Sterling Bancorp Reports 2010 Second Quarter Results

NEW YORK, July 26 /PRNewswire-FirstCall/ -- 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 $2.3 million, or $0.09 per diluted share, for the second quarter ended June 30, 2010.  The Company attributed its increasing profitability to a series of recent initiatives, including the acquisition and launch of complementary products, a capital raise in March 2010 that provided additional resources for growth, a continued sharp focus on meeting the needs of customers in its marketplace, and a disciplined approach to expense control.  

Financial Highlights

• Rising profitability – For the 2010 second quarter, Sterling's net income available to common shareholders reached its highest level since the first quarter of 2009.
• Strong capital – The tangible common equity ratio rose to 7.33% from 4.47% a year earlier, and all capital ratios exceeded the regulatory "well-capitalized" requirements.
• Loans – Responding to opportunities in its marketplace, Sterling approved significant new credit facilities during the first half of this year.  Total loans in portfolio rose 14.9% from a year ago, excluding lease financing receivables, which experienced a planned reduction in volume.  The portfolio exceeded $1.2 billion at June 30, 2010.  
• Demand deposits increase – Demand deposits rose to $525.2 million at June 30, 2010, up 19.2% from a year ago.  The ratio of demand deposits to total deposits remains one of the highest in the industry, at 32.0%, and represents a stable source of low-cost funds.  

• Noninterest income growth – Noninterest income rose 5.2% to $11.4 million, primarily driven by growth in Sterling's accounts receivable management, factoring and import trade finance fees.
• Improving credit quality – The level of nonaccrual loans decreased by $1.9 million compared with the second quarter of 2009.

Management Comments

"Our ongoing efforts to use our increased capital resources to support profitable growth resulted in higher earnings for the second quarter of 2010," said Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer.  "Net income rose to the highest level of the past four quarters.  Total assets reached a record $2.28 billion and deposits also have increased substantially.  We have continued to grow our lending activities in a prudent and disciplined manner, in accordance with our traditional credit standards."  

"Sterling is working diligently to build upon this solid performance, while continuing to meet the needs of our customers and prospects.  Our already strong capital base has been further enhanced by our stock offering in the first quarter of this year.  We have continued to expand our range of products – and our potential to create shareholder value – both through acquisitions and organic growth.  Strategic initiatives have enabled us to extend our reach to new customers and markets, while adding to our revenue and earnings-generating capacity.  One such recent initiative was our launch of a mortgage warehouse lending program in April 2010, which is a natural extension of our expertise in asset-based lending and mortgage finance."  

"Looking ahead, we have abundant capital and liquidity to respond to the vast opportunities we see in our marketplace, but are still in the early stages of prudently deploying that capital.  As a result, our current asset mix reflects a relatively high level of short-term, lower-yielding investment securities.  As we continue to respond to the needs of quality borrowers, we would expect to shift that asset mix to loans, thus achieving higher yields.  The results of this and other efforts to grow our business should be reflected in Sterling's future performance," Mr. Cappelli noted.    

Second Quarter 2010 Financial Results

Net income available to common shareholders for the second quarter of 2010 was $2.3 million, or $0.09 per diluted share, versus $0.1 million, or $0.01 per diluted share, for the same period of 2009.  The significant increase in profitability reflected the Company's recent growth initiatives, while the year-ago results included an industry-wide FDIC special assessment and other factors related to the economic downturn.  Sterling's performance in the 2010 second quarter benefitted from higher noninterest income, a lower provision for loan losses, and reduced noninterest expenses.  This more than offset lower net interest income due to asset mix and prevailing interest rates.  Earnings per share in the 2010 period reflected the impact of a significant 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 $21.1 million for the 2010 second quarter, compared to $21.5 million for the 2009 period.  This change primarily reflected higher average loan and investment securities balances, reduced borrowings and lower funding costs, offset by the impact of lower yields on loans and securities, and higher interest-bearing deposit balances.  Net interest margin was 4.12% for the 2010 second quarter, on a tax-equivalent basis, compared to 4.37% for the 2010 first quarter and 4.53% for the second quarter of 2009, primarily due to Sterling's deployment of the proceeds of its March 2010 stock offering in short-term, lower yielding investment securities.  

Noninterest income rose 5.2% to $11.4 million for the 2010 second quarter from $10.8 million a year earlier.  This increase primarily reflected higher accounts receivable management, factoring and import trade finance fees, due to Sterling's expansion of that business through an acquisition as well as organic growth.  Service charges on deposit accounts also contributed to the rise in noninterest income.  These factors were partially offset by lower mortgage banking income.        

Noninterest expenses fell 8.3% to $22.1 million for the 2010 second quarter, from $24.1 million a year ago, primarily as the result of lower advertising, professional fee and deposit insurance expenses.  Included in the results for the year-ago period was the impact of the industry-wide FDIC special assessment.

First Half 2010 Financial Results

Net income available to common shareholders for the first half of 2010 was $4.3 million, or $0.19 per diluted share, up from $2.9 million, or $0.16 per diluted share, for the same period of 2009.  Earnings per share in the 2010 period reflected the impact of a significant 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 $41.5 million for the first half of 2010, compared to $43.0 million for the same 2009 period.  The decrease primarily reflected higher average loan and investment securities balances, reduced borrowings and lower funding costs, offset by the impact of lower yields on loans and securities, and higher interest-bearing deposit balances.  Net interest margin was 4.27% for the first six months of 2010, on a tax-equivalent basis, compared to 4.55% for the same period of 2009, primarily due to Sterling's deployment of the proceeds of its March 2010 stock offering in short-term, lower yielding investment securities.

Noninterest income rose to $22.5 million for the first half of 2010, compared to $21.6 million a year ago.  This increase primarily reflected Sterling's expansion of its accounts receivable management, factoring and import trade finance business through acquisition and organic growth.  This was partially offset by lower mortgage banking income and securities gains.

Noninterest expenses were $43.5 million for the first half of 2010, down from $44.2 million in 2009, primarily as a result of lower professional fee and deposit insurance expenses. Included in the results for the year-ago period was the impact of the industry-wide FDIC special assessment.

Loans and Deposits

Total loans held in portfolio were $1.24 billion at June 30, 2010, rising from $1.16 billion a year earlier.  Excluding lease financing receivables, which had a planned reduction in volume, loans held in portfolio increased 14.9% from a year ago.  Sterling extended a significant level of new credit facilities during the first six months of 2010, while maintaining its traditional disciplined credit standards.    

Noninterest-bearing demand deposits totaled $525.2 million at June 30, 2010, a 19.2% increase from a year ago, and represented 32.0% of total deposits, one of the highest ratios of demand to total deposits in the industry.  Total deposits were $1.64 billion at June 30, 2010, up from $1.30 billion a year earlier.  

Asset Quality

The Company has continued to experience an improvement in credit quality.  The provision for loan losses declined to the lowest level of the past six quarters, at $5.5 million for the 2010 second quarter.  Net charge-offs were $5.0 million for the 2010 second quarter, compared to $5.6 million a year ago.  The allowance for loan losses as a percent of nonaccrual loans was 109.8% at June 30, 2010, an improvement in coverage from 88.0% at June 30, 2009.      

The level of nonaccrual loans was $18.7 million at June 30, 2010, compared to $20.6 million a year earlier.  The ratio of nonaccrual loans to total loans was 1.46% at June 30, 2010, versus 1.69% at June 30, 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 7.33% at June 30, 2010 from 4.54% at December 31, 2009 and 4.47% at June 30, 2009.  Book value per common share increased to $7.04 at June 30, 2010 from $6.73 at December 31, 2009 and $6.51 at June 30, 2009.    

At June 30, 2010, Sterling's Tier 1 risk-based capital ratio was 14.32% (compared to a requirement of 6.00%), total risk-based capital was 15.55% (requirement of 10.00%), and the Tier 1 leverage ratio was 10.76% (requirement of 5.00%).  

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on July 26, 2010, at 10:00 a.m. Eastern Daylight Time to discuss the second quarter 2010 financial results.  To access the conference call live, interested parties may dial 800-230-1093 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 July 26, 2010, until 11:59 p.m. Eastern Daylight Time on August 9, 2010.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 164601.

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.