Sterling Bancorp Reports Net Income Of $20.0 Million For 2012, Increasing 14% From The Prior Year

NEW YORK, Jan. 24, 2013 /PRNewswire/ --

Strong Financial Performance

• Net income available to common shareholders was $20.0 million or $0.65 per diluted share for the full year and $5.2 million or $0.17 per diluted share for fourth quarter 2012.
• Pre-tax income rose 31% for the full year and 58% in the fourth quarter of 2012, before the effect of a net tax benefit of approximately $1.9 million in the 2011 periods.
• Gross revenues were $145.7 million for the full year 2012, an increase of $5.1 million over 2011.
• Growth in gross revenues of 4% for 2012 exceeded the noninterest expense increase of 2%.
• Net interest margin increased 16 basis points to 4.17% for full year 2012.
  

Robust Loan and Deposit Growth

• Loans, net of unearned discount, reached an all-time high of $1.8 billion, increasing 17%.
• Total deposits increased 14% to a record $2.3 billion.
• Demand deposits of $924.4 million represented over 40% of total deposits.

Solid Credit Metrics

Comparisons above are at, or for the periods ended, December 31, 2012 vs. December 31, 2011.

• Net charge-offs were 0.47% of loans in portfolio for full year 2012.
• Ratio of nonperforming assets to total assets decreased to 0.27%.
• Allowance for loan losses as a percentage of loans held in portfolio was 1.35%.

Sterling Bancorp (NYSE: STL) today reported strong financial and operating performance for 2012, reflecting a more profitable earning asset mix, ongoing business growth, expense control and continued sound asset quality.

Net income available to common shareholders rose to $20.0 million for the full year 2012, from $15.5 million in 2011. Pre-tax income was $28.6 million in 2012, 31% higher than the amount reported for 2011.  Diluted earnings per common share were $0.65 for 2012, up from $0.51 a year ago. Results for the full year 2011 included $2.1 million of dividends on preferred shares and accretion related to TARP preferred shares and warrants to purchase common shares, which were redeemed in April 2011.

For the 2012 fourth quarter, net income available to common shareholders was $5.2 million, or $0.17 per diluted share.  In the 2011 fourth quarter, Sterling recorded a tax benefit of approximately $1.9 million, or $0.06 per diluted share. Including this tax benefit, net income available to common shareholders for the 2011 fourth quarter was $5.3 million or $0.17 per diluted share.  Pre-tax income for the 2012 fourth quarter, excluding the effect of the year-ago tax benefit, rose 58% to $7.1 million.  

Selected Financial Highlights

2012 Results Reflect Business Growth, Higher Profitability

"Sterling delivered outstanding growth and strong profitability in 2012," said Louis J. Cappelli, Sterling's Chairman and Chief Executive Officer. "Our accomplishments during the year were noteworthy for double-digit increases in loans and deposits, as we continued to capitalize on opportunities to serve the needs of customers in the dynamic New York metropolitan area marketplace and beyond. We delivered higher gross revenues, through an increase in interest income and diverse sources of noninterest income.  In addition, we maintained disciplined management of operating expenses, even as we expanded the business organically and through an accretive acquisition, while our sound asset quality metrics were further strengthened."

"We have consistently pointed to our strategic focus on redeploying assets from lower yielding investments into higher yielding loans, and our results in 2012 benefitted from the successful execution of this strategy. This has led to higher loan balances, a more profitable earning asset mix, and a higher net interest margin, enabling Sterling to counter the margin compression that many other banks have experienced due to prevailing low interest rates.  Our loan portfolio grew by 17% year-over-year and reached an all-time high of $1.8 billion at year end.  Loans represented over 65% of earning assets for 2012 on average, a meaningful increase versus a year ago. Deploying our assets more profitably led to a 16 basis point increase in the net interest margin for the year 2012.  Our model is built upon providing a portfolio of financial solutions for businesses, and the growth in our business activity produced higher noninterest income, as well as higher demand deposit balances."     

"Another highlight of 2012 was our well-timed and successful acquisition of Universal Mortgage, Inc. in the third quarter.  This transaction was planned in advance of the current rebound in the mortgage market and, as expected, has proven to be an excellent source of additional mortgage volume and higher mortgage banking income. Reflecting the positive impact of the Universal acquisition, and the growth in our overall mortgage banking business, we saw a sharp increase in mortgage banking income in the 2012 fourth quarter. We believe there are opportunities to expand upon Universal's well-established presence and relationships in Brooklyn, a market that is experiencing exceptional growth and has a high demand for all of our financial products.  We plan to open a new Brooklyn location in the 2013 first quarter to serve both as a branch and as new and expanded offices for Universal Mortgage." 

"We believe the positive momentum we experienced in 2012 is continuing and that Sterling is well positioned for 2013. Our performance in the year ahead should continue to benefit from the strengths and strategies that drove our solid results last year.  Our team has demonstrated its ability to grow the business.  We believe that our ability to redeploy our assets, while generating revenue from a diverse and balanced range of sources, and serving the needs of customers in a vibrant marketplace with our dedicated team of talented professionals will continue to contribute to enhanced shareholder value going forward," Mr. Cappelli stated.

Net Interest Income

Net interest income was $93.9 million for the full year 2012, up 8% from 2011.  This primarily reflected a higher yield on earning assets due to the Company's previously noted strategy of shifting its asset mix toward loans from investment securities, as well as a lower cost of funds largely due to disciplined deposit pricing.   For the fourth quarter of 2012, net interest income increased nearly 9% from the 2011 period, to $24.8 million.

Noninterest Income

Total noninterest income for full year 2012 was $40.8 million, relatively unchanged from a year ago. For the 2012 fourth quarter, total noninterest income was $9.6 million, up from $9.2 million in the 2011 period.  The increase in the 2012 fourth quarter primarily reflected a sharp rise in mortgage banking income, which was partially offset by lower accounts receivable management and other related fees.  Noninterest income was a significant contributor to Sterling's financial performance, representing 28% of total revenue for the full year 2012.

Noninterest Expenses         

Sterling strengthened its operating leverage during 2012, as the rate of growth in noninterest expenses was exceeded by the increase in gross revenues.  Personnel and occupancy expenses rose modestly due to investments to support new business development and the addition of Universal Mortgage, while this increase was largely offset by declines in other key expense categories.  As a result, total noninterest expenses increased by approximately 2% for full year 2012 to $95.9 million.  For the 2012 fourth quarter, noninterest expenses rose less than 2% from the prior year period, to $24.9 million.

Record Loans and Deposits

Loans, net of unearned discount were a record $1.8 billion as of December 31, 2012, an increase of approximately 17% from a year earlier.  The ratio of loans to deposits was 78% at December 31, 2012.

Total deposits were a record $2.3 billion at December 31, 2012, increasing 14% from a year earlier. Noninterest-bearing demand deposits represented over 40% of total deposits, among the highest ratios of demand to total deposits in the industry.  The growth in demand deposits reflects the Company's emphasis on generating such deposits as part of its customer relationship model.

Total assets increased to $2.7 billion and earning assets were $2.6 billion at December 31, 2012.  The yield on earning assets rose six basis points to 4.64% for the full year 2012, reflecting the Company's strategy of redeploying assets into higher yielding loans from lower yielding investment securities. 

Asset Quality

"Sterling maintained our longstanding underwriting discipline while increasing our lending to creditworthy borrowers, leading to continued strong credit quality metrics during 2012.  It is significant to note that our allowance for loan losses has increased as charge-offs have continued to decline, and that our earnings improvement did not benefit from a reduced allowance for loan losses, as has been the case at some banking institutions," Mr. Cappelli said.

Net charge-offs were $7.7 million for the year 2012, compared to $10.2 million for 2011. The allowance for loan losses as a percentage of nonaccrual loans was 377% at December 31, 2012, versus 315% a year earlier. Nonperforming assets were $7.4 million or 0.27% of total assets at December 31, 2012, compared to $8.3 million or 0.33% a year earlier.  The allowance for loan losses as a percentage of portfolio loans was 1.35% at December 31, 2012, compared to 1.36% a year earlier.  The provision for loan losses was $2.5 million and $10.3 million for the fourth quarter and full year 2012, compared with $3.0 million and $12.0 million for the respective 2011 periods. 

Capital

The Company's capital base has continued to exceed all regulatory requirements for well-capitalized institutions.  At December 31, 2012, Sterling's Tier 1 risk-based capital ratio was 11.49% (compared to a requirement of 6.00%), total risk-based capital was 12.58% (requirement of 10.00%), and the Tier 1 leverage ratio was 9.14% (requirement of 5.00%).  The tangible common equity ratio was 7.50% at December 31, 2012.

Conference Call

Sterling Bancorp will hold a conference call on Thursday, January 24, 2013, at 10:00 a.m. Eastern Time to discuss these financial results.  To access the conference call live, interested parties may dial 800-230-1096 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 24, 2013, until 11:59 p.m. Eastern Time on February 7, 2013.  To access the replay by telephone, interested parties may dial 800-475-6701 and enter the Access Code 279219.

About Sterling Bancorp

Sterling Bancorp (NYSE: STL) is a New York City-based financial corporation with assets of $2.7 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 provides clients with a full range of depository and cash management services and 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 results of operations, liquidity, interest rate risk, operating expenses, financial position, dividends and other events, plans and objectives for future operations, capital, liquidity and growth, statements concerning the economic environment, asset quality and future levels of nonaccrual loans, charge-offs and provisions for loan losses, our ability to continue capitalizing on opportunities to serve the needs of customers in the New York metropolitan market and beyond, as well as the strength of that market, to redeploy assets from lower yielding investments into higher yielding loans, to improve our earning asset mix, net interest margin and demand deposit balances, to counter margin compression, to effectively provide a portfolio of financial solutions for businesses, to continue to achieve additional mortgage volume and higher mortgage banking income from the Universal acquisition or otherwise, and to expand on Universal's well-established presence and relationships in Brooklyn, the extent to which Brooklyn will experience continued growth and high demand for our financial products, our success in opening a Brooklyn location for Universal in the 2013 first quarter, the continuation of positive momentum for our business into 2013, whether our performance in 2013 will continue to benefit from the strengths and strategies that drove our results in 2012, our team's ability to grow the business both organically and through acquisitions, whether acquisitions will be available and permissible and, if so, whether they will be well executed and contribute to growth, whether our strategy will continue to be to redeploy our assets, while generating revenue from a diverse and balanced range of sources, and serving the needs of customers and, if so, whether we can execute that strategy and enhance shareholder value going forward, whether we can continue to shift our asset mix toward loans from investment securities, our ability to maintain underwriting discipline, 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, 2011.

SOURCE Sterling Bancorp