 2,858,097   $ 2,800,159   2 % $ 2,725,680   5 % $ 2,222,355   29 %
 
Sterling Bancorp, Inc.
Deposit Composition (Unaudited)
(dollars in thousands)   June 30,

2018

  March 31,

2018

  %

change

  December 31,

2017

  %

change

  June 30,

2017

  %

change

 
Noninterest bearing demand deposits $ 73,791 $ 75,062 (2 )% $ 73,682 0 % $ 66,455   11 %
Money Market, Savings and NOW 1,518,635 1,536,481 (1 )% 1,507,956 1 % 1,357,805 12 %
Time deposits   748,179   679,622 10 %   663,472 13 %   372,064 101 %
Total deposits $ 2,340,605 $ 2,291,165 2 % $ 2,245,110 4 % $ 1,796,324 30 %
 
Sterling Bancorp, Inc.
Capital and Credit Quality Ratios (Unaudited)  
As of and for the Three Months Ended
(dollars in thousands) June 30,

2018

  March 31,

2018

  December 31,

2017

  June 30,

2017

Capital Ratios  
Regulatory and Other Capital Ratios—
Consolidated:
Tier 1 (core) capital to risk-weighted assets 16.21 % 15.77 % 15.53 % 11.69 %
Tier 1 (core) capital to adjusted tangible assets 9.88 % 9.73 % 9.83 % 7.62 %
Common Tier 1 (CET 1) 16.21 % 15.77 % 15.53 % 11.69 %
Total adjusted capital to risk-weighted assets 20.77 % 20.38 % 20.28 % 16.11 %
 
Regulatory and Other Capital Ratios—Bank:
Tier 1 (core) capital to risk-weighted assets 14.52 % 14.02 % 13.71 % 13.79 %
Tier 1 (core) capital to adjusted tangible assets 8.84 % 8.65 % 8.68 % 8.99 %
Common Tier 1 (CET 1) 14.52 % 14.02 % 13.71 % 13.79 %
Total adjusted capital to risk-weighted assets 15.60 % 15.07 % 14.76 % 14.89 %
 
Credit Quality Data
Nonperforming loans (1) $ 641 $ 5,115 $ 783 $ 665
Nonperforming loans to total loans 0.02 % 0.20 % 0.03 % 0.03 %
Nonperforming assets (2) $ 3,583 $ 8,082 $ 3,777 $ 3,793
Nonperforming assets to total assets 0.12 % 0.27 % 0.13 % 0.16 %
Allowance for loan losses to total loans 0.72 % 0.74 % 0.71 % 0.73 %
Allowance for loan losses to nonperforming loans 3167 % 374 % 2357 % 2443 %
Net charge offs to average loans (0.00 )% (0.00 )% (0.03 )% (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.

 
Sterling Bancorp, Inc.
Allowance for Loan Losses (Unaudited)
  Three Months Ended
(dollars in thousands) June 30,

2018

  March 31,

2018

  December 31,

2017

June 30,

2017

Allowance for loan losses
Balance at beginning of period

$

19,132

$

18,457

$

17,189

$

15,567

Provision for loan losses 1,120 641 600 600
Charge offs (4 ) - (19 ) -
Recoveries   52     34   687     79
Balance at end of period

$

20,300

 

$

19,132

$

18,457

 

$

16,246

 

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

Average tangible common equity and return on average 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 June 30, 2018 and 2017, and March 31, 2018.

Sterling Bancorp, Inc.
GAAP to Non-GAAP Reconciliations
  As of and for the Three Months Ended   As of and for the Six Months Ended
(dollars in thousands)   June 30,

2018

  March 31,

2018

  June 30,

2017

June 30,

2018

  June 30,

2017

 
Net Income $ 15,982 $ 15,749 $ 8,938 $ 31,731 $ 19,354
Average shareholders' equity 299,988 284,100 172,572 292,088 170,543
Adjustment
Customer-related intangible   (750 )   (863 )   (1,181 )   (806 )   (1,238 )
Average tangible common equity

$

299,238  

$

283,237   $ 171,391   $ 291,282   $ 169,305  
Return on average tangible common equity* 21.36 % 22.24 % 20.86 % 21.79 % 22.86 %

*Annualized

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