• 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.



) --

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


, 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."

The types of service firms that Sterling focuses on include law firms, real estate management companies, not-for-profit companies and staffing agencies.

Millman added that "approximately 80% of the loan growth is from new client relationships," and that the "sweet spot" for the loan growth is "companies with credit needs between $3 and $10 million dollars. We find that that is an under-served market place."

Millman says that the lending market in New York City is "a very resilient market with tremendous density of small and mid-sized businesses," and with Sterling having such a small market share, "the opportunity for market growth is essentially unlimited for us. That's coupled with the fact that a number of banks are less interested in lending to small and midsized companies than we are."


Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here:

Philip van Doorn


To follow the writer on Twitter, go to



To submit a news tip, send an email to:



Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.