Sterling Bancorp, Inc. (SBT)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 delivered modest profitability: net income $1.316M and diluted EPS $0.03, with NIM at 2.44% and non-interest expense down to $14.9M .
• Balance sheet stable: deposits $2.013B, loans net $1.237B; ACL 2.18% of loans; NPLs rose to $12.2M (0.51% of assets) from $9.3M in Q1, largely seasoned residential exposures .
• Structural clean-up progressed: repaid the $50M FHLB advance in May; DOJ investigations relating to the former Advantage Loan Program closed, implying lower forward legal/professional burden .
• No formal quantitative guidance; management remains focused on protecting book value, liquidity, and disciplined credit while cautiously growing commercial real estate .
• Potential stock reaction catalysts: closure of DOJ investigations (reduced overhang), continued expense discipline, and any evidence of margin stabilization as deposit costs plateau .

What Went Well and What Went Wrong

What Went Well

• Expense control improved: non‑interest expense fell to $14.9M (−3% q/q), aided by staff reductions and rollback of legal/professional costs as DOJ closed investigations .
• Asset sensitivity helped yields: loan yields rose 18 bps q/q and securities yields rose 43 bps, partially offsetting higher deposit costs .
• Capital and liquidity strong: shareholders’ equity $328.9M; leverage ratios 14.26% (consolidated) and 13.80% (bank); cash and liquid assets substantial .
  • Quote: “Credit quality remains strong as do our capital ratios… Deposit levels remain essentially flat… we are seeing some growth in our commercial portfolio” — CEO Thomas O’Brien .

What Went Wrong

• Margin pressure persisted: NIM fell to 2.44% from 2.52% as deposit rates increased 22 bps q/q, lifting interest expense by $1.3M .
• Nonperforming loans rose to $12.2M and 0.51% of assets (from $9.3M and 0.39%), mainly residential slow pays; still well collateralized but a headwind optics-wise .
• Net interest income dipped to $14.4M (−4% q/q; −11% y/y) on lower average loan balances despite higher yields .
  • Analyst concern: pace of deposit repricing vs asset repricing may keep NIM under pressure near term .

Financial Results

Guidance Changes

Note: No dividend guidance or tax rate guidance provided beyond actual effective rate commentary .

Earnings Call Themes & Trends

Management Commentary

• “Our focus remains fixed on protecting book value and Sterling’s financial position while we continue to explore opportunities to prudently reposition the Company and increase net income.” — CEO Thomas O’Brien .
• “Expenses are finally peaking and trending in the right direction… DOJ notified us during the quarter that their investigation is now closed.” — CEO Thomas O’Brien (Q2 call) .
• “We are not originating any residential loans and have no plans to do so… we will continue to look at commercial opportunities as they come along.” — CEO Thomas O’Brien (Q2 call) .
• “The result basically of some cost cutting that we did in the beginning of the year… appears that we are done with all of the investigations and the costs related there.” — CEO Thomas O’Brien (Q2 call) .
• “Annual merit process takes effect in the third quarter. But other than that, I don’t foresee anything [unusual on expenses].” — CFO Karen Knott (Q2 call) .

Q&A Highlights

• Rates and margin sensitivity: Management expects lower rates would help as liabilities reprice; asset prepayments in residential unlikely to change materially given adjustable structures .
• Expense trajectory: No out‑of‑ordinary spend expected beyond normal merit increases; run‑rate trending toward ~$15M per quarter .
• Asset quality: NPLs predominantly residential; limited delinquencies in CRE; a handful in foreclosure with historically minimal loss content due to collateral and seasoning .
• Strategic posture: Continued caution on new lending; no residential originations; selective CRE growth aligned with protecting TBV and balance sheet integrity .

Estimates Context

• Wall Street consensus via S&P Global was unavailable for SBT for Q2 2024 due to missing SPGI/CIQ mapping, so estimate comparisons could not be performed at this time. We will update once S&P Global mapping is available.
• As a result, no quantified beat/miss vs EPS or revenue consensus can be stated.

Key Takeaways for Investors

• Expense discipline is taking hold alongside the closure of DOJ investigations, supporting incremental profitability improvements even with NIM pressure .
• Elevated liquidity and deposit pricing continue to compress spreads; watch for signs that deposit costs plateau to stabilize NIM .
• Credit remains solid with ACL at 2.18% and net recoveries; rising NPLs are largely seasoned residential with strong collateral, limiting expected loss content .
• Business mix is shifting: residential balances running off; CRE growing selectively (+13% q/q) — monitor CRE underwriting discipline and market conditions .
• De‑leveraging completed (FHLB repaid); core deposit funding and high cash/securities give optionality for strategic actions when market conditions improve .
• Near‑term trading: narrative anchored on expense moderation and legal overhang removal; any NIM stabilization could be a positive catalyst. Conversely, further deposit repricing without asset yield relief would weigh on earnings .
• Medium‑term thesis: balance sheet strength (capital, liquidity), clean‑up progress, and cautious credit posture provide downside protection while management explores strategic repositioning or combinations when markets normalize .

Additional notes:

• Primary source documents read in full: Q2 2024 8‑K earnings press release and exhibits –; Q2 2024 earnings call transcript –; prior quarters Q1 2024 8‑K and call – –; Q4 2023 8‑K and call – –.
• No other company press releases for Q2 2024 beyond the earnings release were found in the period reviewed ; legal‑firm PRs in September are unrelated to Q2 operations [4] [5].