Sterling Bancorp(US:SBT)2021-05-14 16:39PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited consolidated financial statements and notes detail financial position, performance, cash flows, and key accounting policies Condensed Consolidated Balance Sheets Total assets, cash, investment securities, and loans decreased; liabilities fell due to reduced deposits; equity slightly increased Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | Change (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total Assets | $3,694,027 | $3,914,045 | $(220,018) | | Cash and due from banks | $873,223 | $998,497 | $(125,274) | | Investment securities | $259,686 | $304,958 | $(45,272) | | Loans, net | $2,389,599 | $2,434,356 | $(44,757) | | Total Liabilities | $3,372,111 | $3,594,454 | $(222,343) | | Interest-bearing deposits | $2,749,868 | $3,040,508 | $(290,640) | | Total Shareholders' Equity | $321,916 | $319,591 | $2,325 | Condensed Consolidated Statements of Income Q1 2021 net income of $2.3 million improved from a $4.0 million net loss in Q1 2020, driven by loan loss recovery Condensed Consolidated Income Statement Highlights | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Total interest income | $31,947 | $40,993 | $(9,046) | | Total interest expense | $8,720 | $12,351 | $(3,631) | | Net interest income | $23,227 | $28,642 | $(5,415) | | Provision (recovery) for loan losses | $(737) | $20,853 | $(21,590) | | Total non-interest income | $453 | $529 | $(76) | | Total non-interest expense | $21,334 | $14,235 | $7,099 | | Income (loss) before income taxes | $3,083 | $(5,917) | $9,000 | | Net income (loss) | $2,325 | $(4,030) | $6,355 | | Income (loss) per share, basic and diluted | $0.05 | $(0.08) | $0.13 | Condensed Consolidated Statements of Comprehensive Income (Loss) Q1 2021 comprehensive income of $2.3 million improved from a $3.5 million loss in Q1 2020, driven by net income Condensed Consolidated Comprehensive Income Highlights | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Change (in thousands) | | :--------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net income (loss) | $2,325 | $(4,030) | $6,355 | | Total other comprehensive income (loss) | $(59) | $563 | $(622) | | Comprehensive income (loss) | $2,266 | $(3,467) | $5,733 | Condensed Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity increased slightly to $321.9 million at March 31, 2021, primarily due to net income Shareholders' Equity Highlights | Metric | March 31, 2021 (in thousands) | March 31, 2020 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Balance at January 1 | $319,591 | $332,614 | | Net income (loss) | $2,325 | $(4,030) | | Stock-based compensation | $105 | $109 | | Other comprehensive income (loss) | $(59) | $563 | | Balance at March 31 | $321,916 | $328,675 | Condensed Consolidated Statements of Cash Flows Operating cash flows remained negative; investing activities provided cash; financing used cash due to deposit reduction Condensed Consolidated Cash Flow Highlights | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(3,106) | $(2,457) | | Net cash provided by investing activities | $87,612 | $65,350 | | Net cash provided by (used in) financing activities | $(209,780) | $249,272 | | Net change in cash and due from banks | $(125,274) | $312,165 | | Cash and due from banks at end of period | $873,223 | $389,984 | Notes to Condensed Consolidated Financial Statements (Unaudited) Notes detail operations, accounting policies, financial instruments, loan portfolio, regulatory capital, and legal matters Note 1—Nature of Operations and Basis of Presentation Sterling Bancorp operates Sterling Bank, offering diverse loans and deposits in California; selling Bellevue branch with $78.0 million in deposits - The Company's primary business is conducted through Sterling Bank, which originates residential and commercial real estate loans, construction loans, commercial lines of credit, other consumer loans, and provides deposit products. Operations are concentrated in California, with 26 of 30 branches in San Francisco and Los Angeles21 - The Bank entered an agreement to sell its Bellevue, Washington branch office, including $78.0 million in deposits, with a 2.1% premium on deposits, expected to close in Q2 202123 Note 2—New Accounting Standards Company prepares for CECL adoption by 2023 and evaluates LIBOR transition impact, not using derivatives - The Company, as a smaller reporting company, has deferred the effective date of ASU No. 2016-13 (CECL) to January 1, 2023, and is actively developing and testing credit loss estimation models2728 - The Company may take advantage of LIBOR transition relief allowed under ASU No. 2020-04 for contract modifications between March 12, 2020, and December 31, 2022, for contracts referencing LIBOR, but does not anticipate using derivative instruments for this purpose2930 Note 3—Summary of Significant Accounting Policies Financial statements conform to GAAP; loan portfolio concentrated in residential real estate and California; Advantage Loan Program discontinued; COVID-19 impacts delinquencies - Residential real estate loans constituted 82% of the loan portfolio at March 31, 2021, with approximately 86% originated to California