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

Rhea-AI Summary

Sterling Bancorp, Inc. (NASDAQ: SBT) has completed its audit for the year ended December 31, 2019, filing its 2019 Annual Report on Form 10-K with the SEC. The audit faced delays due to the suspension of the Advantage Loan Program and an internal review. Revised financials disclosed a net income of $29.2 million, net income per diluted share of $0.57, and established liabilities of $32.8 million related to loan repurchases and litigation. The company aims to file its Q1 and Q2 2020 reports soon and is focused on achieving regulatory compliance and sustainable profitability.

Positive

• Net income for 2019 was $29.2 million.
• Net income per diluted share increased to $0.57.
• Return on average assets was 0.89%.
• Return on average shareholders' equity was 8.41%.
• The net interest margin stood at 3.78%.

Negative

• Delayed filings of 2019 Form 10-K and Q1/Q2 2020 reports due to compliance issues.
• Established a loan repurchase liability of $7.8 million and contingent loss liability of $25.0 million.
• Non-performing loans reached $14.8 million.

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