Market Overview

Sterling Bancorp announces results for the second quarter of 2019 with diluted earnings per share available to common stockholders of $0.46 (as reported) and $0.51 (as adjusted); results reflect the continued progress in balance sheet transition and financial center consolidation strategies

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Key Performance Highlights for the Three Months ended June 30, 2019 vs. June 30, 2018

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  6/30/2018   6/30/2019   Change % / bps   6/30/2018   6/30/2019   Change % / bps
Total revenue2 $ 284,084     $ 258,897     (8.9 )%   $ 276,806     $ 263,259     (4.9 )%
Net income available to common 112,245     94,473     (15.8 )   112,868     105,124     (6.9 )
Diluted EPS available to common 0.50     0.46     (8.0 )   0.50     0.51     2.0  
Net interest margin3 3.56 %   3.53 %   (3 )   3.62 %   3.58 %   (4 )
Return on average tangible common equity 18.68     15.13     (355 )   18.79     16.83     (196 )
Return on average tangible assets 1.54     1.36     (18 )   1.55     1.51     (4 )
Operating efficiency ratio4 44.0     49.0     500     38.3     40.9     260  
  • Net income available to common stockholders of $94.5 million (as reported) and $105.1 million (as adjusted).
  • Total commercial loans of $17.6 billion at June 30, 2019; growth of 12.0% over June 30, 2018.
  • Operating efficiency ratio of 49.0% (as reported) and 40.9% (as adjusted).
  • Repurchased 4,502,053 common shares in the second quarter of  2019.
  • Tangible book value per common share1 of $12.40; growth of 13.6% over June 30, 2018.

Key Performance Highlights for the Three Months ended June 30, 2019 vs. March 31, 2019

($ in thousands except per share amounts) GAAP / As Reported   Non-GAAP / As Adjusted1
  3/31/2019   6/30/2019   Change % / bps   3/31/2019   6/30/2019   Change % / bps
Total revenue2 $ 255,103     $ 258,897     1.5 %   $ 263,923     $ 263,259     (0.3 )%
Net income available to common 99,448     94,473     (5.0 )   105,902     105,124     (0.7 )
Diluted EPS available to common 0.47     0.46     (2.1 )   0.50     0.51     2.0  
Net interest margin3 3.48 %   3.53 %   5     3.54 %   3.58 %   4  
Return on average tangible common equity 16.00     15.13     (87 )   17.04     16.83     (21 )
Return on average tangible assets 1.39     1.36     (3 )   1.48     1.51     3  
Operating efficiency ratio4 45.1     49.0     390     40.5     40.9     40  
  • Growth in commercial loans of $495.8 million over linked quarter; 11.6% annualized growth rate.
  • Total deposits were $20.9 billion with a cost of 0.91%.  Municipal deposit balances decreased by $327.7 million due to seasonal outflows.
  • Total cost of deposits increased by three basis points; total cost of funding liabilities decreased by one basis point.
  • As adjusted net interest margin increased four basis points to 3.58%.  Excluding accretion income on acquired loans, net interest margin for the three months ended June 30, 2019 was 3.22%.
  • Recorded pre-tax charge of $14.4 million related to ongoing financial center consolidation strategy. Consolidated two financial centers in the second quarter of 2019. An additional 10 financial centers and three back-office locations anticipated to be consolidated in 2019.
  1. Non-GAAP / as adjusted measures are defined in the non-GAAP tables beginning on page 18.
  2. Total revenue is equal to net interest income plus non-interest income. Total revenue as adjusted is equal to tax equivalent net interest income   plus non-interest income excluding securities gains and losses.
  3. Net interest margin is equal to net interest income divided by average interest earning assets. Net interest margin as adjusted, or tax equivalent net interest margin, is equal to net interest income plus the tax equivalent adjustment for tax exempt securities divided by average interest earning assets. The tax equivalent adjustment is assumed at a 21% federal tax rate in all periods presented.
  4. Operating efficiency ratio is a non-GAAP measure. See page 21 for an explanation of the operating efficiency ratio.

1

MONTEBELLO, N.Y., July 24, 2019 (GLOBE NEWSWIRE) -- Sterling Bancorp (NYSE:STL) (the "Company"), the parent company of Sterling National Bank (the "Bank"), today announced results for the three and six months ended June 30, 2019. Net income available to common stockholders for the quarter ended June 30, 2019 was $94.5 million, or $0.46 per diluted share, compared to net income available to common stockholders of $99.4 million, or $0.47 per diluted share, for the linked quarter ended March 31, 2019, and net income available to common stockholders of $112.2 million, or $0.50 per diluted share, for the three months ended June 30, 2018.

Net income available to common stockholders for the six months ended June 30, 2019 was $193.9 million, or $0.92 per diluted share, compared to net income available to common stockholders of $209.1 million, or $0.93 per diluted share, for the six months ended June 30, 2018.

President's Comments
Jack Kopnisky, President and Chief Executive Officer, commented: "We continued executing our strategy in the second quarter, focusing on growing our commercial businesses, transitioning our balance sheet and driving operational efficiency. In the second quarter of 2019, our adjusted net income available to common stockholders was $105.1 million and our adjusted diluted earnings per share available to common stockholders was $0.51. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.51% and adjusted return on average tangible common equity of 16.83%.

"Our commercial businesses have continued to demonstrate strong performance. We grew spot commercial loan balances by $888.3 million since December 31, 2018, which was offset by substantial run-off of residential mortgage loans of $297.6 million. At June 30, 2019, our loan portfolio consisted of 86.2% in total commercial loans, in-line with our longer-term target of commercial loans representing at least 85.0% of our total portfolio. We will remain disciplined on new loan originations and portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

"Our average total deposit balances have increased by $380.2 million since the second quarter of 2018. Total deposits were $20.9 billion and the cost of total deposits was 0.91% in the second quarter of 2019. We have seen an improvement in market conditions and competitive dynamics in our deposit markets, demonstrated by the increase of three basis points in total cost of deposits relative to the linked quarter. This is substantially lower than the pace of quarterly deposit rate increases we have experienced since the completion of the Astoria Merger in Q4 2017.

"Although we experienced some pressure on earning asset and loan origination yields, our net interest margin excluding accretion income on acquired loans increased six basis points to 3.22% in the second quarter of 2019. We anticipate that our loan portfolio transition, lower FHLB costs and borrowing balances, and improving deposit market competitive dynamics will allow us to maintain and potentially increase our current level of tax equivalent net interest margin excluding accretion income on acquired loans in 2019.

"We continue to focus on controlling operating expenses and driving operational efficiency. During the second quarter of 2019, we consolidated two financial centers, bringing our total to nine financial centers consolidated year to date.  We recorded a pre-tax  charge of $14.4 million related to our ongoing financial center consolidation strategy and anticipate consolidating an additional 10 financial center locations and three back-office locations through the rest of the year. We anticipate our total financial centers will be below 85 in the next 12 to 18 months. In the second quarter of 2019, our annualized adjusted operating expenses were $432.2 million and our adjusted operating efficiency ratio was 40.9%.

"Our tangible common equity ratio was 8.94% and our estimated Tier 1 Leverage ratio was 9.57% at June 30, 2019. Our tangible book value per common share was $12.40, which represented an increase of 13.6% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders. In the second quarter of 2019, we repurchased 4,502,053 common shares. There are 8,380,581 shares remaining for repurchase at June 30, 2019 under our current authorized repurchase program. We anticipate we will complete our program by the end of 2019.

"We have created a Company with significant operating flexibility and are confident that our business mix, growth strategy and strong capital position will allow us to continue generating superior returns and earnings per share growth. We would like to thank our clients, colleagues and shareholders for your support and look forward to working with all of our partners as we continue to build a great company.

"Lastly, we have declared a dividend on our common stock of $0.07 per share payable on August 19, 2019 to holders of record as of August 5, 2019."

2

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
The Company's GAAP net income available to common stockholders of $94.5 million, or $0.46 per diluted share, for the second quarter of 2019, included the following items:

  • a pre-tax loss of $528 thousand on the sale of available for sale securities;
  • a pre-tax charge of $14.4 million related to the consolidation of financial centers and other back-office real estate locations; and
  • the pre-tax amortization of non-compete agreements and acquired customer list intangible assets of $200 thousand.

Excluding the impact of these items, adjusted net income available to common stockholders was $105.1 million, or $0.51 per diluted share, for the three months ended June 30, 2019.

Non-GAAP financial measures include references to the terms "adjusted" or "excluding". See the reconciliation of the Company's non-GAAP financial measures beginning on page 18.

Net Interest Income and Margin

($ in thousands) For the three months ended   Change % / bps
  6/30/2018   3/31/2019   6/30/2019   Y-o-Y   Linked Qtr
Interest and dividend income $ 304,906     $ 309,400     $ 302,457     (0.8 %)   (2.2 )%
Interest expense 58,690     73,894    
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