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Sterling Bancorp Announces Strong Results for the Three and Nine Months Ended September 30, 2016

/EINPresswire.com/ -- Strong operating momentum in the third quarter continues, highlighted by GAAP diluted earnings per share of $0.29, adjusted diluted earnings per share(1) of $0.29 and record volumes in loans and deposits

MONTEBELLO, NY--(Marketwired - October 25, 2016) -

Key Performance Highlights for the Three Months ended September 30, 2016 vs. September 30, 2015

($ in thousands except per share amounts)   GAAP / As Reported     Non-GAAP / As Adjusted1  
    2015     2016     Change % / bps     2015     2016     Change % / bps  
Total revenue2   $ 112,156     $ 122,169     8.9 %   $ 111,137     $ 122,371     10.1 %
Net income     24,193       37,422     54.7       32,035       37,793     18.0  
Diluted EPS     0.19       0.29     52.6       0.25       0.29     16.0  
Net interest margin3     3.69 %     3.41 %   (28 )     3.76 %     3.53 %   (23 )
Return on average tangible equity     10.82       15.13     431       14.33       15.28     95  
Return on average tangible assets     0.91       1.20     29       1.21       1.21     -  
Efficiency ratio4     63.6       51.0     (1,260 )     49.0       45.8     (320 )
  • Total portfolio loans reached a record $9.2 billion as of September 30, 2016.
  • Annualized loan growth of 26.6% (end of period balances, including acquired loans) and 20.6% (average balances, including acquired loans) over the linked quarter.
  • Loans to deposits ratio of 89.9%; total deposits reached a record $10.2 billion at September 30, 2016 with over $9.0 billion in core deposits5 and a total cost of deposits of 0.37%.
  • Annualized deposit growth of 16.7% (end of period balances) and 14.7% (average balances) over the linked quarter. Annualized core deposit5 growth of 8.7% (end of period balances) and 8.7% (average balances) over the linked quarter.
  • Consolidated one financial center during the quarter; total of 12 financial centers consolidated year-to-date. Total financial centers were 41 as of September 30, 2016.
  • Completed the divestiture of the residential mortgage originations business; incurred a charge of $2.0 million related to fixed asset impairments, facilities closures and severance. Income from existing loans held for sale and earn-out payments related to the divestiture are expected to be recognized over the next 12 months should result in a neutral impact to earnings over time.
  • Completed the acquisition of a ~$170 million restaurant franchise finance portfolio from GE Capital in September 2016.
  1. Adjusted measures are defined in the non-GAAP tables beginning on page 15.
  2. Total revenue as adjusted is equal to tax equivalent net interest income plus non-interest income excluding securities gains and losses.
  3. Net interest margin as adjusted is equal to net interest margin plus the tax equivalent adjustment for tax exempt securities.
  4. See page 16 for the calculation of the efficiency ratio and page 17 for an explanation of the efficiency ratio.
  5. Core deposits include retail, commercial and municipal transaction, money market and savings accounts and exclude certificates of deposit and brokered deposits, except for reciprocal Certificate of Deposit Account Registry balances.

Sterling Bancorp (NYSE: STL) (the "Company"), the parent company of Sterling National Bank (the "Bank"), today announced results for the three and nine months ended September 30, 2016. Net income for the quarter was $37.4 million, or $0.29 per diluted share, compared to net income of $37.8 million, or $0.29 per diluted share, for the linked quarter ended June 30, 2016 and net income of $24.2 million, or $0.19 per diluted share, for the third quarter of 2015.

Net income for the nine months ended September 30, 2016 was $99.0 million, or $0.76 per diluted share, compared to net income of $33.3 million, or $0.32 per diluted share for the first nine months of 2015. Results for the first nine months of 2015 included merger-related expense and other restructuring charges incurred in connection with the Hudson Valley Merger, and the results of operations of Hudson Valley for the period June 30, 2015 (date of acquisition) through September 30, 2015.

President's Comments
Jack Kopnisky, President and Chief Executive Officer, commented: "Our positive momentum in operating performance continued this quarter, highlighted by higher adjusted profitability and significant growth in loans and deposits. As of September 30, 2016, our total assets reached $13.6 billion, compared to $11.6 billion a year ago, and our total deposits reached $10.2 billion, compared to $8.8 billion a year ago. We continue to execute our strategy of creating a high performing regional bank that focuses on serving commercial middle market clients and consumers.

"The positive impact of our strategic initiatives, which include the continued reduction of our network of financial centers and the expansion of our commercial banking relationships and operations, is evident in our results. For the third quarter, our GAAP net income was $37.4 million, or $0.29 per diluted share. Our adjusted net income was $37.8 million and adjusted diluted earnings per share were $0.29, compared to $32.0 million and $0.25, respectively, for the same quarter a year ago. This represents adjusted growth of 18.0% and 16.0%, respectively, between the two periods. Our return on average tangible assets for the quarter was 1.20% and return on average tangible equity was 15.13%. This compares to 0.91% and 10.82% for the same quarter a year ago. Our adjusted return on average tangible assets for the quarter was 1.21% and adjusted return on average tangible equity was 15.28%. This compares to 1.21% and 14.33%, respectively, for the same quarter a year ago.

"We continue to focus on improving our operating leverage and becoming a more efficient and profitable company. During the quarter, our reported operating efficiency ratio was 51.0% and our adjusted efficiency ratio was 45.8%. This represents a decrease of 1,260 and 320 basis points, relative to the same quarter a year ago.

"We continuously evaluate the performance of our business lines to determine where we should allocate our capital and resources. During the third quarter, we closed the sale of our residential mortgage originations business, which will further improve our operating efficiency. We anticipate we will complete the sale of our trust division in the fourth quarter of 2016. We will reallocate capital and resources from these businesses to other businesses that are more in-line with our diversified commercial banking strategy and where we can achieve risk-adjusted returns that exceed our targets.

"We have a strong and diversified balance sheet, with ample funding to continue executing our strategy. We are confident in our ability to generate organic growth and acquisition opportunities, and we are well-positioned to continue delivering attractive returns for our shareholders.

"Lastly, I am pleased to announce our Board of Directors has declared a dividend on our common stock of $0.07 per share payable on November 21, 2016 to holders of record as of November 7, 2016."

Reconciliation of GAAP Results to Adjusted Results (non-GAAP)
GAAP net income of $37.4 million, or $0.29 per diluted share, for the third quarter of 2016, included a pre-tax net gain on sale of securities of $3.4 million, a pre-tax loss on the extinguishment of debt of $1.0 million as the Company repurchased $23.0 million of senior notes due July 2018, a pre-tax restructuring charge recorded in connection with the divestiture of the residential mortgage originations business of $2.0 million and the amortization of non-compete agreements and acquired customer list intangibles of $970 thousand. Excluding the impact of these items, adjusted net income was $37.8 million, or $0.29 per diluted share, which matched our reported GAAP results.

Non-GAAP financial measures include references to the terms "adjusted" or "excluding". See the reconciliation of the Company's Non-GAAP financial measures beginning on page 15.

 
Net Interest Income and Margin
 
($ in thousands)   For the three months ended     Change % / bps  
    9/30/2015     6/30/2016     9/30/2016     Y-o-Y     Linked Qtr  
Interest income   $ 103,298     $ 114,309     $ 118,161     14.4 %   3.4 %
Interest expense     9,944       13,929       15,031     51.2     7.9  
Net interest income   $ 93,354     $ 100,380     $ 103,130     10.5     2.7  
                                     
Accretion on acquired loans   $ 5,756     $ 4,088     $ 4,381     (23.9 )%   7.2 %
Yield on loans     4.75 %     4.68 %     4.57 %   (0.18 )   (0.11 )
Tax equivalent yield on investment securities     2.63       2.76       2.74     0.11     (0.02 )
Tax equivalent yield on interest earning assets     4.15       4.09       4.03     (0.12 )   (0.06 )
Cost of total deposits     0.24       0.35       0.37     0.13     0.02  
Cost of interest bearing deposits     0.39       0.52       0.54     0.15     0.02  
Cost of borrowings     2.38       1.73       1.75     (0.63 )   0.02  
Tax equivalent net interest margin     3.76       3.60       3.53     (0.23 )   (0.07 )
                                     
Average loans, includes loans held for sale   $ 7,331,559     $ 8,313,529     $ 8,744,508     19.3 %   5.2 %
Average investment securities     2,414,475       2,869,651       2,937,708     21.7     2.4  
Average total earning assets     10,038,831       11,558,424       12,015,838     19.7     4.0  
Average deposits     8,691,908       9,561,997       9,915,494     14.1     3.7  
                                     

Third quarter 2016 compared with third quarter 2015
Net interest income was $103.1 million, an increase of $9.8 million compared to the third quarter of 2015. This was mainly due to an increase in average loans, resulting from the acquisition of NewStar Business Credit LLC ("NSBC"), which closed on March 31, 2016, and organic growth. Other key components of the changes in net interest income were the following:

  • The yield on loans was 4.57%, compared to 4.75% for the three months ended September 30, 2015.
  • Yield on loans included $4.4 million of accretion of the fair value discount associated with prior acquisitions compared to $5.8 million in the third quarter of 2015.
  • Average commercial loans were $7.7 billion compared to $6.3 billion in the third quarter of 2015, an increase of $1.5 billion or 23.4%.
  • The tax equivalent yield on investment securities increased 11 basis points to 2.74%.
  • The cost of total deposits was 37 basis points and the cost of borrowings was 1.75%, compared to 24 basis points and 2.38%, respectively, for the same period a year ago.
  • The tax equivalent yield on interest earning assets decreased 12 basis points from the third quarter of 2015 to 4.03% for the third quarter of 2016.
  • Tax equivalent net interest margin was 3.53% compared to 3.76% for the same period a year ago.

Third quarter 2016 compared with linked quarter ended June 30, 2016
Net interest income increased $2.8 million compared to the linked quarter ended June 30, 2016. The increase was mainly due to organic loan growth, as the average balance of loans increased $431.0 million compared to the linked quarter ended June 30, 2016. The franchise financing loan portfolio acquired from GE Capital on September 9, 2016 increased our average commercial loan balances in the period by approximately $40 million. Net interest income also benefited from higher accretion of the fair value discount on acquired loans, which increased $293 thousand and was $4.4 million in the third quarter of 2016. Average interest bearing deposits increased by $216.9 million and average borrowings increased $19.6 million relative to the linked quarter, resulting in an increase of $1.1 million in interest expense.

Other key components of the change in net interest income were the following:

  • The yield on loans was 4.57% in the quarter compared to 4.68% in the linked quarter.
  • Average commercial loans were $7.7 billion compared to $7.3 billion in the linked quarter, an increase of $436.9 million, or 23.9% on an annualized basis.
  • During the quarter, we issued $65.0 million of subordinated notes at Sterling National Bank at an effective interest rate of 5.125%, and we redeemed $23.0 million of 5.50% senior notes due July 2018.
  • The tax equivalent yield on investment securities decreased two basis points to 2.74% in the quarter.
  • The cost of total deposits increased two basis points to 37 basis points in the quarter. The total cost of borrowings increased two basis points to 1.75% for the third quarter of 2016.
  • The tax equivalent yield on interest earning assets decreased six basis points to 4.03% in the quarter.
  • Tax equivalent net interest margin was 3.53% compared to 3.60% in the linked quarter.
 
Non-interest Income
 
($ in thousands)   For the three months ended   Change %  
    9/30/2015   6/30/2016   9/30/2016   Y-o-Y     Linked Qtr  
Total non-interest income   $ 18,802   $ 20,442   $ 19,039   1.3 %   (6.9 )%
Net gain on sale of securities     2,726     4,474     3,433   25.9     (23.3 )
Adjusted non-interest income   $ 16,076   $ 15,968   $ 15,606   (2.9 )   (2.3 )
                               

Third quarter 2016 compared with third quarter 2015
Excluding net gain on sale of securities, adjusted non-interest income declined $470 thousand in the third quarter of 2016 to $15.6 million compared to $16.1 million in the same quarter last year. The change was mainly due to a decrease in mortgage banking fee income of $1.8 million as a result of the sale of our residential mortgage originations business, and a decrease of $1.0 million in deposit fees and service charges associated mainly with the impact of the Durbin Amendment, which decreased our interchange revenue effective July 1, 2016. Partially offsetting these decreases was an increase in other non-interest income of $1.4 million due to letters of credit, other commissions and loan fees and higher swap fees, an increase of $598 thousand in bank owned life insurance ("BOLI") income, and an increase of $137 thousand in accounts receivable/factoring commissions.

Third quarter 2016 compared with linked quarter ended June 30, 2016
Excluding net gain on sale of securities, adjusted non-interest income declined $362 thousand from $16.0 million in the second quarter of 2016 to $15.6 million in the third quarter of 2016. This was mainly due to lower mortgage banking fee income of $1.2 million as a result of the sale of our residential mortgage originations business and lower deposit fees and service charges of $677 thousand associated with the impact of the Durbin Amendment. These declines were partially offset by an increase of $742 thousand in accounts receivable/factoring commissions, and an increase of $610 thousand in BOLI income.

 
Non-interest Expense
 
($ in thousands)   For the three months ended     Change % / bps  
    9/30/2015     6/30/2016     9/30/2016     Y-o-Y     Linked Qtr  
Compensation and benefits   $ 29,238     $ 31,336     $ 32,501     11.2 %   3.7 %
Occupancy and office operations     9,576       8,810       8,021     (16.2 )   (9.0 )
Loss on extinguishment of senior notes     -       -       1,013     -     NM  
Charge for asset write-downs and severance     -       -       2,000     NM     NM  
Defined benefit plan termination charge     13,384       -       -     (100.0 )   NM  
Other expenses     19,117       19,494       18,721     (2.1 )   (4.0 )
Total non-interest expense   $ 71,315     $ 59,640     $ 62,256     (12.7 )   4.4  
Full time equivalent employees ("FTEs") at period end     1,138       1,065       995     (12.6 )   (6.6 )
Financial centers at period end     59       42       41     (30.5 )   (2.4 )
Efficiency ratio, as reported     63.6 %     49.4 %     51.0 %   12.6     (1.6 )
Efficiency ratio, as adjusted     49.0       47.2       45.8     3.2     1.4  
                                     

Third quarter 2016 compared with third quarter 2015
Total non-interest expense decreased $9.1 million relative to the third quarter of 2015, from $71.3 million to $62.3 million in the third quarter of 2016. Results for the third quarter of 2015 included a defined benefit plan termination charge of $13.4 million. Also contributing to the decline in non-interest expense was a decrease of $1.6 million in occupancy and office operations mainly due to the consolidation of 18 financial centers between the periods. Partially offsetting this decline was an increase in compensation and benefits expense of $3.3 million in the third quarter of 2016 compared to the third quarter of 2015, which is mainly due to an increase in personnel as a result of the NSBC acquisition and the continued growth of our commercial banking teams, and the loss on extinguishment of debt and charges related to the divestiture of the residential mortgage originations business increased non-interest expense by $3.0 million in the quarter, as discussed above.

Third quarter 2016 compared with linked quarter ended June 30, 2016
Non-interest expense increased $2.6 million from $59.6 million in the linked quarter to $62.3 million in the third quarter of 2016. This was mainly due to the loss on extinguishment of debt and charges related to the divestiture of the residential mortgage originations business, which is discussed above. Compensation and benefits expense increased $1.2 million between the periods due to incentive compensation and an increase in the cost of employee benefits associated with our health care plan. Partially offsetting these increases was a decline in occupancy and office operations of $789 thousand due to the ongoing consolidation of our financial centers and other locations, a decrease in other expenses associated with the sale of the residential mortgage originations business and a decrease in total FTEs from 1,065 to 995.

Taxes
As a result of the completion of the Company's income tax returns for fiscal 2015, and the continued growth of tax-exempt loans and municipal securities, the Company revised its estimated effective income tax rate to 32.5% for the nine months ended September 30, 2016. This resulted in an effective tax rate of 31.2% for the third quarter, compared to 32.8% in the second quarter of 2016 and 32.5% in the third quarter of 2015. The effective income tax rate for fiscal 2016 is expected to be between 32% and 33%.

 
Key Balance Sheet Highlights as of September 30, 2016
 
($ in thousands)   As of     Change % / bps  
    9/30/2015     12/31/2015     9/30/2016     Y-o-Y     Nine months  
Total assets   $ 11,597,393     $ 11,955,952     $ 13,617,228     17.4 %   13.9 %
Total loans     7,525,632       7,859,360       9,168,741     21.8     16.7  
Commercial & industrial ("C&I") loans     3,015,043       3,131,028       4,097,767     35.9     30.9  
Commercial real estate loans     3,497,755       3,715,779       4,107,072     17.4     10.5  
Total commercial loans     6,512,798       6,846,807       8,204,839     26.0     19.8  
Total deposits     8,805,411       8,580,007       10,197,253     15.8     18.8  
Core deposits     8,157,838       7,822,637       9,002,189     10.4     15.1  
Investment securities     2,527,992       2,643,823       2,797,717     10.7     5.8  
Total borrowings     948,048       1,525,344       1,451,526     53.1     (4.8 )
Loans to deposits     85.5 %     91.6 %     89.9 %   4.4     (1.7 )
Core deposits to total deposits     92.6       91.2       88.3     (4.30 )   (2.90 )
Investment securities to total assets     21.8       22.1       20.5     (1.3 )   (1.6 )
                                     

Highlights in balance sheet items as of September 30, 2016 were the following:

  • C&I loans (which include traditional C&I, asset-based lending, payroll finance, warehouse lending, factoring and equipment finance) represented 44.7%, commercial real estate loans represented 42.5%, consumer and residential mortgage loans represented 10.5%, and acquisition, development and construction loans represented 2.3% of the total loan portfolio.
  • Commercial loan growth, which includes all C&I loans, commercial real estate and acquisition, development and construction loans, was $1.4 billion for the nine months ended September 30, 2016, which included $162.0 million of franchise financing loans acquired from GE Capital and $320.4 million of ABL loans acquired from NSBC.
  • Residential mortgage warehouse lending balances reached a record $586.4 million as of September 30, 2016.
  • Aggregate exposure to taxi medallion relationships was $51.9 million, which represented 0.57% of total loans as of September 30, 2016.
  • Total deposits at September 30, 2016 increased $1.6 billion, or 25.2% annualized, over December 31, 2015, and $1.4 billion or 15.8%, over September 30, 2015.
  • Core deposits at September 30, 2016 increased $1.2 billion, or 20.1% annualized, over December 31, 2015, and $844.4 million, or 10.4%, over September 30, 2015.
  • Borrowings were $1.5 billion at September 30, 2016 and December 31, 2015.
 
Credit Quality
 
($ in thousands)   For the three months ended     Change % / bps  
    9/30/2015     6/30/2016     9/30/2016     Y-o-Y     Linked Qtr  
Provision for loan losses   $ 5,000     $ 5,000     $ 5,500     10.0 %   10.0 %
Net charge-offs     1,706       2,149       1,960     14.9     (8.8 )
Allowance for loan losses     47,611       55,865       59,405     24.8     6.3  
Non-performing loans     67,672       79,564       81,067     19.8     1.9  
Net charge-offs annualized     0.09 %     0.10 %     0.09 %   -     1.0  
Allowance for loan losses to total loans     0.63       0.65       0.65     2.0     -  
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans6     1.28       1.11       1.10     (18.0 )   (1.0 )
Allowance for loan losses to non-performing loans     70.4       70.2       73.3     290     310  
                                     

Provision for loan losses was $5.5 million in the third quarter of 2016, an increase of $500 thousand from the linked quarter. This was mainly due to organic loan growth.

As a result of purchase accounting, a substantial portion of the loans acquired in prior merger transactions do not have an allocation in the allowance for loan losses as the performance of these loans remains satisfactory. The total valuation balances recorded against portfolio loans to adjusted gross portfolio loans6 was 1.11% and 1.10% at June 30, 2016 and September 30, 2016, respectively.

Non-performing loans at September 30, 2016, which includes non-accrual loans and loans over 90 days past due still accruing interest increased by $1.5 million to $81.1 million from the linked quarter. The allowance for loan losses to non-performing loans increased to 73.3% as of September 30, 2016.

Aggregate exposure to taxi medallion relationships as of September 30, 2016 was $51.8 million. This represented a decrease of $6.1 million, or 10.4%, relative to the linked quarter.

6 See a reconciliation of this non-GAAP financial measure on page 17.

 
Capital
 
($ in thousands, except share and per share data)   As of     Change % / bps  
    9/30/2015     12/31/2015     9/30/2016     Y-o-Y     Six months  
Total stockholders' equity   $ 1,652,204     $ 1,665,073     $ 1,765,160     6.8 %   6.0 %
Goodwill and intangible assets     751,529       748,066       765,858     1.9     2.4  
Tangible stockholders' equity   $ 900,675     $ 917,007     $ 999,302     11.0     9.0  
Common shares outstanding     129,769,569       130,006,926       130,853,673     0.8     0.7  
Book value per share   $ 12.73     $ 12.81     $ 13.49     6.0     5.3  
Tangible book value per share     6.94       7.05       7.64     10.1     8.4  
Tangible equity to tangible assets     8.30 %     8.18 %     7.78 %   (0.52 )   (0.40 )
Estimated Tier 1 leverage ratio - Company     9.12       9.03       8.31     (0.81 )   (0.72 )
Estimated Tier 1 leverage ratio - Bank     9.80       9.65       8.72     (1.08 )   (0.93 )
                                     

The increase in stockholders' equity of $100.1 million to $1.8 billion as of September 30, 2016 compared to December 31, 2015 was mainly the result of net income of $99.0 million, and an increase in other comprehensive income of $20.0 million. The change in accumulated other comprehensive income was primarily due to a change in the fair value of our available for sale securities portfolio, and stock option exercises and stock-based compensation, which totaled $8.4 million. These increases were partially offset by declared dividends of $27.3 million.

Total goodwill and other intangible assets were $765.9 million at September 30, 2016, an increase of $17.8 million compared to December 31, 2015, which was due to the NSBC Acquisition, partially offset by amortization of $9.5 million.

For the quarter ended September 30, 2016, basic and diluted weighted average common shares outstanding increased to 130.2 million and 130.9 million, respectively, compared to 130.1 million basic shares and 130.7 million diluted shares, respectively, for the quarter ended June 30, 2016. Total common shares outstanding at September 30, 2016 were approximately 130.9 million.

Conference Call Information
Sterling Bancorp will host a teleconference and webcast on Wednesday, October 26, 2016 at 10:30 AM Eastern Time to discuss the Company's results. Interested parties are invited to listen to the webcast and view accompanying slides on the Company's website at www.sterlingbancorp.com. Analysts are invited to listen by dialing (888) 312-9846, Conference ID #5351232. A replay of the teleconference can be accessed through the Company's website.

About Sterling Bancorp
Sterling Bancorp, whose principal subsidiary is Sterling National Bank, specializes in the delivery of service and solutions to business owners, their families and consumers within the communities it serves through teams of dedicated and experienced relationship managers. Sterling National Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Sterling Bancorp website at www.sterlingbancorp.com.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This release may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may concern Sterling Bancorp's current expectations about its future results, plans, operations and prospects and involve certain risks, including the following: our ability to successfully implement strategic initiatives, to grow revenues faster than we grow expenses, and to integrate and fully realize cost savings and other benefits we estimate in connection with acquisitions; a deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets; inflation; the effects of, and changes in, trade; changes in asset quality and credit risk; introduction, withdrawal, success and timing of business initiatives; capital management activities; customer disintermediation; and the success of Sterling Bancorp in managing those risks. Other factors that could cause Sterling Bancorp's actual results to differ from those indicated in forward-looking statements are included in the "Risk Factors" section of Sterling Bancorp's filings with the Securities and Exchange Commission. The forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2016. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the Quarterly Report on Form 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.

 
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
 
    9/30/2015   12/31/2015   9/30/2016
Assets:            
Cash and cash equivalents   $ 318,139     $ 229,513     $ 380,458  
Investment securities     2,527,992       2,643,823       2,797,717  
Loans held for sale     66,506       34,110       81,695  
Portfolio loans:                        
  Residential mortgage     721,606       713,036       672,355  
  Commercial real estate     3,320,693       3,529,381       3,895,176  
  Commercial and industrial     3,015,043       3,131,028       4,097,767  
  Acquisition, development and construction     177,062       186,398       211,896  
  Consumer     291,228       299,517       291,547  
    Total portfolio loans, gross     7,525,632       7,859,360       9,168,741  
  Allowance for loan losses     (47,611 )     (50,145 )     (59,405 )
    Total portfolio loans, net     7,478,021       7,809,215       9,109,336  
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank Stock, at cost     89,626       116,758       107,670  
Accrued interest receivable     31,092       31,531       42,107  
Premises and equipment, net     63,508       63,362       58,761  
Goodwill     670,699       670,699       696,600  
Other intangibles     80,830       77,367       69,258  
Bank owned life insurance     195,741       196,288       198,556  
Other real estate owned     11,831       14,614       16,422  
Other assets     63,408       68,672       58,648  
    Total assets   $ 11,597,393     $ 11,955,952     $ 13,617,228  
Liabilities:                        
Deposits   $ 8,805,411     $ 8,580,007     $ 10,197,253  
FHLB borrowings     806,970       1,409,885       1,181,498  
Other borrowings     42,286       16,566       21,191  
Senior notes     98,792       98,893       76,388  
Subordinated notes     -       -       172,449  
Mortgage escrow funds     13,865       13,778       15,836  
Other liabilities     177,865       171,750       187,453  
    Total liabilities     9,945,189       10,290,879       11,852,068  
Stockholders' equity:                        
Common stock     1,367       1,367       1,367  
Additional paid-in capital     1,508,669       1,506,612       1,504,777  
Treasury stock     (78,342 )     (76,190 )     (66,262 )
Retained earnings     221,335       245,408       317,385  
Accumulated other comprehensive (loss) income     (825 )     (12,124 )     7,893  
    Total stockholders' equity     1,652,204       1,665,073       1,765,160  
      Total liabilities and stockholders' equity   $ 11,597,393     $ 11,955,952     $ 13,617,228  
                         
Shares of common stock outstanding at period end     129,769,569       130,006,926       130,853,673  
Book value per share   $ 12.73     $ 12.81     $ 13.49  
Tangible book value per share     6.94       7.05       7.64  
 
Sterling Bancorp and Subsidiaries
CONSOLIDATED CONDENSED INCOME STATEMENTS
(unaudited, in thousands, except share and per share data)
 
    For the Quarter Ended   For the Nine Months Ended
    9/30/2015   6/30/2016   9/30/2016   9/30/2015   9/30/2016
Interest and dividend income:                    
  Loans and loan fees   $ 87,774   $ 96,658   $ 100,503   $ 202,789   $ 286,195
  Securities taxable     11,114     10,662     9,870     27,168     32,548
  Securities non-taxable     3,169     5,871     6,751     8,936     16,501
  Other earning assets     1,241     1,118     1,037     3,023     3,232
  Total interest and dividend income     103,298     114,309     118,161     241,916     338,476
Interest expense:                              
  Deposits     5,299     8,328     9,201     11,749     23,938
  Borrowings     4,645     5,601     5,830     14,372     17,518
Total interest expense     9,944     13,929     15,031     26,121     41,456
Net interest income     93,354     100,380     103,130     215,795     297,020
Provision for loan losses     5,000     5,000     5,500     10,200     14,500
Net interest income after provision for loan losses     88,354     95,380     97,630     205,595     282,520
Non-interest income:                              
  Accounts receivable / factoring commissions and other fees     4,761     4,156     4,898     12,698     13,548
  Mortgage banking income     2,956     2,367     1,153     8,643     5,522
  Deposit fees and service charges     4,450     4,084     3,407     11,628     11,981
  Net gain on sale of securities     2,726     4,474     3,433     4,958     7,624
  Bank owned life insurance     1,293     1,281     1,891     3,443     4,499
  Investment management fees     844     934     1,086     1,520     3,144
  Other     1,772     3,146     3,171     3,778     8,593
Total non-interest income     18,802     20,442     19,039     46,668     54,911
Non-interest expense:                              
  Compensation and benefits     29,238     31,336     32,501     75,070     93,857
  Stock-based compensation plans     1,064     1,747     1,673     3,300     4,960
  Occupancy and office operations     9,576     8,810     8,021     23,610     26,113
  Amortization of intangible assets     3,431     3,241     3,241     6,611     9,535
  FDIC insurance and regulatory assessments     2,281     2,300     2,151     5,093     6,709
  Other real estate owned, net     183     541     721     187     1,844
  Merger-related expenses     -     -     -     17,079     265
  Defined benefit plan termination charge     13,384     -     -     13,384     -
  Loss on extinguishment of borrowings     -     -     1,013     -     9,729
  Other     12,158     11,665     12,935     58,564     37,815
Total non-interest expense     71,315     59,640     62,256     202,898     190,827
Income before income tax expense     35,841     56,182     54,413     49,365     146,604
Income tax expense     11,648     18,412     16,991     16,043     47,646
Net income   $ 24,193   $ 37,770   $ 37,422   $ 33,322   $ 98,958
Weighted average common shares:                              
  Basic     129,172,832     130,081,465     130,239,193     102,655,566     130,049,358
  Diluted     129,631,858     130,688,729     130,875,614     103,069,057     130,645,705
Earnings per common share:                              
  Basic earnings per share   $ 0.19   $ 0.29   $ 0.29   $ 0.32   $ 0.76
  Diluted earnings per share     0.19     0.29     0.29     0.32     0.76
  Dividends declared per share     0.07     0.07     0.07     0.21     0.21
                               
Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA
(unaudited, in thousands, except share and per share data)
 
    As of and for the Quarter Ended
End of Period   9/30/2015   12/31/2015   3/31/2016   6/30/2016   9/30/2016
Total assets   $ 11,597,393   $ 11,955,952   $ 12,865,356   $ 13,065,248   $ 13,617,228
Tangible assets 1     10,845,864     11,207,886     12,092,966     12,296,123     12,851,370
Securities available for sale     1,854,862     1,921,032     1,894,820     1,613,013     1,417,617
Securities held to maturity     673,130     722,791     952,922     1,367,046     1,380,100
Portfolio loans     7,525,632     7,859,360     8,286,163     8,594,295     9,168,741
Goodwill     670,699     670,699     696,600     696,600     696,600
Other intangibles     80,830     77,367     75,790     72,525     69,258
Deposits     8,805,411     8,580,007     9,328,622     9,785,556     10,197,253
Municipal deposits (included above)     1,352,846     1,140,206     1,285,263     1,184,231     1,551,147
Borrowings     948,048     1,525,344     1,675,508     1,309,954     1,451,526
Stockholders' equity     1,652,204     1,665,073     1,698,133     1,735,994     1,765,160
Tangible equity 1     900,675     917,007     925,743     966,869     999,302
Quarterly Average Balances                              
Total assets     11,242,870     11,622,621     12,001,370     12,700,038     13,148,201
Tangible assets 1     10,490,169     10,872,287     11,253,958     11,929,107     12,380,448
Loans, gross:                              
  Residential mortgage     780,373     777,561     755,564     729,685     727,304
  Commercial real estate     3,253,183     3,444,774     3,587,341     3,694,162     3,823,853
  Commercial and industrial:                              
    Traditional commercial and industrial     1,295,034     1,378,642     1,381,107     1,456,402     1,624,438
    Asset based lending     303,387     304,113     304,779     636,383     640,931
    Payroll finance     175,240     199,856     192,428     187,887     162,938
    Warehouse lending     286,557     293,387     248,831     301,882     404,156
    Factored receivables     192,380     210,081     181,974     183,051     200,471
    Equipment financing     578,655     587,445     616,995     630,922     652,531
      Total commercial and industrial     2,831,253     2,973,524     2,926,114     3,396,527     3,685,465
  Acquisition, development and construction     173,898     181,550     179,420     197,489     215,798
  Consumer     292,852     281,242     297,028     295,666     292,088
Loans, total 2     7,331,559     7,658,651     7,745,467     8,313,529     8,744,508
Interest bearing cash and cash equivalents     211,723     168,199     296,668     272,426     230,478
Securities (taxable)     1,967,600     2,111,953     2,139,547     2,032,518     1,838,775
Securities (non-taxable)     446,875     429,633     593,777     837,133     1,098,933
Total earning assets     10,038,831     10,460,168     10,880,356     11,558,424     12,015,838
Deposits:                              
  Non-interest bearing demand     3,234,450     3,017,727     3,009,085     3,059,562     3,196,204
  Interest bearing demand     1,418,803     1,485,690     1,607,227     2,016,365     2,107,669
  Savings (including mortgage escrow funds)     950,709     962,766     814,485     809,123     827,647
  Money market     2,548,181     2,808,734     2,866,666     3,056,188     3,174,536
  Certificates of deposit     539,765     550,640     619,154     620,759     609,438
Total deposits and mortgage escrow     8,691,908     8,825,557     8,916,617     9,561,997     9,915,494
Borrowings     772,777     988,550     1,274,605     1,304,442     1,324,001
Stockholders' equity     1,639,458     1,661,282     1,686,274     1,711,902     1,751,414
Tangible equity 1     886,757     910,948     938,862     940,971     983,661
1 See a reconciliation of this non-GAAP financial measure on page 15.
2 Includes loans held for sale, but excludes allowance for loan losses.
 
Sterling Bancorp and Subsidiaries
SELECTED FINANCIAL DATA AND PERFORMANCE RATIOS
(unaudited, in thousands, except share and per share data)
 
    As of and for the Quarter Ended  
Per Share Data   9/30/2015     12/31/2015     3/31/2016     6/30/2016     9/30/2016  
Basic earnings per share   $ 0.19     $ 0.25     $ 0.18     $ 0.29     $ 0.29  
Diluted earnings per share     0.19       0.25       0.18       0.29       0.29  
Adjusted diluted earnings per share, non-GAAP 1     0.25       0.26       0.25       0.27       0.29  
Dividends declared per share     0.07       0.07       0.07       0.07       0.07  
Tangible book value per share     6.94       7.05       7.09       7.40       7.64  
Shares of common stock o/s     129,769,569       130,006,926       130,548,989       130,620,463       130,853,673  
Basic weighted average common shares o/s     129,733,911       129,812,551       129,974,025       130,081,465       130,239,193  
Diluted weighted average common shares o/s     130,192,937       130,354,779       130,500,975       130,688,729       130,875,614  
Performance Ratios (annualized)                                        
Return on average assets     0.85 %     1.12 %     0.80 %     1.20 %     1.13 %
Return on average equity     5.85 %     7.83 %     5.67 %     8.87 %     8.50 %
Return on average tangible assets, as reported 1     0.91 %     1.20 %     0.85 %     1.27 %     1.20 %
Return on average tangible equity, as reported 1     10.82 %     14.28 %     10.18 %     16.14 %     15.13 %
Return on average tangible assets, as adjusted 1     1.21 %     1.22 %     1.15 %     1.19 %     1.21 %
Return on average tangible equity, as adjusted 1     14.33 %     14.60 %     13.78 %     15.14 %     15.28 %
Operating efficiency, as adjusted 1     49.0 %     47.6 %     48.9 %     47.2 %     45.8 %
Analysis of Net Interest Income                                        
Yield on loans     4.75 %     4.65 %     4.62 %     4.68 %     4.57 %
Yield on investment securities - tax equivalent 2     2.63 %     2.66 %     2.65 %     2.76 %     2.74 %
Yield on interest earning assets - tax equivalent 2     4.15 %     4.09 %     4.00 %     4.09 %     4.03 %
Cost of total deposits     0.24 %     0.26 %     0.29 %     0.35 %     0.37 %
Cost of borrowings     2.38 %     2.04 %     1.92 %     1.73 %     1.75 %
Cost of interest bearing liabilities     0.63 %     0.63 %     0.70 %     0.72 %     0.74 %
Net interest rate spread - tax equivalent basis 2     3.52 %     3.46 %     3.30 %     3.37 %     3.29 %
Net interest margin - GAAP basis     3.69 %     3.62 %     3.46 %     3.50 %     3.41 %
Net interest margin - tax equivalent basis 2     3.76 %     3.68 %     3.53 %     3.60 %     3.53 %
Capital                                        
Tier 1 leverage ratio - Company 3     9.12 %     9.03 %     8.60 %     8.36 %     8.31 %
Tier 1 leverage ratio - Bank only 3     9.80 %     9.65 %     9.16 %     8.84 %     8.72 %
Tier 1 risk-based capital ratio - Bank only 3     11.79 %     11.45 %     10.89 %     10.70 %     10.32 %
Total risk-based capital ratio - Bank only 3     12.34 %     12.00 %     12.60 %     12.37 %     12.53 %
Tangible equity to tangible assets - Company 1     8.30 %     8.18 %     7.66 %     7.86 %     7.78 %
Condensed Five Quarter Income Statement                                        
Interest and dividend income   $ 103,298     $ 106,224     $ 106,006     $ 114,309     $ 118,161  
Interest expense     9,944       10,803       12,496       13,929       15,031  
Net interest income     93,354       95,421       93,510       100,380       103,130  
Provision for loan losses     5,000       5,500       4,000       5,000       5,500  
Net interest income after provision for loan losses     88,354       89,921       89,510       95,380       97,630  
Non-interest income     18,802       16,081       15,430       20,442       19,039  
Non-interest expense     71,315       57,419       68,931       59,640       62,256  
Income before income tax expense     35,841       48,583       36,009       56,182       54,413  
Income tax expense     11,648       15,792       12,243       18,412       16,991  
Net income   $ 24,193     $ 32,791     $ 23,766     $ 37,770     $ 37,422  
1 See a reconciliation of non-GAAP financial measures beginning on page 15.
2 Tax equivalent basis represents interest income earned on municipal securities divided by the applicable Federal tax rate of 35%.
3 Regulatory capital amounts and ratios are preliminary estimates pending filing of the Company's and Bank's regulatory reports.
 
Sterling Bancorp and Subsidiaries
ASSET QUALITY INFORMATION
(unaudited, in thousands, except share and per share data)
 
    As of and for the Quarter Ended
Allowance for Loan Losses Roll Forward   9/30/2015   12/31/2015   3/31/2016   6/30/2016   9/30/2016
Balance, beginning of period   $44,317   $47,611   $50,145   53,014   $55,865
Provision for loan losses   5,000   5,500   4,000   5,000   5,500
Loan charge-offs:                    
  Commercial & industrial   (224)   (281)   (489)   (429)   (570)
  Payroll finance   (44)   -   -   (28)   -
  Warehouse lending   -   -   -   -   -
  Factored receivables   (52)   (21)   (81)   (792)   (60)
  Equipment financing   (1,369)   (1,463)   (457)   (572)   (377)
  Commercial real estate   (223)   (1,134)   (4)   (100)   (630)
  Multi-family   -   -   -   (18)   (399)
  Acquisition development & construction   -   -   -   -   -
  Residential mortgage   (546)   (524)   (224)   (209)   (338)
  Consumer   (387)   (810)   (511)   (532)   (259)
    Total charge offs   (2,845)   (4,233)   (1,766)   (2,680)   (2,633)
Recoveries of loans previously charged-off:                    
  Commercial & industrial   781   675   329   199   381
  Payroll finance   -   24   4   28   -
  Warehouse lending   -   -   -   -   -
  Factored receivables   18   14   24   17   10
  Equipment financing   148   409   108   102   123
  Commercial real estate   76   56   21   53   111
  Multi-family   -   9   2   -   -
  Acquisition development & construction   -   43   -   104   -
  Residential mortgage   81   -   28   1   -
  Consumer   35   37   119   27   48
    Total recoveries   1,139   1,267   635   531   673
Net loan charge-offs   (1,706)   (2,966)   (1,131)   (2,149)   (1,960)
Balance, end of period   $47,611   $50,145   $53,014   $55,865   $59,405
Asset Quality Data and Ratios                    
Non-performing loans ("NPLs") non-accrual   $67,390   $65,737   $84,436   $79,036   $77,794
NPLs still accruing   282   674   1,002   528   3,273
    Total NPLs   67,672   66,411   85,438   79,564   81,067
  Other real estate owned   11,831   14,614   14,527   16,590   16,422
  Non-performing assets ("NPAs")   $79,503   $81,025   $99,965   $96,154   $97,489
  Loans 30 to 89 days past due   $30,881   $67,996   $19,168   $18,803   $17,683
  Net charge-offs as a % of average loans (annualized)   0.09%   0.15%   0.06%   0.10%   0.09%
  NPLs as a % of total loans   0.90   0.84   1.03   0.93   0.88
  NPAs as a % of total assets   0.69   0.68   0.78   0.74   0.72
  Allowance for loan losses as a % of NPLs   70.4   75.5   62.0   70.2   73.3
  Allowance for loan losses as a % of total loans   0.63   0.64   0.64   0.65   0.65
  Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans 1   1.28   1.16   1.17   1.11   1.10
  Special mention loans   $91,076   $68,003   $101,560   $103,710   $101,784
  Substandard loans   120,684   129,665   131,919   125,571   112,552
  Doubtful loans   152   713   556   330   932
1 See a reconciliation of this non-GAAP financial measure on page 17.
 
Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
 
  For the Quarter Ended  
  June 30, 2016     September 30, 2016  
  Average
balance
    Interest     Yield/Rate     Average
balance
    Interest     Yield/Rate  
  (Dollars in thousands)  
Interest earning assets:                                  
  Commercial loans $ 7,288,178     $ 86,206     4.76 %   $ 7,725,116     $ 89,905     4.63 %
  Consumer loans   295,666       3,391     4.61 %     292,088       3,269     4.45 %
  Residential mortgage loans   729,685       7,061     3.87 %     727,304       7,329     4.03 %
Total net loans 1   8,313,529       96,658     4.68 %     8,744,508       100,503     4.57 %
  Securities taxable   2,032,518       10,662     2.11 %     1,838,775       9,870     2.14 %
  Securities non-taxable   837,133       9,032     4.34 %     1,098,933       10,386     3.78 %
  Interest earning deposits   272,426       258     0.38 %     230,478       167     0.29 %
  FHLB and Federal Reserve Bank stock   102,818       860     3.36 %     103,144       870     3.36 %
    Total securities and other earning assets   3,244,895       20,812     2.58 %     3,271,330       21,293     2.59 %
  Total interest earning assets   11,558,424       117,470     4.09 %     12,015,838       121,796     4.03 %
Non-interest earning assets   1,141,614                     1,132,363                
Total assets $ 12,700,038                   $ 13,148,201                
Interest bearing liabilities:                                          
  Demand deposits $ 2,016,365     $ 1,994     0.40 %   $ 2,107,669     $ 1,856     0.35 %
  Savings deposits 2   809,123       841     0.42 %     827,647       1,515     0.73 %
  Money market deposits   3,056,188       4,152     0.55 %     3,174,536       4,357     0.55 %
  Certificates of deposit   620,759       1,341     0.87 %     609,438       1,473     0.96 %
Total interest bearing deposits   6,502,435       8,328     0.52 %     6,719,290       9,201     0.54 %
  Senior notes   99,032       1,478     5.97 %     90,954       1,328     5.84 %
  Other borrowings   1,097,270       2,642     0.97 %     1,104,581       2,733     0.98 %
  Subordinated notes   108,140       1,481     5.48 %     128,466       1,769     5.51 %
    Total borrowings   1,304,442       5,601     1.73 %     1,324,001       5,830     1.75 %
  Total interest bearing liabilities   7,806,877       13,929     0.72 %     8,043,291       15,031     0.74 %
Non-interest bearing deposits   3,059,562                     3,196,204                
Other non-interest bearing liabilities   121,697                     157,292                
Total liabilities   10,988,136                     11,396,787                
  Stockholders' equity   1,711,902                     1,751,414                
Total liabilities and stockholders' equity $ 12,700,038                   $ 13,148,201                
Net interest rate spread 3                 3.37 %                   3.29 %
Net interest earning assets 4 $ 3,751,547                   $ 3,972,547                
Net interest margin - tax equivalent           103,541     3.60 %             106,765     3.53 %
Less tax equivalent adjustment           (3,161 )                   (3,635 )      
Net interest income         $ 100,380                   $ 103,130        
Ratio of interest earning assets to interest bearing liabilities   148.1 %                   149.4 %              
1 Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.
 
Sterling Bancorp and Subsidiaries
QUARTERLY YIELD TABLE
(unaudited, in thousands, except share and per share data)
 
  For the Quarter Ended  
  September 30, 2015     September 30, 2016  
  Average
balance
    Interest     Yield/Rate     Average
balance
    Interest     Yield/Rate  
  (Dollars in thousands)  
Interest earning assets:                                  
  Commercial loans $ 6,258,334     $ 77,150     4.89 %   $ 7,725,116     $ 89,905     4.63 %
  Consumer loans   292,852       3,294     4.46 %     292,088       3,269     4.45 %
  Residential mortgage loans   780,373       7,330     3.76 %     727,304       7,329     4.03 %
Total net loans 1   7,331,559       87,774     4.75 %     8,744,508       100,503     4.57 %
  Securities taxable   1,967,600       11,114     2.24 %     1,838,775       9,870     2.14 %
  Securities non-taxable   446,875       4,876     4.33 %     1,098,933       10,386     3.78 %
  Interest earning deposits   211,723       131     0.25 %     230,478       167     0.29 %
  FHLB and Federal Reserve Bank stock   81,074       1,110     5.43 %     103,144       870     3.36 %
    Total securities and other earning assets   2,707,272       17,231     2.53 %     3,271,330       21,293     2.59 %
  Total interest earning assets   10,038,831       105,005     4.15 %     12,015,838       121,796     4.03 %
Non-interest earning assets   1,204,039                     1,132,363                
Total assets $ 11,242,870                   $ 13,148,201                
Interest bearing liabilities:                                          
  Demand deposits $ 1,418,803     $ 923     0.26 %   $ 2,107,669     $ 1,856     0.35 %
  Savings deposits 2   950,709       564     0.24 %     827,647       1,515     0.73 %
  Money market deposits   2,548,181       2,961     0.46 %     3,174,536       4,357     0.55 %
  Certificates of deposit   539,765       851     0.63 %     609,438       1,473     0.96 %
Total interest bearing deposits   5,457,458       5,299     0.39 %     6,719,290       9,201     0.54 %
  Senior notes   98,727       1,474     5.97 %     90,954       1,328     5.84 %
  Other borrowings   674,050       3,171     1.87 %     1,104,581       2,733     0.98 %
  Subordinated notes   -       -     - %     128,466       1,769     5.51 %
    Total borrowings   772,777       4,645     2.38 %     1,324,001       5,830     1.75 %
  Total interest bearing liabilities   6,230,235       9,944     0.63 %     8,043,291       15,031     0.74 %
Non-interest bearing deposits   3,234,450                     3,196,204                
Other non-interest bearing liabilities   138,727                     157,292                
Total liabilities   9,603,412                     11,396,787                
  Stockholders' equity   1,639,458                     1,751,414                
Total liabilities and stockholders' equity $ 11,242,870                   $ 13,148,201                
Net interest rate spread 3                 3.52 %                   3.29 %
Net interest earning assets 4 $ 3,808,596                   $ 3,972,547                
Net interest margin - tax equivalent           95,061     3.76 %             106,765     3.53 %
Less tax equivalent adjustment           (1,707 )                   (3,635 )      
Net interest income         $ 93,354                   $ 103,130        
Ratio of interest earning assets to interest bearing liabilities   161.1 %                   149.4 %              
1 Average balances include the effect of net deferred loan origination fees and costs, allowance for loan losses and non-accrual loans. Interest includes prepayment fees and late charges.
2 Includes club accounts and interest bearing mortgage escrow balances.
3 Net interest rate spread represents the difference between the tax equivalent yield on average interest earning assets and the cost of average interest bearing liabilities.
4 Net interest earning assets represents total interest earning assets less total interest bearing liabilities.
 
Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
 

The Company provides supplemental reporting of non-GAAP financial measures as management believes this information is useful to investors. See legend on page 17.

       
    As of and for the Quarter Ended  
    9/30/2015     12/31/2015     3/31/2016     6/30/2016     9/30/2016  
   
The following table shows the reconciliation of stockholders' equity to tangible equity and the tangible equity ratio1:  
                               
Total assets   $ 11,597,393     $ 11,955,952     $ 12,865,356     $ 13,065,248     $ 13,617,228  
Goodwill and other intangibles     (751,529 )     (748,066 )     (772,390 )     (769,125 )     (765,858 )
Tangible assets     10,845,864       11,207,886       12,092,966       12,296,123       12,851,370  
Stockholders' equity     1,652,204       1,665,073       1,698,133       1,735,994       1,765,160  
Goodwill and other intangibles     (751,529 )     (748,066 )     (772,390 )     (769,125 )     (765,858 )
Tangible stockholders' equity     900,675       917,007       925,743       966,869       999,302  
Common stock outstanding at period end     129,769,569       130,006,926       130,548,989       130,620,463       130,853,673  
Stockholders' equity as a % of total assets     14.25 %     13.93 %     13.20 %     13.29 %     12.96 %
Book value per share   $ 12.73     $ 12.81     $ 13.01     $ 13.29     $ 13.49  
Tangible equity as a % of tangible assets     8.30 %     8.18 %     7.66 %     7.86 %     7.78 %
Tangible book value per share   $ 6.94     $ 7.05     $ 7.09     $ 7.40     $ 7.64  
                                         
   
The following table shows the reconciliation of reported return on average tangible equity and adjusted return on average tangible equity2:  
                                         
Average stockholders' equity   $ 1,639,458     $ 1,661,282     $ 1,686,274     $ 1,711,902     $ 1,751,414  
Average goodwill and other intangibles     (752,701 )     (750,334 )     (747,412 )     (770,931 )     (767,753 )
Average tangible stockholders' equity     886,757       910,948       938,862       940,971       983,661  
Net income     24,193       32,791       23,766       37,770       37,422  
Net income, if annualized     95,983       130,095       95,586       151,910       148,874  
Reported return on average tangible equity     10.82 %     14.28 %     10.18 %     16.14 %     15.13 %
Adjusted net income (see reconciliation on page 16)   $ 32,035     $ 33,525     $ 32,159     $ 35,414     $ 37,793  
Annualized adjusted net income     127,095       133,007       129,343       142,434       150,350  
Adjusted return on average tangible equity     14.33 %     14.60 %     13.78 %     15.14 %     15.28 %
                                         
The following table shows the reconciliation of reported return on tangible assets and adjusted return on tangible assets3:  
                                         
Average assets   $ 11,242,870     $ 11,622,621     $ 12,001,370     $ 12,700,038     $ 13,148,201  
Average goodwill and other intangibles     (752,701 )     (750,334 )     (747,412 )     (770,931 )     (767,753 )
Average tangible assets     10,490,169       10,872,287       11,253,958       11,929,107       12,380,448  
Net income     24,193       32,791       23,766       37,770       37,422  
Net income, if annualized     95,983       130,095       95,586       151,910       148,874  
Reported return on average tangible assets     0.91 %     1.20 %     0.85 %     1.27 %     1.20 %
Adjusted net income (see reconciliation on page 16)   $ 32,035     $ 33,525     $ 32,159     $ 35,414     $ 37,793  
Annualized adjusted net income     127,095       133,007       129,343       142,434       150,350  
Adjusted return on average tangible assets     1.21 %     1.22 %     1.15 %     1.19 %     1.21 %
 
Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
 

The Company provides supplemental reporting of non-GAAP financial measures as management believes this information is useful to investors. See legend on page 17.

       
    As of and for the Quarter Ended  
    9/30/2015     12/31/2015     3/31/2016     6/30/2016     9/30/2016  
The following table shows the reconciliation of the reported operating efficiency ratio and adjusted operating efficiency ratio4:  
                               
Net interest income   $ 93,354     $ 95,421     $ 93,510     $ 100,380     $ 103,130  
Non-interest income     18,802       16,081       15,430       20,442       19,039  
Total net revenue     112,156       111,502       108,940       120,822       122,169  
Tax equivalent adjustment on securities interest income     1,707       1,692       2,091       3,161       3,635  
Net (gain) loss on sale of securities     (2,726 )     121       283       (4,474 )     (3,433 )
Adjusted total revenue     111,137       113,315       111,314       119,509       122,371  
Non-interest expense     71,315       57,419       68,931       59,640       62,256  
Merger-related expense     -       -       (265 )     -       -  
Charge for asset write-downs, retention and severance     -       -       (2,485 )     -       (2,000 )
Charge on benefit plan settlement     (13,384 )     -       -       -       -  
Loss on extinguishment of borrowings     -       -       (8,716 )     -       (1,013 )
Loss on extinguishment of senior notes     -       -       -       -       -  
Amortization of intangible assets     (3,431 )     (3,431 )     (3,053 )     (3,241 )     (3,241 )
Adjusted non-interest expense     54,500       53,988       54,412       56,399       56,002  
Reported operating efficiency ratio     63.6 %     51.5 %     63.3 %     49.4 %     51.0 %
Adjusted operating efficiency ratio     49.0       47.6       48.9       47.2       45.8  
                                         
The following table shows the reconciliation of reported net income (GAAP) and adjusted net income (non-GAAP) and adjusted diluted earnings per share5:  
                                         
Income before income tax expense   $ 35,841     $ 48,583     $ 36,009     $ 56,182     $ 54,413  
Income tax expense     11,648       15,792       12,243       18,412       16,991  
Net income (GAAP)     24,193       32,791       23,766       37,770       37,422  
                                         
Adjustments:                                        
Net (gain) loss on sale of securities     (2,726 )     121       283       (4,474 )     (3,433 )
Merger-related expense     -       -       265       -       -  
Charge for asset write-downs, retention and severance     -       -       2,485       -       2,000  
Charge on benefit plan settlement     13,384       -       -       -       -  
Loss on extinguishment of borrowings     -       -       8,716       -       1,013  
Loss on extinguishment of senior notes     -       -       -       -       -  
Amortization of non-compete agreements and acquired customer list intangible assets     961       961       968       969       970  
Total adjustments     11,619       1,082       12,717       (3,505 )     550  
Income tax (benefit) expense     (3,777 )     (348 )     (4,324 )     1,149       (179 )
Total adjustments net of taxes     7,842       734       8,393       (2,356 )     371  
Adjusted net income (non-GAAP)   $ 32,035     $ 33,525     $ 32,159     $ 35,414     $ 37,793  
                                         
Weighted average diluted shares     130,192,937       130,354,779       130,500,975       130,688,729       130,875,614  
Diluted EPS as reported (GAAP)   $ 0.19     $ 0.25     $ 0.18     $ 0.29     $ 0.29  
Adjusted diluted EPS (non-GAAP)     0.25       0.26       0.25       0.27       0.29  
 
Sterling Bancorp and Subsidiaries
NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands, except share and per share data)
 

The Company provides supplemental reporting of non-GAAP financial measures as management believes this information is useful to investors. See legend below.

       
    As of and for the Quarter Ended  
    9/30/2015     12/31/2015     3/31/2016     6/30/2016     9/30/2016  
The following table shows a reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans6:  
Allowance for loan losses   $ 47,611     $ 50,145     $ 53,014     $ 55,865     $ 59,405  
Remaining purchase accounting adjustments:                                        
  Acquired performing loans     31,364       24,766       27,340       23,802       26,003  
  Purchased credit impaired loans     17,783       16,617       16,862       15,955       15,513  
    Total remaining purchase accounting adjustments     49,147       41,383       44,202       39,757       41,516  
Total valuation balances recorded against portfolio loans   $ 96,758     $ 91,528     $ 97,216     $ 95,622     $ 100,921  
                                         
Total portfolio loans, gross   $ 7,525,632     $ 7,859,360     $ 8,286,163     $ 8,594,295     $ 9,168,741  
Remaining purchase accounting adjustments:                                        
  Acquired performing loans     31,364       24,766       27,340       23,802       26,003  
  Purchased credit impaired loans     17,783       16,617       16,862       15,955       15,513  
Adjusted portfolio loans, gross   $ 7,574,779     $ 7,900,743     $ 8,330,365     $ 8,634,052     $ 9,210,257  
Allowance for loan losses to total portfolio loans, gross     0.63 %     0.64 %     0.64 %     0.65 %     0.65 %
Total valuation balances recorded against portfolio loans to adjusted gross portfolio loans     1.28 %     1.16 %     1.17 %     1.11 %     1.10 %
                                         

The non-GAAP measures presented above are used by our management and the Company's Board of Directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance and to assess our performance compared to our annual budget and strategic plans. These non-GAAP financial measures complement our GAAP reporting and are presented above to provide investors, analysts, regulators and others information that we use to manage and evaluate our performance each period. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. When non-GAAP measures are impacted by income tax expense, we present the pre-tax amount for the income and expense items that result in the non-GAAP adjustments and present the income tax expense impact at the effective tax rate in effect for the period presented.

1 Stockholders' equity as a percentage of total assets, book value per share, tangible equity as a percentage of total assets and tangible book value equity per share provides information to help assess our capital position and financial strength. We believe tangible book measures improve comparability to other banking organizations that have not engaged in acquisitions that have resulted in the accumulation of goodwill and other intangible assets.

2 Reported return on average tangible equity and adjusted return on average tangible equity measures provide information to evaluate the use of our tangible equity.

3 Reported return on tangible assets and adjusted return on tangible assets measures provide information to help assess our profitability.

4 The reported operating efficiency ratio is a non-GAAP measure calculated by dividing our GAAP non-interest expense by the sum of our GAAP net interest income plus GAAP non-interest income. The adjusted operating efficiency ratio is a non-GAAP measure calculated by dividing non-interest expense adjusted for intangible asset amortization and certain expenses generally associated with discrete merger transactions and non-recurring strategic plans by the sum of net interest income plus non-interest income plus the tax equivalent adjustment on securities income and elimination of the the impact of gain or loss on sale of securities. The adjusted operating efficiency ratio is a measure we use to assess our operating performance.

5 Adjusted net income and adjusted earnings per share present a summary of our earnings which includes adjustments to exclude certain revenues and expenses (generally associated with discrete merger transactions and non-recurring strategic plans) to help in assessing our profitability.

6 The reconciliation of the allowance for loan losses and remaining purchase accounting adjustments to portfolio loans provides information to evaluate the impact of purchase accounting adjustments and the allowance for loan losses on our portfolio loans. In purchase accounting, the prior allowance for loan losses is not carried over, and in place, we are required to estimate the fair value of the loan, which includes an estimate of life of loan losses on the portfolio, which is included as a purchase discount within the acquired loan portfolio.

STERLING BANCORP CONTACT:
Luis Massiani
SEVP & Chief Financial Officer

845.369.8040

Sterling Bancorp
400 Rella Boulevard
Montebello, NY 10901-4243

T 845.369.8040
F 845.369.8255

http://www.sterlingbancorp.com