Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) Q4 2018 Earnings Conference Call - Final Transcript

Jan 24, 2019 • 10:30 am ET


Sterling Bancorp, Inc. (Southfield, MI) (NASDAQ:SBT) Q4 2018 Earnings Conference Call - Final Transcript


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Good day, everyone. Thank you for standing by. Welcome to the Sterling Bancorp Fourth Quarter 2018 Conference Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Jack Kopnisky, President and CEO of Sterling Bancorp. Please go ahead, sir.

Jack L. Kopnisky

Good morning, everyone, and thanks for joining us to present our results for the fourth quarter and year-end 2018. Joining me on the call is Luis Massiani, our Chief Financial Officer. We have a detailed -- we have a presentation on our website, which along with our press release provides detailed information on our quarter and annual results.

During this call, we will highlight the strong fourth quarter and 2018 results for the company, review the previously announced sale of residential fixed rate mortgages, describe our purchase of $504 million in asset-based lending and equipment finance loans from Woodforest National Bank, update you on our common share repurchase progress. And finally, highlight our anticipated outlook for 2019.

First, on an operating basis, we finished 2018 in a strong position. Adjusted net income available to common stockholders for the quarter was $116.5 million and for the year was $450 million, representing increases over prior periods of 34% and 103%, respectively. Adjusted earnings per share for the fourth quarter was $0.52 and for the year $2, representing increases of 33% and 43% over the same periods last year.

Operating metrics continue to be at or above our targets for the fourth quarter. Adjusted return on average assets was 158 basis points. Adjusted return on average tangible common equity was 18.17%, and our efficiency ratio was 38%. Positive operating leverage continued to increase with adjusted total revenues increasing by $9.1 million and adjusted total expenses decreasing by $5.5 million quarter-over-quarter.

In 2018, we continued to evolve the balance sheet to maximize returns and control risks. For the fourth quarter, commercial loan balances increased at an annualized rate of approximately 10.4%. Commercial loan balances for the year increased 11%.

We improved our mix in total loans with targeted double digit increases in traditional C&I, factoring, equipment finance, public sector and CRE loans and reduced balances in residential mortgage, broker-originated multi-family loans and acquisition development and construction loan lending. Commercial loan yields increased 11 basis points and overall loan yields increased by 6 basis points.

During the quarter, we moved $1.6 billion of fixed rate residential loans into loans held for sale. Average deposits for the quarter grew by $242 million. Overall, average deposit balances grew 4.2% on an annual basis, with targeted business demand deposits growing 12%.

We continue to have a favorable mix of deposits with 40% demand deposits, 11% savings, 37% MMDA and 12% certificates of deposits at a cost of 77 basis points. The deposit beta over the past year has been 27%. With the pending sale of residential mortgages, the loan-to-deposit ratio is 90.6%. From a balance sheet perspective, you can expect us to continue to transition lower-yielding residential mortgages and broker-originated multifamily loans and