Sterling Bank & Trust

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Table of Contents

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, 2022


☐	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	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 4, 2022, 50,800,012 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)	2
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	2
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	62
Item 4.	Controls and Procedures	64

PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	65
Item 1A.	Risk Factors	66
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 6.	Exhibits	67
Exhibit Index
SIGNATURES		68

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,
	2022		2021
Assets
Cash and due from banks	$	352,404	$	411,676
Interest-bearing time deposits with other banks		1,183		1,183
Investment securities		353,219		313,879
Loans held for sale		8,833		64,987
Loans, net of allowance for loan losses of $45,362 and $56,548		1,636,266		1,956,266
Accrued interest receivable		7,061		7,696
Mortgage servicing rights, net		1,842		2,722
Leasehold improvements and equipment, net		6,585		7,421
Operating lease right-of-use assets		15,467		18,184
Federal Home Loan Bank stock, at cost		20,288		22,950
Cash surrender value of bank-owned life insurance		8,448		33,033
Deferred tax asset, net		23,907		21,426
Other assets		12,401		15,407
Total assets	$	2,447,904	$	2,876,830

Liabilities and Shareholders’ Equity
Liabilities
Noninterest-bearing deposits	$	70,063	$	63,760
Interest-bearing deposits		1,880,951		2,197,975
Total deposits		1,951,014		2,261,735
Federal Home Loan Bank borrowings		50,000		150,000
Subordinated notes, net		65,290		65,343
Operating lease liabilities		16,664		19,400
Accrued expenses and other liabilities		35,335		36,725
Total liabilities		2,118,303		2,533,203

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 50,800,012 shares at September 30, 2022 and 50,460,932 shares at December 31, 2021		83,295		82,157
Additional paid-in capital		14,560		14,124
Retained earnings		252,482		248,243
Accumulated other comprehensive loss		(20,736)		(897)
Total shareholders’ equity		329,601		343,627
Total liabilities and shareholders’ equity	$	2,447,904	$	2,876,830

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Sterling Bancorp, Inc.

Condensed Consolidated Statements of Income (Unaudited)

(dollars in thousands, except per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Interest income
Interest and fees on loans	$	20,975	$	27,348	$	65,589	$	88,716
Interest and dividends on investment securities and restricted stock		1,945		375		4,133		1,150
Other interest		1,925		253		2,931		743
Total interest income		24,845		27,976		72,653		90,609

Interest expense
Interest on deposits		3,724		3,541		8,070		15,479
Interest on Federal Home Loan Bank borrowings		253		826		919		2,511
Interest on subordinated notes		1,329		972		3,383		3,157
Total interest expense		5,306		5,339		12,372		21,147

Net interest income		19,539		22,637		60,281		69,462
Provision (recovery) for loan losses		(4,357)		397		(9,755)		(2,146)
Net interest income after provision (recovery) for loan losses		23,896		22,240		70,036		71,608

Non-interest income
Service charges and fees		124		120		351		423
Gain on sale of mortgage loans held for sale		—		151		200		619
Unrealized losses on equity securities		(184)		(24)		(590)		(99)
Gain on sale of branch office		—		1,417		—		1,417
Net servicing loss		(384)		(31)		(118)		(1,369)
Income on cash surrender value of bank-owned life insurance		87		325		670		960
Other		—		100		586		291
Total non-interest income		(357)		2,058		1,099		2,242

Non-interest expense
Salaries and employee benefits		9,336		2,774		24,522		19,300
Occupancy and equipment		2,112		2,395		6,441		6,840
Professional fees		5,756		4,024		17,979		18,500
FDIC assessments		316		417		1,031		1,636
Data processing		725		403		2,292		1,189
Net recovery of mortgage repurchase liability		(145)		(298)		(670)		(963)
Other		3,521		1,361		8,943		5,852
Total non-interest expense		21,621		11,076		60,538		52,354

Income before income taxes		1,918		13,222		10,597		21,496
Income tax expense		742		3,665		6,358		6,162
Net income	$	1,176	$	9,557	$	4,239	$	15,334

Income per share, basic and diluted	$	0.02	$	0.19	$	0.08	$	0.31

Weighted average common shares outstanding:
Basic		50,400,412		50,167,295		50,326,951		50,010,341
Diluted		50,572,931		50,262,686		50,523,076		50,079,931

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Sterling Bancorp, Inc.

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

(dollars in thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	1,176	$	9,557	$	4,239	$	15,334
Other comprehensive loss, net of tax:
Unrealized losses on investment securities, arising during the period, net of tax effect of $(2,632), $(89), $(7,515) and $(61), respectively		(7,154)		(230)		(19,839)		(158)
Comprehensive income (loss)	$	(5,978)	$	9,327	$	(15,600)	$	15,176

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Sterling Bancorp, Inc.

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

(dollars in thousands)


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Retained		Comprehensive		Shareholders’
	Shares	Amount		Capital		Earnings		Income (Loss)		Equity
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 9)	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

Balance at January 1, 2022	50,460,932	$	82,157	$	14,124	$	248,243	$	(897)	$	343,627
Net income	—		—		—		5,260		—		5,260
Repurchase of restricted shares to pay employee tax liability	(13,383)		—		(84)		—		—		(84)
Stock-based compensation	49,284		—		146		—		—		146
Other comprehensive loss	—		—		—		—		(7,543)		(7,543)
Balance at March 31, 2022	50,496,833	$	82,157	$	14,186	$	253,503	$	(8,440)	$	341,406
Net loss	—		—		—		(2,197)		—		(2,197)
Repurchase of restricted shares to pay employee tax liability	(16,345)		—		(112)		—		—		(112)
Issuance of shares of common stock to defined contribution retirement plan (Note 9)	160,978		1,138		—		—		—		1,138
Stock-based compensation	176,746		—		239		—		—		239
Other comprehensive loss	—		—		—		—		(5,142)		(5,142)
Balance at June 30, 2022	50,818,212	$	83,295	$	14,313	$	251,306	$	(13,582)	$	335,332
Net income	—		—		—		1,176		—		1,176
Repurchase of restricted shares to pay employee tax liability	(1,299)		—		(8)		—		—		(8)
Stock-based compensation	(16,901)		—		255		—		—		255
Other comprehensive loss	—		—		—		—		(7,154)		(7,154)
Balance at September 30, 2022	50,800,012	$	83,295	$	14,560	$	252,482	$	(20,736)	$	329,601

See accompanying notes to condensed consolidated financial statements.

Table of Contents

STERLING BANCORP, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(dollars in thousands)


	Nine Months Ended
	September 30,
	2022		2021
Cash Flows From Operating Activities
Net income	$	4,239	$	15,334
Adjustments to reconcile net income to net cash provided by operating activities:
Provision (recovery) for loan losses		(9,755)		(2,146)
Deferred income taxes		5,034		1,009
Gain on sale of branch office		—		(1,417)
Unrealized losses on equity securities		590		99
Net amortization (acrretion) on investment securities		(342)		1,229
Depreciation and amortization on leasehold improvements and equipment		1,162		1,395
Net principal payments (originations) of loans held for sale		2,284		(9,385)
Proceeds from sale of mortgage loans held for sale		1,831		19,179
Gain on sale of loans held for sale		(200)		(619)
Net recovery of mortgage repurchase liability		(670)		(963)
Increase in cash surrender value of bank-owned life insurance, net of premiums		(292)		(404)
Valuation allowance adjustments and amortization of mortgage servicing rights		891		2,939
Stock-based compensation		640		494
Other		82		475
Change in operating assets and liabilities:
Accrued interest receivable		635		2,635
Other assets		2,214		1,588
Accrued expenses and other liabilities		(812)		4,549
Net cash provided by operating activities		7,531		35,991

Cash Flows From Investing Activities
Maturities of interest-bearing time deposits with other banks		—		6,216
Maturities and principal receipts of investment securities		80,551		121,958
Purchases of investment securities		(147,493)		(23,237)
Proceeds received from redemption of Federal Home Loan Bank stock		2,662