Sterling Bank & Trust

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021


☐	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 incorporation or organization)		(I.R.S. Employer 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)

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 value per share	SBT	The NASDAQ Stock Market LLC (NASDAQ
		Capital Market)

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 ☒ No ☐

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 ☒ No ☐

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 ☐		Accelerated filer ☐		Non-accelerated filer ☒		Smaller reporting company ☒
						Emerging growth company ☒

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. ☒

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

As of November 8, 2021, 50,449,063 shares of the registrant’s Common Stock were 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 September 30, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 4.	Controls and Procedures	61

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	62
Item 1A.	Risk Factors	63
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65
Exhibit Index		65
SIGNATURES		66

Table of Contents

Sterling Bancorp, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(dollars in thousands)

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


	September 30,		December 31,
	2021		2020
Assets
Cash and due from banks	$	609,412	$	998,497
Interest-bearing time deposits with other banks		805		7,021
Investment securities		204,689		304,958
Mortgage loans held for sale		12,744		22,284
Loans, net of allowance for loan losses of $70,238 and $72,387		2,168,544		2,434,356
Accrued interest receivable		8,355		10,990
Mortgage servicing rights, net		2,873		5,688
Leasehold improvements and equipment, net		8,931		8,512
Operating lease right-of-use assets		18,889		19,232
Federal Home Loan Bank stock, at cost		22,950		22,950
Cash surrender value of bank-owned life insurance		32,899		32,495
Deferred tax asset, net		23,379		24,326
Other assets		24,494		22,736
Total assets	$	3,138,964	$	3,914,045

Liabilities and Shareholders’ Equity
Liabilities:
Noninterest-bearing deposits	$	65,456	$	64,509
Interest-bearing deposits		2,274,039		3,040,508
Total deposits		2,339,495		3,105,017
Federal Home Loan Bank borrowings		307,000		318,000
Subordinated notes, net		65,360		65,341
Operating lease liabilities		20,106		20,497
Accrued expenses and other liabilities		70,438		85,599
Total liabilities		2,802,399		3,594,454

Shareholders’ equity:
Preferred stock, authorized 10,000,000 shares; no shares issued and outstanding		—		—
Common stock, no par value, authorized 500,000,000 shares; issued and outstanding 50,475,064 shares and 49,981,861 shares at September 30, 2021 and December 31, 2020, respectively		82,157		80,807
Additional paid-in capital		13,992		13,544
Retained earnings		240,187		224,853
Accumulated other comprehensive income		229		387
Total shareholders’ equity		336,565		319,591
Total liabilities and shareholders’ equity	$	3,138,964	$	3,914,045

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(dollars in thousands, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Interest income
Interest and fees on loans	$	27,348	$	35,918	$	88,716	$	112,944
Interest and dividends on investment securities and restricted stock		375		901		1,150		2,972
Other interest		253		211		743		786
Total interest income		27,976		37,030		90,609		116,702

Interest expense
Interest on deposits		3,541		9,288		15,479		29,228
Interest on Federal Home Loan Bank borrowings		826		859		2,511		2,546
Interest on subordinated notes		972		1,178		3,157		3,533
Total interest expense		5,339		11,325		21,147		35,307

Net interest income		22,637		25,705		69,462		81,395
Provision (recovery) for loan losses		397		2,123		(2,146)		27,273
Net interest income after provision (recovery) for loan losses		22,240		23,582		71,608		54,122

Non-interest income
Service charges and fees		120		61		423		273
Gain (loss) on sale of investment securities		—		(20)		—		179
Gain on sale of mortgage loans held for sale		151		437		619		1,457
Unrealized gains (losses) on equity securities		(24)		—		(99)		123
Gain on sale of branch office		1,417		—		1,417		—
Net servicing loss		(31)		(121)		(1,369)		(1,239)
Income on cash surrender value of bank-owned life insurance		325		317		960		962
Other		100		437		291		1,208
Total non-interest income		2,058		1,111		2,242		2,963

Non-interest expense
Salaries and employee benefits		2,774		7,517		19,300		21,606
Occupancy and equipment		2,395		2,219		6,840		6,545
Professional fees		4,024		12,207		18,500		23,787
FDIC assessments		417		956		1,636		1,215
Data processing		403		392		1,189		1,078
Net provision (recovery) of mortgage repurchase liability		(298)		—		(963)		25
Other		1,361		1,683		5,852		5,000
Total non-interest expense		11,076		24,974		52,354		59,256

Income (loss) before income taxes		13,222		(281)		21,496		(2,171)
Income tax expense (benefit)		3,665		(170)		6,162		(897)
Net income (loss)	$	9,557	$	(111)	$	15,334	$	(1,274)

Income (loss) per share, basic and diluted	$	0.19	$	(0.00)	$	0.31	$	(0.03)

Weighted average common shares outstanding:
Basic		50,167,295		49,843,925		50,010,341		49,839,860
Diluted		50,262,686		49,843,925		50,079,931		49,839,860

See accompanying notes to condensed consolidated financial statements.

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Sterling Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(dollars in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Net income (loss)	$	9,557	$	(111)	$	15,334	$	(1,274)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities, arising during the period, net of tax effect of $(89), $(86), $(61), and $131, respectively		(230)		(222)		(158)		338
Reclassification adjustment for (gains) losses included in net income of $-, $20, $-, and $(179), respectively, included in gain (loss) on sale of investment securities, net of tax effect of $-, $(6), $-, and $50, respectively		—		14		—		(129)
Total other comprehensive income (loss)		(230)		(208)		(158)		209
Comprehensive income (loss)	$	9,327	$	(319)	$	15,176	$	(1,065)

See accompanying notes to condensed consolidated financial statements.

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Sterling Bancorp, Inc.

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

(dollars in thousands, except per share amounts)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Shareholders’
	Shares	Amount		Capital		Earnings		Income		Equity
Balance at January 1, 2020	49,944,473	$	80,889	$	13,210	$	238,319	$	196	$	332,614
Net loss	—		—		—		(4,030)		—		(4,030)
Repurchases of shares of common stock (Note 10)	(10,912)		(82)		—		—		—		(82)
Stock-based compensation	134,177		—		109		—		—		109
Other comprehensive income	—		—		—		—		563		563
Dividends distributed ($0.01 per share)	—		—		—		(499)		—		(499)
Balance at March 31, 2020	50,067,738	$	80,807	$	13,319	$	233,790	$	759	$	328,675
Net income	—		—		—		2,867		—		2,867
Stock-based compensation	(60,323)		—		9		—		—		9
Other comprehensive loss	—		—		—		—		(146)		(146)
Balance at June 30, 2020	50,007,415	$	80,807	$	13,328	$	236,657	$	613	$	331,405
Net loss	—		—		—		(111)		—		(111)
Stock-based compensation	(30,206)		—		58		—		—		58
Other comprehensive loss	—		—		—		—		(208)		(208)
Balance at September 30, 2020	49,977,209	$	80,807	$	13,386	$	236,546	$	405	$	331,144


Balance at January 1, 2021	49,981,861	$	80,807	$	13,544	$	224,853	$	387	$	319,591
Net income	—		—		—		2,325		—		2,325
Repurchase of restricted shares to pay employee tax liability	(8,536)		—		(46)		—		—		(46)
Stock-based compensation	36,082		—		105		—		—		105
Other comprehensive loss	—		—		—		—		(59)		(59)
Balance at March 31, 2021	50,009,407	$	80,807	$	13,603	$	227,178	$	328	$	321,916
Net income	—		—		—		3,452		—		3,452
Issuance of shares of common stock for cash ($4.50 per share) (Note 10)	300,000		1,350		—		—		—		1,350
Stock-based compensation	165,774		—		193		—		—		193
Other comprehensive income	—		—		—		—		131		131
Balance at June 30, 2021	50,475,181	$	82,157	$	13,796	$	230,630	$	459	$	327,042
Net income	—		—		—		9,557		—		9,557
Stock-based compensation	(117)		—		196		—		—		196
Other comprehensive loss	—		—		—		—		(230)		(230)
Balance at September 30, 2021	50,475,064	$	82,157	$	13,992	$	240,187	$	229	$	336,565

See accompanying notes to condensed consolidated financial statements.

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Sterling Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)


	Nine Months Ended
	September 30,
	2021		2020
Cash Flows From Operating Activities
Net income (loss)	$	15,334	$	(1,274)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Provision (recovery) for loan losses		(2,146)		27,273
Deferred income tax expense (benefit)		1,009		(8,574)
Gain on sale of branch office		(1,417)		—
Gain on sale of investment securities		—		(179)
Unrealized (gains) losses on equity securities		99		(123)
Net amortization on investment securities		1,229		128
Depreciation and amortization on leasehold improvements and equipment		1,395		1,199
Origination, net of principal payments, mortgage loans held for sale		(9,385)		(160,540)
Proceeds from sale of mortgage loans held for sale		19,179