Sterling Bancorp Reports 2010 First Quarter Results

NEW YORK, April 27 /PRNewswire-FirstCall/ -- Sterling Bancorp (NYSE: STL), a financial holding company headquartered in New York City and the parent company of Sterling National Bank, today announced results for the first quarter ended March 31, 2010 that were highlighted by profitable performance, an over-subscribed common stock offering and growth in its core business.

Financial Highlights

• Continued profitability – Net income available to common shareholders was $1.9 million, or $0.10 per diluted share, for the first quarter ended March 31, 2010.
• Growth from acquisition initiative – Sterling continues to benefit from its acquisition in the 2009 second quarter of an accounts receivable management, factoring and import trade finance business, now known as Sterling Trade Capital.  Due to the expansion of the acquired business and the growth of the Company’s existing factoring operations, fees from this category rose 58% in the first quarter.
• Rising loan demand – New credit facility approvals exceeded $66 million for the first quarter.  Total loans in portfolio rose to $1.2 billion at March 31, 2010.  The Company believes it is well-positioned to gain market share in its core lending business from competing financial institutions that have shifted their focus away from Sterling’s market.  
• Credit quality improves – The level of nonaccrual loans decreased for the third consecutive quarter and has declined by $3.4 million since the second quarter of 2009.
• Significant demand deposit increase – Demand deposits at March 31, 2010, were $509.5 million, up 11.4% from a year ago, representing 31.6% of total deposits, one of the highest ratios in the banking industry.  

• Strong net interest margin – The Company’s funding strategies continued to produce a high net interest margin relative to industry peers, at 4.37% on a tax-equivalent basis.

Business Highlights and Strategic Initiatives

• Over-subscribed stock offering raises gross proceeds of $69 million – Sterling successfully completed a public offering on March 19, 2010 of 8.625 million common shares at a price to the public of $8.00 per share.  Due to significant investor demand, the size of the offering was increased from the originally announced 5.1 million common shares.  The proceeds of the offering contributed to an increase of nearly 41% in shareholders’ equity since December 31, 2009, to reach $228.2 million at the end of the 2010 first quarter.  Already considered a well-capitalized institution, Sterling’s capital ratios were further enhanced as the tangible common equity ratio rose to 7.58% at March 31, 2010 from 4.59% at December 31, 2009.  Sterling previously announced that it may use the proceeds, among other things, to support the growth of its business, both organically and through acquisitions.
• Deploying Capital for Growth – Reflecting its strategies to deploy the capital raised in the recent stock offering, the Company recently announced plans to launch a mortgage warehouse lending business to finance the residential loans of qualified mortgage banking firms.  The new Sterling Warehouse Lending Group will concentrate primarily on warehouse facilities secured by Fannie Mae, Freddie Mac and FHA residential loans, and is a natural extension of Sterling’s well-established expertise in both asset-based lending and mortgage banking.  

Management Comments

“Sterling’s performance for the first quarter of 2010 reflected progress on many levels.  We experienced strong loan demand and deposit growth.  Our cost-effective funding base of noninterest-bearing demand deposits again contributed to a high net interest margin.  Noninterest income benefitted from higher accounts receivable management, factoring and import trade financing fees, as our strategies led to growth in both our existing and acquired businesses.  We also see encouraging signs of a continued improvement in credit quality,” said Louis J. Cappelli, Sterling’s Chairman and Chief Executive Officer.  

“We believe that current economic conditions offer a unique window of opportunity, as businesses begin to recover from the recession and seek a strong bank with the capacity and commitment to meet their needs.  Our recent successful common stock offering, which raised gross proceeds of $69 million, further strengthened the capital resources available to pursue such opportunities. In addition, by substantially increasing the Company’s market capitalization and providing greater trading liquidity in our stock, the offering should increase Sterling’s appeal to investors and result in greater shareholder value over the long term.”  

“Strategic efforts are underway to build on our increased capital foundation.  The formation of our new mortgage warehouse lending business is a clear example of this commitment to deploy capital in a safe, sound and productive manner.  We also have demonstrated our successful ability to integrate and enhance acquired businesses.  We are in a strong position to build our business profitably and will continue to seek growth opportunities through extensions of our existing services, selected value-added acquisitions, and the addition of talented professionals to our team,” Mr. Cappelli stated.

First Quarter 2010 Financial Results

Net income available to common shareholders for the first quarter of 2010 was $1.9 million, or $0.10 per diluted share, compared to $2.8 million, or $0.15 per diluted share, for the first quarter of 2009.  These results reflected sharply higher noninterest income excluding security gains, a lower provision for loan losses, and lower discount accretion on Series A preferred shares.  Offsetting these benefits were lower net interest income and securities gains, while noninterest expenses increased largely due to costs associated with the expansion of the Company’s business and higher FDIC deposit insurance costs.  Earnings per share in the 2010 period reflected the impact of an increase in the average number of common shares outstanding due to Sterling’s stock offering completed on March 19, 2010.

Net interest income, on a tax-equivalent basis, was $20.4 million for the 2010 first quarter, compared to $21.5 million for the 2009 period.  The benefit of lower cost of funding was offset by lower yields on loans, largely due to the continued planned reduction in the leasing portfolio, as well as lower yields and balances on investment securities.  Net interest margin was 4.37% for the 2010 first quarter, on a tax-equivalent basis, down 13 basis points from the same period of 2009.

Noninterest income excluding security gains increased 24% from the year-ago period.   This primarily reflected higher accounts receivable management, factoring and import trade finance fees, due to Sterling’s expansion of that business through acquisition in April 2009, as well as organic growth.  This was partially offset by lower mortgage banking income.  Noninterest income including security gains rose to $11.1 million for the 2010 first quarter, from $10.8 million a year ago.      

Noninterest expenses were $21.3 million for the 2010 first quarter, compared to $20.1 million a year ago.  The increase was due to the impact of the acquisition in the second quarter of 2009 of the business now known as Sterling Trade Capital, coupled with higher employee benefit, advertising and FDIC deposit insurance costs.  Partially offsetting those increases was a reduction in incentive compensation expense.

The provision for income taxes was $1.1 million for the 2010 first quarter, compared to $2.3 million for the same period of 2009.

Loans and Deposits

Total loans held in portfolio were $1.2 billion at March 31, 2010.  Excluding lease financing receivables, loans held in portfolio increased 11.3% from a year ago.  Sterling extended in excess of $66 million in new credit facilities during the 2010 first quarter.    

The Company believes its strong liquidity provides capacity for further loan growth, as the ratio of portfolio loans to deposits was approximately 74.0% at March 31, 2010.

Mr. Cappelli noted, “Sterling has continued to gain market share in our targeted businesses, in contrast to the financial institutions that curtailed their services due to consolidation, capital constraints or recessionary pressures.  We have continued to serve creditworthy customers during the downturn, and thus expect to be a lender of choice for many borrowers as the cycle turns positive.  The vast majority of the potential credit transactions in our pipeline have come from clients of other financial institutions that have shifted their focus and are no longer adequately serving this market.”

Noninterest bearing demand deposits totaled $509.5 million at March 31, 2010, an 11.4% increase from a year ago, and represented 31.6% of total deposits, one of the highest ratios of demand to total deposits in the industry.  Total deposits were $1.6 billion at March 31, 2010.  

Asset Quality

The provision for loan losses declined to the lowest level of the past five quarters, at $6.0 million for the 2010 first quarter, compared to nearly $8.0 million for the 2009 fourth quarter.  Net charge-offs were $5.9 million for the 2010 first quarter, compared to $7.0 million for the 2009 fourth quarter.  The allowance for loan losses as a percent of nonaccrual loans was 115.8% at March 31, 2010, an improvement in coverage from 110.5% at December 31, 2009.      

Nonaccrual loans have decreased in every quarter since the second quarter of 2009.  The level of nonaccrual loans was $17.2 million at March 31, 2010, compared to $18.0 million at December 31, 2009.  The ratio of nonaccrual loans to total loans was 1.42% at March 31, 2010, versus 1.46% at December 31, 2009.

Capital

Sterling’s capital base, which previously exceeded all regulatory requirements for well-capitalized institutions, was further strengthened by the capital raise completed on March 19, 2010.  The tangible common equity ratio rose to 7.58% at March 31, 2010 from 4.59% at December 31, 2009.  Book value per common share increased to $7.00 at March 31, 2010 from $6.73 at December 31, 2009.    

At March 31, 2010, Sterling’s Tier 1 risk-based capital ratio was 15.73% (compared to a requirement of 6.00%), total risk-based capital was 16.98% (requirement of 10.00%), and the Tier 1 leverage ratio was 11.74% (requirement of 5.00%).  

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on April 27, 2010, at 10:00 a.m. Eastern Daylight Time to discuss the first quarter 2010 financial results.  To access the conference call live, interested parties may dial 800-230-1059 at least 10 minutes prior to the call.

A replay of the conference call will be available beginning at approximately 1:00 p.m. Eastern Daylight Time on April 27, 2010, until 11:59 p.m. Eastern Daylight Time on May 11, 2010.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 154461.

About Sterling Bancorp

Sterling Bancorp (NYSE: STL) is a New York City-based financial corporation with assets exceeding $2 billion. Since 1929, Sterling National Bank, the company’s principal banking subsidiary, has successfully served the needs of businesses, professionals and individuals in the NY metropolitan area and beyond. Sterling is well-known for its high-touch, hands-on approach to customer service and a special focus on serving the business community.

Sterling offers clients a full range of depository and cash management services plus a broad portfolio of financing solutions – including working capital lines, accounts receivable and inventory financing, factoring, international trade financing, payroll funding and processing, equipment leasing and financing, commercial and residential mortgages and trust and custodial account services.

Certain statements in this press release, including but not limited to, statements as to future events, future liquidity, future interest rate risk and operating expenses, statements concerning future results of operations, financial position or dividends, and plans and objectives for future operations, future capital, future liquidity and future growth, statements concerning the economic environment and credit quality, and the Company’s position for future growth and ability to benefit from an economic recovery, and other statements contained herein regarding matters that are not historical facts, are "forward-looking statements" as defined in the Securities Exchange Act of 1934. These statements are not historical facts but instead are subject to numerous assumptions, risks and uncertainties, and represent only the Company’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside its control. Any forward-looking statements the Company may make speak only as of the date on which such statements are made.  The Company’s actual results and financial position may differ materially from the anticipated results and financial condition indicated in or implied by these forward-looking statements, and the Company makes no commitment to update or revise forward-looking statements to reflect new information or subsequent events or changes in expectations. For a discussion of some of the risks and important factors that could affect the Company’s future results and financial condition, see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward-Looking Statements and Factors that Could Affect Future Results” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.