Company Quick10K Filing
Quick10K
Sterling Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$10.04 52 $521
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
8-K 2019-05-23 Shareholder Vote
8-K 2019-05-21 Regulation FD, Exhibits
8-K 2019-05-13 Regulation FD, Exhibits
8-K 2019-04-29 Earnings, Exhibits
8-K 2019-02-11 Regulation FD, Exhibits
8-K 2019-01-28 Earnings, Exhibits
8-K 2019-01-28 Earnings, Exhibits
8-K 2018-11-07 Regulation FD, Exhibits
8-K 2018-10-29 Earnings, Exhibits
8-K 2018-10-17 Regulation FD, Exhibits
8-K 2018-08-27 Regulation FD, Exhibits
8-K 2018-08-13 Regulation FD, Exhibits
8-K 2018-07-30 Earnings, Exhibits
8-K 2018-05-15 Shareholder Vote
8-K 2018-04-30 Earnings, Exhibits
8-K 2018-03-21 Officers, Exhibits
8-K 2018-03-06 Regulation FD, Exhibits
8-K 2018-02-20 Officers, Exhibits
8-K 2018-02-15 Other Events, Exhibits
8-K 2018-01-31 Regulation FD, Exhibits
8-K 2018-01-30 Earnings, Exhibits
WPX WPX Energy 5,260
AVX AVX 2,680
UMH UMH Properties 525
BYSI Beyondspring 341
GLAC Greenland Acquisition 59
CTEK CynergisTek 43
TCCO Technical Communications 8
ENTB Entest Group 0
SPL Sabine Pass Liquefaction 0
LFIN Longfin 0
SBT 2019-03-31
Part 1. Financial Information
Item 1. Financial Statements
Note 1-Nature of Operations and Basis of Presentation
Note 2-New Accounting Standards
Note 3-Summary of Significant Accounting Policies
Note 4-Investment Securities
Note 5-Loans
Note 6-Mortgage Servicing Rights, Net
Note 7-Deposits
Note 8-Federal Home Loan Bank Borrowings
Note 9-Subordinated Notes, Net
Note 10-Stock Repurchase Program
Note 11-Stock-Based Compensation
Note 12-Income per Share
Note 13-Fair Values of Financial Instruments
Note 14-Regulatory Capital Requirements
Note 15-Related Party Transactions
Note 16-Operating Leases
Note 17-Commitments and Contingencies
Note 18-Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 a19-7757_1ex31d1.htm
EX-31.2 a19-7757_1ex31d2.htm
EX-32.1 a19-7757_1ex32d1.htm
EX-32.2 a19-7757_1ex32d2.htm

Sterling Bancorp Earnings 2019-03-31

SBT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 a19-7757_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 


 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2019

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from          to           

 

Commission File Number 001-38290

 

Sterling Bancorp, Inc.

 

(Exact name of registrant as specified in its charter)

 

Michigan

 

38-3163775

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

One Towne Square, Suite 1900

 

Southfield, Michigan 48076

 

(248) 355-2400

 

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Not Applicable

 

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer x

 

Non-accelerated filer o

 

Smaller reporting company x

 

 

 

 

 

 

Emerging growth company x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, no par

 

SBT

 

The NASDAQ Stock Market LLC

value per share

 

 

 

(NASDAQ Capital Market)

 

As of May 9, 2019, there were 51,834,010 shares of the Registrant’s Common Stock outstanding.

 

 

 


Table of Contents

 

STERLING BANCORP, INC.

FORM 10-Q

INDEX

 

PART I — FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

2

 

Condensed Consolidated Statements of Income for the three months ended March 31, 2019 and 2018

3

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018

4

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2019 and 2018

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018

6

 

Notes to the Condensed Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

44

Item 4.

Controls and Procedures

45

 

 

 

PART II — OTHER INFORMATION

 

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 6.

Exhibits

47

Exhibit Index

47

SIGNATURES

48

 

1


Table of Contents

 

Sterling Bancorp, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(dollars in thousands)

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

 

 

March 31,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Cash and due from banks

 

  $

58,030

 

  $

52,526

Interest-bearing time deposits with other banks

 

1,100

 

1,100

Investment securities

 

151,049

 

148,896

Mortgage loans held for sale

 

165

 

1,248

Loans, net of allowance for loan losses of $20,698 and $21,850

 

2,923,576

 

2,895,953

Accrued interest receivable

 

13,746

 

13,529

Mortgage servicing rights, net

 

10,755

 

10,633

Leasehold improvements and equipment, net

 

9,680

 

9,489

Operating lease right-of-use assets

 

21,398

 

Federal Home Loan Bank stock, at cost

 

22,950

 

22,950

Cash surrender value of bank-owned life insurance

 

31,454

 

31,302

Deferred tax asset, net

 

5,938

 

6,122

Other assets

 

2,351

 

3,026

Total assets

 

  $

3,252,192

 

  $

3,196,774

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

Liabilities:

 

 

 

 

Noninterest-bearing deposits

 

  $

70,527

 

  $

76,815

Interest-bearing deposits

 

2,366,040

 

2,375,870

Total deposits

 

2,436,567

 

2,452,685

Federal Home Loan Bank borrowings

 

333,051

 

293,000

Subordinated notes, net

 

65,065

 

65,029

Operating lease liabilities

 

22,331

 

Accrued expenses and other liabilities

 

56,276

 

51,003

Total liabilities

 

2,913,290

 

2,861,717

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Preferred stock, authorized 10,000,000 shares; no shares issued and outstanding

 

 

Common stock, no par value, authorized 500,000,000 shares at March 31, 2019 and December 31, 2018; issued and outstanding 51,870,853 and 53,012,283 shares at March 31, 2019 and December 31, 2018, respectively

 

99,694

 

111,238

Additional paid-in capital

 

12,839

 

12,713

Retained earnings

 

226,272

 

211,115

Accumulated other comprehensive income (loss)

 

97

 

(9)

Total shareholders’ equity

 

338,902

 

335,057

Total liabilities and shareholders’ equity

 

  $

3,252,192

 

  $

3,196,774

 

 

See accompanying notes to condensed consolidated financial statements.

 

2


Table of Contents

 

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2019

 

2018

Interest income

 

 

 

 

Interest and fees on loans

 

  $

41,722

 

  $

36,400

Interest and dividends on investment securities and restricted stock

 

1,227

 

819

Other interest

 

236

 

114

Total interest income

 

43,185

 

37,333

 

 

 

 

 

Interest expense

 

 

 

 

Interest on deposits

 

10,656

 

6,589

Interest on Federal Home Loan Bank borrowings

 

1,055

 

833

Interest on subordinated notes

 

1,174

 

1,172

Total interest expense

 

12,885

 

8,594

Net interest income

 

30,300

 

28,739

Provision (recovery) for loan losses

 

(1,014)

 

641

Net interest income after provision (recovery) for loan losses

 

31,314

 

28,098

 

 

 

 

 

Non-interest income

 

 

 

 

Service charges and fees

 

104

 

74

Investment management and advisory fees

 

340

 

623

Gain on sale of mortgage loans held for sale

 

38

 

65

Gain on sale of portfolio loans

 

2,442

 

3,941

Unrealized gains (losses) on equity securities

 

49

 

(64)

Income on cash surrender value of bank-owned life insurance

 

310

 

295

Other

 

545

 

559

Total non-interest income

 

3,828

 

5,493

 

 

 

 

 

Non-interest expense

 

 

 

 

Salaries and employee benefits

 

7,267

 

6,649

Occupancy and equipment

 

2,237

 

1,546

Professional fees

 

962

 

622

Advertising and marketing

 

439

 

349

FDIC assessments

 

255

 

543

Data processing

 

308

 

288

Other

 

1,654

 

1,506

Total non-interest expense

 

13,122

 

11,503

 

 

 

 

 

Income before income taxes

 

22,020

 

22,088

Income tax expense

 

6,337

 

6,339

Net income

 

  $

15,683

 

  $

15,749

 

 

 

 

 

Income per share, basic and diluted

 

  $

0.30

 

  $

0.30

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

Basic

 

52,554,446

 

52,963,308

Diluted

 

52,562,820

 

52,963,308

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


Table of Contents

 

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended 

 

 

 

March 31,

 

 

 

2019

 

2018

 

 

 

 

 

 

 

Net income

 

  $

 15,683

 

  $

 15,749

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Unrealized gains (losses) on investment securities, arising during the period, net of tax effect of $41 and $(3), respectively

 

106

 

(13

)

Reclassification adjustment for (gains) losses included in net income

 

 

 

Total other comprehensive income (loss)

 

106

 

(13

)

Comprehensive income

 

  $

 15,789

 

  $

 15,736

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


Table of Contents

 

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(dollars in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

Shareholders’

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income (Loss)

 

Equity

 

Balance at January 1, 2018

 

52,963,308

 

 $

111,238

 

 $

12,416

 

 $

149,816

 

 $

(172)

 

 $

273,298

 

Cumulative effect adjustment, reclassification of unrealized losses on equity securities

 

 

 

 

(50)

 

50

 

 

Net income

 

 

 

 

15,749

 

 

15,749

 

Stock-based compensation

 

39,655

 

 

9

 

 

 

9

 

Other comprehensive loss

 

 

 

 

 

(13)

 

(13

)

Dividends distributed ($0.01 per share)

 

 

 

 

(531)

 

 

(531

)

Balance at March 31, 2018

 

53,002,963

 

 $

111,238

 

 $

12,425

 

 $

164,984

 

 $

(135)

 

 $

288,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2019

 

53,012,283

 

 $

111,238

 

 $

12,713

 

 $

211,115

 

 $

(9)

 

 $

335,057

 

Net income

 

 

 

 

15,683

 

 

15,683

 

Repurchases of shares of common stock

 

(1,212,574)

 

(11,544)

 

 

 

 

(11,544

)

Stock-based compensation

 

71,144

 

 

126

 

 

 

126

 

Other comprehensive income

 

 

 

 

 

106

 

106

 

Dividends distributed ($0.01 per share)

 

 

 

 

(526)

 

 

(526

)

Balance at March 31, 2019

 

51,870,853

 

 $

99,694

 

 $

12,839

 

 $

226,272

 

 $

97

 

 $

338,902

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


Table of Contents

 

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

Cash Flows From Operating Activities

 

 

 

 

 

Net income

 

  $

15,683

 

  $

15,749

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Provision (recovery) for loan losses

 

(1,014)

 

641

 

Deferred income taxes

 

143

 

(387

)

Unrealized (gains) losses on equity securities

 

(49)

 

64

 

Accretion on investment securities, net

 

(441)

 

(69

)

Depreciation and amortization of leasehold improvements and equipment

 

391

 

318

 

Net change in operating leases

 

63

 

 

Amortization of intangible asset

 

113

 

113

 

Origination, premium paid and purchase of loans, net of principal payments, mortgage loans held for sale

 

(3,166)

 

(7,424

)

Proceeds from sale of mortgage loans held for sale

 

4,152

 

6,165

 

Gain on sale of mortgage loans held for sale

 

(38)

 

(65

)

Gain on sale of portfolio loans

 

(2,442)

 

(3,941

)

Increase in cash surrender value of bank-owned life insurance

 

(152)

 

(157

)

Amortization, net of valuation allowance adjustments, of mortgage servicing rights

 

721

 

237

 

Stock-based compensation

 

126

 

9

 

Other

 

36

 

34

 

Change in operating assets and liabilities:

 

 

 

 

 

Accrued interest receivable

 

(217)

 

(443

)

Other assets

 

1,432

 

(245

)

Accrued expenses and other liabilities

 

5,273

 

6,134

 

Net cash provided by operating activities

 

20,614

 

16,733

 

 

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

 

 

Maturities and principal receipts of investment securities

 

45,124

 

26,615

 

Purchases of investment securities

 

(46,640)

 

(24,734

)

Loans originated, net of repayments

 

(74,766)

 

(182,870

)

Proceeds from the sale of portfolio loans

 

49,891

 

112,169

 

Purchase of leasehold improvements and equipment

 

(582)

 

(980

)

Net cash used in investing activities

 

(26,973)

 

(69,800

)

 

 

 

 

 

 

Cash Flows From Financing Activities

 

 

 

 

 

Net increase (decrease) in deposits

 

(16,118)

 

46,055

 

Proceeds from advances from Federal Home Loan Bank

 

1,021,000

 

505,000

 

Repayments of advances from Federal Home Loan Bank

 

(981,000)

 

(513,000

)

Net change in line of credit with Federal Home Loan Bank

 

51

 

12,937

 

Repurchases of shares of common stock

 

(11,544)

 

 

Dividends paid to shareholders

 

(526)

 

(531

)

Net cash provided by financing activities

 

11,863

 

50,461

 

Net change in cash and due from banks

 

5,504

 

(2,606

)

Cash and due from banks at beginning of period

 

52,526

 

40,147

 

Cash and due from banks at end of period

 

  $

58,030

 

  $

37,541

 

 

 

 

 

 

 

Supplemental cash flows information

 

 

 

 

 

Cash paid:

 

 

 

 

 

Interest

 

  $

12,278

 

  $

6,333

 

Noncash investing and financing activities:

 

 

 

 

 

Transfers of residential real estate loans to mortgage loans held for sale

 

48,260

 

198,184

 

Transfers of residential real estate loans from mortgage loans held for sale

 

103

 

2,158

 

Right-of-use assets obtained in exchange for new operating lease liabilitites

 

513

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

6


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(dollars in thousands, except per share amounts)

 

Note 1—Nature of Operations and Basis of Presentation

 

Nature of Operations

 

Sterling Bancorp, Inc. (the “Company”) is a unitary thrift holding company that was incorporated in 1989 and the parent company to its wholly owned subsidiary, Sterling Bank and Trust, F.S.B. (the “Bank”). The Company’s business is conducted through the Bank which was formed in 1984. The Bank originates construction, residential and commercial real estate loans, commercial lines of credit, and other consumer loans and provides deposit products, consisting primarily of checking, savings and term certificate accounts. The Bank operates through a network of 30 branches of which 26 branches are located in San Francisco and Los Angeles, California with the remaining branches located in New York, New York, Southfield, Michigan and the greater Seattle market.

 

The Company is headquartered in Southfield, Michigan and its operations are in the financial services industry. Management evaluates the performance of its business based on one reportable segment, community banking.

 

The Company is subject to regulation, examination and supervision by the Board of Governors of the Federal Reserve (“Federal Reserve”). The Bank is a federally chartered stock savings bank which is subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (“OCC”) of the U.S. Department of Treasury and the Federal Deposit Insurance Corporation (“FDIC”) and is a member of the Federal Home Loan Bank (“FHLB”) system.

 

Basis of Presentation

 

The condensed consolidated balance sheet as of March 31, 2019, and the condensed consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the three months ended March 31, 2019 and 2018 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, in the opinion of management, of a normal recurring nature that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. The financial data and other financial information disclosed in these notes to the condensed consolidated financial statements related to these periods are also unaudited. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ended December 31, 2019 or for any future annual or interim period. The consolidated balance sheet at December 31, 2018 included herein was derived from the audited financial statements as of that date. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

Adjustments to Prior Interim Period

 

In the second quarter of 2018, the Company corrected the classification of commitment fees, net of direct loan origination costs, earned on construction loans and other lines of credit to commercial customers in its condensed consolidated statements of income to the financial statement caption, interest and fees on loans, within interest income, which were previously reported in service charges and fees, within non-interest income. The Company has made the correction to conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”). As a result, prior period financial statements included herein have been adjusted from the amounts previously reported.

 

The amount of the adjustment to decrease service charges and fees, and increase interest and fees on loans was $544 for the three months ended March 31, 2018. There was no change to the reported net income or income per share, basic and diluted, as previously reported as a result of this immaterial correction. Management has evaluated the materiality of the correction on its previously filed financial statements from a quantitative and qualitative perspective, and has concluded that the correction was not material to the prior period.

 

7


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

Note 2—New Accounting Standards

 

Adoption of New Accounting Standard

 

The Company has adopted Accounting Standards Update No. 2016-02, Leases (Topic 842) and all subsequent amendments as of January 1, 2019. Topic 842 requires a lessee to recognize the following for all leases, except short-term leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Topic 842 also requires expanded disclosures.

 

Topic 842 permits entities to use a modified retrospective transition approach to apply the guidance as of the beginning of the earliest period presented in the financial statements in the period adopted or the optional transition method which allows entities to apply the new guidance at the adoption date and record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, and not to restate the comparative periods presented.

 

The Company adopted Topic 842 as of January 1, 2019 using the optional transition method. Therefore, the comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.  The adoption of the standard resulted in the recognition of operating lease right-of-use assets of $21.8 million and operating lease liabilities of $22.7 million on the condensed consolidated balance sheet as of January 1, 2019. The operating lease right-of-use assets includes the impact of unamortized lease incentives and deferred rent. The Company elected to apply the package of practical expedients upon transition, which includes no reassessment of whether existing contracts are or contain leases and allowed for the lease classification for existing leases to be retained. The Company did not elect the practical expedient to use hindsight, and accordingly the initial lease term did not differ under the new standard versus prior accounting practice. After transition, in certain instances, the cost of renewal options will be recognized earlier in the term of the lease than under the previous lease accounting rules. The Company elected the practical expedient to not separate non-lease components from the lease components contained in the operating lease agreements but instead to combine them and account for them as a single lease component and will continue to do so for its real estate operating leases. The new standard did not have a significant impact on the condensed consolidated statement of income or statement of cash flows for the three months ended March 31, 2019.

 

The Company’s operating leases are included in operating lease right-of-use assets and operating lease liabilities in the condensed consolidated balance sheet at March 31, 2019. The lessors’ rate implicit in the operating leases were not available to the Company and were not determinable from the terms of the leases. Therefore, the Company’s incremental borrowing rate was used in determining the present value of the future lease payments. The incremental borrowing rates were not observable and therefore, the rates were estimated primarily using observable borrowing rates on the Company’s FHLB advances. The FHLB borrowing rates are generally for over collateralized advances for varying lengths of maturity. Therefore, the risk-free U.S. Government bond rate and high-credit quality unsecured corporate bond rates were also considered in estimating the incremental borrowing rates. The Company’s incremental borrowing rates were developed considering its monthly payment amounts and the initial terms of its leases. These incremental borrowing rates were applied to future lease payments in determining the present value of the operating lease liability for each lease.

 

As stated, the comparative prior period information for the three months ended March 31, 2018 has not been adjusted and continues to be reported under the Company’s historical lease recognition policies under ASC Topic 840, Leases.

 

The disclosure requirements of Topic 842 are included within Note 16, Operating Leases.

 

8


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STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

Recently Issued Accounting Guidance Not Yet Adopted

 

In August 2018, the Financial Accounting Standards Board (FASB) issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements as follows: (1) removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the reporting entity’s policy for timing of transfers between levels; (2) removes the requirement to disclose the valuation processes for Level 3 fair value measurements; (3) clarifies that the measurement uncertainty disclosure for recurring Level 3 fair value measurements is to communicate information about the uncertainty in measurement as of the reporting date; (4) requires disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period; and (5) requires disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU No. 2018-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. An entity is permitted to early adopt the provisions that remove or modify disclosures upon issuance of this ASU and delay adoption of the additional disclosures until the effective date. The Company is currently evaluating the impact adoption will have on its current fair value measurement disclosures.

 

In June 2016, FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring recording of credit losses on loans and other financial instruments on a more timely basis. The guidance will replace the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU No. 2016-13 is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2019. The Company has formed a cross-functional implementation team consisting of individuals from credit, finance and information systems. A project plan and timeline has been developed and the implementation team has been meeting weekly to assess the project status to ensure adherence to the timeline. The implementation team has been working with a software vendor to assist in implementing required changes to credit loss estimation models and processes, and is finalizing the historical data collected to be used in the credit loss models. The Company expects to recognize a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the first reporting period in which ASU No. 2016-13 is effective. The Company has not yet determined the magnitude of any such one-time adjustment or the overall impact of ASU No. 2016-13 on its condensed consolidated financial statements.

 

Note 3—Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements have been prepared using U.S. GAAP. The condensed consolidated financial statements include the results of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in the future periods may be based upon amounts that could differ from those estimates.

 

9


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

Concentration of Credit Risk

 

The loan portfolio consists primarily of residential real estate loans which are collateralized by real estate. At March 31, 2019 and December 31, 2018, residential real estate loans accounted for 85% and 84%, respectively, of the loan portfolio. In addition, most of these residential loans and other commercial loans have been made to individuals and businesses in the state of California which are dependent on the area economy for their livelihoods and servicing of their loan obligation. Approximately 92% and 94% of the loan portfolio was originated in California at March 31, 2019 and December 31, 2018, respectively.

 

Note 4—Investment Securities

 

Debt Securities

 

The following tables summarize the amortized cost and fair value of debt securities available for sale at March 31, 2019 and December 31, 2018 and the corresponding amounts of gross unrealized gains and losses:

 

 

 

March 31, 2019

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gain

 

Loss

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

144,978

 

$

116

 

$

(10

)

$

145,084

 

Collateralized mortgage obligations

 

1,439

 

46

 

 

1,485

 

Collateralized debt obligations

 

307

 

 

(17

)

290

 

Total

 

$

146,724

 

$

162

 

$

(27

)

$

146,859

 

 

 

 

December 31, 2018

 

 

 

Amortized

 

Gross Unrealized

 

Fair

 

 

 

Cost

 

Gain

 

Loss

 

Value

 

Available for sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

$

142,905

 

$

9

 

$

(56

)

$

142,858

 

Collateralized mortgage obligations

 

1,554

 

46

 

 

1,600

 

Collateralized debt obligations

 

308

 

 

(11

)

297

 

Total

 

$

144,767

 

$

55

 

$

(67

)

$

144,755

 

 

No securities of any single issuer, other than debt securities issued by the U.S. government were in excess of 10% of total shareholders’ equity as of March 31, 2019 and December 31, 2018.

 

The amortized cost and fair value of debt securities available for sale issued by U.S. Treasury at March 31, 2019 are shown by contractual maturity. Collateralized mortgage obligations and collateralized debt obligations are disclosed separately in the table below as the expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

 

Amortized
Cost

 

Fair
Value

 

U.S. Treasury securities

 

 

 

 

 

Due less than one year

 

$

144,978

 

$

145,084

 

Collateralized mortgage obligations

 

1,439

 

1,485

 

Collateralized debt obligations

 

307

 

290

 

Total

 

$

146,724

 

$

146,859

 

 

10


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

The table summarizes debt securities available for sale, at fair value, with unrealized losses at March 31, 2019 and December 31, 2018 aggregated by major security type and length of time the individual securities have been in a continuous unrealized loss position, as follows:

 

 

 

March 31, 2019

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

U.S. Treasury securities

 

$

28,917

 

$

(10)

 

$

 

$

 

$

28,917

 

$

(10)

 

Collateralized debt obligations

 

 

 

290

 

(17)

 

290

 

(17)

 

Total

 

$

28,917

 

$

(10)

 

$

290

 

$

(17)

 

$

29,207

 

$

(27)

 

 

 

 

December 31, 2018

 

 

 

Less than 12 Months

 

12 Months or More

 

Total

 

 

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

Fair
Value

 

Unrealized
Losses

 

U.S. Treasury securities

 

$

113,219

 

$

(56)

 

$

 

$

 

$

113,219

 

$

(56)

 

Collateralized debt obligations

 

 

 

297

 

(11)

 

297

 

(11)

 

Total

 

$

113,219

 

$

(56)

 

$

297

 

$

(11)

 

$

113,516

 

$

(67)

 

 

As of March 31, 2019, the Company’s debt securities portfolio consisted of 8 debt securities, with 3 debt securities in an unrealized loss position. For debt securities in an unrealized loss position, management has both the intent and ability to hold these investments until the recovery of the decline; thus, the impairment was determined to be temporary. All interest and dividends are considered taxable.

 

A collateralized debt obligation with a carrying value of $290 and $297 at March 31, 2019 and December 31, 2018, respectively, was rated high quality at inception, but it was subsequently rated by Moody’s as B1, which is defined as “extremely speculative.” The issuers of the underlying collateral for the security are primarily banks. Management uses in-house and third party other-than-temporary impairment evaluation models to compare the present value of expected cash flows to the previous estimate to ensure there are no adverse changes in cash flows during the period. The other-than-temporary impairment model considers the structure and term of the collateralized debt obligations and the financial condition of the underlying issuers. Assumptions used in the model include expected future default rates and prepayments. The collateralized debt obligation remained classified as available for sale and represented $17 and $11 of the unrealized losses reported at March 31, 2019 and December 31, 2018, respectively.

 

Equity Securities

 

Equity securities consist of an investment in a qualified community reinvestment act investment fund, which is a publicly-traded mutual fund, and an investment in Pacific Coast Banker’s Bank, a thinly traded, restricted stock. At March 31, 2019 and December 31, 2018, equity securities totaled $4,190 and $4,141, respectively.

 

At March 31, 2019 and December 31, 2018, equity securities with readily determinable fair values were $3,944 and $3,895, respectively. The following is a summary of unrealized and realized gains and losses recognized in the condensed consolidated statements of income during the three months ended March 31, 2019 and 2018:

 

 

 

Three Months Ended
March 31,

 

 

 

2019

 

2018

 

Net gains (losses) recorded during the period on equity securities

 

$

49

 

$

(64

)

Less: net gains (losses) recorded during the period on equity securities sold during the period

 

 

 

Unrealized gains (losses) recorded during the period on equity securities held at the reporting date

 

$

49

 

$

(64

)

 

11


Table of Contents

 

STERLING BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

The Company has elected to account for its investment in a thinly traded, restricted stock using the measurement alternative for equity securities without readily determinable fair values. The investment was reported at $246 at March 31, 2019 and December 31, 2018, respectively.

 

Note 5—Loans

 

Major categories of loans were as follows:

 

 

 

March 31,

 

December 31,

 

 

 

2019

 

2018

 

Residential real estate loans

 

$

2,494,030

 

$

2,452,441

 

Commercial real estate loans

 

240,896

 

250,955

 

Construction loans

 

172,398

 

176,605

 

Commercial lines of credit

 

36,916

 

37,776

 

Other consumer loans

 

34

 

26

 

Total loans

 

2,944,274

 

2,917,803

 

Less: allowance for loan losses

 

(20,698

)

(21,850

)

Loans, net

 

$

2,923,576

 

$

2,895,953

 

 

Loans with carrying values of $1.10 billion and $898.7 million were pledged as collateral on FHLB borrowings at March 31, 2019 and December 31, 2018, respectively.

 

The table presents the activity in the allowance for loan losses by portfolio segment for the three months ending March 31, 2019 and 2018:

 

March 31, 2019

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction

 

Commercial
Lines of
Credit

 

Other
Consumer

 

Unallocated

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

13,826

 

$

2,573

 

$

3,273

 

$

1,058

 

$

1

 

$

1,119

 

$

21,850

 

Provision (recovery) for loan losses

 

(343

)

(253

)

(558

)

(58

)

 

198

 

(1,014

)

Charge offs

 

 

 

 

(176

)

 

 

(176

)

Recoveries

 

5

 

31

 

2

 

 

 

 

38

 

Total ending balance

 

$

13,488

 

$

2,351

 

$

2,717

 

$

824

 

$

1

 

$

1,317

 

$

20,698

 

 

March 31, 2018

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction

 

Commercial
Lines of
Credit

 

Other
Consumer

 

Unallocated

 

Total

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

12,279

 

$

2,040

 

$

2,218

 

$

 469

 

$

1

 

$

1,450

 

$

18,457

 

Provision (recovery) for loan losses

 

(782

)

501

 

760

 

147

 

 

15

 

641

 

Charge offs

 

 

 

 

 

 

 

 

Recoveries

 

2

 

31

 

1

 

 

 

 

34

 

Total ending balance

 

$

11,499

 

$

2,572

 

$

2,979

 

$

 616

 

$

1

 

$

1,465

 

$

19,132

 

 

12


Table of Contents

 

STERLING BANCORP, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

The following tables present the balance in the allowance for loan losses and the recorded investment by portfolio segment and based on impairment method as of March 31, 2019 and December 31, 2018:

 

March 31, 2019

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction

 

Commercial
Lines of
Credit

 

Other
Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

45

 

$

 —

 

$

 

$

6

 

$

 

$

 

$

51

Collectively evaluated for impairment

 

13,443

 

2,351

 

2,717

 

818

 

1

 

1,317

 

20,647

Total ending allowance balance

 

$

13,488

 

$

 2,351

 

$

2,717

 

$

824

 

$

1

 

$

1,317

 

$

20,698

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

225

 

$

 3,743

 

$

9,268

 

$

238

 

$

 

$

 

$

13,474

Loans collectively evaluated for impairment

 

2,493,805

 

237,153

 

163,130

 

36,678

 

34

 

 

2,930,800

Total ending loans balance

 

$

2,494,030

 

$

 240,896

 

$

172,398

 

$

36,916

 

$

34

 

$

 

$

2,944,274

 

December 31, 2018

 

Residential
Real Estate

 

Commercial
Real Estate

 

Construction

 

Commercial
Lines of
Credit

 

Other
Consumer

 

Unallocated

 

Total

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance balance attributable to loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

46

 

$

30

 

$

78

 

$

195

 

$

 

$

 

$

349

Collectively evaluated for impairment

 

13,780

 

2,543

 

3,195

 

863

 

1

 

1,119

 

21,501

Total ending allowance balance

 

$

13,826

 

$

2,573

 

$

3,273

 

$

1,058

 

$

1

 

$

1,119

 

$

21,850

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

 

$

228

 

$

3,779

 

$

7,412

 

$

416

 

$

 

$

 

$

11,835

Loans collectively evaluated for impairment

 

2,452,213

 

247,176

 

169,193

 

37,360

 

26

 

 

2,905,968

Total ending loans balance

 

$

2,452,441

 

$

250,955

 

$

176,605

 

$

37,776

 

$

26

 

$

 

$

2,917,803

 

13


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

The following tables present information related to impaired loans by class of loans as of and for the periods indicated:

 

 

 

At March 31, 2019

 

At December 31, 2018

 

 

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses

 

Unpaid
Principal
Balance

 

Recorded
Investment

 

Allowance
for Loan
Losses

 

With no related allowance for loan losses recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate, first mortgage

 

$

132

 

$

106

 

$

 

$

 

$

 

$

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

1,355

 

1,156

 

 

1,370

 

1,174

 

 

Multifamily

 

1,082

 

1,077

 

 

1,088

 

1,083

 

 

Offices

 

1,521

 

1,510

 

 

 

 

 

Construction

 

9,269

 

9,268

 

 

4,751

 

4,751

 

 

Commercial lines of credit, C&I lending

 

100

 

100

 

 

 

 

 

Subtotal

 

13,459

 

13,217

 

 

7,209

 

7,008

 

 

With an allowance for loan losses recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate, first mortgage

 

119

 

119

 

45

 

254

 

228

 

46

 

Commercial real estate, offices

 

 

 

 

1,530

 

1,522

 

30

 

Construction

 

 

 

 

2,661

 

2,661

 

78

 

Commercial lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Private banking

 

138

 

138

 

6

 

316

 

316

 

95

 

C&I lending

 

 

 

 

100

 

100

 

100

 

Subtotal

 

257

 

257

 

51

 

4,861

 

4,827

 

349

 

Total

 

$

13,716

 

$

13,474

 

$

51

 

$

12,070

 

$

11,835

 

$

349

 

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

2018

 

 

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

Cash Basis
Interest
Recognized

 

Average
Recorded
Investment

 

Interest
Income
Recognized

 

Cash Basis
Interest
Recognized

 

With no related allowance for loan losses recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate, first mortgage

 

$

107

 

$

 

$

 

 

 

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

1,165

 

15

 

10

 

1,238

 

16

 

10

 

Multifamily

 

1,080

 

12

 

8

 

 

 

 

Offices

 

1,516

 

25

 

17

 

 

 

 

Construction

 

9,325

 

146

 

97

 

 

 

 

Commercial lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Private banking

 

 

 

 

146

 

2

 

2

 

C&I lending

 

100

 

2

 

1

 

 

 

 

Subtotal

 

13,293

 

200

 

133

 

1,384

 

18

 

12

 

With an allowance for loan losses recorded:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate, first mortgage

 

120

 

1

 

1

 

122

 

1

 

1

 

Commercial real estate, offices

 

 

 

 

1,550

 

21

 

14

 

Commercial lines of credit, private banking

 

139

 

2

 

1

 

193

 

3

 

2

 

Subtotal

 

259

 

3

 

2

 

1,865

 

25

 

17

 

Total

 

$

13,552

 

$

203

 

$

135

 

$

3,249

 

$

43

 

$

29

 

 

14


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

The unpaid principal balance is not reduced for partial charge offs. The recorded investment excludes accrued interest receivable on loans which was not significant.

 

Also presented in the above table is the average recorded investment of the impaired loans and the related amount of interest recognized during the time within the period that the impaired loans were impaired. When the ultimate collectability of the total principal of an impaired loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the total principal of an impaired loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method. The average balances are calculated based on the month-end balances of the loans for the period reported.

 

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2019 and December 31, 2018:

 

 

 

March 31, 2019

 

December 31, 2018

 

 

 

Nonaccrual

 

Loans Past Due Over
90
Days Still Accruing

 

Nonaccrual

 

Loans Past Due Over
90
Days Still Accruing

 

Residential real estate:

 

 

 

 

 

 

 

 

 

Residential first mortgage

 

$

5,231

 

$

80

 

$

4,360

 

$

80

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

Retail

 

55

 

 

60

 

 

Construction

 

1,971

 

 

 

 

Total

 

$

7,257

 

$

80

 

$

4,420

 

$

80

 

 

The following tables present the aging of the recorded investment in past due loan by class of loans as of March 31, 2019 and December 31, 2018:

 

March 31, 2019

 

30 - 59
Days
Past Due

 

60 - 89
Days
Past Due

 

Greater
than
89 Days
Past Due

 

Total
Past Due

 

Loans Not
Past Due

 

Total

 

Residential real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential first mortgage

 

$

2,166

 

$

2,273

 

$

5,311

 

$

9,750

 

$

2,461,354

 

$

2,471,104

 

Residential second mortgage

 

 

 

 

 

22,926

 

22,926

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

55

 

55

 

6,550

 

6,605

 

Multifamily

 

 

 

 

 

63,196

 

63,196

 

Offices

 

 

 

 

 

27,139

 

27,139

 

Hotel/SROs

 

 

 

 

 

97,077

 

97,077

 

Industrial

 

 

 

 

 

14,692

 

14,692

 

Other

 

 

 

 

 

32,187

 

32,187

 

Construction

 

 

 

1,971

 

1,971

 

170,427

 

172,398

 

Commercial lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Private banking

 

 

 

 

 

15,776

 

15,776

 

C&I lending

 

 

 

 

 

21,140

 

21,140

 

Other consumer loans

 

 

 

 

 

34

 

34

 

Total

 

$

2,166

 

$

2,273

 

$

7,337

 

$

11,776

 

$

2,932,498

 

$

2,944,274

 

 

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STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

December 31, 2018

 

30 - 59
Days
Past Due

 

60 - 89
Days
Past Due

 

Greater
than
89 Days
Past Due

 

Total
Past Due

 

Loans Not
Past Due

 

Total

 

Residential real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential first mortgage

 

$

3,110

 

$

1,257

 

$

4,440

 

$

8,807

 

$

2,421,190

 

$

2,429,997

 

Residential second mortgage

 

377

 

295

 

 

672

 

21,772

 

22,444

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

60

 

60

 

9,957

 

10,017

 

Multifamily

 

 

 

 

 

64,638

 

64,638

 

Offices

 

 

 

 

 

27,670

 

27,670

 

Hotel/SROs

 

 

 

 

 

101,414

 

101,414

 

Industrial

 

 

 

 

 

14,756

 

14,756

 

Other

 

 

 

 

 

32,460

 

32,460

 

Construction

 

1,971

 

 

 

1,971

 

174,634

 

176,605

 

Commercial lines of credit:

 

 

 

 

 

 

 

 

 

 

 

 

 

Private banking

 

176

 

 

 

176

 

15,762

 

15,938

 

C&I lending

 

 

 

 

 

21,838

 

21,838

 

Other consumer loans

 

 

 

 

 

26

 

26

 

Total

 

$

5,634

 

$

1,552

 

$

4,500

 

$

11,686

 

$

2,906,117

 

$

2,917,803

 

 

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which is presented above, and by payment activity. The Company reviews the status of nonperforming loans which include loans 90 days past due and still accruing and nonaccrual loans.

 

Troubled Debt Restructurings

 

At March 31, 2019 and December 31, 2018, the balance of outstanding loans identified as troubled debt restructurings was $6,968 and $5,826, respectively. The Company has an allowance for loan losses of $51 and $261 on these loans at March 31, 2019 and December 31, 2018, respectively. There were no loans identified as troubled debt restructurings that subsequently defaulted.

 

During the three months ended March 31, 2019, the terms of a construction loan was modified by providing for an extension of the maturity dates at the contract’s existing rate of interest, which is lower than the current market rate for new debt with similar risk. The total outstanding recorded investments was $1,046 both before and after modification. The effect of the modification on the allowance for loan losses was not significant. The Bank had commitments to lend an additional $498 to customers whose terms have been modified in troubled debt restructuring as of March 31, 2019. During the three months ended March 31, 2018, the Bank did not modify any loans as a troubled debt restructuring.

 

The terms of certain other loans have been modified during the three months ended March 31, 2019 and 2018 that did not meet the definition of a troubled debt restructuring. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a significant delay in a payment. These other loans that were modified were not considered significant.

 

Credit Quality

 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes homogeneous loans such as residential real estate and

 

16


Table of Contents

 

STERLING BANCORP, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited) - Continued

(dollars in thousands, except per share amounts)

 

consumer loans and non-homogeneous loans, such as commercial lines of credit, construction and commercial real estate loans. This analysis is performed monthly. The Company uses the following definitions for risk ratings:

 

Pass:  Loans are of satisfactory quality.

 

Special Mention:  Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

 

Substandard:  Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

 

Doubtful:  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

 

At March 31, 2019 and December 31, 2018, the risk rating of loans by class of loans was as follows:

 

March 31, 2019

 

Pass

 

Special
Mention

 

Substandard

 

Doubtful

 

Total

 

Residential real estate:

 

 

 

 

 

 

 

 

 

 

 

Residential first mortgage

 

$

2,465,820

 

$

 

$

1,046

 

$

4,238

 

$

2,471,104

 

Residential second mortgage

 

22,926

 

 

 

 

22,926

 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

Retail

 

5,450

 

 

1,155

 

 

6,605

 

Multifamily

 

62,119

 

 

1,077

 

 

63,196

 

Offices

 

27,139

 

 

 

 

27,139

 

Hotel/SROs

 

93,538

 

3,539

 

 

 

97,077

 

Industrial

 

14,692

 

 

 

 

14,692

 

Other

 

31,214

 

 

973

 

 

32,187

 

Construction

 

158,744

 

4,386

 

9,268

 

 

172,398

 

Commercial lines of credit:

 

 

 

 

 

 

 

 

 

 

 

Private banking

 

15,776

 

 

 

 

15,776

 

C&I lending

 

17,085

 

 

4,055

 

 

21,140

 

Other consumer loans

 

34

 

 

 

 

34

 

Total

 

$

2,914,537

 

$

7,925

 

$

17,574

 

$

4,238

 

$