Sterling Bancorp Reports 2010 Fourth Quarter and Full Year Results

NEW YORK, Jan. 27, 2011 /PRNewswire/ --  

Highlights

• Growing profitability – Net income available to common shareholders was $3.5 million for the 2010 fourth quarter, representing Sterling’s highest quarterly profit in the past two years.  Key contributors to the rise in profitability were increased loan volume, higher noninterest income due to growth in fee-generating products, and lower credit costs.  

• Improved credit quality – Nonaccrual loans were $6.6 million at December 31, 2010, down from $18.0 million a year earlier, nearly returning to pre-recession levels.  The allowance for loan losses as a percent of nonaccrual loans rose to 274.5% at December 31, 2010, from 110.5% a year earlier.

• Higher noninterest income – Noninterest income rose 12.0% to $12.1 million for the 2010 fourth quarter, primarily driven by growth in accounts receivable management, factoring and trade finance fees.

• Solid loan volume – Total loans in portfolio were up 9.9% from a year ago.  The loan portfolio exceeded $1.3 billion at December 31, 2010.  Total assets at the end of 2010 were a record $2.4 billion.

• Increasing deposits – Total deposits were $1.7 billion at December 31, 2010, rising 10.6% from the prior year. Noninterest-bearing demand deposits were $570.3 million, representing nearly 33% of total deposits, one of the highest ratios in the banking industry.

• Strong capital – The tangible common equity ratio rose to 6.81% from 4.59% a year earlier, and all capital ratios continued to exceed the regulatory “well-capitalized” requirements. Shareholders’ equity reached $222.7 million at December 31, 2010.  

Sterling Bancorp (NYSE: STL), a financial holding company headquartered in New York City and the parent company of Sterling National Bank, today reported net income available to common shareholders of $3.5 million for the fourth quarter ended December 31, 2010, an increase of 76.0% over the $2.0 million reported for the same period of 2009.  Net income available to common shareholders rose to $0.13 per diluted share for the 2010 fourth quarter, from $0.11 per diluted share a year earlier, as the average number of shares outstanding in the 2010 fourth quarter increased 48% from the prior year due to the Company's March 2010 stock offering.

Sterling's strong performance in the 2010 fourth quarter reflected growth in loans and deposits; higher noninterest income primarily from its growing accounts receivable management, factoring and trade finance products; and a lower provision for loan losses resulting from an improvement in credit quality.

Management Perspective

"The fourth quarter of 2010 represented Sterling's most profitable period in the past eight quarters.  Our solid performance, coming on the heels of one of the worst economic cycles in recent history, reflects the fundamental strength of our business model, our focus on pursuing growth opportunities, and our commitment to superior customer service," stated Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer.

"During the past two years, we charted a course to navigate an uncertain economy and to position Sterling for strong performance as conditions improved.  We focused on expanding our market share by offering 'high touch' service and providing credit to quality borrowers when many competing institutions were constrained from serving the marketplace.  We took action to reinforce our asset quality through a planned reduction of our lease financing portfolio.  We strengthened our balance sheet, highlighted by an over-subscribed public stock offering in March 2010 that raised gross proceeds of $69 million, providing the capital to support growth.  And, we pursued growth opportunities, both in existing products and newer areas such as mortgage warehouse lending, that have diversified our sources of profitability, particularly noninterest income."  

"As a result of our actions during a challenging period, Sterling has emerged stronger and better positioned to expand our franchise and continue to take market share.  This is evident in our 2010 fourth quarter performance and should be reflected in our future growth and profitability."    

Fourth Quarter 2010 Financial Results

Net income available to common shareholders for the fourth quarter of 2010 was $3.5 million, or $0.13 per diluted share, up from $2.0 million, or $0.11 per diluted share, for the fourth quarter of 2009.  This increase reflected higher noninterest income, lower interest expenses and a significantly lower provision for loan losses, partly offset by lower interest income and higher noninterest expenses.  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 March 2010 stock offering.

Net interest income, on a tax-equivalent basis, was $21.1 million for the 2010 fourth quarter, compared to $22.4 million for the 2009 period.  This reflected the impact of lower yields on loans and securities, and higher interest-bearing deposit balances, partially offset by higher average loan and investment securities balances and reduced funding costs.  Net interest margin was 3.98% for the 2010 fourth quarter, on a tax-equivalent basis, compared to 4.49% for the fourth quarter of 2009. The margin trend reflects a shift in the loan portfolio mix, as the planned reduction in lease financing receivables was offset by growth in loan categories with lower yields, which the Company calculates led to a reduction of 20 basis points in net interest margin.  In addition, as part of its asset-liability management strategy, the Company has deployed excess funds in short-term, lower yielding assets.  While this strategy is accretive to earnings, the gross yield unfavorably impacts the margin.    

The provision for loan losses decreased to $3.0 million for the 2010 fourth quarter, compared to $8.0 million a year earlier.  This reflects an improvement in asset quality, as evidenced by the reduction of nonaccrual loans to $6.6 million at December 31, 2010, from $18.0 million a year earlier.

Noninterest income rose 12.0% to $12.1 million for the 2010 fourth quarter from $10.8 million a year earlier.  This increase primarily reflected higher accounts receivable management, factoring and trade finance fees.

"We have continued to refine our business model to increase the focus on Sterling's core strengths in commercial lending products.  These products have traditionally performed well for us in terms of asset quality and are also sources of noninterest income.  By continuing to build these products, we believe we are adding quality earning assets to the portfolio, protecting our future profitability by focusing on classes with proven credit quality, and diversifying our revenue stream through fee-generating activities that supplement net interest income," Mr. Cappelli noted.  

Noninterest expenses were $24.3 million for the 2010 fourth quarter, compared to $21.2 million a year ago, primarily reflecting higher compensation, occupancy and marketing expenses related to the growth of the business and increased business development activities, as well as higher professional fees and deposit insurance premiums.  As a result of a settlement of litigation, professional fees in the 2009 fourth quarter reflected a recovery of legal costs.  The increase in deposit insurance premiums was caused primarily by the growth of insured deposits in 2010.

Full-Year 2010 Financial Results

Net income available to common shareholders for 2010 was $4.4 million, or $0.18 per diluted share.  This compared to $6.6 million, or $0.37 per diluted share, for 2009.  Earnings per share in the 2010 period reflected the impact of the 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 $84.2 million for 2010, compared to $87.6 million for 2009.  This decrease primarily reflected the impact of lower interest rates on the yield on earning assets, partially offset by the effect of changes in average balances.  Net interest margin was 4.25% for 2010, on a tax-equivalent basis, compared to 4.63% for 2009, reflecting the previously noted planned shift in the loan portfolio from lease financing receivables to lower yielding loan categories, and the deployment of excess funds in short-term, lower yielding investment securities.

The provision for loan losses was $28.5 million for 2010, compared to $27.9 million a year earlier based on management's evaluation of the loan portfolio.  In light of economic conditions, during the 2010 third quarter the Company decided to implement an accelerated resolution of certain categories of nonaccrual loans, primarily in the lease financing portfolio, which was reflected in the loan loss provision and net charge-offs during 2010.  

Noninterest income rose to $47.6 million for 2010, compared to $44.2 million a year ago.  This increase was primarily due to Sterling's expansion of its accounts receivable management, factoring and trade finance products.  This was partially offset by lower mortgage banking income and lower securities gains.

Noninterest expenses were $91.6 million for 2010, compared to $88.5 million in 2009, primarily reflecting higher compensation and occupancy expenses related to the growth of the business and increased business development activities.  

Loans and Deposits

Total loans held in portfolio were $1.31 billion at December 31, 2010, rising from $1.20 billion a year earlier. Sterling extended a significant volume of new credit facilities during 2010, while maintaining its traditional disciplined credit standards.    

Noninterest-bearing demand deposits totaled $570.3 million at December 31, 2010, a 4.4% increase from a year ago, and represented 32.6% of total deposits, one of the highest ratios of demand to total deposits in the industry.  Total deposits were $1.75 billion at December 31, 2010, up from $1.58 billion a year earlier.  

Asset Quality

Sterling experienced an overall improvement in credit quality during 2010.  Net charge-offs declined to $2.9 million for the 2010 fourth quarter, compared to $7.0 million for the 2009 fourth quarter.  The ratio of nonaccrual loans to total loans was 0.49% at December 31, 2010, compared to 1.46% a year earlier.  Non-performing assets fell to 0.29% of total assets at December 31, 2010, from 0.89% a year ago.  The allowance for loan losses as a percentage of nonaccrual loans was 274.5% at December 31, 2010, compared to 110.5% at December 31, 2009.      

Capital

Sterling's capital base has consistently exceeded all regulatory requirements for well-capitalized institutions.  At December 31, 2010, Sterling's Tier 1 risk-based capital ratio was 13.61% (compared to a requirement of 6.00%), total risk-based capital was 14.68% (requirement of 10.00%), and the Tier 1 leverage ratio was 10.15% (requirement of 5.00%).  

The tangible common equity ratio rose to 6.81% at December 31, 2010 from 4.59% at December 31, 2009.  Book value per common share increased to $6.79 at December 31, 2010 from $6.73 at December 31, 2009.    

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on January 27, 2011, at 10:00 a.m. Eastern Time to discuss the fourth quarter and full year 2010 financial results.  To access the conference call live, interested parties may dial 800-288-8975 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 Time on January 27, 2011, until 11:59 p.m. Eastern Time on February 10, 2011.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 189902.

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, trade financing, payroll funding and processing, equipment financing, commercial and residential mortgages and mortgage warehouse lines of credit.

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, asset quality and future levels of nonaccrual loans, charge-offs and provisions for loan losses, 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.