Sterling Bancorp(US:SBT)2023-11-09 15:26Financial Performance - Net income for the three months ended September 30, 2023, was $0.3 million, down from $1.2 million in the same period in 2022, primarily due to a decline in net interest income and recovery of credit losses [211]. - Net income for the nine months ended September 30, 2023, was $2.4 million, compared to $4.2 million for the same period in 2022 [268]. - Net interest income for Q3 2023 was $16.0 million, a decrease of $3.5 million, or 18%, from $19.5 million in Q3 2022 [275]. - Net interest income for the nine months ended September 30, 2023, was $49.9 million, a decrease of $10.4 million, or 17%, compared to the same period in 2022 [283]. - Non-interest income for the nine months ended September 30, 2023, was $2.6 million, an increase of $1.5 million from the same period in 2022, mainly due to gains on loan sales [294]. Loan and Credit Quality - Credit quality remained strong, although nonperforming loans and delinquent loans increased during the three months ended September 30, 2023 [212]. - Recovery of credit losses decreased to $1.9 million during the three months ended September 30, 2023, reflecting a decline in the loan portfolio [212]. - Nonperforming assets totaled $6.2 million at September 30, 2023, a significant decrease from $38.3 million at December 31, 2022 [228]. - The ratio of total nonaccrual loans to total loans was 0.36% at September 30, 2023, down from 2.03% at December 31, 2022 [228]. - Total loans 90 days or more past due decreased from $33.7 million at December 31, 2022, to $6.2 million at September 30, 2023 [234]. - Total delinquent loans increased by $11.5 million to $28.6 million during the three months ended September 30, 2023 [234]. - Loans classified as Special Mention and Substandard decreased by $29.0 million from $84.8 million at December 31, 2022, to $55.8 million at September 30, 2023 [236]. Capital and Regulatory Compliance - The company’s Tier 1 leverage capital ratios remained above the requirements to be considered "well capitalized" under applicable regulations as of September 30, 2023 [212]. - The company met all regulatory capital requirements as of September 30, 2023, and is considered "well capitalized" under the CBLR framework [323]. - The company is currently restricted from raising capital in private placements under Regulation A and Regulation D due to a guilty plea and criminal conviction, which may last up to five years unless a waiver is granted [324]. Deposits and Funding - Total deposits reached $2.0 billion as of September 30, 2023, an increase of $86.6 million, or 4%, compared to December 31, 2022 [259]. - Core deposits totaled $1.8 billion, representing 88% of total deposits, consistent with the previous year [260]. - Estimated uninsured deposits were $438.8 million, or 21% of total deposits at September 30, 2023 [261]. - Outstanding FHLB borrowings remained at $50.0 million as of September 30, 2023 [263]. - The Company had the ability to borrow an additional $341.6 million from the FHLB, including a line of credit of $20.0 million [265]. Interest Rate and Margin - The company experienced margin compression due to the substantial rise in interest rates, impacting net interest income [211]. - Interest expense on deposits increased significantly, outpacing interest income during the rising rate environment [275]. - The average rate paid on interest-bearing deposits increased by 218 basis points for the nine months ended September 30, 2023, contributing to higher interest expenses [287]. - Net interest margin decreased to 2.62% in Q3 2023, down 57 basis points from 3.19% in Q3 2022 [282]. Strategic Initiatives - The company engaged a consulting firm to develop a comprehensive strategic plan, incorporating new banking products and services following its new status as a covered savings association [208]. - The board of directors is exploring potential strategic alternatives, including a sale of the company or a merger [209]. - The company suspended the origination of residential mortgage loans due to the exit of its third-party vendor responsible for this function [208]. - The company has stopped originating construction loans and is evaluating alternatives for the development of new loan products [223]. Legal and Compliance Matters - The company paid $27.2 million in restitution as part of the Plea Agreement with the DOJ, which is expected to reduce legal costs moving forward [210]. - The company is involved in a legal proceeding against its founder for alleged breaches of fiduciary duties, with the outcome pending [339].