Sterling Bancorp(US:SBT)2023-05-10 18:40Financial Performance - The company reported a net loss of $(0.5) million for Q1 2023, compared to a net income of $5.3 million in Q1 2022, primarily due to a 166 basis point increase in interest expense on average interest-bearing deposits [195]. - Net interest income for the three months ended March 31, 2023, was $17.7 million, a decrease of $3.6 million, or 17%, from $21.3 million for the same period in 2022 [262]. - Total non-interest income decreased to $278,000 for the three months ended March 31, 2023, down $1.1 million, or 80%, from $1.4 million for the same period in 2022 [271]. - Non-interest income for Q1 2023 was $0.3 million, a decrease of $1.1 million or 78% from Q1 2022, primarily due to declines in net servicing income and recoveries of loan valuation losses [272]. - The effective tax rate for Q1 2023 was 9.7%, a decrease from 30.3% in Q1 2022, attributed to lower pretax earnings [275]. Interest Rates and Income - Average interest rate paid increased from 0.00%-0.25% in March 2022 to 4.75%-5.00% by March 31, 2023, while the average yield on interest-earning assets increased by 133 basis points [195]. - Interest income increased to $29.4 million for the three months ended March 31, 2023, up $4.5 million, or 18%, compared to the same period in 2022, primarily due to higher yields on investment securities and other interest-earning assets [263]. - Interest expense rose to $11.7 million for the three months ended March 31, 2023, compared to $3.6 million for the same period in 2022, driven by an increase in rates on interest-bearing deposits [267]. - The average yield on other interest-earning assets was 4.67% for the three months ended March 31, 2023, compared to 0.19% for the same period in 2022, benefiting from rising interest rates [263]. - The average yield on subordinated notes increased to 10.38% for the three months ended March 31, 2023, compared to 5.90% for the same period in 2022 [268]. Loans and Credit Quality - The company has suspended the origination of residential loans and is in the process of finding a new mortgage fulfillment provider [209]. - The allowance for credit losses was $38.6 million as of March 31, 2023, compared to $45.5 million at December 31, 2022 [207]. - The ratio of nonaccrual loans to total gross loans decreased from 2.14% at December 31, 2022, to 1.65% at March 31, 2023, when including nonaccrual loans held for sale [221]. - Total nonperforming assets totaled $26.3 million as of March 31, 2023, a decrease of $12.0 million from $38.3 million at December 31, 2022 [221]. - Net charge-offs for Q1 2023 were $6.4 million, compared to net recoveries of $(0.2) million in Q1 2022 [232]. Deposits and Funding - Total deposits remained stable at $1.9 billion as of March 31, 2023, with a decrease of $32.2 million, or 2%, from December 31, 2022 [197]. - The company had estimated $389.1 million in uninsured deposits, representing approximately 20% of total deposits at March 31, 2023 [249]. - Time deposits due within one year increased to $604.4 million, representing 31% of total deposits as of March 31, 2023, compared to 23% as of December 31, 2022 [282]. - The company had outstanding FHLB borrowings of $50.0 million as of March 31, 2023 [251]. - Core deposits totaled $1.7 billion, or 86% of total deposits, at March 31, 2023, compared to 88% at December 31, 2022 [247]. Regulatory and Compliance - The company entered into a Plea Agreement with the DOJ, agreeing to pay $27.2 million in restitution and enhance compliance programs [191]. - Regulatory capital ratios remained well above the levels required to be considered well capitalized for regulatory purposes [198]. - Non-interest expenses remained high due to ongoing professional fees related to the DOJ investigation [195]. - The company established a liability for unfunded commitments of $0.6 million following the adoption of ASU 2016-13 [227]. - The company is required to make a restitution payment of $27.2 million for the benefit of non-insider victim shareholders, to be funded primarily from a cash dividend from the Bank [288].