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Sterling Grows Loans as Earnings Rise

  • Sterling Bancorp's second-quarter net income to common shareholders before accelerated accretion from TARP redemption of 12 cents meets analysts' consensus estimate.
  • Portfolio loans increase 10% year-over-year.
  • Loan loss reserves increase slightly, credit quality very strong.

NEW YORK. ( TheStreet) -- Sterling Bancorp (STL - Get Report) on Tuesday reported second-quarter net income available to common shareholders of $2.5 million, or 8 cents a share.

Excluding $1.2 million, or 4 cents a share, in accelerated accretion on the full repayment of $42 million in federal bailout funds received through the Troubled Assets Relief Program, or TARP, second-quarter earnings available to common shareholders totaled $3.7 million, or 12 cents a share, matching the consensus earnings estimate among analysts polled by Thomson Reuters.

Sterling National Bank president and CEO John Millman

In anticipation of the TARP repayment, Sterling Bancorp raised $38.6 million in common equity during the first quarter, following a previous common equity raise of $58.4 million last August.

Unlike so many banks that saw a boost to second-quarter earnings from the release of loan loss reserves, Sterling Bancorp's allowance for loan losses actually increased 3% during the second quarter, to $18.5 million.

The second-quarter provision for loan losses was $3 million, which was the same level as in the first quarter, but declined sharply from $5.5 million a year earlier.

Total portfolio loans were $1.4 billion as of June 30, increasing over 10% from a year earlier, and credit quality was very strong, with nonperforming assets making up just 0.30% of total assets as of June 30.

Sterling Bancorp also reported strong deposit growth, with total deposits exceeding $2 billion for the first time, and growing 16% from the first quarter and 22% year-over-year.

The company's net interest margin -- the difference between its average yield on earning assets and its average cost of funds - was 3.85% during the second quarter, up slightly from 3.84% the previous quarter but down from 4.12% a year earlier. The company said the margin decline reflected the "temporary deployment of proceeds from its common share offerings in short-term investment securities, where yields have declined sharply due to market conditions."

Sterling Bancorp's main subsidiary is Sterling National Bank. In an exclusive interview with TheStreet, Sterling National Bank's president and CEO John Millman said "a substantial amount of the deposit growth was related to our lending activity, and we do business with many service firms that are substantial generators of deposits."

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