Sterling Bancorp Reports 2011 First Quarter Results

NEW YORK, April 26, 2011 /PRNewswire/ --

Highlights

• Growing profitability – Net income available to common shareholders was $3.3 million for the 2011 first quarter, rising 71% from the same period last year, reflecting the Company's strong loan volume, higher noninterest income due to growth in fee-generating products, and lower credit costs.  

• Higher noninterest income – Noninterest income increased to $11.4 million for the 2011 first quarter from $11.1 million in the year-ago period, primarily due to growth in accounts receivable management, factoring, trade finance and mortgage banking. Reflecting the significance of fee-generating products to the Company's business model, noninterest income was 33.5% of total revenue in the recent quarter.

• Rising loan volume – Total loans in portfolio increased 7.8% from a year ago to $1.3 billion at March 31, 2011.

• Increasing deposits – Total deposits were $1.7 billion at March 31, 2011, rising 7.1% from the prior year. Noninterest-bearing demand deposits were $561.5 million, representing over 32% of total deposits, one of the highest ratios in the banking industry.

• Asset growth – Total assets approached $2.4 billion at March 31, 2011, an increase of 9.0% from a year ago.

• Successful capital raise – Sterling completed a public equity offering on March 9, 2011 of 4.025 million common shares at a price to the public of $9.60 per share, raising gross proceeds of $38.6 million.  The offering further increased the Company's strong capital ratios, resulting in a tangible common equity ratio of 8.30% at March 31, 2011.

• Improved credit quality – The provision for loan losses decreased to $3.0 million for the 2011 first quarter, from $6.0 million a year ago. Nonaccrual loans decreased to $7.0 million at March 31, 2011, from $17.2 million a year ago.  The ratio of nonaccrual loans to total loans improved to 0.53% at March 31, 2011, versus 1.42% a year ago.

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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 $3.3 million for the first quarter ended March 31, 2011, an increase of 71.2% over the $1.9 million reported for the same period in 2010.   Net income available to common shareholders per diluted share rose 20%, to $0.12 for the 2011 first quarter from $0.10 a year earlier, a significant increase, given the more than 42% rise in the average number of shares outstanding over this period due to the Company's March 2010 and March 2011 common share offerings.

Sterling's strong performance in the 2011 first quarter reflected growth in loans, investment securities and deposits; higher noninterest income primarily from accounts receivable management, factoring, trade finance and mortgage banking products; and a lower provision for loan losses resulting from an improvement in credit quality.

Management Perspective

"Sterling's results for the first quarter of 2011 continued the strong performance that we delivered in the 2010 fourth quarter and set the stage for profitable growth this year," stated Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer.  "Our net income rose sharply compared to the year-ago period and we produced solid increases in assets, loans and deposits.  This primarily reflected the demand for Sterling's financial products and services, as well as our efforts to build a balanced and diversified income platform, including a growing contribution from fee-generating products, coupled with further improvement in our asset quality and related credit costs."

"We significantly strengthened Sterling's balance sheet during the 2011 first quarter with a common share offering that raised gross proceeds of $38.6 million.  Our resulting strong capital ratios give us ample 'dry powder' that we can deploy to take advantage of growth opportunities.  We are gratified by the receptivity of investors to our business model and growth strategies, as reflected in the fact that we successfully completed two public equity offerings in the past twelve months."

"Our primary focus on meeting the financial needs of the New York metropolitan area and beyond should continue to drive our performance during this year and in the future.  The diversity and economic resiliency of this market are generating solid demand for our products and services. With Sterling's strong capital foundation, unique business banking franchise, and reputation for exceptional customer service, we see many opportunities to deliver continued profitable growth and to enhance shareholder value," Mr. Cappelli concluded.      

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First Quarter 2011 Financial Results

Net income available to common shareholders for the first quarter of 2011 was $3.3 million, or $0.12 per diluted share, up from $1.9 million, or $0.10 per diluted share, for the first quarter of 2010.  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 2011 first quarter reflected the impact of an additional 8.1 million average common shares outstanding, due to Sterling's March 2010 and March 2011 common share offerings.

Net interest income, on a tax-equivalent basis, was $20.3 million for the 2011 first quarter, compared to $20.4 million for the year-ago period.  This reflected the benefit of higher average loan and investment securities balances and reduced funding costs, offset by the impact of lower yields on loans and securities, and higher interest-bearing deposit balances.  

"The fact that our business model emphasizes products that generate fee income, as well as interest income, has resulted in a broader and more diversified revenue stream.  If the fee income associated with our accounts receivable management, factoring and trade finance products were reflected in the net interest margin, it would add approximately 100 basis points to the margin," Mr. Cappelli noted.  

The net interest margin on the loan portfolio was 4.90% for the 2011 first quarter, compared to 5.03% a year earlier, largely due to the effect on interest income of a change in the loan portfolio mix.  The net interest margin on the investment portfolio decreased to 2.55% for the 2011 first quarter from 3.57% a year earlier.  This primarily reflected the temporary deployment of proceeds from the common share offerings in short-term, lower yielding investment securities, in a strategy intended to enhance future liquidity to fund loan growth and respond to possible changes in interest rates.  Overall, the net interest margin was 3.84% for the 2011 first quarter, on a tax-equivalent basis, compared to 4.37% for the first quarter of 2010.

The provision for loan losses decreased to $3.0 million for the 2011 first quarter, compared to $6.0 million a year earlier.  This reflects an improvement in asset quality, as evidenced by the reduction of nonaccrual loans to $7.0 million at March 31, 2011, from $17.2 million a year earlier.

Noninterest income, excluding securities gains, rose $1.1 million or 11.6% comparing the first quarter of 2011 and 2010, primarily reflecting growth in fees from accounts receivable management, factoring, trade finance and mortgage banking products.  Total noninterest income rose to $11.4 million for the 2011 first quarter from $11.1 million a year earlier, reflecting lower security gains in the 2011 period.        

Noninterest expenses were $22.5 million for the 2011 first quarter, compared to $21.3 million a year ago.  The increase was primarily due to additional compensation expenses related to the expansion of business development activities, and higher occupancy costs.

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Loans and Deposits

Total loans held in portfolio were $1.29 billion at March 31, 2011, rising from $1.20 billion a year earlier.  The Company continues to have a robust loan pipeline and believes its strong liquidity provides capacity for further loan growth.  The ratio of portfolio loans to deposits was approximately 74.6% at March 31, 2011.

Noninterest-bearing demand deposits totaled $561.5 million at March 31, 2011, a 10.2% increase from a year ago, and represented 32.5% of total deposits, one of the highest ratios of demand to total deposits in the industry.  Total deposits were $1.73 billion at March 31, 2011, up from $1.61 billion a year earlier.  

Asset Quality

Sterling continued to experience an improvement in credit quality during the 2011 first quarter.  The provision for loan losses declined to $3.0 million for the 2011 first quarter, compared to $6.0 million a year earlier.  Net charge-offs declined by $2.7 million for the 2011 first quarter, from $5.9 million for the year-ago period.  Nonperforming assets were 0.30% of total assets at March 31, 2011, compared to 0.83% a year ago.  The allowance for loan losses as a percentage of nonaccrual loans was 257.1% at March 31, 2011, compared to 115.8% at March 31, 2010.      

Capital

Sterling's capital base has continued to exceed all regulatory requirements for well-capitalized institutions.  At March 31, 2011, Sterling's Tier 1 risk-based capital ratio was 15.50% (compared to a requirement of 6.00%), total risk-based capital was 16.53% (requirement of 10.00%), and the Tier 1 leverage ratio was 11.90% (requirement of 5.00%).  

The tangible common equity ratio rose to 8.30% at March 31, 2011 from 7.58% a year ago.  Book value per common share increased to $7.10 at March 31, 2011, from $7.00 a year earlier.    

Conference Call

Sterling Bancorp will host a teleconference call for the financial community on April 26, 2011, at 10:00 a.m. Eastern Time to discuss the first quarter 2011 financial results.  To access the conference call live, interested parties may dial 800-288-8968 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 April 26, 2011, until 11:59 p.m. Eastern Time on May 10, 2011.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 201537.

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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 New York 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 the ability to benefit from increased capital that it can deploy to take advantage of growth opportunities, the demand for the Company's products and services, 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, 2010.

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