Sterling Bancorp (STL) Tops Q4 EPS by 1c

Sterling Bancorp (NYSE: STL) reported Q4 EPS of $0.54, $0.01 better than the analyst estimate of $0.53. Revenue for the quarter came in at $264.46 million versus the consensus estimate of $228.44 million.

President’s Comments

Jack Kopnisky, President and Chief Executive Officer, commented: “We delivered strong operating performance in 2019, continuing to grow our commercial businesses, transitioning our balance sheet, managing our funding costs and driving operational efficiency. In the fourth quarter of 2019, our adjusted net income available to common stockholders was $108.9 million and our adjusted diluted earnings per share available to common stockholders (“adjusted EPS”) was $0.54. Our profitability metrics remained strong, including adjusted return on average tangible assets of 1.51% and adjusted return on average tangible common equity of 16.6%. We continue to deliver on our track record of growth and profitability. Over the past five years, our adjusted EPS has grown at a compound annual growth rate (“CAGR”) of 21.3%, and our tangible book value per common share has grown at a CAGR of 15.1%.

“Our commercial businesses have strong momentum. We grew spot commercial loan balances by $791.3 million in the fourth quarter of 2019 and $2.8 billion since December 31, 2018. In the same periods, run-off of residential mortgage loans was $160.1 million and $623.9 million, respectively. At December 31, 2019, our loan portfolio consisted of 88.6% in total commercial loans, in-line with our target of commercial loans representing at least 85.0% of our total loan portfolio. We continue to exercise discipline on new loan originations and have augmented our growth through opportunistic portfolio acquisitions, focusing on diversified commercial asset classes where we can achieve our target risk-adjusted returns.

“We continue to focus on generating deposit growth through full client relationships. Total deposits were $22.4 billion and the cost of total deposits was 0.89% in the fourth quarter of 2019, which represented a three basis points decline in cost compared to the third quarter of 2019. The improving market conditions and competitive dynamics in our deposit markets is evident in our ability to reduce the cost of interest bearing deposits by twelve basis points in the fourth quarter of 2019 relative to the linked quarter. We have also created a more optimal overall funding mix, reducing our total interest expense by $4.7 million relative to the linked quarter. We anticipate the current interest rate environment and pricing strategies we have implemented will allow us to further reduce our cost of total funding liabilities. In the fourth quarter of 2019, our cost of total funding liabilities was 1.06%, a decrease of 10 basis points relative to the linked quarter.

“The low interest rate environment and flat yield curve continued to pressure our interest earning asset and loan origination yields, as our tax equivalent yield excluding accretion income on acquired loans was 3.13% in the fourth quarter of 2019 compared to 3.15% for the linked quarter. Our net interest margin was impacted by higher average cash balances in the fourth quarter, which increased by $269.0 million relative to the linked quarter and were a result of funding needs for the acquisition of the equipment finance loan and lease portfolio. We estimate the higher cash balances negatively impacted our net interest margin by approximately four basis points. Although net interest margin decreased, our growth, asset mix and funding composition allowed us to grow net interest income by $4.9 million in the fourth quarter of 2019 relative to the linked quarter.

“We continue to maintain strong controls over operating expenses. During the fourth quarter of 2019, we consolidated five financial centers, bringing our total to 24 financial centers consolidated in 2019. Our financial center count was 82 at December 31, 2019, and we anticipate our total financial centers will decrease below 80 in 2020. In the fourth quarter of 2019, our annualized adjusted operating expenses were $418.7 million and our adjusted operating efficiency ratio was 39.9%.

“We constantly evaluate alternatives to increase our operational efficiency and effectiveness. To that end, we executed several corporate actions during the quarter. First, we completed the issuance of $275.0 million of subordinated notes that will be used in part to redeem the senior notes maturing in June 2020 that we assumed in the merger with Astoria Financial Corp. (the “Astoria Merger”). Second, we completed our previously announced equipment finance portfolio acquisition with total balances at acquisition of $838.9 million in November 2019. This portfolio was integrated into our equipment finance portfolio.

“Our tangible common equity ratio was 9.03% and our estimated Tier 1 Leverage ratio was 9.55% at December 31, 2019. Our tangible book value per common share was $13.09, which represented an increase of 11.1% from a year ago. Our ample capital position and strong internal capital generation will support our growth strategy and allow us to return capital to stockholders. In the fourth quarter of 2019, we repurchased 4,000,000 common shares.

“We have created a Company with significant operating flexibility and are confident that our business mix, growth strategy and strong capital position will allow us to continue generating superior returns and earnings per share growth. We would like to thank our clients, colleagues and shareholders for your support and look forward to working with all of our partners as we continue to build a great company.

“Lastly, we have declared a dividend on our common stock of $0.07 per share payable on February 18, 2020 to holders of record as of February 3, 2020.”

For earnings history and earnings-related data on Sterling Bancorp (STL) click here.

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